General - Lynas - Graphex - Doray

Good afternoon

Housing numbers in the States were solid today, as Import-and Export Prices are rising quite strongly. Investor confidence in Germany rises strongly, ahead of the elections on Sunday.

Metal prices are continuing with their recent consolidation, and are more or less unchanged today except for nickel, which is currently trading just below 11.000$/t. Copper stocks at the LME have been slightly lower today. following a strong buildup last week.

The Oktoberfest is progressing as we are used to - many drunken Germans, even more drunken Australians - but thank´s god without anything which smells like terrorism!! 

The market continues to show a lot of interest in the EV-theme...Galaxy; Orocobre making new highs, massive turnover continues in Lynas - Grahite finding some interest of late as well. Syrah Resources is using this for a quick & dirty 110 mill$ capital raising.

While there is certainly a shortage of lithium and many other commodities in the short term, especially the former does not seem to be immune against a correction. Without any doubt, there is a lot of material coming - the only question is the timing of it. For now, all is fine - but still, I wonder, whether some of these stocks have had enough of a run for now.

Lynas - came out with their full year accounts today. The company produced a respectable 31 mill$ in EBITDA - not bad given, that prices really moved only late in the year, starting in June. Debt continues to come down - today, another 35 Mill US$ got converted into equity ( at 11ct ), creating a nice profit for the - once - brave holders of the convertible. Total debt is now only 311 Mill US$, of which 126.5 mill US are in the convertble and will most probably be converted, unles the company can find a way to buy it back. For a mining company, debt is still relatively high, but is coming down very quickly now and has reached a managable level. Cash flow generation at current prices is very strong, and debt could be paid off by 2020 easily ( that´s the current maturity ).

Graphex - I have touched on this stock yesterday, but after having spoken to them today, need to talk them again! Their Chinese JV-partner is truly excited about the fantastic quality of graphite in GPX´s resource. This material is getting very tight in China, and the world, and it´s superior to the product of all other , known projects under development. The company is negotiating the final JV with their Chinese partner, and once that has been finalised, will enter into discussions with the Tanzanian government. I have no doubt, that Tanzania is gready - but they are not stupid either. With a Chinese-, powerful JV-partner I believe GPX to be in a much better position than Acacia, with their legacy in this country. GPX will be starting a new proejct from scratch, and Tanzania will profit from it, not only via the 16%, free carried interest, but also via jobs, taxes etc. Under the current price regime for Graphite, the project is looking stunning, and I would have thought, that financing from Chinese banks is still possible, even in the current, political situation.

China has been a big infrastructur provider for Tanzania, and Chinese clients are really desperate for this material. This should provide for a powerful alliance!

Peak Resources - that´s a bit different...another great project, another product, which is in desperate need - but they do not have a Chinese JV-partner! They do have the World Bank - but I guess those guys  are not as flexible, nor do they want to flex their muscles as a Chinese company would. Still, tehy are certainly influential. Peak are doing a placement at 4ct today, and will raise some more via a 1:8 rights issue to existing shareholders, also at 4ct. Both tranches will get a hlf, 6ct option with it. The terms are disappointing, given the strong performance of Rare Earth prices - but Tanzania is obviously a very difficult place for companies and investors. I will fully take up my rights - should the political situation normalize, the stock will rocket

Doray - production update today...Andy Well is in transition to care & maintenance - prodution of the remaining 2 month will be a little higher than originally planned ( 13-14.000 oz vs expected 11.500 oz . Deflector , their longer term mine, had lower than expected production to the middle of August, and as a result, guidance is for 60-65.000oz this financial year, at ASIC of 1250-1350 A$/oz - which means, that they will not genrate any cash ( I guess ) after developement capital. I just can´t become friends with Doray - costs are very high, the miens look pretty hungry for ongoing capital spend, and exploration delivers around the edges, but not significant enough to make a real change. At this stage at least, they look to me like a roughly 1500 A$/oz total cost producer, with  limited mine life and limited upside.

