General - Drillers - RIO -Goldmans on gold

Good afternoon

big day for gold…opened at 1940 in Asia, to reach 1980 at about 3 am our time, and to trade 1937 at the time of the Australian close…tanked further to 1907 early morning here, and at 3 pm, it´s trading abck at 1940 US$, or 2710 A$…fun & games!

Australian gold equities sold off following a strong start, to close the day down 1-2-3-4%….marjet did not like the reversal! I reckon if we close at above 1940, Australian stocks will rally tonight!

Goldmans have raised their 12-month target to 2300 US$, as fear s are mounting, that the US$ is loosing it reserve currency status! I think as little sympathy I do have for the US - that would be potentially very destabilizing!

Base metals are seeing little change today - equities are slightly weaker.

Gold explorers and developers are raising funds left, right& center!! I have heard about 2 weeks ago, that it starts to become difficult to get drill rigs - at least for surface drilling. I think this will intensify, and very soon, prices for drilling will go up again. One should have a good look at Mitchell Servies, or Swick Mining ( the latter I know much better). When something trades at 2,4x EV/EBITDA, it´s cheap indeed! In the old days, drilelrs and service companies used to trade at 3-4 x EV/EBITDA - and in the bull market, got up to 7-8x EV/EBITDA ( which was a crazy valuation, as these type of companies need to reinvest in equipment all the time ). But I see no problem for valuations to go back to say 4x EV/EBITDA, which would equate to 70% upside for Swick. This is before valuing their new assaying business, which is a new technolgy, into which SWK have invested heavily for quite a few years. Not sure, what it might be worth - but this could well add another 20% to the valuation, if IPO´d. Both companies are not very liquid - but there are indeed a few insto´s on the register ( including my little fund! ). Rates for drill rigs will go up, and utilisation will go up as well - a perfect storm!!

RIO - confirms first resource for Winu, in the neighbourhood of AZY, CWX, NCM and others…500 millt at 0,45% copper, targeting first production in 2023 on a moduled basis - i.e.starting with a small, 35.000t plant. The company potentially sees multiple mines in the area! They have also discovered very promising gold mineralisation, just 2 km East of Winu - further enhancing the potential.

At 5pm, the gold price is back up to 1950 US$ and 2730 A$/oz - that´s a real sign of strength, in my opinion, and augurs well for our gold stocks in Australia tonight!

Have a nice evening

WS

General - Oklo - Lefroy

Good afternoon

new all time high for gold!!

The bad news is, that I really believe, that it has not only to do with the things we have been talking about for years - debt, money-printing, low interest rates etc - but also with something like a trust-crisis in the US, and the US government! If correct, this is potentially bad news for the entire system - and I sincerely hope, that this crisis - if it exists - does not go any further. In any case - a 9% fall against the Euro in a little more than 2 month is remarkable!

Gold ETF´s saw a very large inflow last week of about 3,4 bill US$. Still, in the overall scheme of things , this is still not a lot of money! If we had this inflow every week, it would add to roughly 170 bill US$ - 12% or so of the market cap of Microsoft, if we saw this kind of inflow for an entire year!

Industrial Profits in China very strong - Business Confidence in Germany very strong. But in the days of corona, these things can obviously change very quickly. Durable Goods orders in the States pretty strong as well.

The virus is coming back in amyn countries - that´s certainly a worry. This includes countries, which have previously managed the situation rather well - but also many others like in Latin America, the US or South Africa, where the situation looks continously very bad…

Base metals a little stronger - profiting to some degree from the weak US$. Nickel is the strongest again, still being pushed on the back of Musk´s recent comments.

VW started to take orders for it´s new battery car, ID-3 - and the numbers are booming!

Lefroy - the company has a large exploration area in the North-West of Goldfields St Ives Gold Mine, which has produced 10 mill oz in the past. Goldfields have a large JV with LEX, under which GFI has to spend up to 25 Mill A$ in exploration. The first 4 Mill A$ have been spent, mainly on ground work - now GFI have to spend another 6 Mill this financial year, to earn 51%. GFI believe, that they have found rock formations very similar to the ones at neighbouring St.Yvey, and have now started an 8000 m drilling program. The potential here is obviously significant. Lefroy already have a gold resource established on it´s 100% owned ground, which could easily be trucked to several existing plants in the area. Lefory has been pretty quiet for a long time, but suddenly the share price awakend today!

Oklo - make hay, while the sun shines! OKU raised 10 Mill A$ at 32ct, to bring it´s cash position to 22 mill A$. OKU will accelerate it´s drilling of the West Mali assets. First resource estimate should come over the enxt 2-3 month - probably 600-700.000 oz. The stock is not dirt cheap, but the resources are potentially of relatively high grade, which would get a premium rating in the market. OKU I think will have several options - I think the resource will be large enough to feed a stand-alone mill, but it could also be sold to the neighbours!

