Market Update

General

Good afternoon

Madame Lagarde statet today, that the ECB wants to step up it´s bond purchases - putting a lid for now on interest rates in Europe. Bond markets are strong today in Europe, but slightly weaker in the US.

Slightly better tha expected unemployment numbers in the US

Tech´s are building on their recent gains - strong again today. It takes more than a few interest rate fears to finish a 14 year bull market , which has made most people sooo much money! But I remain cautious…in my fund, I have minimal exposure here.

Base metals are having a very strong day today - copper is back up through 9000 US$/t ( strike at Antofagasta ? )…and iron ore has recovered as well. Gold, though, is down by a few $ - I am a bit worried about the relentless selling of the various gold ETF´s - since the 4th of Feb, their holdings of gold have fallen every bloody single day!

Oil is approaching 70 US$ again on signs of improving demand. Despite a good run recently, major oil stocks like BP or Royal Dutch are still trading at very subdued levels… I think there is still very good value in these things!

As one fundmanager pointed out to me: No government in this world ( and many companies as well ) can afford strongly rising interest rates. IF we get some infaltion on a sustained basis - that will be the time when gold should move strongly: Inflation and no chance to increase rates will be a potent cocktail for very strong gold prices! I think he is very right - but we are certainly not at this point yet, as shown by the - still - very subdued CPI in the States the other day.

Newmont moved on little know GT Gold yesterday, and Newcrest also did a corporate transaction in Canada - I guess there is still more to come on M&A!

Have a nice evening

WS

General - Western Areas - West African Resources - Horizon Gold

Good afternoon

bond staged a recovery yesterday - and tech stocks as well as gold reacted strongly! Indications from the Chinese government to scale down stimulus rattled commodity markets, as well as the local, Chinese equity market. Today it´s all a bit quieter - well , so far!

The market was relieved today by CPI numbers in the States, which came in as expected at 1,7% YoY. At least no inflation as yet!

Equities are behaving well - tech´s seem to be able to hold the strong gain from Tuesday, despite bonds in the US being weaker.

Western Areas - the company disappointed investors yet again by raising 85 mill A$ in a placement at 2,15 A$ - on top of recently receiving a 75 mill$ dent facility. Still not enough to pay for their new nickel mine, and despite strong nickel prices over the last few month. This company has generated less cash than you would expect continously for a long time, and the new Odysseus mine looks as it will merely replace WSA´s old assets, rather than growing the production profile. The company has had a few issues over the last 12-18 month, and I am not sure, whether the management has to be held responsible here? For me, WSA are currently uninvestable! The placement yesterday was underwritten by Goldman´s at 2,15 A$ - they either asked for a few favours, or they are loosing money here, as the stock closed at 2,03 A$ only today! But I think this is small beer for them - when you see the billion $ profits being made by investors in US IPO´s recently, I think they might have gotten this one away easily!

West African Resources - new guidance and Life-Of-Mine Plan yesterday! for 2021 calendar year, tehy see 250-280.000oz at AISC of between 720-and 800 US$ AISC ( which includes everything exl exploration and financing, but including head office ). This is a cash machine , regardless of the gold price being 1600, 1700 or 1800 US$/oz! The LOM is stating 216.000 oz p.a. on average for the next 10 years. To arrive there, the company has also used some inferred resources from Togea ( an orebody, which seems to be very consistent ) and M1 South Deeps ( again, a very consistent orebody even with regards to grades, but some infill holes left to do this year ). So there is a bit of work left for WAF to do here to make their LOM water-proveI think this a very well managed company with one top asset, which should ultimatively have a much longer mine life than 10years! But at this point, WAF is a one mine wonder - to derisk and to be assigned a much higher rating, WAF need a second mine, preferrably in a different country. Alternatively, one of the other West African gold-players with higher valued stock might take them out.

Horizon Gold - as expected, HRN are raising fresh equity! Surprisingly, the 1:4.4 rights issue at 35ct is not underwritten by the largest shareholder, which is good….The company will raise 7 mill A$ before costs, and plans to drill 40.000m, starting in April. This is aggod news…I have written often about the problematic governance situation at HRN, with Zeta controlling the company. This is a clear negative! But the stock is so dramatically undervalued, in my opinion, that I am keeping a relatively large position.

Have a nice evening

WS

General - nickel - Strike Energy/Warrego

Good afternoon

economic numbers over the last few days had few surprises…The market is anxiously awaiting FED-comments tonight, trying to get a clue why the bond market is so volatile, what might be behind it, and whether the FED will adress the issue. The labor market in the States is still very subdued, which will give investors some comfort into the interest rate enviroment in the immidiate future. But the volatility , and general positioning by investors in different sectors, are making me think, that this time, the multi-year trend for interest rates to fall might have come to an end??? We have been fearing that before , I know - perhaps this is another storm in the tea-cup? Hmmm…one day it has to happen, and that day might have been a few weeks ago!

