Market Update

General - Genex - Independence - Mineral Resources - Sandfire - Oz Minerals

Good afternoon

Equities continue to be well supported by the EU/US agreement  ( ? ) on tariffs. 

US tech rally still seems to be intact, despite the Facebook sell-off, and helped by strong results from Google earlier on, and Amazon yesterday. Will be of interest to see the Apple-result next week!

US growth estimate of 4.1% for the 2nd Quarter very strong....Confidence stays high!

Genex Power - the Government is currently working on a new energy program, which is meant to ensure, that gas/power will always be secure in Australia. This new framework is expected to be out in August. GNX would a new long term off-take agreement with a large utility only to be signed, once the new framework is know. I fear this means, that we will see it in September at the earliest. The company is still very confident though, to finish all necessary financing for the new projects this calendar year. In my opinion, extraordnary cheap - for me as a large holder, a little unfortunate to have to wait a little longer - for some of you, this only increases the window of opportunity to accumulate stock. Recall, that the 516 mill$ subordinate debt line from the Northern Australian Infrastructure Fund remains a fix offer, subject mainly to an offtake-agreement.

Mineral Resources - are always good for a surprise! They have entered into a conditional JV with Brockmann, to jointly develope BCK´s, stranded 1 billt iron ore reserve in the Pilbara. This large deposit would be connected via the planned, MIN Light Railway system, which is planned anyway, but will onyl use 20 millt of it´s 50 millt capacity for now. The new JV is planned for 20 millt of iron ore p.a., potentially 30 millt in Stage 2, which would fill up the new rail completely. MIN claim, that the 20 mill$ would be produced within the lowest Quartile of world production at port - which means, that cash costs need to be around 15$ or so. Another positive is, that production - according to MIN - would be at a minimum of 60% iron ore content, which would be at the quality-mid point of ore from FMG at the lower end, and BHP/RIO at the upper end. I am speculating here - but using a 60$ iron ore price, and 15$/t cost at port, this could leave easily 20$ in free cash/t for the JV-partners. For MIN, this would also make sure, that the amortisation of their 1.5bill$ rail system would be very much stronger. Planned capex for the mine has been quoted by MIN at 300 mill$ pre rail. It sounds almost odd to bring on a new mine - but I think there would be a ready market for 60%+ iron ore material -but to the detriment of 57-58% iron ore from Fortescue. Another reason to buy MIN, probably - but probably also another reason to sell FMG?

Sandfire - delivered an excellent Quarterly with higehr production at lower costs than expected - but also issued a relatively weak guidance for this year. I never liekd management, and the asset, while printing money in the moment, has got limited mine life only. Despite of trying, they have not found any extensions/ new orebodies so far... M&A might follow, and I have my doubts as to management´s wisdom! Not a stock to hold for me, despite the fall today. 

Oz Minerals - is a different cattle of fish alltogether, with good management, and a good outlook as a copper producer. But relative to others in the space, and relative to the copper price, they have done very well. I think at current levels between 9.50- and 10$, the stock is fully valued for now. Don´t forget, that copper is trading 1000$ below recent highs in June.

Independence - confirmed my view with today´s Quarterly, that there is very little reason to hold them at current levels, which gives them nearly 3 bill$ in market cap ( and also EV, as net debt is close to zero ). Tropicana Gold ( which they call a world class mine, with AISC just under 1100 A$/oz last Quarter ) is not performing that great, and the Nova Nickel Mine has also disappointed for a few Quarters and is yet to produce for a full Quarter at planned levels. 


have a nice weekend - I will disappear to a Northern German Island!