Market Update

General - Metro - Oceana - Independence - Apollo and from today: St Barbara - Strike

Good afternoon

Oh no…forgot to post yesterdays report…here it is…at the bottom , today´s update!

no big economic news out today…

The Australian government seems to find a majority in parliament for substantial tax cuts, mainly on income tax for lower-and middle-income earners. Alongside record- low interest rates in Australia, that should add strong support for the economy, once gone through the parliament.

Equities rally, being dragged higher by ultra-low interest rates…metals unchanged, gold a touch lower, and bonds are holding their extremely strong levels from yesterday. Independence Day in the States….

Ms Lagarde is seen as a person, who will continue the loose mionetary policy of Draghi. Good for us equity-people for now…but no idea, where this will lead us into in the future. I think very low interest rates will HAVE to stay with us for a long time to come - otherwise everything and everybody will go bust!

Metro Mining - announced some early production numbers for the June Quarter today. A bit more detail on this, as I am pushing them so hard! As you know, the company is not producing/shipping during the wet season, which is starting in Dec to approx the end of March in the very North of Australia, where MMI is operating ( 1700mm rain on average over 4 month , which is about 3x our yearly rainfall in Germany ). So operations are restarting always in April ( with some rain falling, still ). This year, the company also switched from contractor mining to owner mining. So as you would expect, April started slow for mining, and ramped up very strongly to 427.000 WMT in May - on target to achieve guidance of 3.3-3.5 mill wet metric tons for 2019 ( I am even hoping for a little better? ). Ship-loading experienced some problems, as reported, from late May for about 10 days, at least halving loading rates, as they experienced unusually high seas during that period.

Mining rates per month: April: 124.000WMT - May: 329.000 WMT - June 427.000 WMT

Shipping rates per day: April 8400 WMT - May 10.000 WMT - June 12.500 WMT

Certainly, new record numbers in June for a monthly period!

Once the swell came back to normal, the company achieved average shipping rates of 15.000 WMT/day, with a new record of above 20.000 WMT being achieved on the 29th of June. At 15.000t, they are on target to achieve guidance of 3.3-3.5 millt for the full year as well.

Given for how well mining/shipping went late in the Quarter, I quietly hope for MMi to achieve the top of the guidance for the current year. In terms of costs, we will have to wait for the full Quarterly - they will be bad I guess, and not representative for costs for the full year, given the above statistics. As an indication, MMI reported EBITDA of 8.6 mill A$ for the 4th Quarter calendar 2018, from shipping of 816.000t of bauxite. Even for the relatively difficult Quarter just finished, the company now reported 836.000t of shipped bauxite…so I am expecting two very strong Quarters ahead with falling costs, and probably not much change in the bauxite price. The next big triggers for Metro Mining will be the release of the final feasibility study ( expansion to 6 millt p.a., reduction of costs by 5$/t because of economies of scale ) over the next few weeks and the full Quarterly Report late this month - especially the latter should bring them back on the way to 20ct! My only little concern in the very short run is, that the numbers for the Quarter just finished will not look great - but to wait for the ( most probably ) excellent numbers for the current Quarter will probably cost you the first, easiest 20-30% in share price appreciation. remember, that we thought, that this thing was cheap at 20ct, and nothing really has changed the medium to longer term outlook since then!

Oceana - poor old Oceana - such a well-managed company, and once in a while they get caught by strange things in the Phillipines. This time, the Governor ( I guess of the province ) has issued an order to restarinoperations at Didipio - whatever that means in that country! The company ahs filed an injunction and can continue operations, at least for now. Some NGO´s has tried to block the main road etc… very difficult to get a feel for what´s really happening from the distance. Thesituation has led the company to ask for a suspension of trading, until the situation gets clearer. OGC has done a very good job in the past in the Phillippines, from what I can gather - very responsible , socially and enviromentally friendly - at least that´s what everybody, who has been there, assures me. I real mess, once agaain, following a few years of straightforward operations.

Independence - looks like they are finally firing! Early production update for the June Quarter out today, and that was a positive surprise! Their nickel mine in Western Australia, Nova, has delivered above expectations, and Tropicana, their gold mine owned in JV with Goldfields, has done in line with expectations. Nova rarely lived up to expectations so far - it´s outperformance is certainly very good news. But the stock looks pretty expensive to me, even taken into account better nickel prices in the future. The only game changer could be substantial exploration success at /around Nova - but that has never eventuated so far, despite significant exploration spend. The only reason in my opinion for the high valuation is the scarcity of medium sized base metal stocks in Australia.

Apollo Minerals - desaster for them! We all expected France to be a difficult place to start a mine, but it has turned out to be much worse even! It had taken the company frustrating long time to get approval for access to the mine, and to eb able to do some work there - now a local court has decided to declare the mining license void, as the government would had done some process orders in issuing it many years ago. Nothing to do with the activities of Apollo in recent years! Scandalous…The government is appealing against the court decision, as it is of the strong opinion, that the mining license has been issued correctly. The only good news is not really tangible in the moment: The French government issued a statement, which is stressing it´s strong support for the project, and the importance of it for employment in the area. There also appears to be very strong, local support for the mine. But if it comes to approvals, this might not be imporatnat, as we could see in Spain with Berkeley in recent times. Mining in Europe seems to be a devious thing these days…Everybody needs it, but the believe here seems to be, that natural resources come from ships, grow on trees or fall off the sky! Poor Hugo Schumann - his first role as MD, and he cannot even get started properly.

Have a nice evening


Good afternoon

here the report from Friday, 5th of July!

Very strong US-labor numbers indeed! Bonds are very weak - and equities do not like these numbers either, as they have been running largely based on ever falling interest rates! The UIS$ is stronger - as you would think! - and metals are surprisingly miced: copper and zinc are weaker, while nickel is unchanged - gold is back below 1400 US$ in the moment!

German Factory Orders are weak again!

Strike Energy - have had some good oil-shows West Erregulla. They will be tested, once total depth of this subsection has been reached - I think over the next few days. Drilling goes well and has now reached 3371 m - so about 800-900m progress during the week. This should tell us , that the week starting the 15th of July will be the all-important week, when the main target will be reached!

St Barbara - early production release for the June Quarter out today…Gwalia produced 50.000 oz for the Quarter, in line with the reduced guidance. Simberi with a great Quarter - 36.200 oz and 142.000oz for the year, which is 2.000 oz higher than the upward-revised guidance - mainly because of excellent grades. About 30 mill A$ higehr cash balance versus previous Quarter, plus 480 mill$ from capital raising. Total cash at bank is 890 mill, of which 779 mill are earmarked for the takeover of Atlantic Gold. The company also has a corporate facility of 200 mill A$, which is undrawn.

Slowly but surely, Gwalia is coming down to the reserve grade of 7,5g gold / t, implying more downside to production over the next few Quarters.

Not much more happening today…

Have a nice weekend!


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