Have a nice evening

WS

General - Evolution - Paringa - Graphex

Good afternoon

The German elections next Sunday could deliver an unpleasant surpise....Merkel will win by a very large margin, but lots of voters are still undecided, while the new right wing party ( currently at 12%! ) could profit from this. The Social Demeocrats will be the big loosers at about 20% of votes, but it´s uncertain, whether they will prolong the existing coalition with Merkel. The right wing will definitely not be party of any coalition - still, a big win of votes for them could be bad news for the overall, political climate.

Economists are upgrading growth forecasts for Europe to 2.1% this year - the ECB is at 2.2%. That´would be the best growth in 10 years.

European equites are stronger today,a s are metal prices except for gold, which looks like it wants to test the 1300-level.

Evolution - has sold Edna May, as expected - price a little bit worse than  expected: 40 Mill A$ in cash , another up to 50 Mill$ in royalties. Not that it makes a huge difference, as Edna May has been a small part of analyst´s overall valuation - but I would have hoped for a little more. EVN have issued new guidance, cutting AISC from 850-900 A$/ounce to 820-870 A$/oz - reflecting, that Edna May has been the highest cost mine within the portfolio. So I think overall, this sale is neutral to EVN - 30-40 Mill A$ less thann being hoped for, but certainly an improvement of the asset quality in terms of costs, and also mine life. Perhaps equally importantly, it fres up management capacity.

Graphex - JV-Partner CN Docking have released results from more due diligence work, namely their assessment of product specifications. They confirm, that the Graphex project contains the coarsest graphite product in the world. Also, the Chinese company reports about a 50% increase in prices for graphite this year, as China continues to clamp down on enviromentally damaging production in the country, amidst a growing market from battery producers, and housing related uses of Graphite. Unfortunately, and as you know, the project is based in Tanzania - so some time will be needed for the government to come clear with their plans for the taxing and the ownership of new mines. In a situation like this, I am sure, that it´s good to have a Chinese JV-partner!! I continue to back this company - any good news on clearing up the government plans will be very very welcome for the market 

Paringa - announced a 9% increase of capex due to sme changes to the mines design - that is just within their contingency. The changes will decrease operating costs over the mine life and hence, the NPV will be slightly higher. Construction remains on track for a mid-2018 start-up. The company has also stengthened the operating team in the US with experienced personnel. In my opinion, this stock is a very safe bet and should deliver +50% over the next 15 month.

Cardinal - a new and positive resource statement is out: 120 mT at 1,1g, using a 0,5g cut-off, for 4.3 mill oz in the indicated category. That is very positive inded, and the deposit looks to be mined in one, very large open pit down to 350 m. This update is very positive - but unless I have ovelooked it, tha granting of all necessary titles still has not happened. This is a real worry for me - millions of ounces can make very gready!!! Otherwise, the company has made some good progress on treating the ore, and recoveries are satisfactory now, though not great. But a single-pit, 4-5 mill ounce mine does find a lot of interest from larger mines - but only, once all necessary titles are there!

Have a nice evening!

WS

General - Nev Power - Vale

Good afternoon

Chinese numbers yesterday definitely point to a moderation of growth...Fixed Asset Investment ( + 7.8% ); Retail sales ( +10.1% ); Industrial Production ( +6% ) were all below expectations, and below recent numbers - but obviously, still very supportive of world growth. In the States, the CPI increased by 0,4% MoM - that´s very strong - while labor market numbers have been slightly positive.

But today, Retial Sales provided us with a very negative surprise....Trump-country could be in for something very ugly: Economy slowing down, inflation creeping up!!

Labor market numbers in Australia were very strong yesterday - the economy created 54.000 new jobs last month, of which 40.000 were full-time jobs.

Metals are still correcting, although the metals finsihed the day above lows. There is still a lot of interest in what I call EV-metals: Lithium continues to be the bussword, and cobalt is still trading at highs. Iron ore had a small correction, but all coal types are still at highs. We saw some signs of metal prices stabolizing today - but that could also be due to shortcovering ahead of the wekend, following a pretty sharp correction this week.-

The US$, as you would expect, reacted as well and is attempting to fall through 1.20 Euro again.

