Market Update

General - Quarterlies of Perseus and Metro

Good afternoon,

equities are a bit weaker again today, driven by corporate earnings and some new concerns with regards to the trade war.

Nickel continues its amazing run…new 12-month high and in A$, highest since 2011….should these prices be halfway sustainable, my little Panoramic will make us real money and lots of it! But for now - and I do not know, why! - it´s stottering!

Gold is down a few$ from yesterday´s big run - holdings of Gold-ETF´s up strongly again. It does not feel like a bull market as yet in the small stocks - but they have definitely started to move as well! Well - as I am finishing this, gold came all the way back now and is currently trading at 1430 US$!

Metro Mining - great Quarterly today! as you know, I was a little cautious going into this report, as they mine started performing slowly in April, following the wet season, and had a few weather-related issues, which held them back a little. But EBITDA for the Quarter has been a very sound 9.1 mill A$, with production of 124.000t in April / 329.000 in May and 427.000 in June - shipments a little lower ( building a stockpile, which is very good ). Shiploading rates have averaged over 15.000t/day since 2nd week of June, and has continued through July so far “ exceeding the average required to reach 3.5mt for the full year” - which is the top of their guidance! EBITDA for June alone was 5,7 mill A$, which is fantastic, and the company expects this to even increase over this Quarter and next.

Importantly, site costs for a t of bauxite were 35,50A$ in April/ 21.94A$ in May and 19.87 A$ in June - freight + royalties added about 23/t A$ over the Quarter . EBITDA-margin in June was 15.22 A$/t - you can see the economies of scale in this largely fixed-cost business. Chinese bauxite prices have been pretty stable over the last 12 month, with a slight upward-trajectory. Not much change is expected going forward, as Chinese imports of byuxite are still rising strongly, as local production is closing down for enviromental reasons mainly.

The final feasibility study for the expansion to 6 millt yearly production has been delayed a little bit, due to some changes to the loading capacity - the board wants to have some spare capacity to enable catch-up, if shipments are slowed down from weather-related effects like in late May/ early June - but it will be out by mid-August. That might be very bullish - the ability to load larger ships alone will cut costs by 4-5$/t! I would assume, that we also see some more economy-of-scale effects to bring costs down to less than 15A$ / t site costs!??

Metro held 29.5 mill A$ in free cash at the end of the Quarter, and had debt of 42 mill A$. Funding of the expansion ( 30-35 mill$? ) should be easy via free cash flow and anotehr debt-facility, which has been largely bedded down. I continmue to believe, that this company will produce in the vicinity of 120 mill A$ in oeprational free cash - timing and exact details will be known, oncethe feasibility study has been announced in about 4 weeks time - maybe 5 weeks. I still think, that Metro Mining is outstandingly cheap at 11.5 ct or a market cap of only 160 mill A$….one of the larger positions in my fund, as I have been adding some more lately. Black Rock own 150 mill shares as per Bloomberg - I am amazed, that they do not buy a few more!

Perseus - Quarterly out. Their production of 64.000oz was slightly weaker than the excellent March-Quarter - grades at Edikan came down, and all-in site costs were higehr - also because of a high stripping ratio in the Quarter - at 1090 US$/oz. AtSissingue, All-in site costs were 791 US$ - also 40$ higher than in the March-Quarter, making it 989 US$/oz for the group. Guidance for the current financial year is 260-300.000 oz at 800-975 US$/oz - tilted towards the second half. Overall, they are on track to get Yaoure up and running by the end of 2020 and to have it financed from cash flow, the current cash balance of net 88 mill US$ . This includes the warrant exercise. Three banks are very substantially advanced to install a 150 Mill US$, corporate credit facility. As part of that - I understand - they had to hedge some more gold…not nice in today´s enviroment. The total hedge position is now 274.000 oz at 1299 US$/oz…..about 30% of production for the calendar years incl 2022, based on their current production but certainly less including Yaoure. I can understand it - and I guess they had to do it anyway! - but with strongly rising gold prices ( which are currently more than 100 US$ higher !) I am sure, that one or the otehr investor does not like this. Like all gold producers in Australia, PRU had a great run this year - but I am pretty sure, that they will continue to run with the gold price for a while now!

Have a nice evening

WS

Schröder Equities GmbH

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General - Syrah - Mineral Resources - Metro

Good afternoon

German car sales falling strongly in June…

Mrs.von der Leyen should be a very good choice for the EU, I think….not everybody agrees!

Mrs.Kramp-Karrenbauer new Minister of Defence….hmmmm???? On the 1st of April, I would have taken this as an April-joke….these days, it seems to be true, as she was sworn in today…

Macron is fighting his tech-tax out with the US…about time, that the tech giants pay their fair share of tax! Good on him - fight on, please!

