Market Update

Australian Resources Conference Zurich - General - Oceanagold - Bellevue Gold - Graphex/Black Rock Mining - Lucapa Diamonds

^Good afternoon

Many people have registered, but I a missing a few…If you have not done so already, please use the following link to register for the

Australian Resources Conference Zurich, Hotel Baur au Lac, 22nd of February 2019

You will also find the attending company there

German IFO Index of investor confidence yesterday at the lowest since 2014….

Very strong labor market numbers on Friday inspired investors to take some gold off the table, but continue to help the base metals…nickel up 5% yesterday - down 2% today. Unusual divergence in base metal performance today: zinc pretty weak/copper pretty strong

Iron ore continues it´s sad run - 87$ yesterday. vale´s tragedy is the Australian´s luck…late yesterday, a Brazilian court ordered another 30 millt producer to shut down - at least temporarely. The marginal producers like Mineral Resources are the biggest beneficiaries - but god knows for how long these mine closures in Brazil will last. Probably not for too long - the country needs the money, and indirectly, Government is the largest shareholder of Vale.

For us it´s a little frustrating to see Rio/BHP/FMG tio make multi-year highs, while our risk-stocks are languishing…at current levels for iron ore, BHP/RIO/FMG are making an absolut killing with costs of around 25 US$ incl transport, and 87$ price…multiply that with a few hundred millt in each case, and the numbers are staggering! Lucky Australia - Iron ore, coal + LNG all doing pretty well at the same time, with gold and battery minerals also igniting some new projects - yet the country is at best bumping along…

Ghana is making noises at INDABA - they want stop to make foreigners rich and participate more in “extraordinary” profits from mining. Not what we like to hear…There certainly are a few examples of great mines in Ghana - but many are mediocre as well. At first, they should get rid of illegal, Chinese mining, which devastates the enviroment! Zambian Finance Minister re-affirms their stance on increased royalties, as well as extra 10% on copper, if prices exceed 7.500$/t.

Anglo American Platinum sees 10-15 years of supply-deficit in palladium…Citi is seeing a price of 1600US$/oz. If these things come true, Panoramic´s PGM-resource Panton in Australia, which contains 2.3 mill oz of PGM , of which 55% is palladium, could be worth quite a bit of money! PGM´s outside of South Africa and Russia are very rare…

Bellevue Gold - none of the above problems for these guys! Another excellent resource upgrade today, even though in inferred reseources. 500.000oz every three/four month to 1.53 mill oz at 11.8g at a cut-off grade of 3.5g as at today is very impressive indeed! 50% increase in t and 47% increase of contained metal ( and the entire increase from “Bellevue Surrounds” ) is very positive! 4 drill rigs drilling - targeting extensions as well as infilling. Maximum depth 600m so far…and the next resource increase targeted for the 2nd Quarter. In the summer, the company will need cash again - 13.7 mill$ as at 31.12., but heavy drilling will finish this off by July or so…Nothing wrong with that - the next resource increase will hopefully show some extensions of the ultra-high grade Viago Lode. In my opinion, they are on track for 2 mill oz, with a large ground position. Ideal for some of the neighbours like NST , Goldfields or St Barbara….high grades = low costs are a beautiful thing. As I said before - I am a little bit held back because of the 120 mill performance shares + options - but sometimes you have to look past that! Metallurgical results so far have been outstanding as well. You won´t get rich with BGL - i.e. you will not make multiples ( Macquarie is valuing them at 70ct in the moment, using 1 mill oz mining reserve, which is not unreasonable ) - but then who knows, and in my opinion, you are not paying for much upside today for what is shaping up to be a pretty extraordinary resource.

Oceana - slightly disappointing - guidance for 2019 has been on the low side in terms of production, and on the high side for costs, triggering some limited downgrades by analysts. On the positive side, they received mining approval for Martha Underground in NZ, which continues the positive run the company has had in NZ. OGC are spending 50 mill or on exploration this year, and past success should augur well for this money being spent wisely. Nevertheless - not a drama, but not a good announcement today!

Black Rock Mining / Graphex Mining - I own both stocks, and both released new presentations on their respective projects in Tanzania to produce graphite. Interesting enough, that both are targeting the market for large flake size, expandable graphite , which is mainly used as a flame retardent in building materials, not so much for batteries ( contrary to say Syrah, which produces a different product ). Black Rock appears a little further advanced, as tehy have finished the DFS and have done extensive pilot plant testing on a relatively large scale, enabling them to conclude off-take agreements for their planned production. They have a number of applications left to receive in Tnazania, but have recently reported good progress. Their receipt seems to be possible in the near future. They have not done a deal on financing as yet! The share price has nearly doubled recently, mainly driven by a strong research report.

Graphex have planned a smaller project, and are working to finish the DFS by mid-year. Their IRR appears much higher than for BKT - but the off-take agreements are not as advanced as those of BKT. First investment is only 80 Mill US vs 115 mill US for BKT, which is also an advantage. Application for mining lease etc is far advanced, but approval does not appear to be as imminent as for BKT. While GPX have not done as much work on testing as BKT ( I believe ), their product quality appears superior to BKT´s and to every project I have looked at.

In terms of market cap, both stocks are very cheap - GPX 16.5 mill A$ and BKT 40 mill A$…both companies will need more equity, but GPX have the advantage of just having received a 5 mill US$ loan from a hedge fund, to finish the DFS - so no funds needed for the next few month. I think that might be different for BKT…

Overall - both stocks have their pro´s and contra´s - I think both are very cheap. I hope that GPX might be able to profit a little from BKT´s great performance recently, while BKT will probably raise some money after Indaba ( ? ). Both will profit greatly from an improved perception on Tanzania, which I think is coming ( from a very low base! ). And finally - both stocks would have to move dramatically higher to come only close to their NPV! In essence - you should own a few of both!

Lucapa Diamonds - further to my recent quick update, a few more details from their INDABA-presentation: Large increase of production from the Lulo Mine in Angola from introduction of an additional shift, increaseing througput/mining by roughly 30%….easily financed by existing cash flow and recent, very succesfull sales. In Lesotho, potentially doubling production by 2nd Half 2021. Revised guidance will be announced early in the June Quarter - based on very strong grades, guidance can only be positive! The company will also release a cash flow model - so far, the market has a difficult task to model any numbers around the project. The first sale of Lesotho diamonds will take place this February in Antwerp, incl special stones. As I wrote the other day - I think there should be some very positive newsflow coming up, and the company could be one of the winners from the current INDABA conference.

Have a nice evening


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