Interesting equity markets today! looked pretty weak, once again , this morning - but with the open in the US, they turned around to be stronger now - led again by the DOW Jones, with NASDAQ also up a little. But an hour into trading, Wall Street looks sick again! And another hour later, it´s just green ! What a day…Let´s hope, that Powell will calm the markets later! The better news comes from the bond market today, which has recovered somewhat, especially in Europe, from yesterday´s losses.

Oil is strong backed by some Saudi Arabian comments , to not increase production to soon.

The big story for me as a resources investor is the news, that Tiangshan , the world´s largest stainless steel producer, is planning to produce battery-nickel from indonesian plants. And not only this - they are targeting a near doubling of nickel production over the next 5 years! That would not only nad news for the nickel price, but also replace some nickel production from sulphides ( as largely happening in Australia, for example ). The nickel prices has tanked from a high of 20.000 US$/t on the 25th of Feb, to 18700 US$ on the 3rd of March, to a low of 16.000 US$ today!!! It´s recovering now - trading at 16510 US$t currently.

A few comments:

it remains to be seen, whether Tiangshan actually will be able to deliver on it´s plans on a large scale. It also remains to be seen, whether this material is suitable for western automotive companies, as I believe, that Indonesian production of nickel is very energy-intensive, and enviromentally damaging . And lastly, it remains to be seen, at what price they can produce. Previous comments indicated, that they need a nickel price sort opf 8$/lb or 17.600 US$ to justify the investment. Macquarie believe, that this price could well be lower.

I think we will not find out for a while - but this issue will continue to overhang the market in nickel for some time, I think. Most nickel producers can make money at 16.000 - but the recent 20.000 US$/t certainly was much nicer. We might not see this price level again for some time…But Tianshan´s plans will also destroy some nickel production in China, and might make it very hard for completely new projects to get of the ground, therefore limiting supply from elsewhere.

Strike Energy / Warrego - Strike announced, that the next intermediate target of their current well at 3906m has been reached. Hydrocarbon shows have bene recorded throughou the latest section. This is good news, as this could mean oil - but in any case, the company comments, that these occurences are supportive of Strike´s models, and are analogous to what tehy saw at the extremely succesfull West Erregulla 2 well. This could be fun! The main two gas zones will be drilled shortly- everything so far points to final results in March. Once again - exciting times for Strike. If succesfull, the stock will be valued a few ct higher ( one broker indicated 44ct/share today ) - if they can deliver a serious JV-partner for the urea-project, higher again - and if they should be successfull with exploration on their adjacent, 100% owned acreage, potentially quite a bit higher. At this point, it´s definitely worth holding Strike! Another 800-900m to go for the well! Gas markets are looking good in Western Australia as well for many years to come!

Have a nice evening

General - Osino

Good afternoon

these bond markets are continuing to provide me with a headache…Is this the 27th falsealarm, or is this the trend change??? One day it has to happen - perhaps the time is now - considered massive fiscal and monetary stimlus from China to the US to Europe, it would not be that surprising. My portfolios are relatively cautiously positioned - at least for somebody, who has been a perrenial optimist for most of my 40 years in investing!

Base metals started the day on a cautious note, as China´s top banking regulator warned of excessive property markets - indicating, that the massive, Chinese stimulus might be scaled back? But looking much stronger now at early afternoon my time. Aluminium, which is generally profiting from a strong consumer sector, is up by nearly 3%.

Following on from very strong US-markets yesterday, European equities are stronger today.

Bond markets are giving up some of yesterdays big gains.

Gold is a bit of a worry for me! I cannot quite explain, why it´s so weak ( traded as low as 1707 US$ in Asia today ) at a time, where massive money printing and stimulus is running the risk of igniting inflation! Gold ETF´s have seen outflows for 14 days in a row now…. It looks horrible on the charts - even though in the evry short tun, it might have been a little oversold. It has been even weaker in A$, falling from a top of about 2870 A$/oz to the current 2224 A$. This is still a relatively nice price for most producers - but some will start to struggle now based on “true” costs of production! And very low grade projects might find it hard to be brought into production! I have recently reduced my gold exposure, but do not dare as yet to buy it back,,,

Several companies announced good exploration results today - Liontown from their highly prospective Moora project in Western Australia, Chesser from their project in Senegal ( incl 41m with 6,77 g gold/t ! ), and Marvel from their Tabakorole project in Mali ( will probably increase the resource ). The best results, though, were coming today from

Osino Resources - 8m with 12,7g within a zone of 54m with 2,6g / 12m with 5,2g within 48m with 1,86g are very significant, as they confirm the existence of high grade shoots within a large, lower grade resource. Another hole intersected 4m with 13,7g - another one of 4m with 11g. Infill drilling at Twin Hills found 89m with 1,69g / 114 m with 1,09g. All of the above augurs very well for a sizeable, maiden resource to be expected early in the 2nd Quarter. Normally, the stock would be strongly up today - let´s wait and see, what it does in the current, weak gold price enviroment! Currently, the BMO conference is on - so they might well get some recognition for the excellent results!

