Very general!!

This was meant to be yesterday´s report….which I did not send out….

Hi guys

I have to admit, that I can´t be bothered today! This is no fun!

Enjoy a bottle of red tonight, and stay home!

Wille

Hi guys

I finished the bottle of red on my own last evening, after I saw the finish in the US for mid-sized gold stocks, as measured by the GDXJ - down a wapping 25%! Absolutely amazing…It´s trading at the same level as a few years agon, when physical gold was trading at about 1100 US$ or about 1550 A$/oz!!!

Anyway… Australia last night had the most amazing turnaround I can think of since 1985, when I started working…down 8,2% by late lunch Australian time, and up by 4,4% at the close…a turnaround of nearly 14 on the day!!! My Australian contacts are absolutely sure, that the market turned with the news from a Canadian company, which claims to have found a cure for the virus - ready to be tested on humans by July/August…

Not exactly sure, wheather this is the entire story…also rumours flushing around , that the FEd will take drastic action by buying bonds, equities etc etc…we will find out!

For now, things are looking a bit brighter…European equities are 2-3 % up, base metals are up by between 2% for copper , and 8% for nickel. In that context, it´s worthwhile to mention the almost astonishing performance of metals recently:, during the turmoil: Copper is down by less than 2% since the end of Feb / up by about 1% in A$ terms - Zinc is up by 2% in A$, and nearly unchanged in US$ - nickel is up by more than 2% in US$ and up by about 5% in A$! I think this is an incredible performance. Do people want hard assets, or are they expecting economic stimulus by central banks and governments to turn things around ( whatever it takes! ) in a few month time?? Probably a bit of both…

Gold, by the way, exactly unchanged in the moment ( 1583 US$/oz ) from 28.2., and more than 2% up in A$ to currently 2506 A$/oz. I bought Evolution yesterday - obviously, one day too early - and I bought Bellevue today. Both stocks are incredibly cheap - EVN as a safe stock, and Bellevue as a deep value gold developer…a little more here:

Bellevue Gold - the stock crashed like everything else…the day after conference on the 24th of Feb, the stock closed at 64ct - today, it closed down 42% vs the GDX, which is down 45% over this time frame. But Bellevue announced a great resource increase by 400.000oz at more than 12g/t on that very day. Broking analysts estimate, that Bellevue has to spend 110-140 mill A$ incl capex for underground development ( 30 mill ) to produce 160.000 oz p.a. at AISC of about 1000 A$ - or let´s say total costs of 1400 A$/oz ( that´s my personal nack-on-the-envelope number). That leavs them making 1100 A$/oz in free cash - or 176 mill A$ p.a. vs a current market cap of 213 mill A$. With resources of 2,2 mill ounces right now, and strong upside from multiple lodes within the system, I think this stock would end up with 10 years mine life! I think this stock is crazily cheap! The only small caveat: At the current , massive rate of spending + dewatering , they will run out of money by June…I am sure, that they can slow down things a bit - but still, at some stage this year, tehy will need more money. I have no problem with that, as eveyr drilling program so far and every placement, has lead to a large amount of gold being found. The fantastic grades and teh ( still ) large exploration upside right in the middle of a few existing gold mines, make BGL a standout-corporate target in my view. Wheather it´s EVN, SAR, SLR, NST or even some outsider like Western African Resources ( once in proper production ) - I think a takeover at double todays price would add a lot of value to all these guys, with the exception perhaps of WAF - but they would gain a second mine, and one in Australia vs the current one in Burkina Faso!

Panoramic - now it´s confirmed…Andrew Forrest´sinvestment vehicle bought 5,5% of PAN - and he also increased his stake in Mincor to 12%…nice work in this market! I am sure, thathe has a grand-plan

General - Panoramic - Evolution - Perseus - Newcrest

Good afternoon

I spoke to a mining CEO today, about how Corona could affect mines…He believes, that the risk of mines actually closing is pretty low at this stage. They are taking precautions, like constantly checking on employees etc, seperating shifts and so on. Every worker returning from a problem area, is being sent to voluntary, 2 week quarantine etc etc….That does not remove all risk from the virus, but clearly some of it…I guess these things will add slightly to costs - but the very weak oil price on the other side is certainly helping the miners!

The very high death rate in Italy , as well as the very high number of infected people in neighbouring Switzerland, let us believe, that the true number of infections in Italy is much larger than the reported 10.000 cases - probably double, potentially triple! But italy also has the oldest average age of population in Europe - the average age of people dying from Corona is 81 years, and many of those, had pre-conditions.

Merkel and Trump are doing absolutely nothing so far- except for rethoric!