We could be in for a volatile week!

Not much from the company front today, and yesterday!

 Vale - is having some problems with a large nickel mine in the Amazonas, which got closed today by the government. It´s beingh claimed, that Vale has cheated some indigenous people - well, I guess that is a distinct possibility! Also, the JV-mine Samarco, jointely owned with BHP, will probably only come back on now in late 2018.

Fortescue - Nev Power, Australia´s probably most highly regarded CEO ( certainly in natural resources ), will resign from his job in February 2018. This has been coming for some time, and I was actually surprised, that he has been staying for so long. Nevertheless, FMG fell by 4% - also driven by weaker iron ore prices. Nev has done an unbelievably good job at FMG...he will be difficult to replace. Also, the company hinted today at the possibility to enter new businesses , even outside of mining. Understandably from Andrew Forrest´s view point ( he still controls 30% of the stock ! ) - but I do not believe, that investors do like this kind of noise / uncertainty.

Have a nice weekend

WS

General - KGL Resources - Newcrest - Perseus

Good afternoon

quite large inflows into LME warehouses finished the metal rally for now...I guess Chinese speculators needed a reason for profit-taking, following very strong rises over the last 2-3 month. We might see some more of this...but recent economic numbers from around the world have been pretty reasonable and pointed to a furtehr, sustained recovery. So if we should see much weakness, there might be opportunities coming up.

Inflation is coming back in Germany ( 1.8% ) and PPI increases by 0,2% MoM in the US. For sure, especially the ECB will watch that!

For a change, currencies are relatively quiet today ( well, that was until late afternoon..US$ now strong, and subsequently, gold is down a few $ ), as are equity markets.

Not all that much to report today....

KGL Resources - interesting development today, as RCF, a very well known PE-fund, invested 3 Mill$ as part of a 12.4 Mill$ placement. This is a very highly regarded investor. The placement took place at 30ct, and teh Executive Chairman also putting 1.2 Mill$ into it - that´s a big commitment. For the first time in years, they will be able to spend serious money on exploring their copepr project right in the middle of Australia! There is much work to do - at this stage, they lack tonnage to get this remote project off the ground. But more recently, electro magnetic surveying has proved to be a very effective tool for this resource, and a few conductors remain untested. Who knows, perhaps these guys are actually getting somewhere, after many years! I have been out for some time.

Newcrest - the Cadia East Cave 1 is starting production again. The repairs following the mini-earthquake have taken some time, and teh second Cave remains to be opened. The functioning of those two, and their safe operation, is expected - but nevertheless, you never know, and they are very important operations for Newcrest. For a while, there will be this thought in the back on investors mind....

Perseus - Sally-Anne Layman, a very experienced mining-finance person, is joining the board. I am sure, that this makes a lot of sense - she will be needed, when it comes to financing Yaoure sometime late next year. She was c-managing the mining finance division of Macquarie in Perth until last year. Also, PRU have hired a very experienced man as  General Manager of Sissingue. He ahs done it before, and has spent many years in French-speaking Africa Both are good additions to the board/management.

Have a nice evening!

WS

General - Lithium et al - Evolution - Finders - Iluka

Good Afternoon!

The Chinese consumer does, what he has been told: Consumer Confidence is on a 20-year high, driven by a rise of 7.8% in Disposable Income. He is also buying cars - as do Europeans, Japanese and now also Russians, Brazlians and Indians. Global car sales increased by an estimated 3.9% YoY in August, as estimated by Macquarie. EV´s market share is rising strongly: From 1.8% last year to 3.2% in China; from 1.6% in Europe last year to 2,6% this year. Overall, marklet share of EV´s worldwide has increased from 1.9% to 2.2%. Politics everywhere are pushing this story very hard, and we will see this trend continue for years. I just hope, that governments around the world will catch up and provide the appropriate infrastructure! 

I have the distinct hope, that after 2030, I will not be able anymore to put gasoline instead of diesel into my tank!

