Market Update

Ramelius/Explaurum - Sheffield - Peel - Prairie - Paringa

Good afternoon

no major moves in metals and equities today, while Trump is mulling further tariffs on Chinese imports...

Ramelius/Explaurum - RMS making a hostile bid for Explaurum today, bidding 1 share in RMS for 4 shares in EXU, equivalent to 0,1125 A$, based in RMS closing price today, or 54 Mill A$ ( market cap just about the same as EV ). This is interesting, as a) - it´s hostile, and b), it involves a junior gold miner bidding for an even more junior developer. EXU have a reserve of 485.000 oz at 2,09g in WA, and a resource of 675.000 oz at 1,79g gold/t. The company is working on financing etc, and hope to be in production in the first half of 2020. Planned is a 100.000oz mine, with a 1.5 millt plant, for 120 mill A$ capital cost. Planned AISC of 1000 A$/t ( this seems to be the number for new, Australian gold projects! ). EXU have already rejected the bid as it would undervalue it´s assets. 

I find this bid interesting as it provides a benchmark for our little Breaker Resources. Breaker are say 12 month behind Explaurum in their development, but already have significantly larger resources of 1.08 mill oz, including a high grade core of 808.000oz at 2g - very similar grades to EXU. The company has also demonstrated through various drill holes, that the underground potential is very significant ( exploration target of more than 1 mill oz ) at riding grades, and the resource is open in all directions. In my opinion, BRB´s Lake Roe project offers much larger upside. The market cap of Breaker today is 10% lower than EXU´s. I think the strong share price of Breaker today is due to a very positive research report by Bell Potter ( which was already ouit late last week ), and perhaps even more so, this takeover bid for EXU. In my opinion, the chances to add a few nunded thousand oz over the next 4-6 month, are significant, and compared to EXU, I think BRB are way too cheap.

The other one, which is in a similar league, is Gascoyne. 650.00 oz in reserves, 1.3 mill oz in resources - again, good exploration upside - and 1000 A$/oz a second deposit with 1mill oz in resources, which got to be worth something...also in WA...and in production - I assume, in full production from next month on. EV of approx 190 mill A$ - that is exactly the same EV as Expluarum, once in full production...but with 40% more reserves. As always, when things are not going well, there are funny rmours going around, like the one,  that the largest pit would still be full of water ( but they announced, that ore is being delivered from all 3 pits now ). I think if that stock does not go up any time soon, they might be bid for as well ( and Ramelius said, that they are continuing to look for opportunities ). This is, unless GCY have a major problem at their hands - the only one I can potentially see being grades not reconciling!

Peel Mining - that´s one I have on my watch-list. The company has just done another placement + announced a rights issue, ex-Date 13th of Sept - which means, that the stock will not do much for the next 4 weeks. But St Barbara have increased their holding to 18% of the company. Peel have released a myriad of excellent drilling results from their multi-metal deposit in Cobar, N.S.W., over the last year, and had a good run, until they cam,e under pressure in this terrible market ( stock has had a high of 80ct in February, now at 41ct, rights issue at 36ct ). They have now come back to a reasonable level, Following the next round of drilling, the company is planning to calculate a maiden resource.The current rights-issue might weaken the stock, and could be a good buying opportunity...but if you want it a little saver, wait for the maiden resource!

Sirius Minerals - interesting for followers of potash...announced major cost increases for their planned mine in Yorkshire - mainly for the massive tunnel, planned to deliver the stuff over ( for memory ) 15km! to the port ...Not really a surprise...but nevertheless, the market cap of this thing is still 1.2 bill Sterling....not one for widows. The stock seems to be mainly supported by generalists, which makes me very very cautious! If you ask me, this won´t be the last hurdle on the way for this adventerous development...

Sheffield Resouces - managed to make another step forward to get to their full, native title...and following that, the mining lease. The stock has been extremely well supported in almost any market over the last few month...I think the final leg might well be some corporate action, hence I am not selling a share yet. Mineral sand markets look extremely strong , still - slowly but surely increasing demand is meeting mine production, which is slated to fall over the next few years, and massive problems at the world´s largest mine in South Africa. The stock closed at a recent high - just shy of an alltime high - and I think there is still a lot of room left!

Paringa - announced the first drawdown of debt from Macquarie, having finalised all conditions precedent under the loan agreement.The second tranche will not be needed before the 1st Quarter 2019, and is meant to be for working capital during the ramp-up phase of ther coal mine in the US. The company is also updating on the coal market in the US, which has profited substantially from high world market prices for thermal coal, making it profitabel to export. Prices in the Illinois Basin have been reported around 44,50 US$, which is at least as high as anticipated by analysts, and due to the weak A$, report to higher numbers even in the Australian P&L statement. Strong growth in Natural Gas demand in the States, and a pipeline of large LNG-projects for export are the drivers of a positive outlook as well. Natur Gas is the main alternative to coal fired power in the US. Construction of the plant and the mine is now going according to plan, following some delays in August, and first coal is still anticipated for December. I think this is a tight schedule - anyway - another month delay will not be a major problem, I think, as the Macquarie credit line can now be used. The company has had its fair share of problems this year and therefore, I think the market will wait for first coal to be produced, to re-rate Paringa again to a more reasonable level.

Prairie Mining - weak in Poland today! The CEO of JSW is rumoured to be sacked this week by the government, which owns a controlling stake in JSW. The story is, that JSW is being pushed to invest in another, state-owned company, which is in severe trouble. JSW´s unions are supoorting their CEO, and talk of extorting JSW. This is clearly not a good situation for the company, and sounds like more trouble ahead. Certainly not nice, if you are in the middle of making a decision to lodege a full bid ( potentially ) for Prairie Mining! This action could be testing our patience!

Have a nice evening


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