The crazy volatility does continue…metals are down by 1% ( nickel by 2%) , while gold is trading just below 1150 US$. Inflows into ETF´s are continuing…And so is the disappointing performance of gold stocks. I think they are generally very good value in the moment, as the A$ gold price at 2330 A$/oz is trading just a little below the all time high. By late afternoon European time, the GDXJ is trading at the same level as in July 2019, when gold was around 1400 US$/oz!! Gold currently is 1649 US$!

There certainly is some correlation between equity markets, and gold stocks - it´s even higher very short term than the correlation between gold and gold stocks: Over the last few trading days, gold is hardly changed, while gold equities as measured by the GDXJ are down by 12-13%!

BASF together with the large South African producers claims, that they have developed a catalyst, which uses platinum instead of palladium for gasoline engines. They believe, that it could have some impact in 2022-2023.

Evolution - Macquarie/BHP veteran Vicky Binns is joining the board…a smart woman, and a good addition! Great to join a board at a time, when the company is just printing money!

Perseus - updated development progress for Yaoure with a video. I have compared it with previous updates on West African Resources, which is now ready to go. I think PRU are still on target for comissioning of Yaoure before year end - so all looking ok at this stage. The stock has got quite a hammering, from a recent high of 1,30 A$ ( which probably was fully valuing PRU at the time ) to a current 0,925 A$. That is overdone, as is the case with many gold mines currently. PRU have delivered very well over the last few Quarters, and I would buy the stock down here. There is clearly some development/comissioning risk associated with Yaoure - but the company has previously shown with the smaller Sissingue, that the team is well capable of development on time and budget. One problem I see with it is, that tehre are many people running around at a construction side, and you cannot so easily control workers coming in and out of the site - hence the risk of some people catching the virus is much larger, than at a “normal” mine site. Still - I think the stock is very much on the cheap side here at current gold prices.

Newcrest - cut guidance for Lihir by about 1500.000oz or 15%, and for Telfer by 40-50.000 oz or about 10%…Cadia and Red Chris doing slightly better than expected, but not nearly enough to make up for Lihir especially. As I said so often - there is no reason to own NCM..and there is not after today´s fall, which was just a liitle bit worse than the average gold stock.

Panoramic - here comes Andrew Forrest?? According to a press article in Australia, his investment company has been buying a stake in PAN. Fact at this stage is, that somebody via Credit Suisse has been buying a lot of stock. Fact is also, that Andrew is the second largest shareholder of Poseidon Nickel ( where Peter Harold is now Managing Director!! ) , the largest shareholder of Mincor…and according to the press, has also held talks with Western Areas. Is he planning to consolidate the smaller, Australian nickel producers? This would not only make sense - it would also be typical for Andrew, who likes to think big! PAN responded to the press article, as you would expect: Holding talks with Third Parties, Data Room still open etc etc…That´s all tehy can legally say. Watch this space! Poseidon Nickel had 51 mill A$ in cash as at 31.12.2019, and tehy are spending very little, as they also have very little at this stage to spend the money on! 51 Mill A$ would ve very handy to bring PAN as well as MCR into full production…without any problems and financing constrains! Everybody knows here, that I am close to Peter Harold - but please do not believe, that any of the above is from him!!! He would not tell me anything…so I do not even worry about asking him!

Have a nice eveing, and try to relax with some soccer - albeit without any fans!

WS

General - West African - Tietto

Good afternoon

In China, of 80700 infected - only 19 new cases - 62000 have recovered…but in Italy, 463 have died, and 9170 are infected - a plus of 1800…in Spain, there are 1204 cases, a plus of more than 600…but in Germany, the pace of increase has slowed down substantially, as it has in Korea, Iran . Europe and to some degree, the US are the main areas of concern in the moment, and you would hope, that they can deal with it as Asia has! I think major concerns are overdone…but there is no doubt, that we will have a recession in the first 2 Quarters of this year. The big question for markets currently: How quickly can governments/central banks reignite growth?

In any case - money prining, and loose fical policy will be standard…so do not put aside the allure of gold in such a ( short term? ) recovery! Gold ETF-holdings are still soaring, at least for now! Up by 1.5 mill oz in two days…And I am sure, that Mr.Trump will do “whatever it takes” to beef up the US-economy ahead of the election in November!

Metals are strong today…oil is recovering some ground…equities are rallying like mad. Let´s hope, that this is not a dead-cat bounce! As someone said the otehr day: This massive volatility shows us, that investors have no idea about direction in the moment! New situation for everybody - as usual these days! But I don´t want to winge…UP is always good enough for me!

However - as I am finishing this in late afternoon, Europe is closing down a bit again, and the US is trying to defeat some small gains of 1-1.5%. However - metals are still green, except for gold at 1655 US$!

