General - Strike

Good afternoon

oil is falling into a seemingly bottomless hole! Worst day today since at least 1982…WTI is currently down by 7$/barrell to 11,30 US$!! But Brent is holding much better, down 1.70$ only. For the hedge funds, shorting oil has been a nearly riskless game: Overproduction into a very weak market, with storage at 100% - somewhere, the stuff has to go! So selling at any price for cash-strapped producers….

But in the longer term, this is a buying opportunity too good to be true! IF these levels should hold for a while- and nobody believes, that the will - all shale production will be wiped out, and no new project will spring to life! The only question is, what to buy - the physical, or some quality oil stocks? Being an equity man, the physical is not what I understand trading in - especially, as longer dated futures are trading at big premiums. With the lack of storage, this wonderful for hedge funds to buy the actualy and sell the future, has been made impossible as well. And unfortunately, quality equity names have been weak, but nowhere as exhibiting the current prices for oil. But still - I think there are some good oil investments around, or investments in the sector, which would still profit from longer term, rising energy prices. Two of them are Beach Petroleum and Strike Energy. Beach has no debt, and 40% of it´s earnings are from fixed natural gas contracts ( at least until June 2021, and some longer ) - but the share price has still halved. My little Strike does not profit directly from better oil prices, but would indirectly profit from better sentiment in the sector.

Gold is holding it´s ground today, while equities don´t like these oil prices…not good for oil producers, obviously, the economy in parts of the US, and definitely a big issue for corporate credit markets! As New York has been open for a few hours, markets are recovering some of the earlier losses ( NASDAQ just green! ), and gold is improving as well.

Base metals are mixed today - nickel strong + 2,7% , following strong market for stainless steel in China.

Vale has cut it´s production range for iron ore this year by 20 millt due to impact from corona. The Brazilian Prime Minister is still not accepting, that this is not just another flue, potentially risking much higher infection rates than the current in Brazil. This poses some further risk for the new guidance. Good for the large Australian producers, and the Australian current account balance!

Strike-excellent Quarterly, despite not having anything you can put into hard facts! As the MD reports, he has never been any busier than in the moment! Approvals and preparations/negotiations for drilling a well in August by latest, I believe ( officially in the 2.Half ), tender completed for thirs party midstream processing, appraisal plan for two more wells near West Erregully, engineering work for first production etc etc etc. Perhaps the most exciting of the Quarter has been, that more work has been done on South Erregulla, where the company sees a 50% chance of a Prospective Resource of 1,6 TCF, which would be absolutely outstanding and potentially worth even more than WestErrgulla, the find of last year. The company has 24.5 mill A$ in cash , no debt. The next well will cost 15-20 mill A$ of which Strike either has to pay 50% - or alternatively, and that would be fantastic - get a bigger part of the pie, in case the JV-partner, Warrego ( probably 6-7 mill A$ in cash ) could not pay for it´s 50% share. Strike is also in advanced disussion for project finance for the development of West Erregulla, and expects something there over the next few month. I know, that it´s boring to see the share price close at 13ct just about every day - but don´t get it wrong: This is a very active time for the company, and while it has nothing to do with fundamentals, I think the price will start to improve, once the market can see a fixed time frame for drilling of the next hole. Marketwise, this is a quiet time for them - but you should use this time to accumulate stock at current levels! Last , but not least, Woodside have delayed final investment decisions for two major offshore gas projects, which will make gas from Strike more sought after for domestic users! I guess to fix project finance, some kind of longer term gas sale agreements would be needed for Strike - hence, this is very positive!

Have a nice evening!

WS

General - Chalice - Panoramic - Metro Mining - Genex - Silver Lake - Oz Minerals

Good afternoon

Mr. Trump think´s, that it´s a good time to stop payments to the WHO! The world of politics is ruthless - using even the Corona-Virus for campaigning…anyway, this also happens in Germany!

Factory output in the States slumped by 6,3% - apparently more than expected, although I find this number very reasonable in light of the situation. But investors are looking for a reason to sell some stock today anyway, following the very sharp and relentless rally recently. Equities are currently pretty weak across the world, down by 2-4%. I think the market is not happy with the oil price at all - potentially, it has bad repecussions, for example for US credit markets!

