General - Regis - Prairie Mining - Foran - Northern Star - Breaker

Good afternoon

markets are not quite sure about direction...while the US$ has strengthened today and yesterday to some degree, metals are sliding a little bit today- equities also see-sawing and largely unchanged on balance. But as the day progresses and the US-markets wake up, metals are turning green

German investor confidence slipped following the recent turmoil, but is still strong. ZEW expects an improving economy for the next 6 month.

Weak result after market today from BHP. Much improved certainly from last year, but 6% below consensus. Div better than expected. Costs were a little higehr than expected and contributed to the miss vs analyst expectations.

Regis - a very good result from them today...8ct Div for the half, EPS of 17.29 at average gold price received 1640 A$/oz; cash on hand 172 mill A$ - joining the growing rank of well cashed up Australian gold miners. Some expectations, though, have been higher. Guidance of 335-365.000 oz for the full year will be achived , most probably at the mid-to upper end, with AISC of 858 A$/oz, which is below the lower end of cost guidance. Mine life is the only slight issue for Regis - operationally, they perform very well as ususal. The company has many friends- understandably - but it´s certainly not cheap!

Prairie Mining - is making new highs today in London, following a relatively large line being crossed yesterday. The market is speculating on two things here: Progress and financial details on Jan Karski, and further talks ( potentially a takeover/JV ) on Debiensko with JSW in Poland. Both announcements could/should be strong value generators for Prairie! If for example JSW would buy the entire project for say 100 mill$ + a royalty ( the project has a NPV of 1.5 bill US$), it would pay for more than PDZ´s market cap - not to talk about the Jan Karski mine! Similar to the situation at Jan Karski, where Bogdanka could utilise their existing infrastructure, the same aparently applies to a JSW-co-operation of some sort for Debiensko! Don´t sell a share, in my opinion - there is a lot of upside here!

Northern Star - result was ok, a little below some estimates - exploration was excellent! Looks like they will be able to expand mine life at their most important mine, Jundee, by a few years - but too early to tell, and new results are quite a way from existing development. NST always has to be seen relative to EVN - and I still believe, that EVN are teh clear leader here. Do to their very low costs, free cash generation of EVN is nearly double of NST´s, and reserves are nearly double as well - yet EV is only 35% or so higher for EVN. If bullish forecats for NST are right, though, they have the better growth-profile. The ultra-agressive exploration effort by NST is playing out so far - but at a cost: For Jundee alone, they have increased this year´s exploration budget to 45 mill$! The W.A.-mining services companies will love it! Swick Mining have a large, existing contract with NST for Jundee - this will help them, and I would not be surprised, if they would put another 4-5 drill rigs to work there.

Breaker - the market is clearly believing rumours here, that the resource is not hanging together, and therefore, the first resource estimate might disappoint. In today´s exploration update, Tom sanders is stressing a few times the great continuity of results. We will find out in late March - but you would think, that management would have a good idea about the progress of the first resource estimate. Results today includded many nambers like 10-25m between 1- and 1.5g/t, but also some pretty excisting stuff like 34m with 14g. I tend to be with management here - the stock is probably very cheap here in the 50ties.

Foran Mining - Foran just announced first results from their ongoing drilling campaign: 143% Zn, 21g Ag + some gold and copper over 4m and a similar hole over 5m - nothing in itself to get too excited, but certainly excellent results, closer to the surface than the current resource. More of these results ( drilling program in full swing ), and the market should get excited!

Have a nice evening

WS

General - Perseus - Strike - Graphex

Good afternoon

well...markets have recovered nicely last week, while I was skiing! Metals as well as equities had a pretty massive rebound, and the UIS especially is now back in positive territory for the year, as are the metals and gold. But without any doubt, some fear has been planted, and I have read about quite a few insto´s, which took some chips off the table!

The US consumer confidence, though, is at record levels, as measured last week, right after the little meltdown in markets.