Base metals still in correction-mode, but lead and nickel finishing the day slightly higher now.

M&A in the gold sector is heating up....Alamo is buying Richmont at a 20% premium in a share-deal, and several ( mainly Chinese bidders ) are circling the old Martabe Mine in Indonesia, now owned by EMR, the PE-fund run by Owen Heggarty.

The vagaries of counry risk: Eldorado gets hammered because of their decision to stop investing in Greece ( well understandable - that country does not appear to need any new jobs!! ) - Centerra goes through the roof because of a new agreement with Kirgyztan ( following years of desperation, though!! )

Iluka are beefing up the Zircon price by 130 US$ to 1230 US$/t - that´s earlier and stronger than expected by most analysts. There should be more coming over the next year or two - stocks are being emptied, and the negative enviroment over the last few years has limited the developement of new mines. Sheffield, one of my holdings, should profit from it. I am surprised, that Iluka have not knocked them off as yet!! A new broker report valued them at 1.40 A$, vs current price of 50ct. I have not seen this report, but I believe, that this thing is easily worth 1$ in the medium term ( earliest production in late 2019 ). Blackrock is the largest, single shareholder. 

Finders Resources - the CFO has resigned, after being with the company for 10 years or so. He made the move from the old headoffice in Sydney to Perth, and I believe that he wanted to go back there. No reason to worry...the stock has had a reasonable run this year, but is very cheap, still. I have sold a few over the last weeks, but only, as my holding got too big. At the current copper price, the project should make just above 100 Mill A$ in EBITDA p.a. for Finders - not bad for a company with 170 Mill AS$ market cap, and debt all but gone by this time next year! This is cheap, even in Indonesia!There has been a big shift in ownership over the last 12 month at FND. Resources Finance Corp is gone, and a number of Australian institutions have entered the register. I am hoping for large dividends here, once debt has gone!

Lithium stocks continued to dominate the talk today. China´s decision to stop all non-electric car sales at some stage ( exact date will follow - 2030, 2035? ), has fired up the sector big time. Galaxy, Orocobre, Mineral Resources and several smaller stocks have profited substantially over the last few trading days. It starts feeling a bit hot  - but longer term, these stocks appear still relatively cheap to me. In the end, it will all depend on the pace of EV-take up, as the world generally has enough lithium - but it might well take a few years ( and longer than some xpect ) to beef up production Graphite is obviously another story to play this ( I think Syrah is worth a good look - but I have not done enough work here ), and as we have seen over the last few month: The market is playing one story after another - first was cobalt, then rare Earth, now lithium. I think all of the relevant stocks are very cheap, IF current lithium hydroxide / lithium carbonite / lithium oxide / spodumene prices continue where they are now. Lynas in Rare Earth probably needs a continuing upward trend for Nd/Pr, if we want to see further gains, which is possible. But in my opinion, investors are still not interested enough in nickel! A well respected research company, Wood Mackenzie, suspected the other day, that we will not see any new nickel mines ( ex NPI that is, which is unsuitable for batteries ), unless nickel moves to 20.000 US$+. At that price, my favourite puppy, Panoramic, should be worth  5-6 times todays market cap....The day will come - but relistically, I think 20.000$ we will see only a few years down the track - 2021 or 2022. Anyway, with a consistent price above 12.000 US$/t I would be happy for now!

Obviously, there are many more stocks - I have named just a few. But I would like to mention Graphex and Peak - both doomed in the moment thank´s to their assets being in Tanzania. One day....

Evolution - have received a few bids for their weakest mine, Edna May. Edna May has been a bit of a problem child for EVN, requiring some capital, and lots of management attention, while producing only 8% of the current output. The asset quality of EVN has dramatically improved over the last 2-3 years, and Edna May does not fit the bill anymore. I think they might struggle, though, to get much above 100 mill A$ for it. Small beer in the overall scheme of things, and I agree with just about every analyst in town, that the mine should be sold - provided the price offered is halfway reasonable.

Have a nice evening!

WS