Market Update

General - base metals - Paringa - Kasbah - Breaker

Good afternoon

well some strong labour market- and housing activity numbers from late last week, and more optimism on Trump´s positive impact on the US-economy, are still pushing metals higher. I guess Angie Merkel´s decision to run again for her job, are also giving markets a bit more confidence into stability in Europe.

Whatever the reason - all metals are looking as strong as a bull today - and ALL of them would make new closing highs in A$ terms, as they are trading in the moment!! Copepr up nearly 3%, same as nickel, and zinc + lead nearly 2% stronger. And - thank´s god - gold is a touch stronger as well, and will hopefully not dive below 1200 US$, which would be very negative short term for the chartists.

I find it hard to comprehend, that the A$ is relatively weak against most currencies...but obviously, this is good news in a way for our metal producers. I still believe, though, that the A$ should trade stronger over the next few month, as iron ore at 72 US$, and still very strong coal prices vs expectations from just a few month ago, should drive the Aussie higher. Last but not least, the 50 bill A$/year tourism industry is also profiting from the currency.

Breaker Resources - late last week announced some good drilling results, along strike from their recent discoveries, and further closing the gap between previously deliniated resources ( well, tehy do not have a formal resource at this stage, due to drilling density ). These results makle up for the slightly disappointing results in late October. The company is certainly making good progress, and since they did the last placement to raise 12 mill A$, also have enough cash in the bank to give their discovery a really good shot - but at this stage, I am not convinced, that they will have a mine. Grades might be a bit on the low side, once you put a a pit-outline around the results so far, apply stripping ratio etc...It´s too early to tell, but just to follow my gut feeling, it´s still a bit skinny for now.

Paringa - announced an updated BFS today for their two, planned coal mines in Illinois. The so-called No.2 Mine, the Poplar Grove Mine, is planned to produce 1.8 millt of coal, starting in the 3rd Quarter of 2017. Averga e, annual EBITDA should be 39 Mill US$, Total Initial Capex only 40 mill US$. The ungeared NPV8 is 172 Mill US$ or 226 Mill A$, for an IRR of a healthy 35%. These numbers exclude the recently disovered, additional coal seam, which could improve numbers substantially.

The No.2 Mine, once fully developed, could bring production 5,7 millt p.a., average annual EBITDA of 132 Mill US$, and a NPV8 of 500 mill US - or 650 Mill A$. While I have to sell a few shares, whenever the share price makes a jump, this is only for risk-management reasons...Market cap today is only 92 mill A$ - a far cray from NPV even for the first mine...This is a relatively low-risk coal mine developement, and I believe, that the share price still has a long way to go.

It will be some time until we will know the effects of the new seam in Poplar Grove - but it should easily add tens of millions of dollars to the NPV. The next big trigger will be the announcement of the financing for the mine...

Kasbah - I mentioned it the other day - their planned tin mine in Marocco has a NPV8 of 109 Mill A$ at today´s tin price....The merger with ASN in Canada should be consumed by the end of this week. ASN´s controlling shareholder will be Pala Investment, which normally would increase the risks for independant shareholders. But once the merger is completed, the World Bank, and Lion Selection will have relatively shareholdings in the combined entity, and should look after interests of minority shareholders. For ASN, this project will give them a new lease of life, since they closed their nickel mine in Vietnam, which needs higher nickel prices. Even if I value the nickel assets at very little, the combined entity would still trade at only about 40% of the tin mines NPV, and under Pala´s leadership, the financing should be a much easier task. Once in production, the mine will be one of very few Western World tin producers, and would probably be trading at a premium to many other base metal stocks. Every 1.000$ / t or approx 5% of tin price increase, would add about 26 mill A$ to the NPV, equal to 50% of the combined company.

Have a nice evening !

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General - Graphex - Marindi

Godo afternoon

volatility is coming down a bit..metals a little weaker, and the same for equities and bonds...The US$ is attempting to go higher, while gold is 4-5 $ weaker as well. Oil continues to tarde very volatile - followinga very strong ady yesterday, it´s currently down 1.5%.

Iron ore under pressure...well at 72 US$ it´s still trading way higher than anybody believed possible only very recently..anything above 60 US$ is fantastic anyway for BHP/RIO/Vale/FMG.

