Market Update

General - Graphex - and again, the Prairie-saga

Good afternoon

Goldmans believe, that there is more downside to metal prices in the short term, because of the asset class being singled out by investors as the one toplay, when it comes to more bad news from the US tariff debacle. Fundamentally, they believe the metals to be cheap.

US 10-year bonds are weaker again - trading just below 3% yield...the wage number from Friday is still taking it´s toll, and a bit of talk about inflation around! But if you think, that this talk should help gold - wrong - nothing happening , but base metals got weaker later in the European afternoon. 

Market talk with regards to Electric Vehicles has changed over the summer holidays...while previously, cobalt and lithium had been singled out to be the hottest commodities with regards to strongly rising takeup of electric vehicles over the next few years, consumers of the stuff are now getting more concerned about nickel ( where Scott Mackenzie is expecting 28.000 US$/t in 2-3 years ) and graphite, where the ongoing start-up problems of Syrah have raised concerns about supply. This brings me to little 

Graphex Mining - which will not really produce the type of graphite needed in the battery industry, but in the Chinese building industry. Legislative changes there require companies to include expandable graphite as a flame retardent for certain building materials, as you might remember. This legislationhas not really been inforced so far - very similar to the strict enviromental laws in China, which in fact have been inforced and are bing inforced progressively now. We have seen the massive impact of tehse changes in coal and irone ore, especially, where the world market has subsequently seen some profound changes. In graphite, the material needed is simply not available so far - some observers have been quoted as 2 millt p.a. being required in a few years time. Little Graphex Mining is only planning to produce 50.000t p.a. initially, and doubling up a few years later. 

Their major problem has been so far, that the saga surrounding Acacia/Barrick has made Tanzania a non-investable, and even worse, a non-financable country. This is changing!!! And faster, than I feared! Little Australian company Walkabout Resources have very recently recived their Mining License for a graphite project, and Black Rock Mining have received their Enviromental License. So - things are happening again in Tanzania! Also, last weeks large , African mining conference in Perth had a surprise attendant: The Tanzanian, Deputy Minister of Mines. The country had previously not been seen at any of the large, African mining conferences for years - and he made all  the right noises as well! 

You might remember, that the originally planned, Chinese JV-partner dropepd of GPX´s list, as they were not happy with Tanzania, and the uncertain enviroment there, leading GPX to intensify talks with Private Equity guys, who in the meantime, have been doing extensive studies on the project. It is public knowledge, that an updated feasibility study, and a financing proposal have been worked on for a few month now. I am expecting at least the updated study,and hopefully a conditional financing to be announced in the very short term - next month or so. If anything, the demand for GPX´s product, expandable graphite, is looking healthier than ever, and prices are still very strong - certainly stronger than the price deck used in the original feasibility study. More detail about prices, the exact quality of product, operating costs and capex will be known, once the feasibility study is out in a few weeks time. But you might remember, that analyst reports have been valuing Graphex at 1.50-2,40 A$/share....compared to todays depressed 22ct!! I think the next few weeks do provide enough time to revisit the stock, do some research again, and accumulate a position ( or to average down ! ).No doubt in my mind, that the company will - at some stage - need more equity to stem the 60-70 mill$ 

Prairie - the saga continues...todays talk in Polands internet is, that the CEO of JSW might stay...but the hammering of PDZ´s share price in Poland continues, Stock closed at the equivalent of 44ct Australian - I am almost temped to buy a few again! It just makes too much sense for JSW to take out Prairie or buy the assets...but IF the  CEO of JSW leaves, any potential deal would be pushed out by a few month. I have never seen a company without CEO making a meaningful aquisition!

Have a nice evening



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