Market Update

General - the relentless fall of nickel stocks on the LME - Panoramic

Good afternoon

markets like the prospect of corporate tax cuts in China to support the economy…but this BREXIT-stuff is not helping at all, and as the day progresses, stocks are coming under pressure

Producer Price Index in the States a touch lower than expected, especially ex Food and Energy.

Preliminary comments from the Office of Statistics in Germany imply, that the last Quarter 2018 has been slightly positive for German GDP-growth - following -0,2% in teh 3rd Quarter. Rather weak, following a great goldi-locks time for Germany. Government is already thinking about possible support-programs….German 10-year bonds are tarding at 0,2% yield - the lowest ever except for a few month back in 2016. About a year ago, the yield hit a recent high of 0,75%.

Gold ETF-holdings rise for the 12th consecutive day, while gold is hovering just below the important 1300-level. I guess we might need a breather, before it hopefully manages to break to the topside!

Metals also greenish - nickel the standout at about +1.7% late afternoon. Charts are sometimes hard to believe - but the nickel chart looks very good and has a target of 14.000US$t and 18.000 A$/t ( from 16.000 as we speak ). That would be an excellent price! UBS sees continued deficits, averaging 45.000 t per year for the next few years , and expect higher prices, needed to incentivise higher production . Even at 10% higher prices than todays 11.500 US$t, not much new nickel will come to markets! We spoke to Western Areas last month, and their new mine will have breakeven at I guess 15.600 A$/t ( they only quote cash breakeven of 6.10 A$/lb = 13500 A$/t, and that would not include sustaining capital, estimated at 1$/lb - not even to talk about depreciation of the 300 Mill A$ pre-production capex, and a risk-premium ). This project is a good example - without expecting significantly higher nickel prices, new mines will be a rare thing! Nickel stocks in London down by another 1590 t today - we are currently experiencing the largest 5-day fall in a long time.

Panoramic - updated on ramp-up of Savannah today. Company had a few little issues, mainly relating to a tight market for labor - about 60 out of 240 or so jobs are currently filled by contractors - and a severe storm, which did some damage. The company gas drawn the credit line of 40 mill A$ to 28 Mill A$, with cash at bank estimated to be close to 10 Mill A$ - so liquidity is no issue at all. Once cash comes in, I think net debt won´t be far off 40 mill A$ - but that has been expected. By early January, throughput was exceeding 2.000t per day - ultimately, the plant will be able to do about 2.700t/day. Concentrate shipments have been started to the port, and first shipment to China will be in early February - probably 2 weeks later than I hoped for. But all good, and equally important, the development of Savannah North has started, to enable access to that ( higher grade ) ore body from late this year.

Peter will present at our conference on the 22nd of Feb in Zurich - by that time, the ramp-up might be finished, and cash is coming into the door!

Have a nice evening


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