Market Update

General - Quarterlies of Perseus and Metro

Good afternoon,

equities are a bit weaker again today, driven by corporate earnings and some new concerns with regards to the trade war.

Nickel continues its amazing run…new 12-month high and in A$, highest since 2011….should these prices be halfway sustainable, my little Panoramic will make us real money and lots of it! But for now - and I do not know, why! - it´s stottering!

Gold is down a few$ from yesterday´s big run - holdings of Gold-ETF´s up strongly again. It does not feel like a bull market as yet in the small stocks - but they have definitely started to move as well! Well - as I am finishing this, gold came all the way back now and is currently trading at 1430 US$!

Metro Mining - great Quarterly today! as you know, I was a little cautious going into this report, as they mine started performing slowly in April, following the wet season, and had a few weather-related issues, which held them back a little. But EBITDA for the Quarter has been a very sound 9.1 mill A$, with production of 124.000t in April / 329.000 in May and 427.000 in June - shipments a little lower ( building a stockpile, which is very good ). Shiploading rates have averaged over 15.000t/day since 2nd week of June, and has continued through July so far “ exceeding the average required to reach 3.5mt for the full year” - which is the top of their guidance! EBITDA for June alone was 5,7 mill A$, which is fantastic, and the company expects this to even increase over this Quarter and next.

Importantly, site costs for a t of bauxite were 35,50A$ in April/ 21.94A$ in May and 19.87 A$ in June - freight + royalties added about 23/t A$ over the Quarter . EBITDA-margin in June was 15.22 A$/t - you can see the economies of scale in this largely fixed-cost business. Chinese bauxite prices have been pretty stable over the last 12 month, with a slight upward-trajectory. Not much change is expected going forward, as Chinese imports of byuxite are still rising strongly, as local production is closing down for enviromental reasons mainly.

The final feasibility study for the expansion to 6 millt yearly production has been delayed a little bit, due to some changes to the loading capacity - the board wants to have some spare capacity to enable catch-up, if shipments are slowed down from weather-related effects like in late May/ early June - but it will be out by mid-August. That might be very bullish - the ability to load larger ships alone will cut costs by 4-5$/t! I would assume, that we also see some more economy-of-scale effects to bring costs down to less than 15A$ / t site costs!??

Metro held 29.5 mill A$ in free cash at the end of the Quarter, and had debt of 42 mill A$. Funding of the expansion ( 30-35 mill$? ) should be easy via free cash flow and anotehr debt-facility, which has been largely bedded down. I continmue to believe, that this company will produce in the vicinity of 120 mill A$ in oeprational free cash - timing and exact details will be known, oncethe feasibility study has been announced in about 4 weeks time - maybe 5 weeks. I still think, that Metro Mining is outstandingly cheap at 11.5 ct or a market cap of only 160 mill A$….one of the larger positions in my fund, as I have been adding some more lately. Black Rock own 150 mill shares as per Bloomberg - I am amazed, that they do not buy a few more!

Perseus - Quarterly out. Their production of 64.000oz was slightly weaker than the excellent March-Quarter - grades at Edikan came down, and all-in site costs were higehr - also because of a high stripping ratio in the Quarter - at 1090 US$/oz. AtSissingue, All-in site costs were 791 US$ - also 40$ higher than in the March-Quarter, making it 989 US$/oz for the group. Guidance for the current financial year is 260-300.000 oz at 800-975 US$/oz - tilted towards the second half. Overall, they are on track to get Yaoure up and running by the end of 2020 and to have it financed from cash flow, the current cash balance of net 88 mill US$ . This includes the warrant exercise. Three banks are very substantially advanced to install a 150 Mill US$, corporate credit facility. As part of that - I understand - they had to hedge some more gold…not nice in today´s enviroment. The total hedge position is now 274.000 oz at 1299 US$/oz…..about 30% of production for the calendar years incl 2022, based on their current production but certainly less including Yaoure. I can understand it - and I guess they had to do it anyway! - but with strongly rising gold prices ( which are currently more than 100 US$ higher !) I am sure, that one or the otehr investor does not like this. Like all gold producers in Australia, PRU had a great run this year - but I am pretty sure, that they will continue to run with the gold price for a while now!

Have a nice evening


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