Goldman´s again confirmed their bullish view on the metals, still calling copper to 8000 US$/t by the end of this year. 

But today, and in the absence of Wall Street, and major economic news, we are seeing some profit-taking in equities as well as in metals. 

Strike Energy - have started drilling! Most probably the most advance drill rig in Australia, owned and operated by Halliburton, has now started drilling! Technical success we will know by some time in April - economic success will take longer to evaluate. But I am pretty sure, that we will get some clues on the way through! The company has worked extensively on this thing becoming a success, and Halliburton is very much incentivised, to give it their best shot, as tehy would do all of the follow-up drilling over many years. We all know, that the upside is massive - but a failure would be very negative for Strike. Most probably, their resource would still be exploited at some stage in such a case - so the company would not go under. But I am happy to take a say 50% risk for multiple upside, as I believe, that the chance of success is easily above 50%. It´s certainly worth having some - the only problem being, that I have many!

Perseus - major parts of the new plant at Sissingue have passed contractors guaranteed operating performance ( crusher + SAG mill ), and the plant is running consistently at- or above name plate. Despite of them using only low-grade oxide ore in the comissioning phase, gold recovery has also exceeded feasibility study estimates. The company is now expecting to declare "comemrcial production" by the 31st of March, but to me this is very conservative, and I would expect the plant to be in full production earlier than that, ahead of time, and withing budget of 107 Mill US$. The project was going to make reasonable returns at 1100 US$/oz - at the current price of 1350 US$, Sissingue should be a very valuable exercise before any furtehr exploration success! I guess Jeff Quartermaine will give us a good feel this Friday in Zurich!

Graphex Mining - a new research report was published on the webpage - done by their corporate broker, but not paid research . The updated valuation, incorporating the current price deck for expandable graphite in China, is 2.38 A$ ( using NPV10)  or more than 7x the current share price. As you know, the project is very advanced, and Chinese financing is most probably very close - but you also know, that the project is based in Tanzania, which has a very chequered history of mining politics, to put it mildly. China desperately needs a graphite product like the one GPX could deliver - and China is very powerful in Tanzania. This is why I hope and believe, that the project will be ticked off shortly. The above valuation does include, that Tanzania demands a 16% stake in any project for free! I think Graphex Mining , presented by MD Phil Hoskins, will be one of the most exciting companies presenting this Friday in Zurich. make sure you don´t miss it - hard to beat in terms of risk/return!

Have a nice evening

WS

General

Good afternoon

I have to admit, that yesterday´s renewed, heavy sell-off in N.Y. caught me a little by surprise! I still believe, though, that this recent 10% correction in the S&P should be doing the job. Obviously, some big boys repositioning themselves, and the sheer amount of money from investors like Bridgewater is killing it. I think, that these corrections are way faster these days than they used to be - computers never hesitate! But that also means, that the air should be clear much faster as well. In any case, and whatever computers will do - ultimately, fundamentals always prevail in the long run - and I guess we all agree, that they are looking good!

I agree with most commentators, though, that the way back to "normal" interest rates around the world will be a volatile one! Imagine the ECB, Japan and the FED would be doing it at the same time! But this is not to be expected.

Financial markets are not the reality - they have not been for quite a few years now, at least on a short term basis. And teh erality is, that the world is growing nicely, alongside company profits.

Goldmans stick to their bullish call on commodites.

Inflation in China is easing...

Europe is weaker, but much better than you would have expected following the late route in New York yesterday. It looks loke Australian instos have kept their nerves - the market was only down by 1%,which was a great effort, considered our market is the first one to open.

Small Caps have not been as negative this week, as one might have expected. my small-cap and resource-orientated Australia fund is down by about 6.5% since this volatility started last Thursday. Bad enough - but could have been much worse! There has been some pressure here and there - but largely, investors seem to look at fundamentals, and liquidity-driven selling has not been overwhelming.

