Market Update

General - Panoramic - Evolution - Strike - Gascoyne - Northern Star - Bellevue

Good afternoon

back on the desk…and I fear I did not miss all that much! At least most share prices are as bad as they were!

In our resources-development space we are not having all that much fun these days - and that at a time, when Larry Finkel, the boss of the largest fundmanager worldwide, expects a melt-up in share prices. Too much money has been sitting on the sidelines in this magnificent rally this year, and seems to chase every temporary weakness in equities.

As you know, I have been too cautious too early…and I have to say, that the second most important factor - earnings - certainly has surprised so far. Liwuidity , as the most important factor, is ample - so there appears to be some justification to the current goldi-locks scenario.

And yesterday and today, we got overwhelmed with a myriad of Quarterlies - some of which are quite interesting.

Chines PMI´s today were a little bit on the soft side, but still in positive territory. And European growth of 0,4% last Quarter surprised on the upside.

Panoramic - the Quarterly reads quite awful - but this is all the news which was announced prior to the capital raising, just in some more detail. Important is, that thins have been improving substantially. Mining rates for the current uarter are targeted at 55-65.000t per month in the current Quarter - and I believe, that the lower end or thereabouts has been achieved already. The company really has had some bad luck - two brand new loaders for example have been purchased last Quarter from Caterpillar - both expereinced substantial problems, and one of the, had to be repaired for 4 weeks!! Anyway, these problems are behind of them now. The company has also contracted a mining services company, to help out with one Jumbo and a few people to increase development rates for the twin-decline, which is essential to start production from the new Savannah North orebody by the end of this year. Last but not least, the drilling of the ventilation shaft had experienced substantial problems last Quarter - but again, remains on track to be finished by the end of 2019. The recent capital raising has hurt - but it assured enough capital to enable development of Savannah North at the same time, as the comissioning of the plant and ramp-up of current mining activity are taking place. And the best news comes from the plant - recooveries are now running at targeted levels. So - busy times at Panoramic, and early problems as well as the capital raising are now behind us!

Strike - provided quite a bit of detail on current activities, and especially the time line of drilling of West Erregulla ( spudding some time in May, final results in July ) and roughly the same for Jaws, where pumping is back in full swing and pressure levels are slowly but surely being driven back to levels, which enable consistent gas flows. But we aill also have to wait until the summer for real news and facts! The bank loan to pre-finance the payment of R&D subsidies from the government has bene extended to the 30th of June, as reported previously, and teh company is very confident of a successfull appeal. Unfortunately at this stage, more of teh stuff we have been used for : Very large upside - but the most important stuff, gas to surface in economic quantities, is still missing!

Gascoyne - another very difficult Quarter, as reported previously. Grade problems of start-up pits have been the main problem here, alongside mining problems in small pits. The main story here is the Gilbey pit, which will only contribute in a meaningful way in the second half of 2019. Until then, the company is not for the fainthearted! Production of 12.800 oz in the March Quarter was terrible, and while the comapny states to be on target for 17-22.000oz in the current Quarter , I understand, that April has been another difficult month. So I think you have to be prepared for something towards the lower end of this band, and hence for the higher end of cost guidance ( 1550-1875 A$ oz AISC ). The company has received / will receive early next week all proceeds from recent capital raisings, being about 23 mill A$ after costs. Normally, that should save the company - but unfortunately, recent experience does not really give the market all that much confidence. If not for a brave German investor group from Heidelberg, which took a big slice of the capital raising, things might have been much worse, even. The potential returns of investing in Gascoyne are substantial - but I am too shy to call it a buy! Once bitten, twice shy - and this one has bitten us a few times!

Northern Star - this was a bad Quarter indeed, and I am surprised, that the share price survived it halfway ok! Bill Beament clearly ( and understandably! ) has a great standing with investors, so they are giving him the credit and believe in the expectation of an excellent, current Quarter. In the March Quarter, every operation has been under expectations, and costs were very high at nearly 1370 A$ oz AISC, for production of just 186.000 oz. The worst perfomance vs expectations came form the newly aquired Pogo Mine , which produced just 33.000oz at 2.062 A$ AISC! The company expects this to improve strongly over the next few Quarters, but also cautions, that the recent change to mining technique cannot be done in a day, and that real change at the mine will take a few Quarters. If Pogo does not live up to these expectations, the market will be very unforgiving, I think.For the company to match maintained guidance of 850-900.000 oz and a revised 1.225-1275 A$ AISC ( from 1125-1225 A$ oz ) , they will need to have a very strong June Quarter!

Evolution - their Quarterly was not all that great, either, at least on the production side : 176.000oz at 925 A$ AISC was theirweakest Quarter so far ( but production costs improved a bit from the previous Quarter ). Cowal and Mt Carlton had pretty good month, while Mungari continues to be problem child in the portfolio. In terms of cash generation, Ernest Henry remains a stand-out: Evolutions part of it added to a ne-mine cashflow of a record 60 mill A$ last Quarter! Evolution increased resources by 480.000oz to 14.73 mill oz, after depletion of 900.000 oz - and reserves increased by 410.000 to 7.46 mill oz. That is an excellent outcome - Cowal was mainly responsible for that and is becoming a fantastic asset. Nevertheless - I think like most, Evolution is also feeling some cost pressures - net mine cash flow across all assets was lower than in previous Quarters, despite a better gold price received. The company maintains guidance, though, of 720-770.000 oz for the year and 850-900 A$oz/AISC - further defining it to mid-point of oz and higher end of costs. The A$ gold price is holding up well, and the share price has given up more than 20% from the ( expensive! ) high…the stock is slowly but surely coming back to value-territory. I would love to buy EVN at 3$ - not sure, though, wheather they will come back that much! I think fair value for EVN at the current gold price is somewhere around 3.30-3.40-3.50 A$ - so I need them to come back a little more to have meaningful upside in absence of a better gold price.

Bellevue Gold - during the Quarter, the company ahd announced an excellent resource upgrade to 1.53 milloz at average grade of 11.8g gold/t - all inferred at this stage. The company has announced drilling results outside of the current resource for their Tribune and Viago lodes - indicating, that more is to come and potentially substantially more. They also announced a new lode discovery at Viago. BGL have 4 drill rigs at work, and have also started promising, regional work. Bellevue had 28.7 mill A$ cash in the bank as at 31.3. and are planning to spend another 5 mill in exploration this Quarter. I continue to believe, that they will be able to show more than 2 mill oz of inferred resources later this year at similar grades. BGL got to be on the radar screen of every Australian, mid-sized producer - but I could imagine, that these guys would liek to see some meaningful conversion of inferred to indicated resources. The last placement was very easily done at 55ct - chart support is at 50ct - so the current price of 52ct represents good buying , in my opinion. BGL´s project should be a goer, no matter wheather gold is 100$ higher or lower…and there are enough hungry neigbours around!

Have a nice May-Day!



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