Market Update

General - Perseus - Lucapa - Strike -St Barbara

Good afternoon

German PMI is VERY weak, and much worse than expected. Following the bad news, German 10-year bonds trading at a negative yield for the first time since 2016. In light of these facts, I think Angela Merkel might come under pressure to do something for the economy….probably,. she should!

The US PMI is also slightly weaker than expected, but still in growth-territory - contrary to the German PMI. Existing Home Sales very strong.

The US$ is pretty strong against the Euro today - but I think this is rather Euro-weakness than US$-strength, based on this crazy and stupid BREXIT saga.

Nickel stocks continue to fall at a strong pace…13.000t over the last 4 weeks ( of which 8.000 just in the last 8 days ! )…at this speed, LME stocks in nickel will be gone by the end of this year! Zinc stocks are even lower - hitting a 30-year low today. Base metals are flattish today, held back by a strong US$. Gold is up by a few $ - are Brexit-problems helping?

Martin Wolf and Phillip Stephens bot hammering Mrs.may in a way I ahve hardly read in the FT…right they are….A hard BREXIT becomes a distinct possibility….and I think equity markets in Europe are retreating today in fear of that. BREXIT will be a clear negative for us - but it will be devastating for the POM´s, I believe. Thank you Mr. Cameron!!

Perseus - looks very strong on the charts, having cleared 50ct…the next target is 60ct, which fundamentally would be justified as well. It´s very positive, that the stock is now trading nicely above the option exercise price of 44ct, maturity 15.4.. Financing for Yaoure should be all but a done deal now…55 mill A$ in additional equity are just what the company needed! Yaoure should get into construction this year now - financing I guess late in the 2nd Quarter?

Lucapa Diamonds - announced a very strong resource increase for their Angolan mine…Since the previous statement from 31.5.2017, the mine has produced 30.000 ct - nevertheless, the new resource has increased by 90% to a current 80.400 ct. The resource is only inferred - that is in light of the resource being entirely alluvial, which makes it impossible to have a higher-confidence resource. The consultant has estimated an average value/carat of 1.420 US$, which is an improvement of 17% vs the previous estimate. Probably very conservative, as the company has received an average price of 2.100 US$, which makes it one of the highest value diamond mines in the world. The announcement supports the companies plan to double the mining rate in Lulo this year. I think they are very cheap indeed - the stock is probably suffering from the bad performance of diamond stocks generally!

Strike - updated on Jaws today. The well is functioning as planned - thank´s god! Water is being pumped, and pressure is rising - the well is back to sporadic gas flares, and seems to be on the right track.

St Barbara - received an absolute hammering today! The company has cut guidance by about 15.000 oz this year - but the main story is, that the mining operations will not use hydraulic lifting , but trucks. The reason for this has been a doubling of potential capex….The mine will not run in the medium term on the assumed 1.4 millt p.a., , but at 1.1 millt - resulting in much lower production in years to come. Probably, the heavy fall today has been overdone - but the management has to live with the criticism, that they have not made the company less dependant on the Gwalia mine much earlier. Again, the story shows the vagaries of mining, and the fact, that risks can be mitigated by mining from a number of different mines! Look at Evolution….

Have a nice weekend!


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