Market Update

General - Lynas - Iron ore - Liontown - Silver lake/Doray

Good afternoon

Mnuchin calls trade talks so far “productive”…whatever that means! Perhaps more importantly, Xi also comments on significant progress!

Credit is growing strongly in China!

Equities continue to power ahead -strong as a bull! Remarkable, especially in light of most economic indicators coming in weaker lately!

European Car Sales down 4% in January….Europe erally not looking any good in the moment! Slowly but surely sliding into a mild recession, if we don´t get a US/China trade agreement soon??

Industrial Production in the US also weaker than expected

Iron ore - Macquarie expects reducing prices into the second half…sounds about right to me. The wildcard: More stringent measures taken by the regulator on “wet tailings” in Brazil, further reducing production tehre. About 40% of Brazilian production uses wet tailings dams. But under the line, I have doubts, whether the recent, very strong performance of BHP and RIO can be continued. perhaps time to take some profits? Don´t forget, that BHP have paid 2.50 US$ in dividends over the last 12 month as well, beside of performing very nicely. I think the very mining-friendly new premier in Brazil will not allow to get his main tax payer ( which is partly owned by government ) hurt too much - so I tend to go along with Macquarie´s assessment of iron ore prices going forward.

Liontown - completes a placement for 3 mill A$, and announces a 1:5 rights issue at 2ct to raise a total of just undr 8 mill A$. For the first time ( ever, I think ) Liontown will have sufficient funds to advance their two lithium projects. Tim Goyder, Chairman and largest shareholder, will take up his full entitlement. Directors also subscribed to an additional 350.000$ in the placement. I applied for some shares as well, and got cut back - I understand, tha the placement was quite substantially oversubscribed. Unusual these days - testimony to the strong results from their scoping study, excellent further drilling results, but also slowly improving sentiment towards small stocks. The company will present in Zurich enxt Friday, and I am looking forward to their prsentation - should be a good one! Worth accumulating during the rights issue, usually a great time to buy.

Lynas - have started to find a solution to one of their two residues - albeit the easier one. The difficult one, being very slightly radiocative weill be harder. The main point for me is, that they have founds a solution together with the government, giving me hope for a more constructive relationship between them.

Silver Lake / Doray Minerals - the shareholder meeting to approve the merger will take place on 22.3.2019 - shortly thereafter, the merger will proceed. Contrary to the merger mania at the big end of town, this merger makes a lot of sense in my opinion. Not only will headoffice costs be dramatiaclly reduced - the company will have more flexibility, improve purchasing terms, and will be more investable for larger players. I took an initial position in Silver Lake recently. I think the merger will create a reasonably good company, with room for improvement in terms of asset-quality. The great A$-gold price creates a good enviroment for players like this, which operate relatively high cost, underground operations with limited mine life. The opportunity will be there to spend the saved 7-8 mill$ ( my guess ) in administration costs on exploration, and continue with the aquisition of smaller-sized producers, which are too small for the EVN´s and NST´s, but are still able to improve the asset-quality. In a word - crating anotehr small Evolution. That is at least the opportunity! Delivery, certainly, will be the real test! The combined operations should produce around 230.000 oz pa and generate around 100 mill$ in EBITDA p.a., while having a very healthy balance sheet with some room to manoeuvre.

Have a nice weekend!


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