You have a nice weekend! I guess we will all enjoy two trading-free days!

WS

General - Prairie Mining - West African - Mineral Resources - Crusader

Good afternoon

it looks like derivatives, and this exoctic short-volatility ETF´s, have been largely responsible for the recent sell-off! You wonder what sort of time bombs are there around elsewhere!

Obviously, the market is getting a bit concerned about inflation, as economies around the world are exhibiting concerted growth, and the US labor market is showing signs of getting tight. This is probably right...the big question being, whether continued technology improvements , which have been the major driver to hold prices down over recent years, can continue to do so. The reality will probably be, that we are not going to see run-away price increases, but moderate ( and historically, more normal ) price inflation - especially in the US.

That will potentially see interest rates going higher for some time.

As various commentators from Goldmans and Citi argued, this should be a great enviroment for rising metal prices! Very limited supply growth, restrictive policies in China, concerted growth, and 6-year long underinvestment in new projects should see 2018 and potentially also 2019 as good years for our space.

This morning, metals were pretty weak - but further into the afternoon, metal prices have seen a recovery, and are currently largely unchanged. The strong US$ is also having a negative effect on the metals complex.

New volatility is creping into equity markets today...probably driven by new highs in bonds yields around the world ! Not good...we want things to calm down!!

Prairie Mining - are having a very strong day in Europe, as they are listed in Germany, London as well as Poland. Reason for this is, that PDZ has confirmed early stage talks to JSW, the large , polish coal producer and neighbour in Debiensko, about coperation - whatever that means. Polish newspapers today reported furtehr, that Mittal had met the new Prime Minister in Davos, indicating willingness for additional steel capacity, IF the Polish government would sort out additional coking coal supply..  Prairie paid a few mill $ for Debiensko, which makes it hard for state-controlled JSW to pay a full price for it - the NPV of Debensko is 1.5 bill$! At the time of PDZ buying Debiensko, JSW were in financial trouble, But in 2017 alone, teh company is estimated to have generated 1.1 bill US$ in EBITDA, and should start paying dividends again. Their own share price has gone up 12x from 2 years ago, making it more justifyable to pay a nice price to PDZ. What this price might be? What do you pay for an excellent project - admittedly in Poland, which is perhaps not the greatest jurisdiction, despite being in the EU - which has an NPV of 1.5 bill$?? And even harder for PDZ - what disount will you accept? I think it´s nicer to have a pigoen in in your hand, than a dove on the roof! I would be a happy shareholder, if PDZ would generate an after tax return of 150 mill A$ from Debiensko , which would be approaching 90ct/share! This would leave them with the jan Karski Mine, which has a NPV of 1.8 bill$. It´s nice to have two swords in the fire! And to continue with idioms - where there is smoke, there is fire! "Coperation" could also mean coepration between JSW and PDZ to jointly develope Debiensko....we will find out! Fun ahead, I hope!

West African - announced some very nice infill drilling the other day , which according to management, will increase grades as well as help transferring inferred- to indicated resources. 14m at 39g; 1.5 at 194g; 13 at 5g; 12.5 at 17g; 8.5 at 7g and 1.6 at 26g are certainly exactly the stuff we want to see from them. Like everybody else, WAF are presenting at INDABA - and I have no doubt, that companies will queue for meetings withbthem! There is a big shortage of quality projects, and many mining companies are making good money - Iamgold, B2Gold, St Barbara, Evolution - just to name a few candidates. O.K. - the latter two have not said as yet, that they are looking outside of Australia, but they might have no choice - especially St.Barbara. As you know, a new resource statement coming out late this Quarter, and every 100.000 ounces in additional, indicated resources will increase the valuation by 60-70 Mill A$ or 10-12ct/share.I still have my target of 60-70ct for them by mid year - in form of a takeover, I hope! I bought a few more early this week.

