Market Update

General - Strike Energy - Panoramic Resources - West African Resources

Good afternoon

Australia had the end of the financial year today. Busy time for funds and companies, and also for investors to lock in tax-losses from failed investment. That kind of pressure is gone now!  I am sure, that lots of our stocks have been impacted by this over the last few weeks - there is clearly a risk-off attitude,w hen it comes to small caps, with only a few exceptions.

CPI in Germany hitting 2% for the first time in years - but core inflation is only running at 1%. This is despite a general shortage of skilled workes in Germany. Unemployment remains at a record low 5,2%. In the US, core inflation is running at 2%. Personal Spending in the US was weaker than expected - but the Chicago PMI was very strong.

The EU comes to some sort of an agreement with regards to immigration policy - much needed by Angela to avoid an even deeper crisis of her coalition government in Germany.

Metals looking a little better today, with nickel being the stand-out, once again, up by 1.3% currently and back to 15.000 US$/t ! Nickel is being pushed higher by multiple recomemndations and upgrades, based on a surprisingly strong steel market, and the great  long-term outlook for the metal from the EV-industry.

Panoramic - having a nice move today after announcing a new off-take deal with Jinchuan. The terms of these agreements are a well-kept industry-secret. The market is guessing, that Panoramic gut paid 65-66% under the old deal. Estimates for the current deal are between 72- and 75%, having a very large  and positive impact on production costs for Panoramic. Broker Euroz estimated today peak-earnings for Panoramic of 140 Mill A$ EBITDA p.a.. This could prove conservative - obviously depending on costs, the nickel price, and the exchange rate.Why should we not have a sustained nickel price of 20.000 US$ or even higher at some stage? There is obviously a large shortage of nickel coming up from strong growth of EV´s over the next few years. At 20.000 US$/t ( vs 15.000 today ), and an exchange rate of 75ct, PAN will probably make more than 140 millA$ EBITDA. At 4x EV/EBITDA as target valuation, the stock could double again....The only step left to start production again is now the financing. I hope, that Panoramic´s boeard will be agressive enough to finance all by debt - payback of say 50 mill A$ at current levels for nickel is very short, which should keep banks pretty happy. You know, that I am holding a large position here....

Strike Energy - there is no news - but the market is gaining more confidence in their success by the day. Jawes-1 looks like it´s being extremely well managed by Halliburton, and the gas is there, as we know...flow rates will be determined over the next 2 month or so and could drive the stock way higher. But as I said the other day - the market is also getting pretty excited about the Western Australia-based, conventional gas project, which seems to have the potential to pay for the market cap by itself.

Next Tuesday, Strike will do a presentation in Perth, attended by a large part of it´s retail investors. Again - can only be good for the sentiment! we should not forget, though, that the company could do with some more cash. The question here is, whether they will wait for the flow results to raise some more equity, or wether they will do that sooner. I have no idea - in any case I am hoping for a share price closer to 20ct before they embark on a fund raising of 10-15 Mill A$, which hopefully is still 2-3 month away!

West African Resources - strengthened the management team. Ian Kerr a new board member, with significant experience in building mines, most recently, Gascoyne´s new plant. Padraig Donoghue is the new CFO, also having had this position with several resources producers before. The stock finally got moving today and yesterday - incredible, that this did not happen immediately following their excellent bankable feasibility study. 

Have a nice weekend!


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