General - Dacian - Apollo Consolidated

Good afternoon

are investors lossing faith in the US??? Since we hit the worst in equity markets in late March, the US$ has fallen 110% against the Euro now, and continues falling. Trump´s ridicilous virus-management is also having an impact on the US-economy - PMI´s in Europe have been much stronger than in the US today, and there are also indications for prices rising in the US - especially in the services sector. Having said this, New Home Sales have been strong today - but the sector is reportedly profiting from government help.

I am sure the above is also helping gold, which is currently trading at 1903 US$ - it has also been quite strong over the last few days in Aussie, where it´s trading at 2681 A$ - about 120 $ below the all time high reached earlier this year.

Equity markets in Europe have been relatively weak today, but at least so far, are down just by about 0,5% in the US.

Metals recovered somewhat from a weak opening in the morning - copper is still down by 1,6%, but nickel actually is green now!

Apollo Consolidated - they still own a 1,2% NSR royalty in the Seguela Project in Ivory Coast, which is worth 15 mill A$ and perhaps 20 Mill A$. And perhaps more! Roxgold, the owner of Seguela, announced some excellent infill- as well as exploration drilling results from the project. Currently their EIS-study is targeting production of 800.000 oz over eight years ( 140.000 on average for first three years ). The management stated, that tehy are confident of finishing the feasibility study early in 2021, for a “larger and more robust project”. So I think the value of AOP´s royalty can only go up - and is going up with the gold price anyway!

Dacian - as you will know, the company only has a 3 year mine life proven. DCN also disappointed recently, by cutting the guidance by 10.000 ounces this year. Today, the commpany came with an important announcement in my opinion: Strong exploration results from underground, and also from a nearby open pit target. Every additional year of mine life will do wonders for this company, increasing valuations by roughly 30%. DCN have earmarked 15 mill A$ for brownfield exploration this year - I would be very surprised, if that would not change the current mine life! This is even more so important, as DCN are highly hedeged in the short term, which is a legacy from nearly going under a few month ago, under a heavy debt burden. This situation is in hand now, following the large and heavily discounted rights issue recently. The Quarterly has not been published as yet, but should be interesting reading. DCN could be an excellent opportunity. More following their Quarterly.

Have a nice weekend!

WS

General - Evolution - Northern Star - West African

Good afternoon

for now, it feels like whatever the news is, equities are going higher!

Strong results from Tesla, Twitter and Daimler are helping, but Initial Jobless Claims in the US were worse than expected. Elon Musk is calling for more nickel production!

Base metals are slightly ahead, except for nickel, which is having a very strong day, up by more than 3%.

Gold ETF´s saw inflows of nearly 1.2 mill oz this week so far…in 3 days. This compares to the average, total weekly inflow ( i.e. 5 days ) of 700-800.000 oz recently. This is certainly refelcted in the gold price, which is currently trading at 1872 US$ or 2635 A$ - finally, it´s even up in A$! That´s good - Aussie gold stocks are a little bit tired…one reason might be the relatively flat A$ gold price over the last 10 days or so - the otehr reason might be, that market participants are expecting a consolidation phase of the physical, since it has run pretty hard. But these days, consolidations might be the last thing one should wait for - sooo much moeny is flashing around in the system! But I am certainly resisting the temptation to increase weightings in gold in the moment!

Very mixed Quarterlies today…. Evolution absolutely fantastic, West African as well, while Nortehrn Star has been softish:

Evolution - what a Quarterly! Record mine operating cash flow, record net mine cashflow of 225 Mill A$, and record free cash flow of 188 Mill A$ for the Quarter, on a gold price received of 2500 A$/oz. Comparable production of 190.000 oz at 1008 A$/oz AISC - 218.000 oz at 1088 A$ incl the new Canadian mine, Red Lake. No material impact from Corona! And net debt under 200 Mill A$ now - after receiving 60 Mill A$ recently for Cracow, and furtehr free cash , it will be around 100 mill A$ as at today!!! Cowal is currently treating low grade stock piles and hence, cannot deliver booming results.- while still generating 60 mill A$ in net mine cash flow! And the mine announced it´s first underground reserve of 800.000oz, as part of a 2.9 mill oz resource - a few month earlier than expected. Furtehr excellent drilling results will certainly increase tehse numbers over time, and will drive Cowal to a sustainable level of +300.000 oz p.a. from about 230.000 oz currently. All other mines except for Mt.Carlton ( problems here had been well publicised during the Quarter ) have done very well - Ernest Henry shooting the lights out, once again! But the ebst news perhaps is, that exploration is continuing to deliver at several mines, and that Red Lake, the new aquisition, is doimng very well. About 15% of the workforce have been sacked - at the same time, underground development is increasing strongly, as is production - at costs better than expected! EVN management is getting very bullish on it´s prospects, without putting them into numbers. With the financial results for teh Half Year in mid August, EVN will publish 3-year guidance for all it´s mines. What a well managed company!!!

