Market Update

General - Fortescue - Lefroy - Strike - Horizon

Good afternoon

Australia´s budget to be back in surplus in the year to 30th of June 2020 - would be just about the only one, together with Germany! Lucky country, once again - coal + iron ore helping big time + a strong labor market. The government is expecting a 7 bill A$ surplus - one caveat: The assumptions are on the positive side!

The market clearly believes, that there is a way out of BREXIT-drama. Well - anotehr day of chaotic parliament sessions is over…and the POM´s so far continue to be against every possible alternative being presented to them…But equities in Europe are strong as a bulll.

Durable Goods Orders in the States were in line with negative expectations.

Base metals are weaker today , especially zinc is retreating from a recent high.

Horizon Gold - released more drilling results from their Altair Zn/Cu discovery, contained within the Gum Creek gold project, which in itself has resources of 1.25 mill oz of gold ( part of which refractory ). The drilii intercepts are very long - 36m with 2,6% Zn / 0,4% Cu - 63m with 2,45% Zn and 0,42% Cu - 30m with 1.9% Zn and 0,34% Cu - but I am hesitant to call theme xciting, as the grades appear sub-economic to me at this point.What is quite exciting, though, is the companies comment: “ the intercepts exhibit …hallmarks of a major, hydrothermal VHMS/SEDEX mineralising event”. It´s early days as yet - but certainly tehre is some promise. I am actually surprided, that the stock is not finding a few friends. Probably a lot of stale bulls in there from the spin-off from Panoramic back in December 2016.

Strike - their JV-partner in the West Australian asset, Warrego, has listed niw via a merger with listed company, Petrel Energy ( which subsequently has been renamed Warrego Energy ). Both companies own 50% each of West Erregulla, but Strike has to fund 11 Mill$ in drilling costs to get there. Analysts value the potential gas field at between 75 mill - and 500 mill A$ - the probability of success is seen as between 20% and 70% - depending on whom you talk to. In any case - this is a real target, and the valuations above are for a 50% stake….so in the case of Strike, this thing could be wort everything from the current market cap of STX, to 35ct/share. What is further interesting is, that the former AWE Managing Director also became a director recently of Warrego. AWE has discovered Waitsia, the West Erregulla look-a-like, which was subsequently taken over by Mitsui Following this hotly contested bidding war, Mitsui increased the reserves of Waitsia by 70%, and made it the 5th largest onshore gas discovery ever in Australia. So for us, long suffering STX shareholders , this is certainly very promising - and of course, Jaws is still pumping and I have not given up on it. Following some initial reservations by myself and otehr shareholders, I have to say, that STX´s MD, Stuart Nicholls, did very well top aquire West Erregulla, plus a lot of additional ground in the immediate neighbourhood via the takeover of UIL Energy.

Lefroy Exploration - I have sporadically written about them in the past. The stock is coming to life of lately. They announced some active drilling to take place shortly at both assets, their fullyowned ground, and also the JV ground with Goldfields, where Goldfields are spending 25 mill A$ to earm their interest ( for memory, 70% ). St.Ives has produced more than 10.5 mill ounces sind the mid-eighties, and is one of the truly worldclass gold mines in Australia. Goldfields have had some very exciting exploration success close to the LEX-JV ground, and I believe have been spending 38 mill A$ in exploration in St.Yves surrounding area last year. So some excitement coming to this sleeper…worth watching LEX!

Fortescue - the worlds No.4 iron ore miner continues to do everything right, I believe. The JV ( 60% FMG, along with some Chinese companies ) will develope the Iron Bridge magnetite deposit for 2.6 bill US$, for first production in 2022. Magnetite has much higher production costs ( Macquqrie believe around 50 US$/t AISC ) , but is much better quality than the normal iron ore ( 67% vs 58-62% ) and deserves a much higehr price than “normal” iron ore. For FMG, this is a good step to improve the average quality of it´s iron ore further, at a time, when they have cash coming out of their ears. At spot for iron ore, FMG should make something like 3 bill A$ in net profits in the current year, and 5 bill in 2019/2020.

have a nice evening



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