The A$ is pretty weak today, as are emerging market currencies...I am amazed by this...and I think the A$ is undervalued , based on current prices for commodities. Anyway - for Australien commodities producers it´s certainly great news - nickel at 15.100 A$/t currently, copper at 7.330 A$/t, zinc at 3.442 A$/t, and lead at 2.40 A$/t are fantastic prices for them!"!! And gold at 1640 A$/oz is not that bad, really!!

Just imagine the current exchange rate, and nickel/cobalt/copper at current prices - my baby Panoramic would make very good money, IF they were in production! And my 12-month target for each of these metals is say 10% higher....It will be fun...and while PAN have moved by 300% from the low in Feb, tehy still ahve 300% ahead of them to reach the 2014-high. But they are a good example for just how quick stocks can move in the right enviroment! The easiest money is being made in the first 6 month of a bull market - but it´s also the riskiest trade!

Anyway - for PAN, that "first-move-trade" has gone anyway...for a few others, which might not be that well-known as Panoramic, this trade is still possible: Just a few names: Foran + Heron for zinc/lead/copper exposure, Peak Energy for Rare Earth exposure, Cameco for uranium exposure, or if you are really exotic, you might want to buy some Kasbah...for tin, ahead of the merger with Asian Minerals. That, by the way, could be a very interesting one. Tin is something which could be very interesting, and very hard to buy exposure to - and the mixture with a bull-vehicle for nickel I quite like! The only thing I do not like is being at the mercy of Pala Investment, which is the controlling shareholder of ASN. But through the merger, a few serious players like the World Bank are becoming sharehodlers of the merged entity. I have not done enough work on it, but it could be good story.

Marindi - Joe Treacy, whom some of you might remember from old days at Kagara Zinc, is managing this zinc-explorer he is a good man. Beside of some excellent exploration ground - but relatively early days - they own some very prospective litium ground next to the major find of Kidman Resources. Marindi had tried to put together a JV with Kidman, prior to them finding out, what tehy really have on their hands, and apparently, both companies came to some sort of agreement - no written contract, but some kind of understanding. MZN are now taking Kidman to court to honor this agreement, and it´s to be decided my a judge - or out of court - whether this has been a binding agreement or not. MZN obviously believe, that tehy have a strong case - if yes, it would destroy just about all value within KDR ( which ahs been valued by analysts at 300 mill$, and is capped today at 145 mill A$ ). Potentially a very big prize for Marindi, being capped at 20 mill A$. In a seperate action, MZN have done a deal to buy Australia´s largest, undeveloped zinc resource - only to be pre-empted by Teck Corp, which excersised their pre-emptive right to purchase it. MZN argues, that Teck have let themselves too much time to excersise this right... The latter case seems to be a longer shot to me, but the KDR-transaction could have more merits. Interesting is here, that KDR could loose just about everything, while MZN have nothing to loose - that sounds like potentially a very lucrative out-of-court settlement to me. But this is more one to watch - I am not a lawyer, and I have not seen the emails! In any case, I would not want to hold any Kidman!

Graphex - just reported yesterday about their mining license - today, they announced some excellent exploration results from their advanced graphite project in Tanzania, which give substance to what ahd been expected anyway - the resource will end being much larger than the current resource, which has been established previously just to be large enough to warrant a feasibility study. The big price here is still progress with the Chinese partner on a binding deal for the financing and off-take . I am hoping for some progress here before Christmas.

Have a nice evening

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General - Genex - West African - Oz Minerals - Finders Resources - MSCI rebalance

Good afternoon

the day of profit-taking is with us, finally! Iron is down from a crazy price, thermal coal under some pressure...stocks like S32, Whitehaven and BHP saw some profit-taking in Australia, and base metals are now down in London as well.

Not that surprisingly, gold is rebounding a little today, with bonds...this bond/gold trade still ongoing, it seems. Holdings in the Gold ETF fell quite sharply after the election - but I do not believe, that this will last for very long..As I said yesterday - in my opinion, we are having a great buying opportunity for gold here.

Construction and domestic consumption helped Germany to a smaller than expected 0,2% GDP growth, QoQ. Exports contracted slightly, while investment was sloppy as well. German investor confidence rose by more than expected. In the US, Retail sales have been stronger than expected. An interest rate rise in December is a done deal, especially, as it would only be confirming, what the bond market is already pricing in.