Oil does not seem to have a floor at all…I think prices are falling so heavily, as everybody trying to produce as much as tehy can before the agreed cuts fall into place in 2 weeks time…and reportedly, there is no storage left to arbitrage with later deliveries. The fall of oil I believe to be a temporary thing…but obviously, I am not an expert here! But at 20$ for WTI, and sub-2$ for gas, you will not see many shale producers survive !

The lockdown get´s weakened more and more…Germany also starting on the 4th of May…

The corona infection curve seems to be flattening everywhere now…Australia continues to be just about the best-in-class…

Gold ETF´s saw the equivalent of about 40t of inflow over the last 2 days…that´s massive! ! Approx 2 bill US$…and Newmont/Barrick with anoother high today. Is big money finally moving into gold? As the A$ has given up some of it´s massive gains today, gold in A$ is currently at 2726 A$/oz, while it´s trading around 1720 US$.

Gold stocks continue to be well supported - some money seems to move into the more adventurous part of the market!

Chalice - another big move today!! Company announced more drilling results, some of them containing nice Palladium grades like 33m with 6,5g Pd/0,7g Pt/1,6% Ni and 0,7% Cu - some wide intersections of lower grades like 119m with 0,6g Pd and 0,1g PT and 142m with 0,6g Pd and 0,1g Pt - for the latter holdes, assay results for base metals still outstanding. All holes have not be assayed as yet for Rhodium ( having a price of 8000$/oz! ) and other PGM´s. There is only one laboratory in Australia, which can do this - it´s very rare in Australia! The results confirm the expectation, that this could be a massive deposit of 10´s of million tonns - but obviously, and just with a few drill holes now, it´s still early days. And very important: we have no metallurgical testing as yet…that will need a bit of time as well. Drilling is ongoing, assaying is ongoing - we will have continues news-flow here over the next few weeks and month! As you know - the company is very well cashed up and does not need any money, even to continue drilling a potentially very large deposit like this one. Still - I am sure, that if Blackrock came along and offered them to take a placement of 20 mill A$, they would be very tempted to take that - and probably, they should. I find it absolutely unbelievable, that a Tim Goyder-related company has done it again! The gentleman-explorer with the Midas-touch!

Nobody has ever died of taking some profits - and everybody should probably take a few chips off the table! But I would like to remind you, that the Nova nickel discovery in Western Australia has been sold for 1.8 bill A$, only I think 2 years after the discovery hole! This Julimar-thing of Chalice looks like it might be of a similar magnitude. That would leave a lot of money still to be made…Broker Euroz issued a very bullish note today, having a next target of 1.50 A$ on the shares. I think any target would have to be very tentative and speculative in nature - it´s just too hard to value a potentially very large deposit - but with only a few drill holes drilled as yet!

Great to have some good news in Chalice, as there is always some bad news around as well:

Panoramic - and this one is bad news, indeed! I have been pushing and believing in them for a long time, but today really was not my day…The mine is being put on care and maintenance with immediate effect! PAN have been bleeding cash fro some time as a consequence of the well documentated start-up problems. Operations have become even more difficult with the arrival of the corona virus, and associated measures taken, which have slowed down the operation a bit. Having said this, the Savannah North ore body so far has performed as expected, which is very good news longer term. But for now, the weak nickel price, and ove rthe last few days, the very strong A$ have jeopardized any progress…

Mind you: PAN are not bancrupt! Yes, the company has 30 millA$ in debt with Macquarie Bank, and no hedging ….I believe, though, that the comnpany has a double digit million $ cash position, still, leaving room to pay off the contractor, and whatever there will be in open bills. But certainly, this is a very tough situation for the management, and I am sure, that fresh financing will be needed. This leaves the door open to fresh equity, more debt ( which would come under tough terms ! ), and also corporate action. It sounds odd - but I have no doubt, that this asset is worth more in the longer term than the current equity + debt….In any case, care & maintenance is bad news for shareholders. The company will stay suspended on the ASX until probably 4th of May, when management wants to announce results of a financial and operational review. Until then, there is room for a lot of speculation…

Sorry about this one!!!!! A victim of a mixture of bad luck, and bad circumstances….I do not believe, that the current management has done anything wrong here. That is not to say, that I am happy with the major shareholder…their action re Horizon Gold is very disappointing, and is neglecting the interests of smaller shareholders.

