Market Update

General - Strike - Prairie Mining - Paringa - Genex - West African

Good afternoon

 from my best friends 60th birthday in Mallorca, I am back in the real world!

We have just finished the warmest May since at least 1881 here, and everybody is wondering, what will happen in summer, with spring seeing several days with above 3o degrees! No - there is no global warming!!!

I am absolutely amazed, how well financial markets are doing! Trade war, Trump, Italy, Spain - a G6-against 1 meeting of finance ministers on the weekend, and what promises to be an interesting "G6-against 1" coming up - nothing seems to be bad enough to derail markets! 

Some excellent labor-market numbers in the States have certainly helped to bolster confidence, but the  ( much less important ) investor confidence in Germany today was hit by the Italian malaise.

Escondida´s workers handed in the most agressive pay-demand seen so far, pointing out, that the world´s largest copper mine cash costs are falling, while copper prices have generally been rising...This one could turn out to be ugly, and many others are watching the outcome. So far, we have had relatively little disruption of copper production this year - this could change!

Nickel has been the absolute standout base metal this year so far. Most commentators are surprised about the short term strength, given the fact, that current prices of around 7 US$/lb are great incentive for NPI producers to churn out whatever is possible. Perhaps todays announcement by the Shanghai Metals Exchange, to think about starting a seperate contract for nickel briquette ( = Nickel Cathode for battery-use ) has been bullish for some investors. In any case - what a fantastic price for producers like IGO, WSA and my favourite, Panoramic ( from which we are all expecting an announcement to go back into production some time this month?? ). Until now, it has been a golden decision to not rush back into production, especially, as financing for nickel projects is becoming more agressive by the month!

Strike Energy - I am sure you can imagine my gratification about the best turnover in the stock in many years!! Nearly 20 mill shares changed hands, and the stock closed 28% up!! I have been waiting for this one for sooooo long! Anyway - the company announced, that the 7-day fracking has been completed, and has been very succesfull! This is the first fracking of this kind being done in Australia, and I think many specialists have been watching it with quite a bit of scepticism! The gas has been known to be in place for some time - the fracking has been very successfull - now the most important part of this well Jaws-1 is to come: The flow-rate! Technical risk has been minimised now, the pumps will start pumping by latest mid-July. But in the meantime, I am expecting some more technical information, which should keep interest at a very high level. So - some more luck needed - but since we have been waiting for it for at least five years ( and sometimes in despair! ), I think it would be very well deserved!!

Genex - the ramp-up of Stage1 of their solar-pump-wind project is more or less fully ramped up now, and so called practical completion is to be expected as anticipated in July, from which time on the guaranteed price deal will be in place. Financing for the pump-hydro and the Solar Stage 2 projects is advancing - political pressure on the North Australian Infrastructure Fund, to finally get a few projects going, is still massive. Not sure, whether the plan to have a breakthrough here in June can be fulfilled - but by July I am very hopeful to see strong progress. I am not sure, whether I have reported here about a possible add-on deal, to install 150 MW of wind power as well. Basic landowner agreements have been but in place, and GNX could be the first project ( I think worldwide ) to combine solar-, wind- and hydro-power on large scale. I am still a large holder here as well.

West African Resources - reported some more excellent drilling results last week. Infill drilling from shallower zones at the M1 highgrade resource delivered as planned, as well as step-out drilling at a depth of about 550m, and about 20m apart from previous high grade results. The latter assays are not out as yet, but the drill core included intersections with visible gold. This latest extension will not be included in the up-coming resource estimate, as they are too late for this to be included. The announcement is expected this month! Important also, that results from drilling of the M5 deposit have also been very positive, and should help to start a scoping study into underground mining of this deposit as well. As you know, I ahve been slightly disappointed by the size of the recent placement ( which as heavily oversubcribed ) at the current price of 32ct. But as the company is now planning to go it alone on development, it made sense - enabling early development of underground access to the very high grade ore. I remain very positive here - the resource/reserve statement, as well as the full feasibility study within a month, should be very exciting!!

Prairie Mining - oh no!! Another blow! It appears that they got completely f...ed over by Polish nationalism! Yes, they have positive court decisions on their side...but does that help them? No....International arbitration is certainly a very valid option, and I do expect the company to take this route - they have to, in the interest of their shareholders money, and to protect this. Obviously, that will / would take time, I suspect years. The other way out is certainly still a sale to JSW, the Polish coal miner. The CEO of JSW is today quoted in Polish newspapers, to still talk to PDZ about buying some subsidiaries, some assets, or the entire company. At the same time, he is talking down the assets. I guess negotiations between JSW and PDZ will have to arrive at a reasonable price to avoid international arbitration - but what will a resonable price be?? Certainly far from "real value" - but I suspect above current share price? The company has exercised it´s right to force conversion of some convertible bonds at 33 USct - that´s about 43 Act. I think it would be very unfair to come to a deal with JSW below a valuation of thet price. Nobody really knows at this stage...I am keeping the stock in my portfolio, but I do not dare to buy any, as one probably should.

Paringa - the disappointing and surprisingly large placement/rights issue closes this week. As one would expect, the stock has come down to the placement price of 22ct. Broker estimates I have seen post the rights issue value them at anything between 33ct and 55ct....The market leader in this field in the States, Alliance Resource Partners, have jumped from recent lows below 16$ to nearly 20$...A much nicer share price to make a paper bid for PNL? In any case, I believe that the current pricing in the market is more due to technical issues, than fundamentals...deep value, in my opinion - and thank god, it´s not in Poland!! The first mine will now be in production in the 4th Quarter, to be cash flow positive in the second Quarter 2019. On company numbers, they should produce 41 mill A$ in EBITDA in 2019/2020, and more thereafter.

Australian gold miners have now outperformed their North Amrican counterparts for 5 years or so...and this outperformance has continued this year, and even last month. To be very honest - and you know, how much sympathy I have for my Australian friends, and especially Evolution - this cannot continue??!! It only applies to the fabulous 5 - EVN, SBM, NST, RRL and SAR...especially the stocks active in Western Africa have been left behind big time, like Perseus or Resolute. In light of the detoriation of some of theses countries, perhaps understandable - but also overdone? 

Have a nice evening


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