Good afternoon
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the week started with a bang! Metal prices are very strong today ( nickel is about to break through 13000!! )- 1-2% up, and gold is holding above 1340 US$, leading to very strong prices for the larger gold miners today. Most of them have broken out on the charts, notably Evolution and Perseus. The market seems to punt on further Euro-strength....but coalition talks in Germany have hit a snag....not 100%& sure, that we will have - finally - a new government!
Institutions are starting to reweight into the miners - as can be seen in share prices of BHP ( up 25% since early Dec ); RIO up 23%; and Glencore up 25%. Star performer has been Teck - they are up by a staggering 35% in less than 6 weeks, as are good old Anglo American! History seems to repeat itself - in the early stages of a big recovery in resources, the large miners are early movers, before insto´s start going down the quality-ledder! As you know - there is sooo much upside in smaller names, if this continues. Just look at at West African Resources, Gascoyne in the golds, Paringa/Prairie in the bulks, Panoramic/Foran in the metals, or Syrah/Graphex in the battery-stuff....or you buy Nestor Australien - I am holding significant positions in all of the above stocks!
Perseus - were the star performer today, having announced first ore to the plant at their new Sissingue Mine in Ivory Coast. The mine is planned to produce 80.000 Oz - not that large - but at 625 US/oz AISC incl royalties! First gold will be produced shortly - ahead of plan, and within budget. Well done! Looks like they will bring it on easily, unless somethinmg inforeseen happens in the next few days. The company seems to be very confident, expecting ramp-up to full production until 31.3.2018! The mine should deliver more than 70 Mill A$ in cash p.a., once in full production and at current metal/currency prices. That is increasing hopes, that PRU will be able to bring on the next, much larger mine, Yaoure, without any additional equity. Much depends on timing here - the longer Sissingue and Edikan ( which should be in a cash-sweet-spot as well ) are hammering the cash home, before a development decision for Yaoure has been made, the better the financing prospects! PRU have underperformed for a long time - they look great on the charts now, and have written 60ct all over it! 300-320.000oz yearly production and a market cap of only 450mill A$ give you fantastic leverage, with great exposure to the new, significant ( 215.000oz production planned ) Yaoure Mine!
Middle Island - this minnow is making some progress towards production by trying ore sorting, which seems to gain a lot of tarction in Australia. Ore sorting equipment is mainly coming from German speciality manufactures, and has originally been developed and is used in diamond production. Caravel have done some promising work in Australia as well with their copper project, and it´s being used by 2 smaller, privately owned gold mines. Test results, using MDI´s ore, have resulted in a 200% grade improvement, which would dramatically lower capex, and operating costs, if it works on large scale. obviously, there is aonther layer of production - the sorting itself - but if it works properly, cost savings would still be very substantial.
Breaker Resources - announced some more metallurgical results today. They might not be as eye-catching as exploration results - but in many regards, they are even more important. Breaker has fantastic recoveries of up to 99% of contained gold. Importantly, a large chunk of the gold - on average over 50% - look like being recoverable with very simple gravity methods, which has led them to think about a fast-track and cheap start-up operation using this method only, and to treat the rest at a later stage. Capex would be much smaller than for a CIL plant, and operating costs would be very low. This way, the company could overcome this boring period of doing a feasibility study, then large financing, and construction of a CIL plant. This process would take I guess 2.5-3 years - a pure gravity operation would take ( my guess ) 12 month from now, and less than half the capex. Not sure, whether I would buy Breaker today - but they are definitely a strong hold!
Have a nice evening!
WS
Schröder Equities GmbH
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