Market Update

General - galena - Newcrest - Liontown - Syrah

Good afternoon

equity markets are gradually moving higher today - investors are happy with Apple and Boing´s earnings - I guess investors are also eagerly watching the FED as well as US/Chinese negotiations today. Bonds continue their sideways move at high level, and metals are having another good day! Copper and nickel the standout

Gold ETF´s had another very big day yesterday, with inflows of 300.000 oz.

Markets are just so often exhibiting all signs of herd mentality…the latest examples being cobalt and nickel. Cobalt, for which VW asked mining companies to tender in a long term contract, without getting a single offer, has fallen from a top of nearly 95.000$/t to 36.500 in just 7 month. Some analysts are calling down to 20.000$ or so….I am sure, that enough of the stuff will be needed by EV´s / batteries over the enxt few years, to have the price back up to at least 50.000$, probably more. At current levels, you will not see a single, new project get off the ground!

The trend is your friend - rising prices are sucking in investor money - and certainly, rising prices in commodity are getting momentum-funds moving! All this applis to gold currently - feels good! I think we need much higher share prices for the North American producers to get into the aquisition-frenzy again - but we are getting there! I am watching the likes of Iamgold, Semafo, B2Gold - the latter 2 are moving strongly - for them to finally get enough appetite to swallow my little, and redicioulisly cheap, West African Resources!

Nickel is another one - nobody wanted it one month ago. Now it´s trading nearly 20% higher - with no apparent reason except for the fear, that Vale will have to curtail not only it´s iron ore production, but also some nickel production. - and certainly the fact, that it was very cheap ..and hopefully, still is!

The POM´s still don´t know what to do with themselves, and are playing strange games re BREXIT

Vale is still the big story in the mining world today. The company will cut 40 millt of iron ore production - closing a few tailing dams - but is also expecting to ramp up production at other mines to make up for it. But 40 millt is a lot of material - you just cannot increase production by that amount within say 1-2 month. And when courts have frozen your bank accounts ( to potentially come up for the tragedy ) , it does not make it any easier! Sadly, Vales dimiss has been a major boon to Australian iron ore producers today…especially Fortescue went through the roof today. The iron ore price without any doubt will profit big time from the desaster - the only question whether it will trade 5-or 10$ higher because of it. FMG especially is highly leveraged to iron ore - that´s all they do! - while RIO as well as BHP profit significantly from it as well. It will be interesting to watch, which type of iron ore will profit the most - whether it´s high grade ore from companies like Mt.Gibson, or low-grade material from MIN or FMG. There is also some talk about shipping rates coming under pressure again because of less material being shipped from Brazil - at least in the short term.

Galena Mining - Galena is developing the Abra lead deposit in Australia. Today, the company announced the sale of 40% of the project to Toho, the Japanese smelting/mining company, for 90 mill A$. 20 Mill immediately, another 10 after the feasibility study is finished, and 60 mill A$, once the balance of project finance has been approved. An update PFS is sue soon - the BFS will be out by mid-year. For Galena, certainly very good news: The company is capped at only 80 mill EV, which is obviously a lot less than the 60% of the project they keep, based on the transaction. Great to see, that corporates are still doing deals even pre a BFS, and at a significant premium to the share price. Initial production is planned for 2021. This is anotehr good example, for how long mining developments often take - and this is not a major project, nor is it in some weird country….I invested in Abra Mining ( the owner of the original owner of the deposit ) on the advice of some smart geologists back in 2007!

Newcrest - had a strong Quarter! Cadia was outstanding: 239.000 oz in the Quarter at AISC of 121 US$/oz are clearly outstanding. The other mines were ok - but Cadia is the outstanding cash generator for the company. Newcrest is not really cheap, despite it´s long underperformance - and Cadia accounts for about 60% of it´s value. The well-documented problems of the main ( dam-failure, seismic activity ) over the last year or so make Newcrest vulnerable to any potential problems at this mine complex. Depsite this strong Quarter, little reason to buy NCM, in my opinion!

Liontown - the first broker report in a long time was published yesterday; arriving at a 12ct/share ( NPV10%) versus current share price of 2.5ct. The report followed on from the announcement of a positive scoping study by Liontown the other day . I like management, and I like the project - and not to forget, the company has got a second lithium project, which is shaping up to be sizeable as well. The pre-production capex of 230 mill A$ is not all that crazy as well. All good enough to have a foot in the door here. The problems: I am not 100% sure, whether the market will be happy to finance yet another lithium project, since share prices of more advanced companies have been rather weak. Recent corporate deals, though, indicate, that there is still appetite out there for lithium. Secondly - the company has got less than 1 mill$ cash in the bank…some kind of equity raise cannot be far away. It will be interesting to see their presentation in Zurich , 22nd of Feb!

Syrah - this remains a hard call! Stock fell quite heavily today, folllwing the Quarterly Report. Costs continue to be an issue, and will only trend down to 400 US$/t over the year - which is a rather cautious statement by the company, which expects to receive between 500-and 600 US$/t for it´s product. There is very little room for error here - and one has to say, that over the recent history of Syrah, “errors” and similar surprises, coupled with bad luck, have been the norm rather than the exception! Some people are also of the opinion, that the design of the plant has been wrong from the beginning - producing the wrong material. It´s very hard to judge on this - the industry is very young, and there are very few experts out there. The price is big, as Syrah could/should be the major graphite producer in the world…and if would be a holder, I would probably keep them - but I am not a buyer until things become clearer!

Have a nice evening


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