Market Update

General - Min Res - Metals Ex

Good afternoon

as much as I like it - these markets are starting to scare me! More and more bad economic news from around the world….BREXIT….ok - perhaps some more hope for a trade deal - but still…I am amazed by the run of equities! The bad days in December are completely forgotten, and liquidity is ruling again!

Lyft listed today with almost perfect timing - size increased, bookbuild increased, and trading at a Wall Street bankers are getting very excited and som am I!

I think this weight of cash is also affecting base metals. While we all know, that major companies are having price-protection of their products at the forefront of their minds - hence very limited future supply coming - these mediocre ( to say the least ) economic numbers are certainly not positive for metal consumption, either - but the prices are very strong again today - 1-2% up ( and LME stocks down again - as nearly every day! ). All of this despite a strong US$…

I think we are in urgent need for a trade deal to avoid a further deterioration of economies aroudn the world…but I think that even Mr.Trump does understand this - otherwise his budget deficit will finish him in his current job!

BHP and RIO very strong again , following Vale´s presentation yesterday. Fortescue, as pure iron ore producer , is trading at the strongest since Sept 2008 - much to the delight of Andrew Forrest, who is now worth about 9 bill A$! Not a bad run from about zero in 2003! RIO declared force majeur on some iron ore deliveries from the Pilbara, following the cyclone….Chile produced 8% less copper in February because of heavy rain…perhaps the world starts to understand, that commodities are a rare thing, and don´t just get delivered by UPS as you need them??

Mineral Resources - should be worth another look, in this context! They are proucing 10 Mt of iron ore this year, and 12-13 Mt ove rthe enxt few years. Their costs are high - but that´s where the leverage is! They will be a major profiter from reducing discounts of 58%-ore, and could make 200 mill$ in EBITDA from iron ore this calendar year. Add 260 mill$ from mining services, and not least, one of the better lithium producers in JV with Albemarle, and you have a pretty compelling story here!

Russia is buying more gold…diversifying from US-$ bonds as currency reserve

Metals Ex - Talky Newton´s tin- and copper miner has had a very hard time…their copper mine, Nifty, went from disappointment to disappointment, and the market feels very much let down, having provided the company several times with fresh equity - and much higher share prices. But I guess everything has it´s price…I have shyed away from MLX forever - Nifty always has been a mediocre asset, and hast chewed a lot of cash, while the Renison tin mine is a good asset. Macquarie estimates, that at spot prices, the tin operations are worth more than the share price. Nifty has had another bad Quarter just ended…but if this asset ever recovers to levels even close to original expectations, the upside is dramatic. In the end, Nifty should produce 30.000t of copper p.a. at ASIC of around 2.30-2.40 US$/lb. The relatively high costs give them massive leverage to the copper price as well. But for now, it´s all about operational improvement. The balance sheet looks strong, still - trade payable and debt of about 40 mill A$, while operationg cash is close to 80 mill A$. To me, this stock looks like one which has been abandooned by many institutions, fearing the worst. A good punt, if you like tin - a great punt, if you like copper as well! But obviously, given many Quarters of disappointment, not for widows…To build a reasonable 30.000t p.a. producing copper mine these days, would cost the best part of 300 mill A$ - in many case, ratrher 400 mill A$…this stock is capped at 160 mill A$. I am not brave enough as yet - but worth following it!

Have a nice weekend!