Market Update

General - Sheffield - Metro

Good afternoon

Trum and Xi agree on a standstill, and further talks…Kim is fast becoming Trumps best friend…

German labor market finally shows signs of weakness…

Chinese PMI not looking any good…

Equities show some relief from alittle progress in the trade war - base metals are litle changed except for some profittaking in nickel - gold is weakening, but so far holding abover the recent break-out.

Iron ore at 120 US$!

And not to understimate: it´s 1st of July - the potentially terrible time of tax-loss selling is behind us !!!!! In a market, which is at an all time high, I am sure, that this has played a not

Sheffield Resources - the stock finally moves away from the absolutely crazy lows…but it´s still crazily cheap, I think! The amendment of the final feasibility study to get rid of the ilmenite treatment process, and to replace it by increased revenue from zircon, should be available “early 3rd Quarter” which I assume to be in July. Savings from the capex should be around 75 mill $, replaced by some small capex-increase for increased zircon capacity - I guess the new number will be around 300 mill US$. Today´s announcement about the sale of primary ( = untreated ) ilmenite should add to the total revenue number from the feasibiliyt study, as increaseed zircon production ( which has a much higher price ) had resulted until now in roughly unchanged revenue We will now have to add a number for the primary ilmenite. Also, costs will have fallen from not processing the primary ilmenite - even further increasing the return from the project.

The original feasibility study was talking of an IRR in the mid-twenties - this should now increase to something like mid-30ties…not bad, for a globally signifcant project in a market, where zircon production is set to fall from the exhaustion of several mines in the next few years! Also, and as the company has demonstrated, there is very significant upside in the area from exploration, which looks set to manifest the asset base of Sheffield as a major, zircon/ilmenite-producing province for decades to come. Just too good for major producers to ignore!

I have no doubt, that the feasibility study will show, that this company is extraordinary cheap, and that prices of above 1$/share as little as 7 month ago where no fluke. These much improved numbers will certainly also help to make anybody in the data room very positive!! The stock is now trading at just 39ct or a market cap of 101 mill A$, with the NPV being somewhat higher than the original 670 A$ NPV10 - probably even approaching 900 mill A$. And in the current market for bonds, in a very save jurisdiction like Western Australia, this stock might actually be valued at something like NPV6- or 7 - adding another large number on top of the current NPV-estimate, once in production. Yes - this thing is potentially tarding at 1/7th of it´s potential value!

Metro Mining - I bought additional 1 Mill shares today for my fund. This is another extraordinary opportunity! The Bauxite price is at least holding up - probably trading higher than say 6 month ago - as is the Chinese price for alumina, which acts as a benchmark for prices received for much of MMI´s current production! The company today announced another sales contract with a large, Chinese alumina producer for 420.000t of bauxite, bringing total fixed sales to 90% of this years production! The Chinese buyer will change part of it´s semelting capacity to enable the treatment of MMI´s bauxite - a strong indication for the tightness of chinese bauxite supply. Smeltingh companies hate to adjust their process!

I can only guess MMI´s cash costs for this year…but I think it´s conservative to assume a margin of at least 15 $/t for production. At 3.3 millt of production for calendar 2019, this equals 52 mill A$ in cash inflow from operations! This places the stock at just 3x cash generation incl debt! Remember also, that the final feasibility study to increase production from 3.5 to 6 millt p.a. will be announced soon - some time this month, I assume. This will lead to further pressure on costs, and will probably incerase the margin to 20$/t - certainly over time. The capex of 35 mill ( ? ) will easily be done from cash generation, as per my numbers above….Theoretically, the stock would be trading at just a little abvove 1x cash flow…that´s very crazy! And this is not some mining-hopeful - this is an existent producers, with capable management and a good track record.

Have a nice evening


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