Metro Mining - are having a great start to the year at their bauxite mine! The first ship has been loaded today, as 142.000t have been mined already. The larger trucking fleet, as well as the larger ore screener are performing well and should ensure higher production this year. No corona issues so far….I think bauxite prices are somewhat lower in the moment, but so is the A$ and are shipping rates. I have seen a broker report saying, that the expansion will be a few month delayed because of the late clearance of the 47 mill$ financing…but the same broker sees the company valued at 30% free cash flow yield, once the expansion will be in place some time in the second half of 2021, and has a share price target of 26ct…I continue to believe, that Metro Mining are relatively low risk - the only negative being, that it is a one-mine company, which has some risks in itself!

Genex - share price has been pretty weak today…for no reason. This started yesterday - after a strong opening, some selling pressure came into the market, which intensified today. Rumour is, that there is a large fund behind it, who has some issues and is rumoured to have significant money outflow, and which is currently selling the balance of his holding. A good buying opportunity!

Silver Lake - released a strong Quarterly, producing 65.500 oz at AISC of 1380 A$/oz. The company has upgraded guidance again, by 10.000 oz. Excellent result , especially in light of corona-implications. The company has grown it´s net cash position by 41 Mill A$ to 227 Mill A$. SLR have 1 total of 184.000 oz hedeged until June 2022, at an average price of 2100 A$/oz. Not nice, but not too bad either! The company also announced some nice drilling results from Easter Hollows, next to the existing Daisy development.

Oz Minerals - a good Quarterly, even though costs were a little higher than expected. But production of 20.200t of copper and 55.600 oz of gold was higher than expected as well. Costs at the old mine, Prominent Hill, were higehr than expected, but the new Carapateena Mine has started well. OZ Minerals have minimal debt, but cash will build up again in the second half, when Carapateena is approcahing full production. All well here - OZ Minerals remains the prime copper exposure in Australia!

Have a nice evening

WS

General - West African Resources - Gascoyne

Good afternoon

China announced trade numbers today, which were much better than the market expected. I think they were absolutely outstanding!

Goldman Sachs believe, that the GDP will shrink by 35% for advanced economies and in the current Quarter. I think these numbers will turn out to be way too high! If you assume the current lockdown, and to the same extent, being kept on until the 30th of June, they might be right…even then….Consumption is not coming to a complete standstill, production and construction the same…government expenditure rising…I just cannot see these numbers!

The traditional BoFA fundmanager questionaire ( done between 1.4.- and 7.4. ) show, that cash holdings of funds have been at record levels. That´s the same I hear from Australia - people sitting on their cash, as well as funds.

The Chinese numbers, large cash holdings of investors, and very bleak outlook presented by Merrill Lynch and others tell me, that this market has limited downside! History shows, that every major crisis has been followed by a very strong rebound - BUT before things got finally better, there always was another, and very strong second leg down. Every institutional investor, and many private investors are waiting for this second leg!

And last but not least - I can see with many private contacts, that everybody is dragging his feat and wants to get back into business! Wheather it´s my kids, who want top go back to school and their sport, or wheather its small entrepeneurs and shop-owners ( but also shoppers! ) - they all want to start and are waiting full of energy!

I think for now, I will stay fully invested!

And that is certainly - and especially - true for my gold stocks! These developers are just soooo cheap! Wheather you look at West African, Tietto, Apollo Consolidated, Oklo , Horizon Gold ore probably many others - there is money to be made here! And of the gold price only stay, where it currently is, lots of money!!

Gold, by the way, is up to 1728 US$ currently - in A$, almost exactly 2700 ( the A$ is still strong at about 64ct and could go higher ). Newmont and Barrick very strong - Australia´s top gold stocks all very strong today! But again - these stocks all have room to move!