When gold recently traded in a band of between 1550- 1575 US$/oz, the GDXJ was trading between 40-42…as at the close of yesterday, we are trading at 37!!! So I would not be surprised, if gold mines would recover a bit as well, despite gold being down 22$ currently to 1657 US$/oz .

When it comes to gold mines - or mines in general - there is one big question looming: What, if some mineworker is being tested positiv on Corona??? Will the respective mine have to be closed???? I would not be that surprised. So this is probably a real risk, which needs to be priced in. I think this might have happened already - it might be the reason for gold mines performing so badly vs the gold price? Perhaps it´s not so much the need for investors, to raise liquidity, but more the potential effect of Corona on mining operations?? The resource would not go away, and production would just be moved forward - but in some cases, I am sure we could see a liquidity crisis!

West African Resources - the ball mills are turning, ore through the CIL circuits since 7th of March…the plant is right into comissioning! Company says first gold pour by early April - but there is no reason except for being cautious and conservative, for this to take so long. The mining contractor is now working around the clock at the open pits of M1 as well as M5….350.000t from M5 at 1,5g/t are on stockpile. As at the end of feb, the company had 41 Mill US$ in cash + 40 Mill in undrawn facilites ; 83% of the proposed spending had been completed - so I assume about 35-40 mill US$ left to spend/pay. That leaves the company in a sound position, and hence, they are starting deep drilling again, to extend the 6.5-year underground mine life. As tehy have already had strong results from below the current resource, I am expecting good news from exploration to continue! Evyr additional year from underground ( or every additional 100.000 oz ) should add roughly 100 mill US$ in additional cash generation, at the current gold price. Average production over the first 5 years is expected to be 217.000 oz at below 650 US$/oz AISC….in the first year, 300.000 oz below 500 US$/oz even! Roughly 200 mill US$ or 300 mill A$ will be paid off very quickly indeed! If I assume total costs of 650 US$ in year one, cash generation should be something like 300 mill US$ or 450 mill A$ from Sanbrado over the first 12 month of operation, starting with “commercial production” some time in July/August!

If the last few percent of uncertainty will be removed - and there soes not seem to be any reason for not achieving this - WAF will be a show-case of starting a new mine! Amazingly, run by a geologist!!!! A large part of managing a gold mine start-up is strong marketing - Richard Hyde is ticking that box - another large part is getting the right people - another box ticked - a third one is being honest - also ticked - and last but not least, some luck is needed as well - box probably also ticked! The remaining task: Sell the mine at a good price, or buy something halfway cheap, to diversify risk from a one-mine stock in Burkinah Faso. Also not an easy task - let´s keep our fingers crossed! The stock is worth a lot more than 60ct!! I realize, that they have held up extremely well vs the market - still, I think the stock should be bought here! Comissioning risk is reducing by the day, hardly any gold price risk with AISC below 500 US$ - but certainly some country risk!

Tietto - announced some good drilling results from AG South, which is 1.5km South of their high grade resource AG with 19.3 millt at 2,2g gold/t: 6m with 17,52g / 2m with 2,86g / 3m with 2,22g. Nothing to get too excited - but adding to previous results there, and similar to the stuff they have been finding before. They are currently very actively drilling with 3-4 rigs - some exploration drilling, some resource drilling - so there will be good news, and I guess also some barren holes. Stock is still very cheap, considered their already large resource, and very healthy cash position, which will allow them drilling for anotehr 18month at least.

Have a nice evening!

WS

General

Good afternoon

oil stocks in Australia plummeted by more than 20% - Santos down even 27%. That is incredible, and points to investors expecting a prolonged price war. Shale stocks in the US, which are the highest cost producers ( estimated breakeven for the sector is 42 US$/barrel ), will not only hit because of high costs, but also high debt. As we all know, the shale-frenzy has been financed by cheap debt - and corporate debt spreads have already blown out before today. So will the market eventually behave like a market, and correct itself, by burying the shale story??

European equities are weak, certainly…fluctuating quite a bit, but probably closing 6-7% down for a approx 20% hit since the beginning of the year! The US is trying to recover from a chaotic opening, currently down 4-5%.

Interesting, empirical research from a well regarded analyst in Australia today.: Whenever we have had these massive sell-offs in a very short space of time, the market did recover obviously - but it took a little bit of time: On average, the market was down another 0,5% one month after the sell-off - but 2 month later, itw as up by 5%. So it does need some time to rebuild confidence. Do not expect a V-shaped recovery. This is with regards to the general market - oil might be a different story, as a lot will depend on rethoric from Saudi-Arabia, and also Russia here. Will they attempt to drive down shale production for a long time, or will they bulk under the pressure to get their own houses in order? It´s estimated, that the average cash production cost of Saudi Oil is only about 3$/barrel - but to balance their budget, they reportedly need 80 US$/barrel!