Goldman´s are trying their luck as bulls...at least they are forecasting a coking coal price of 350 US$ for the 1st Quarter 2017, slowly reducing over the year, as Chinese production comes back on, and as some mines around the world re-open. I think they could be right -only, if we see some heavy flooding in Queensland, limiting mining operations. For 2018, they see an average price of 125 US$. I guess they will be wrong for the first Quarter ( too high! ) and they will be wrong for 2018 as well - too low!

Resolute will be added to the MSCI Small Cap Index effective close, 30th of Nov. This should have a positive effect, and has had it today! This is the only stock I am following, which will be included/excluded.

Genex - two solar powerstations in Australia, with a combined capacity of 155 MW, were sold in Australia today for a 257 Mill A$ to an infrastructur fund. Transferred to the 50 MW solar plant of Genex, this would equal 66 mill A$%, about 37% more than the current market cap and 15-25 mill A$ more than a recent research report valued it at. I can only repeat: This stock is a great opportunity in my opinion! In this world, projects like the ones from Genex are easily financable, and usually, find some government or government-body, which guarantees the electricity price...so that only very small equity is needed to build them. In the case of the solar plant, the equity will be 5 mill$ for a 120 mill$ project - and valuations for this proejct alone are anywhere between 40-and 60 mill$. The hydro project is 5x larger - and while I do not expect financing conditions to be as favourable as for the solar plant, I think the valuation up-tick will be very considerable as well. The next step for GNX is financial close and start of construction, to be producing power by Dec 2017.

West African - once again announced some excellent drilling results from their M1 South deposit - 5m at 30g, 14m at 12g - and some good resource-conversion holes from M5 deposit. The company is on track for a new resource statement, as well as a full feasibility study in December. For as long as gold does not slip below 1200 US$, I have absolutely no worries here. The stripping ratio for M1 South will end up much much higher than for M5, but excellent grades should this make easily economic with AISC a long long way below 1000 US$/oz. I guess the stock has not been helped by the negative news of Cardinal recently, but it´s much more advanced, and negative surprises here should not be expected.

Oz Minerals - reserve update today, and announcement of new mine plan. The Prominent Hill plant will be run at full capacity until 2023 by processing all open pit, and stock-piled ore + some underground, and then at reduced capacity and fed by underground only, to at least 2028, at a arte of 3.5-4 millt p.a. The company now has reserves of 75 millt at 1% copper, and 0,6g gold for 740.000t of copper and 1.4 mill oz of gold. Resources are about 2.5x larger than the reserve. The company is confident to convert more resources to reserves in the longer term. Sop far, the market had been expecting a finish to processing in 2022...so this is obviously a large improvemnt. On thop if this, OZL do own the Carapateena project, which would be a huge benficiary, if copper would be going towards 3$/lb over the next year or two.

Still - the stock is not all that ceap at nearly 8$ today - but in Australia at least, the only, large copper producers are OZL and SFR - so there is very little choice for Australian investors to choose from.

Finders - at 2.75 US$/lb, and an exchange rate of 0,76 A$ to the US$, these guys will be making cash flow of about 60 Mill A$ before debt service next year...by the end of financial year June 2019, they will be debt free...this stock is very cheap, even though the recent, disappointing and ill-timed placement has diluted us somewhat. Once things have normalized, the stock should trade 50% higher easily. If not for the placement, FND would tarde at 20-21ct - this way, you can buy them at 16ct! Great opportunity, and I declare my interest!

Have a nice evening

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General - St Barbara - Northern Star - Graphex - Cardinal

Good afternoon

the massive switch out of bonds into equities + commodities continues today, following on from some wild trading on Friday! Same for the US$...it looks like a test of previous highs against the Euro at about 1.05 US$/Euro will be on shortly! One thing seems to be for sure - Trump is delivering a competitive advantage to Europe...via a strong currency! And IF he really imposes the 45% of tariffs on Chinese goods, remains to be seen...If he does so, you will see China competing with the US on who has the biggest infrastructure program!!

In the meantime, IP in China + 6,1% and Fixed Asset Investment up by 8.3% - both with stable growth rates - while retail sales were growing a little less than expected - but still by 10%.

The asset-re-allocation mentioend above could go a lot further - don´t forget,.that there is a lot of cash around, that investors have been very long bonds, and that a 30-year trend is most probably changing here...that could lead to wild moves. And the same for metals...few people own them - but now, many will feel the need to own at least some! But while I think that we are only in the early stages of a 2-3 year move, we will need some substance added to the demand picture....volatility will stay with us!! For now, Chinese demand is still rising, and the world is still growing....The question go to be at some stage: How high can interest rates rise, before some harm is being inflicted on the patchy recovery??