Have a nice evening

WS

General - Chalice - KGL - Lefroy - Carawine - Venturex - Northern Star

Good afternoon

I have to say, that I do not like this incredible volatility in markets….when Tesla has intra-day swings in it´s valuation by 80-90 bill US$, something is wrong. I am frightened!

I do not want to rule out, that I am just subject to the famous wall of worry climb - but FOMO ( fear of missing out ) is ruling markets, and that is dangerous. By reducing what should be very profitable investments, you might miss the last 10% in markets - but eventually, you might be happy to have done so!!

This is general comment, not especially targeted at resources investments. These might be a little different…:

  1. Not many people are overweight in resources - most have even very limited exposure

  2. Inflation or rising interest rates, which are a fear for “normal markets”, might/should actually be good for resources

  3. the current scenario for massive stimulus by central banks and governments in a concerted effort could/should trigger strong growth, once this virus is controlled - hopefully in a few month time

  4. severe underinvestment from oil to copper to you name it over the last few years might pose a big problem in satisfying world demand

Nevertheless - the next Black Swan will definitely be something which comes unexpected, and you should be invested in a balanced and cautious way!!!

Bonds are weak again - equities are fighting…pretty volatile again today, but swings are not nearly as violent as yesterday!

Chalice - managed to get Stephen McIntosh for it´s board - very expereinced and highly regarded RIO man. This type of guy is not only bringing major project experience to the company, but also some validation of Chalice´management-and project quality! Very similar to the recent appointment at Liontown for their lithium project. Tim Goyder is doing all the right things….

KGL Resources - very old name for us…remember Kyrgysia, and their gold project? We lost a lot opf money there…well, they also had a second project, a copper project right in the middle of Australia - very remote. Anyway, the current management , backed with Indonesian family money, have done a good job over many years to slowly advance this project - final feasibiliyt study is in fulls wing to produce about 30.000t of copper p.a. from their asset called Jervois. This is not a worldclass resource, but at 4.20$/lb for copper, it´s certainly sexy! The company has done a placement at 42ct, and is also conducting a 1:13 rights ssue at 42ct to raise a total of 28 mill A$. Funds will finish off the stauy, give them a lot of room for exploration. I am not dead-keen here, but if I held stock, I would participate.

Lefroy Exploration - the stock exploded yesterday…60m with 5,22g gold and 0,38% copper caught the punters attention! The company , which as large JV with neighbouring Goldfields Ltd on some if it´s assets, has long been on the watchlist of some savy investors. We do not know as yet, whether this is a one-day wonder - but being a neighbour of some very aquisitive gold miners, any furtehr success would still drive them higher. In this market, a market cap of 60 mill is not that demanding - and the stock is very tightly held incl Goldfields as their largest investor! I had only a small position which now became a resonable position, and will probably keep the stock to see what happens here!

Carawine - another sleeper with some very positve exploration results from their North Tropicana Project near Kalgoorlie: 4m with 26g / 3m with 22g / 3m with 10g plus some more ersults. We are not talking about hundred thousands of ounces here yet - but some people point out similarities to the early days of Tropicana, which ended up as a major mine. Again - eraly days, but several irons in the fire with CWX, enough cash in the bank, and many assay reults still to receive. Again - I ahve s amll position but will keep it for further information!

Venturex - this one was the big sensation today! Bill Beamont, who is extremely highly regarded and is probably one of the top 2 gold mining executives in Australia ( the other one is Jake Klein, and they are followed by Raleigh Finlayson and probably Mark Clark ) , stepepd down from his position as executive chairman of Northern Star ( a 12 bill$ company and his baby from humble beginnings more than 10 years ago ), to take an executive job ( and no doubt, the big force in the company ) at what was a 30 mill A$ company a few days ago! Bill is taking a 9 mill$ placement at 8ct with free attached options to show his commitment! The stock closed up 24ct at 35ct - and an enterprise value of about 200 mill A$ fully diluted!!! Amazing… teh company has an interesting copper / zinc project in Western Australia, basically readily advanced to financing. This financing ( 200 millA$ ++ total cost ) had been seen as a major obstacle for this small company - but shoudl not be a problem to finish with Beamont running the show. And this will not be the end of it, I guess….

So what is a legend like B.B. worth? ?? Is he worth an immediate uplift to 270 mill A$ market cap??? Well time will show - but for Northern Star, he has certanly been worth a lot more than that over time! And I ahve learned over many years, that you either back great people or great projects - but the latter will be worth only half their value with the wrong management! Unfortunately, I do not own any VXR currently…that might change . I have not made up my mind as yet.

Northern Star - B-B. resigned as you read abnove…problem?? I guess not…Apparently, Bill has been a bit tired to run such a large company, with all it´s bureaucracy and compliance etc. Makes sense to me, and these rumours had been around for two years or so. Finishing the merger with saracen and taking over the Golden Mile made them not only the second largest gold miner in Australia and a formidable force worldwide, but also brought with it an excellent MD, Raleigh Finnlayson. Yes - this will be new task for him…but he should be up to it. So I do not see any negatives arising from the change at the top here! But it also does not change my view, that EVN and Jake are the No.1 !

Have a nice evening

WS