Market Update

Lucapa - Genex - Peak - Highfield - Graphex - RIO

Good afternoon

German factory orders were slightly up vs expected unchanged numbers.

Equity markets slightly better again - interest rate expectations seem to be stronger than the trade war in the moment…not much happening in base metals - gold stronger, again.The A$ gold price at a new high - currently 1911 A$/oz!

Lucapa Diamonds - sold 10 mill US$ worth of stones from Lulo, not including the recently found 130ct white diamond, and a potentially even more valuable 46ct pink stone. The company approved a 3.3 mill US$ exploration program in Angola, to find the source of it´s alluvial diamonds. The stock is slowly edging higher - but in my opinion, is way undervalued…

Peak Resources - this old rare earth hopeful, having a completed a feasibility study two years or so ago, should be on the radar of the Americans! According to the German press, an American representative of the Ministry of Defence said at a Chikago conference, that the US would be contacting companies around the world to help alleviating the UD-dependance on Chinese rare earth. Well - Peak should be one of the more advanced companies, being run by the American Rocky Smith. Rocky, in his previous role, has been the General Manager of Mountain Pass, which is the only US mine of the stuff. I am surprised, that they have not contacted him as yet…Peak need better prices for Nd/Pr ( about 80$ vs current prices of 50 $) - but in the case of sanctions, those prices will be several times higher than needed, potentially. A good punt…

Genex - great announcement - but it bit difficult to value! Electric Power Development Co , a 4 bill US$ market cap company, has signed up to spend a max of 25 mill A$ in a placement to get 19,99% of GNX max, and a minimum of 15%. They will pay the price of the stock at financial close of the project ( see exact details of the announcement ). So what does this really tell us in numbers??? If the share price is unchanged from today, they will pay about 22 Mill$ to get to 19,99%…if the share price is 32ct, they will pay exactly 25 mill A$ for 19,99% - and if the share price is 45ct, they will pay 25 mill A$ for 15% of the company. This is a bit difficult for the market to judge…the company has been quoted very recently as being highly confidentto get the NAIF funding within this month, and also highly confident of getting a substantial grant ( = gift ) from Arena, another government body, also this month ( I believe this grant could be 40-50 mill A$ ). Also, they continue to be in deep discussions with Energy Australia re a transmission agreement. So we have 3 very price-sensitive and most probably positive announcements coming within the next month or so…and financial close relatively soon thereafter ( I suspect only weeks ). The placement to the Japanese is conditional of having received these 3 agreements, and of Financial Close to take place before the 31st of December ( which really is a worst case timetable ).

As all stock overhang should be removed now ( 25 mill A$ should be more than enough equity - the company so far has said that 15 millto 20 mill are needed )…and the three above announcements would dramatically de-risk the company. I would be very surpised to see the stock still tarde at below 32ct by then…so 32ct for the placement is really my base scenario. This announcement today has been very positive and very important - GNX are a strong buy at these levels. Valuations in the market based on this announcement are between 35-and 70ct……There is no such thing as a no-brainer…but I think at 26ct, GNX are very close to it!

Graphex - good announcement today: They received an official letter from the Ministry of Minerals, stating the Tanzanian ownership of 16%, as wella s stating the ability to export concentrates of above 65% ( the company plans to export a 94% concentrate ). These two conditions are very important for the Cstlelake-financing, which ahs been conditional on those things. What is still missing is a fiscal stability agreement -mining permit as well as enviromental permit have already been received. I have not bene able to talk to them - MD is on a mining trip with analysts in Tanzania - but will get further clarity as soon as possible. In any case, this has been positive progress towards getting the project construction-ready! One point on the side - the US are entirely relying on non-US supply of graphite, and largely also on lithium…

Highfield _ I am not holding them anymore - but some of the readers might do. They received their enviromental approval for the phospate project in Spain! I visited the project 4 years ago - enviromental approval was imminent, then!! Anyway - stock made a nice jump today! But now, tehy need to get the mining license - which is meant to be a formality…but obviously, nothing seems to be a formality in Spain! This might only take a few month - but to get into production, the company will need to conduct a very substantial equity raising. I would sell the stock - unless a corporate comes in , this will be hard to do!

RIO - announced some more drilling results from their Winu discovery in Australia. Pretty incredible intersections - up to 500m with around 0,45% copper and o,4g gold, and many similar results. The ore body is under 30-70m of cover - not too bad. This is clearly a very large ore body - but to early to quantify. There is a 180-strong workforce in the outback, exploring this thing. Clearly, one of the largest - if not the largest - RIO exploration projects in the world. A little disappointing, that it did not infect otehr stocks, which are active in the area, especially Antipa, which si also in JV with RIO ( but only in neighbouring areas, not Winu itself ). RIO wants to have enough susbtance by teh end of teh year, to know what tehy have on their hands. Currently, there are 11 drill rigs drilling this thing!

Have a nice evening,


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