Market Update

General - Evolution - Northern Star - Gascoyne - West African

Good afternoon

the torrential rains in Northern Queensland ( which have finished late last week and brought up to 2400mm of rain in about 10 days ) have cost the lifes of up to 500.000 poor cattle…Australian Agricultural alone is estimated to have lost up to 80.000 cattle!

CPI in the States - headline is fine, but underlying inflation a little stronegr than expected at 2.2%. Not sure, whether this is the reason for gold creeping a little higher to 1317 US$ currently, or 1850 A$!!

Equities are higher, again! Almost to good to be true…S&P is up by exactly 10% this year and has recovered a touch more than the terrible fall in december. Trade hopes are cited as the main reason for it. For my taste, equity markets are very ripe for a correction, or at least a pause….

Oil is clearing chart restistance today…not sure, whether I like that, but I guess it will bring attention to commodities generally.

Evolution - Half-Yearly result out today, which was down on pcp, but marginally better than expected. Operating cash flow was 388 mill vs 415 mill A$ pcp. The company is forecasting a materially better result for the second half, if the current gold price will be maintained. All mines of Evolution have been generating cash, with greates distribution from the stunning Ernest Henry, Mt.Carlton and Cowal. The company is spending quite heavily to extend mine life at it´s operations, which is averaging about 10 years now. Net debt is nearly gone, despite capex and dspite of spending quite ehavily ( 30 mill$ ) in exploration, which I think is good news. Dividend was higehr than expected at 3.5ct for the interim.The company continues to use an extremely conservative gold price as basis for the reserve calculation. Jake commented, that EVN are reluctant to aquire projects in a rising gold price enviroment. I totally agree - we have too many companies destroying investors money through aquisitions at the wrong price, and through constantly increasing the gold price forecast. Growth for growth´sake is not what EVN are all about.The company is maintaining guidance of around 750.000 oz at around 875 A$ AISC. The company experienced surpisingly few problems with the Quennsland-based mines - Mt.Carlton lost just one week of production, while disruptions at Ernest Henry were “minimal”.

More detail from the devils mouth at our resources conference in Zurich next Friday !!

Northern Star - also a strong result out. Bill Beamont is making very positive statements about Pogo, which has been their first aquisition outside of Australia. He said, that Pogo is delivering all he expected, and more. If he can repeat, what he has done with the ageing mines he bought in Australia, than it will be a great win for the company. Nevertheless - costs are around 1100 A$ AISC, while EVN experience 225 A$ less. Nobody worries about it at the current gold price - but we all know, that this can change quickly!

Gascoyne - have published a new presentation, which should go a long way to alleviate market concerns - but only, if they start to deliver! They are probably one of the main beneficiaries of the current, very strong A$ gold price -100 A$/ozu make a hell of a difference for them right now, with costs of around 1600 A$, ehile the stripping continues. I do not dare to buy any more….but I think somebody ( corporate ) will, if they deliver over the next few month! There are several smaller producers in Australia with nice cash balances or at least strong balance sheets, which can afford the risk - and I think we will see a lot more M&A among junior producers this year, as tehy are trying to become investable for institutions.

West African Resources - I have nothing to report - but my feeling is, that the share price has turned the corner! Big turnover over the last few days is clearing out the loose holders, while the stock is slowly moving up. I ahve written numerous tiems about them, and look pretty stupid, as the share price has consistently moved in teh wrong direction - despite a lot of good news, and despite being fully financed. The stock is trading at less than half it´s future worth, with no placement to come any more! Insted, I expect strong news from the updated feasibility study, which is expected to confirm 25.000 oz of production over 5 years at AISC of 550 US$/oz. Just too good to be ignored by corporates - and they will get nervous, seeing the stock turning higher!

have a nice evening



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