Crusader - came out with their long awaited, Boroborema optimisation study. The NPV8 has been stated at117 mill US or about 150 mill A$. IRR 31% at 1300 gold price, production of 700.000 oz over 10 years. AISC of 908 US$/oz. Not bad at all, especially against a market cap of 22 Mill A$. The only problem is the size - you do not attract a JV-partner for a 700.000 oz mine - but you might attract a buyer, who pays you half of the NPV. The story remains the same: The stock is very undervalued vers it´s potential! But the new management will have to prove itself. The market needs to get more confidence in the new team, before the stock can be re-rated. And I have to admit, that over the last few years, even larger NPV´s have been thrown around in private conversations ( by old management ). 

Mineral Resources - this great company has delivered an excellnt half-yearly result today, paying a 29ct div and reconfirming guidance of underlying EBITDA of 500 millA$ this financial year. They are teh world´s largest producer of litium these days from zero not too long agao, and plan to push furtehr downsteam activities. Within this year, tehy awill start construction of a lithium carbonate plant, which distances them from being a pure lithium ore, or spodumene ( 6% lithium ) exporter. Stock had a good run over the last few days - but this is a nice div-spinner, and well worth holding - if you like lithium! JP Morgan came out the other day with a pretty bullish report on lithium.

Have a nice evening!
WS

General - Evolution - Finders

Good afternoon

Just in case you ahve forgotten about our resources conference on the 23rd of Feb in Zurich, here is the link.

Unfortunately, Jake Klein of Evolution had to cancel his presentation for very important, personal reasons...we will change this in our document on Monday.

http://www.schroeder-equities.com/conference/

Good afternoon

vry strong manufacturing numbers in the States as well as in Europe yesterday were not enough to hold up markets...Investors are getting concerned about interest rates. Today, strong labor market numbers from the US, and also Average Hourly Earnings increasing quite strongly, underpinning the positive consumer confidence

I guess nobody expects interest rates to really shoot up - and I believe, that strong earnings in the current enviroment should outweigh moderate increases in rates....But today it certainly feels as if we might be in for a little correction generally in equities markets - finally! It might be only a short one!?

Goldmans bullish on commodities - calling oil / iron ore/copper higher, based on solid growth around the world. Gold is weakening on interest rate concerns.

Congo ( DRC ) surprised the other day with new mining taxes....higher royalties, and a super-tax, if metal prices trade 25% higehr than the ones used in a feasibility study. It´s not done yet - Kabila has to sign - and everybody from Glencore to Ivanhoe are trying to talk him out of it. Would be bad news for Ivanhoe´s mega copper-project, which has to be financed at some stage, and certainly others as well.

A litlle bit of profit-taking in the metals so far today...that might change during N.Y. trading, given the positive economic news over there.

Evolution - Mr.Sawiris reduced his stake by 16 Mill shares alltogether, by terminating some option strategy he had put in place about a year ago. His holding is now down to 20% of the company. There is nothing wrong with profit-taking, I guess! Incredibly enough, EVN powered ahead today, and is very close to a chart break-out. the stock has now recuped much of the underperform against the otehr mid-sized producers in Australia - the stand-out, though, is still St Barbara, which came out of severe financial difficulties jst 2 years ago, shooting up by more than 1600% over 2 years!

Finders - good preview for their result today. They generated 72 Mill US$ in EBITDA for 2017, as yet unaudited, with production of 25.200t at AISC of 1,66 US$lb. Their problems in the last 4 month or so have been well documented, and at full production of 28.000t they will be very close to 100 US$ in the current enviroment for copper prices. The company has not made a forecast for current Quarters production - but I expect this to be the last, slightly weaker Quarter than normal, as the plant is normalizing. I hope, that Barry Cahill will update us with some real numbers on the 23rd of Feb in Zurich!. The share price has rarely traded at the takeover price of 23ct - yet no alternative bidder has emerged as yet. I am sure, that many potential players are shying away from doing business in Indonesia!

Have a nice weekend!

WS