And finally, gold. .obviously, this is just an interest rate play in the moment - and I guess that´s the way major hedgefunds are playing it. But you and me know, that interest rates won´t be the only factor driving the gold price. In my opinion, there are multiple, strong reasons to own gold - probably more so than for a long time. But the sheer weight of this Interest rate/ gold trade does put immens pressure on gold in the short term...I believe, that this will shortly change...it all depends on, just how much further the current re-weighting in markets can continue. We will carefully watch...

For now, irone ore as a very large commodity - seaborn trade of about 64 bill US$ at todays price just under 80 US$/t - is powering ahead...as are the major miners. following some profit taking ahead of the weekend on Friday.

Macquarie-analysts increase their copper price forecast by 10-15% for the next few years...basically, 2.35 US$ for 2017/18/19. I think they might be a little behind the curve here! Remember 2003-2006? All these analysts consistently upgraded, ALWAYS behind the curve....once that changed, the bull market was over - but we only realized that later....We are having 2003 today, in terms of the metal-cycle....!!!! By the way, these relatively small upgrades lead to EPS-inreases of 50-80% for pure copper producers OZL and SFR!!!

St Barbara - have decided to keep the Simberi Mine, which produces 100.000 oz p.a., but will have to move to a different processiong route in the medium term, to enable production from sulphide ore. The fact, that a) they have out it on the market in the first place and b) have not managed to get a sufficient price for it, is not very inspiring! And giving up to 75% of exploration rights on the neighbouring islands to Newcrest, not either! But then, I don´t think anybody had valued Simberi at more than 6-7% of assets...Like so many other´s, SBM have fallen heavily over the last few month - perhaps a bit more than others, which generally are down by 30% at the quality end of the market. Most of the Australian producers are good value now - provided the gold price does not fall any further! I think the entire sector is relatively good value at current levels - but for SBM, I am not seeing a reason for outperformance.

Northern Star - Their 60 mill$ exploration budget continues to deliver - but it has to, to justify it´s relative rating, and in light of their mine life. This time, they reported excellent high grade results from a property called Paradigm, close to Kalgoorlie, where they have been the vicinity of an old open pit. A week ago, NST had announced an upgrade to the Jundee plant, increasing production by 15% in the year 2017/18. This decision had also been taken based on good exploration results previously. One has to applaude Bill beamont: He bought undervalued assets early on, then cut costs dramatically - and now he is delivering on the best growth option: exploration! NST and EVN are the two, outstanding Australian growth stories - but I still see EVN as being cheaper, due to the long term nature of some of it´s mines.

Graphex - one of the more hopeful Australian developers of a graphite asset, and the only one, I own, announced the receipt of a mining license from the Tanzanian government. This is one of the main requirements for the offtake- and financing agreement, currently in negotiation with China National Building, the second largest user of Graphite in China.

Cardinal Resources - the West African developer came out with an update to it´s metallurgical problems. In short, they say, that they have several options to improve recovery, including floating, which would produce a high grade concentrate, (which could be further treated in China ). They are also drilling with 4 drill drigs, with a realistic target to increase the resource quite substantially past the current 4 mill oz. As I said earlier - I think CDV are a good speculation, expecting further refinement of the possible treatment route. But with gold stocks generally relatively cheap again, one might not have to take the risk here. I have bought a small position in the stock.

Have a nice evening

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General - Gold - Strike - Finders - Highfield

Good afternoon

I am sure, that we are seeing a speculative bubble in the moment in commodities...but as we know, the world is underweight commodities, and These guys will be scrambling for exposure...So what should be important to us is not, whether this Thing is overbought in the short term...what is important, to be on the trend and to have expsoure to it.

Investor are still not believing the momentum of Trump....I have no doubt at all, that he will put his stamp on many things, and he will move....

This is far reaching consequences: The 20-30 year bull market in bonds is over, if you have not realized this as yet...the Long bear market in commodities is over as well....