Northern Star - is producing more gold than EVN - this Quarter 261.000 oz - but just look at the costs! 1475 A$/oz AISC vs EVN´s 1088 ( and that even includes the - currently - very high costs at Red Lake!! As EVN´s puts it: Margins, not volume is EVN´s mantra - that might not be the greatest thing in a bull market, but reduces the risk of being trapped in a gold bear market! Making money through the cycle - very unusual for a gold miner! NST have had big roblems at Pogo in Alaska with the virus - 36 workers infected, reducing production by 25% and the company expects this to continue, while the virus is with us. Having said all this, the Quarter was a reasonable positive one otherwise, with Jundee performing well. NST is just about net-debt neutral in the moment - still a good effort after aquiring 50% of the Super Pit only recently!

As you know, I have been cautious on NST - I ahve been wrong! But I am sure, that EVN is the better company - less risk, more consistency!

West African - a stellar, first Quarter of production, as envisaged earlier y the company. No virus impact to talk about so far…plant doing extremely well, company generating lots of cash, even before the underground mine has contributed emaningful ounces. And here we see the only virus impact: Underground developpemt has been done with one shift only until late in June, as the mine has been short of staff as a consequence of the virus. This has now changed - development is now 24h and 6 days the week. While I had hoped for a August-start of stoping, it´s now going to happen in late September ( company line had been:”in the 3rd Quarter”. Anyway - this is very immaterial….As one analyst put it: This is one of the very few gold miners trading below valuation! And while the sensitivity of earnings to the gold price is fairly low ( because of the extraordinary low costs! ), WAF is the only , Australian producer of some size, which is completely unhedged!

WAF is conducting underground drilling at M1 in the moment, as I understand it. This could be the enxt bit of news - one broker is correctly pointing out, that the last deep hole has hit 25m with 15g , 150 m below the current resource. I believe, that every 100m add 1 year of mine life to the underground mine…Once the rainy season is over - normally in late Sept/early Oct - the company will start drilling the recent aquisition Togea, as part of the feasibility study. Togea is expected to increase the mine life of the Sanbrado Proejct past 10 years! As I ahve said numerous times before - WAF in my opinion is the cheapest, listed gold miner of some size in Australia! Evolution for large, institutional investors, and WAF for smaller guys are my two top picks in this market - but not only because I like the two bosses here!

As I am finishing, gold is at 1897 US$ and 2660 A$/oz!!! The US$ is weakening further - and equities are about unchanged!

Have a nice evening!

WS

General - Oz Minerals - Resolute

Good afternoon

Equities are slightly weaker today - feeling tired after a big run! Trust in Trump also seems to be waining…somebody who wishes Gislain Maxwell all the best cannot be taken seriously? new clash with China does not help…Certainly not metals, which are weak today.

Gold is very strong - silver even stronger - but gold stocks in Australia are showing signs of fatigue as well…the weak US$ is not helping A$ gold price!

Gold ETf´s with anotehr very strong inflow yesterday…and gold stocks as measured by the GDXJ are up another 2% today so far.

Australia continues to have relatively large numbers of infections, at least in Victoria, and in comparison to past, low numbers. Latin American - and US numbers still booming, as they are in South Africa.

Oz Minerals - excellent Quarter from them! The by-product gold is helping their cost performance as well! Promeinent Hill did well on copper production, and Carapateena is ramping up faster than expected. The company is back in net cash position. OZL have upgraded their guidance for this year by 5% for copper, and 8% for gold - obviously, the latter is very positive! ASIC-guidance has been reduced to 0,7-0,8 US$/lb, from 1,15-1,30 US$/lb. At about 5x EV/EBITDA, the stock remains on the cheap side, even as it´s trading at record highs. OZL remain Australia´s premier copper producer - a very good company! Unfortunately, I do not own any!

Resolute - produced 107.000oz at 1.033 US$/oz AISC…Syama Sulphide, the most important asset, continued to ramp up, even though producing still a bit less than some expectations. Syama Oxide has continued to do very well, but the high grade satellite ore body Tabakoroni has now been mined out. Overall, teh company has left guidance unchanged for production of 430.000 oz at 980 US$ AISC. During the last Quarter, the company has still burned some cash ( incl tax payments etc )..that will hopefully change this Quarter. The market is gaining more confidence in the new Syama sulphide, highly automated underground mine. I believe, that the stock should still be trading at a little discount for ramp-up risks. In so far, RSG is probably approaching full value - like many otehrs, unless gold runs further!

The day is finishing with gold at the high of the day at 1864 US$/

have a nice evening

WS