But one stock is outstanding for me:

West African Resources - I am sorry to bore you with this one! And yes, it´s my largest shareholding, so I am talking my book - and yes, I will have to sell very few again tomorrow, because the size of the holding is at my internally-set limit of 5% of the fund. They are now not a developer anymoe, but a miner! This little company will generate an operating profit from it´s 90% owned Sanbrado Mine in Burkina Faso of more than 500 Mill A$ in the next twelve month, or on average 330 mill A$ p.a. for the next 5 years at a minimum! And probably, we will see an increase of underground reserves within the next 12 month, extending this period of high production by another 2-3 years! Which way you look at it - against current valuations of stocks like Iamgold, Semafo, Endeavour or you name them , or on absolute terms - I think there is every chance to see the stock much closer to 1$ some time this year, at an unchanged gold price!

We all know, what it´s like - and the market is no different here, and it happens again and again: We believe it, when we see it! Especially, when you suddenly have a company, which a few years back was capped at 20 mill$ and sometimes less, cough up 520 mill A$ in a single year from a single mine ( that is 300.000 oz x 1230 US$ margin x 1,56 A$/US$ , 90% owned! The market cap of WAF as at today is only 470 Mill A$ , with net debt probably at something like 160 mill US$ or 250 Mill A$ - we should know, once the Quarterly comes out later this month ). I think for the first time, the market will get a feel for the earnings power of WAF with theis coming Quarterly, and a full feel, with the report for the current Quarter - and I think people will believe then!

This does not remove the negatives - Burkina Faso, and the fact, that this is a one-mine stock. But even if you discount them by 30% because of that, the stock is probably still worth 90ct….and not 55ct!

Gascoyne - and here is a story of a fallen angel! Not only that - straight move from angel to devil!! From big hopes, to ( very very ) close to bankcrupty! From bad judgement, bad management, bad luck - to finally getting close to expectations, with hard work, and what has been a very fair teamwork between banks, receiver and new management, from what I can see as an outsider. Production last Quarter has been consistently above 6.000 oz / month, and should improve, as the plant will finally be able to produce with majority of ore from it´s main pit, and improving grades. The comnpany will defintely come out of receivership, I think, for as long as the gold price remains ok. Gascoyne have no hedging in place, like nearly everybody else in Australia! And they shpuld be able to produce gold at something like 1500-1600 A$/oz AISC - details we will see from the forthcoming Quarterly, and the prospectus, which will have to be issued, when the company will do a much-awaited capital raising to pay off some of the bank-debt, and get fresh working capital. I think this could happen fairly soon - perhaps over the next month or two. Existing shareholders might not get their money back - but they will get a good chance to make some back, and re-invest at a price level, which could be very sexy. Watch out - it might be very sunny at the end of the tunnel!

Have a nice evening!

Ws

General - Tietto - Oceana

Good afternoon

markets continue to recover…most amazingly perhaps in the States, where NASDAQ is only down by 10% this year! Europe is also recovering today, but the DAX for example is still trading 21% below the end of 2019. Are we getting a first indication currently of what´s going to happen this year - kind of a melt-up?

My feeling is, that Corona is certainly not behind us yet, and the Quarterlies coming out soon, alongside what will be a very negative outlook generally for the current Quarter, might well be providing investors, which have missed the boat so far, with a new opportunity to participate it what could be a strong, liquidity-and recovery-driven rally in the second half of this year.

Metals are relatively flat - gold ETF´s continue to see strong infölows, and are driving the gold price strongly higher today - currently at 1677US$ or 2663 A$/oz. It´s not going up in A$ anymore - too strong is the A$ against US at 63ct!! Gold stocks very strong - in the moment , they are up by 6% as measured by the GDXJ. Oil is up by nearly 2$ to 34,60 US$ for Brent….hoping for OPEC/Russia/US getting their act together!

Vale is extending the close of Voisey´s Bay for up to another 3 month, as Las Bambas, MMG´s large copper mine in Peru, has declared force majeure.

Oceana - presented an update, also to introduce the new MD, who knows the company well - he has been COO since 2012. I ahev not met him. He is certainly coming into the job at a very difficult time: Didipio on the Phillippines still closed, Haile still not doing overly well, and the Waihi development in NZ completely closed. Macraes in NZ is producing at reduced capacity. Basically- all mines eitehr out of production, or not producing fully - that´s very nasty! I fear little reason in the short term, to own them…but I am keeping my eyes open here, as a buying situation might be coming up.