For us that means: Don´t sell anything...you will buy it back later! It´s interesting to see, what is Happening to my fund, which has been marketed as a resources-orientated, small-to midcap Australian fund since inception in 2002 - so everybody knows our tendency and heavy overweight in resources:

The fund is up 40% this year, outperforming ( naturally ) every other Australian fund by a vast margin. Do you think, that we are getting any fresh money in?? Nothing...the contrary...over the last week or so, we have had 7% or so money-outflow! I have to sell part of positions anyway, for rsik-control reasons, as individual holdings are not supposed to get too large...and I have to sell more, because of redemptions. This is very anoying, as very soon, I actually will get inflow - forcing me to buy back things I have been selling lower down....The same is happening to everybody, I guess....and it will feed the bull market big time. We have seen it all before!! So do not sell anything, People like me will buy it of you at much higher levels!

Obviously, the strong US$ is putting pressure on Gold in the Moment...as Investors expect interest rates in the States to go higher. But they will go higher everywhere...the US-market is just too important to be seen as an isolated market. Inflation is creeping in...Trump´s spending will make sure, that the expectations will be more than fulfilled....and no matter, what interest rates are doing: IF Inflation will creep in, we will see gold perform....not to talk about the other myriad of reasons speaking for gold....

So use the weakness in stocks like EVN to build your quality portfolio at very reasonable prices, and add a few hot stocks like Kingsgate, West African or even Cardinal for some fun...

Just to give you a feel for the massive moves we have had in commodities ( I calculated the numbers at lunch time today, and they will have changed...but that does not Change the Story anyway ): all prices in A$!!!

Price Change from low this year difference to 5 year high

Copper 7802 A$t + 30% 7%

Zinc 3360 A$/t + 62% new high

Nickel 15500 A$/t + 43% 41%

Gold 1661 A$/oz + 13% 10%

And we are not talking about coking coal ( up by 300% ) thermal coal ( up 100% ) or iron ore ( up more than 50% ), which are Australi´s largest export goods. The A$ will go higher - terms of trade are getting better every day in the moment - and I think the current turmoil in emerging market currencies might be over soon...

Strike Energy - the Company is raising 4.5 mill$ in a 1:14 rights issue at 7ct....This is meant to complete, what they are currently doing - but it´s not adressing the medium term need for much more money. They are also not addressing the question, who will be managing this company in future - Chairman as well as Managing Director have to ask themselves, whether they are the right people to drive this company....Don´t get me wrong..I will certainly take up my rights, and I am continuing to believe in the Company....In tendency, I support the view of this serious analyst from Taylor Collison, who recently ascribed a 37ct or so valuation to the company. But I am pushing for some changes, as do other shareholders in Australia...

Finders - very disappointing Placement...the company raised 12.2 mill$ at 12ct/share! They have been very unlucky indeed - and perhaps a bit naive as well...raising funds in the days prior to an all-important US_election in a small company had to be a hard task...so tehy had to re-price the Placement, and ended up raising less funds than they intended to - closing the raising at a time of major turmoil in markets. This was a desaster...BUT: These guys are producing now 28.000t of copper p.a., at just over 1 US$lb cash costs - and probably AISC of around 1.30 US$/lb. The price of copper has just gone up by 25% in about 2 weeks - trading at 2.67 US$lb....and while they have hedged 26% of production between now and March 2019, that still leaves them very exposed to the strength in copper. Any weakness in the stock, which I expect, once the new shares are tradable in a few days, should be excellent buying...the mine will be producing something like 85 mill US$ in cash, with copper at 3$ - that looks to me a reasonable assumption for the longer term copper price...and 100 Mill US$, once the hedge has matured...

Highfield - has started to run as well...finally! Potash Corp is up by 10% this week, as is K+S ( even though they announced an operational loss for the Quarter, and while having a major , enviromental headache with their salt in Germany )..so it might be rather the wider market, than a company-specific story here. But you will be aware, that Rajoy has managed, finally, to establish a new Government in Spain recently...the ministry is now running out of excuses, to give enviromental clearance to Highfield´s excellent potash project in Northern Spain. They have had massive, local and provincial support anyway - so we are much more hopeful now to see some action! As you know, I am a faithful shareholder - we still have a large position

Crusader - just to Keep in mind: The godl price based in Brazilian Real is actually up by 6% this week...that is with Gold trading at 1236 US$oz, as I am finshing...

and all the metals are down now! Copper down 1% from 7% up....and so on...!!!! What a market....

Have a quite weekend following this tumultous week!

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