The current crisis will without any doubt make the EU very uncompromising with regards to the new refugee-crisis, which has built up recently , as Turkey is trying to send us many new refugees. I fear I have to say, that I agree with this policy - and definitely in the current context! A few hundred thousand fresh refugees from Syria etc is the last thing we need in the moment! No time to show mercy….

Metals are holding up ok - down between 1-2.5% on in the moment - I guess it could be worse! Gold ETF`s are continuing to see strong inflow. Gold is doing at least what you think it should be doing: Holding it´s worth in dangerous times, preserving capital! Oil has been trading at between 35-and 37 US$barrel Brent - that´s at least much better than the lows seen early this morning at around 32$. It is currently trading at the better end at just under 37$/barrel ( 4.30 pm European time ).

And last but not least, the Australian $ went for a wild ride today…the real trading range ( except for a 1-minute interval ) has been between 0,645 and 0,668 currently against the US…

Not surprisingly, very little company-related news out today!

have a nice evening

WS

General - Markets Yo-Yoing - Graphex

Good afternoon

it´s getting crazier by the day…and more volatile!

Equities are getting another hammering today in Europe….base metals are actually holding pretty well, down about 1% on average so far. And gold is obviously profiting from the malaise! The entire metal complex is certainly also supported by a very weak US$ …Bonds are still rallying big time, now trading at 0,66% yield for the US 20-year bond. I think these bonds are not trading at outlook for the economy - they are trading at levels, which still guarantee capital preservation in 10 years time, while people like Victor Dalio are very bearish indeed.

The US came out with some very strong labor market numbers, above the highest estimate, and also revised the previous month up. But as we know - this was before the virus really hit. Gold sold off initially on those numbers, only to find renewed buying and it´s trading at 1684! Well, that was 20 min ago..we are now at 1650 US$/oz at 4.40 pm European time, and as I will leave this uninspiring screen! There is massive macro-trading happening in the moment - looks like equities have bottomed ( for today? ) / bond yields have bottomed / the US$ has bottomed…hence gold is seeing profit-taking.

The Chinese economy is surely ramping up again…many indicators and individual announcements are showing this, while the rest of the world is not quite there yet!

Interesting story today in the PGM´s…Amplats had an explosion at their main refinery, and has cut guidance for PGM production this year by a 1 mill oz! That´s big stuff in a market, which is undersupplied anyway ( in the case of palladium, at least for as long as we are not seeing a real meltdown in car sales this year ) or nearly balanced , with just a 100.00oz approx supply-overhang, in platinum!

Unfortunately for me, smaller gold stocks and developers are still not doing that much…pretty disappointing! But understandable, I guess - in times like these, you want to buy liquid assets only, and that´s whats happening. But at some stage, the liquid boys will be so far ahead, that they get very tempted to use paper to swallow up the smaller ones! I bought some EVN, AOP, HRN and TIE the last few days…

Negative interest rates around the globe are continuing to help the gold price….it feels like it might test 1700 very soon. Holdings of Gold ETF´s are rocketing - up 4 mill oz since 15th of January, to 85 mill oz.

Graphex - announced a small placement ( possibly at the most difficult time ! ) just to keep them running and pay a few consultants, until ( hopefully ) a large financing agreement will be signed in a few month. This is seen as a strategic long term financing for the PE-funds involved - but the current turmoil certainly does not make things any easier! There is a small Shareholder Purchase Plan as well - only 250.000$, and for applications up to 30.000 A$. I could imgaine, that this will be gone quickly - so if you have interest to participate, you should contact the company quickly. We have spoken about GPX many times before - a true high-risk/high-reward situation!

What a week is behind us! A lot of first-ever events! Not really fun, I have to admit…but my feeling is , that we are getting slowly but surely to the bottom of this. Cases of the corona virus have been increasing strongly outside of China - and we will probably see another week or so of the same - but my impression is, that things don´t get out of hand completely. We will have severe disruptions in the economy - no doubt about this - but we will also have a swift recovery, once the worst is behind us in a few weeks time. It´s selffulfilling prophecy - everybody I know, is pretty cautious in what he is doing , and that in itself will restrict the spread. And every additional week pharma companies are getting, will bring them closer to have some sort of cure to this new virus. Complacency is not what we need - but there is no reason to see this as a 100-year event, as Victor Dalio has called it. I find it very promising today, that the market is weak - but not really that volatile - and a reduction of volatility is what will tend to show us the bottom of the market! This plus a bottom of bond yields! So next week will be a weak of bottom-fishing?

Have a nice weekend, still!

WS