Market Update

gold takeovers - Regis - Horizon - Lynas - West African

Good afternoon

big action in the golds today: Barrick is making a paper-bid ( effectively an agreed merger ) for Randgold! ABX got to be one of the biggest value-destructors in the sector - and they have been one of the most active aquirers. They have also been one of the most active sellers - helping for example Northern Star and Evolution to become great companies…Why the hell should you be a shareholder of ABX???

Markets are pretty quiet today, at least in terms of movements…equities slightly down, and metals are giving up some of the very strong gains from Friday. The US$ is weakening, helping gold back up above 1200 US$.

Business Confidence in Germany still positive, but sliding a bit…no surpise, I guess! Draghi is expecting a pick-up in Euro-inflation.

Regis making a paper-bid for little known stock Capricorn, bidding paper at a 90% premium for the advanced explorer. Market cap of CMM before the bid was 45 mill$ -interesting to see, that a leading company is coming down now to the minnows! CMM have a 1.5 mill oz resource at 0,9g gold/t near Newman in Western Australia….Notwithstanding proximity to Regis´operations, I would know one ore two stocks, which offer more value in my opinion! And finally, Beadell also getting a bid, from Great Panther Silver ( whoever that is - don´t know them ), also in paper. A new team trying to get the act together in Brazil? Probably, BDR have nearly completed the hard bit - now shareholders being raped again?? Great Panther has a relatively long list of institutional shareholders - so probably, the company is not that bad.

Horizon Gold, which you might remember was a spin-off from Panoramic, finally is making progress on the exploration front. Announced a good drill hole the other day, and a few really nice ones today. PAN are still a 50.1% shareholder, and manage this small company. Market cap only 10.7 mill$, with a little more than 5 mill$ cash by the end of the current Quarter. They have a resource of 1,25 mill oz at 2,25g - part of which is refractory. The current results of 8m at 19.7g; 6.6m at 11g plus several other, high grade intersections at a property, for which PAN have stated a resource target of between 300-900.000 oz could become significant for this asset, which always needed a few hundred thousand oz extra to make it work. At 10 mill market cap or 5 mill EV, tehre is certainly no upside at all being priced in…The stock could very easily double, if more drilling comes in….we certainyl would be very happy, as most PAN shareholders ( like ourselves! ) subscribed for HRN in the IPO at 40ct. Just look at Capricorn as at above, to get a feel for possible upside…More or less impossible to buy a meaningful amount down here - stock closed 14ct bid - 22ct offer…but at least good for existing shareholders.

Lynas - oh no! The rumoured government review of LYC´s operation in Malaysia has now been confirmed. Apparently, the review committee will be chaired by a long term opponent of the project. While LYC seem to have done everything to the text book, you might remember the emotional discussion of the proejct, before it went into production. Let´s hope, that something like this does not eventuate again - the company does deserve a lot of credit for what they have done over the years. As we say in Germany - one has seen horses throwing up ! Expressing, that the impossible can happen…it certainly can happen in Malaysia, as we have seen before.

West African Resources - just watched Richard Hyde´s presentation in Beaver Creek…very good presentation, unbelievably cheap stock. And looking at ABX buying out Randgold, you wouild have to say, that West Africa comes back en vogue and certainly into perspective again. Any takeover of WAF would need to be pitched at 60ct+ to have a chance of success. Richard pointed out, that there are still several opportunities to reduce AISC from the current 551 US$/oz, and to increase the NPV of the project again - not to talk about exploration! The company ahs had only 2 drill rigs working during the wet season…once over, he will resume with several drill rigs. Expect, though, that underground reserves at M1 will mainly be drilled from the decline, once establihsed. Decline construction will start in October, to ensure, that underground ore will supplement open pit material immediately once plant is operational. The mine is targeted to start production in 2 years time - but I think comissioning could be some time earlier. Financing will be done in the near future! You will not make multiples by investing here ( unless they find another M1 undergound! ), but in terms of risk/return, this is one of my strongest bets.

Have a nice evening


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