Tietto - neraly 5 month ago they completed a highly succesfull, oversubscribed placement at 26ct - today, they are trading at 21ct! In the meantime, that announced a few rounds of good drilling results, and today. a very positive outcome of some metallurgical studies. The ore is of only very moderate hardness, gravity recovery is very high at up to 80% (!) and recovery from standard CIL-treatment is 98%! That´s excellent, and should ensure relatively low operating costs. A new resource stimate is expected for the 3rd Quarter, and a pre-feasibility study should be finished in 12 month time. The company has enough cash to last until the end of the pre-feasibility! In a way, many of tehse valuations are crazily cheap…Tietto for example, has 2,2 mill oz of resources….let´s be conservative and assume, that only 1 mill oz will be mineable - so since the last placement, the valuation of that in the ground, discounted with 12% ( very conservative! ) . At the placement, resources using the same ratio of mineable ore, was about 100 A$/oz in the ground - today, it should theoretically be worth an additional 90 mill A$ - or roughly 50ct - the actual value today is 20% less, at 79 mill A$ with about 16 mill A$ of that in cash! That´s a very agressive way to value them - but not totally crazy! In any case - they are really really cheap at 0,225 A$!

Have a very Happy Easter in strange and often difficult times!

WS

General - Sheffield - Genex - Chalice

Good afternoon

Trump is now blaming the WHO for the “Chinese” virus…I have to say, that he is playing the media very well, if you assume, that at least 50% of the audience is stupid or very stupid!!

US- sales of fire arms at record high!

Market strategists are very divided in their opinion, understandably: While some are warning of the medium term effects and potentially a second, bad leg down, others like BofA have published very bullish forecasts. I think am with the latter camp - markets are as awash with liquidity as never before, and the corona-related lockdowns will reduce over the next month or 6 weeks. The world will start turning again, with lots of money looking for a home. And the rich will become richer…( well, as an equity market investor, I hope so…but it will take a terrible end, if this continues…)

As I said before - the biggest risk is coming from the regulatory and political side to this view - and this will probably take a bit longer to be evident, So for now, and the next few month until year end, I think one should be positioned for strong equity markets around the world - certainly with continuing volatility!

Metals have held up pretty well in all of this - trading into the cost-curve already in all metals, and we are seeing quite a bit of supply being lost due to corona-related closures etc. The upswing in the 3rd Quarter could be massive . Remember, though, that you have to increase sales by 43% to be back at where you started, when you have lost 30% before! All expansion plans in the resources industry for the medium term have been put on hold! And last but not least, inflation might well come back, supporting the asset class.

All of the above should be good for gold….and we are seeing all these strange things happening in physical- as well as future-markets, ETF´s etc., probably heralding a shortage of the stuff!

Australia is holding up well on several fronts: The government reacted fast and quite massively on fiscal measures, as well as on lockdown - resulting in what seems to be a well contained virus-outbreak, with very low new infections for the last few days, a relatively strong equity market, and a very strong A$. Again - the A$ might well be a good indication of positive things to come in resources!

Europe fails to come up with a plan to help the weak countries - putting some pressure on equity markets here.

Sheffield - Quarterly out today…The company is cutting costs, where they can. The current cash position of 7,7 mill A$ should see them through until Feb 2021. The share price has cratered from 1,20 A$ to 11ct…but the project has not changed - nor have the positive longer term fundamentals of the zircon market. I am not 100% sure yet, what happened here - weather bad luck, bad timing , or bad management. Possibly a bit of everything! Hard to believe, as the shares are trading down here: I have no reason to believe, that this has suddenly become a bad project! The company has started working on smaller, and hence lower capital intensive plans to bring Thunderbird into production. Buy straw-hats in winter!

Genex - Funny numbers today in the stock…; When they announced, that the offtake agreement had fallen through a few month ago, the stock fell out of bed - from 27ct to 16.5ct. A few days ago, the company finally announced the offtake - and the stock has now recovered to 16,5ct! That´s how markets can change! Hardly any change of fundamentals only leave one option, in my opinion…GNX are a good buy !

Chalice - are suspended again! Drilling results from their new hot project, Julimar, are pending….Announcement expected the day after Easter!!!

Have a nice evening

WS