Many comments re the strong run of nickel again…Nobody believes, how strong it is! Well I could not believe for how long it has been so cheap! I think the answer to the recent rise might be a very easy one: Supply/demand is reasonably balanced - perhaps a small supply-deficit….somebody might just be taking a view, accompanied by some short-covering? On a 3-year view, I have absolutely no doubt, that nickel will be trading higher than today - and at times of ultra-low interest rates, it might just make sense for some consumer or a hedge-fund to build some stocks in Ni!

Gold just does not want to come down! up a few $ today, despite a relatively strong US$. For the last month or so, we have had the same pattern: every reaction gets bought quickly - and with rising lows. We are on the verge of making a new, recent high today. Gold ETF_holdings are at their highest since April 2013….The GDXJ in the States pretty strong and making another high today.

US-housing industry is a bit weaker….bonds very strong today across the globe.

Syrah - the Quarter just ended was another, relatively bad one for them. I have a lot of time for the Chairman - but this company looks not good…they have raised money the other day - so financially, they are currently very strong. But perhaps more important: They ssem produce the wrong type of graphite, and recoveries remain disappointing. They are ticking two boxes of issues, which usually are a NO-NO! I have lost confidence in them, and I have not enough vision perhaps to see them getting it right.

Metro Mining - announced a reserve increase today….Proven Reserves are now 13 years at the expanded rate of 6 millt p.a.-more than enough - and they have a lot more material of lower quality. I think the market might be concerned with pricing of their product, bauxite , as well as production costs. I expect, that both issues will be shown to not exist in the forthcoming Quarterly. Also, some investors might fear for another equity-raising associated with the near-doubling of production? Again, I think positive numbers in the Quarterly will also alleviated this concern. China needs bauxite - and tehy do not have enough of it, relying mainly on Guinea to fill their supply-gap. I have not been able to find out, what production costs in Guinea actually are - but I very much doubt, whether total costs incl transport on arrival in Shanghai will be any cheaper than from Metro in Northern Australia!

Mineral Resources - the Australian Fiancial Review published an article today, saying, that Stage 2 of the Wodgina lithium development would not yet have approval to go into production, due to seepage from residues in the tailings dam into the groundwater. According to the company, this seems to be formally correct. The company also states, though, that the tailings dam is performing in line with engineeringa nd expectations. They state, that as part of the comissioning, usually water is being used, not ore - this is very common for all new plants. This process does certainly create a much more fluid residue, than operation of the plant with ore would result in. Makes sense to me - so most probably, no reason to panic. I think the weakness in MIN today is a function of the market being extremely cautious, once something with the tailing dam is not in order - this follows the terrible drama in Brazil 7 month ago. Most probably, we have a typical storm in a teacup here!

Have a nice evening

Schröder Equities GmbH

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80538 München

Tel. +49-89-4613440-0

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eingetragen im HR München, HRB 166985

Geschäftsführer: Wilhelm Schröder

 

The information contained in this communication is confidential and is intended only for the use of the addressee. Unauthorised use, disclosure or copying is strictly prohibited. If you have received this communication in error, please delete it and notify us by telephone at +49-89-4613440-0, by fax at +49-89-4613440-10 or by e-mail at wschroeder@schroeder-equities.com immediately. Please note that this communication does not constitute and may not be construed as investment advice and / or referral to buy or sell financial instruments. Unless specified otherwise, the views expressed in this communication are solely subjective notions of the individual sender and / or the entity or individual stated as the author of any information submitted. Performance in the past may in no case be considered as an indication for future performance. Please also note that Schröder Equities GmbH and / or its officers or employees may have interests in financial instruments referred to this communication. A current list of shareholdings can be emailed on request. Furthermore, our clients are hereby informed that Schröder Equities GmbH renders advisory services to Nestor Australien Fonds, an investment fund administered by Nestor Investment Management S.A. Luxemburg. Please also note that e-mails can be intercepted by

General - Panoramic/Horizon - Strike

Good afternoon

only a short report today, as I will be out of office for most of the day…

US reporting season is starting this week, battling with some very strong pcp-numbers, as the tax-cuts came in last year. Will interest rates continue to drive markets, or will the attention switch to corporate profits?????

Iron ore prices reach a new high in China today - strong steel production.

RIO will need at least another 1.8 bill$ to develope their giant copper underground mine in Mongolia - ground stability issues. Need additional 2 year approx to bring it into producton - now target 2022/2023. Lower grades at Kenencott and Escondida continue to put some pressure on existing production.

Macquarie stays cautious on nickel for the short term - BUT stainless steel ( especially the nickel rich 300-series ) is still strong in China, which led to nickel making new highs currently In US$ terms. It has cleared resistance in US$ as well as in A$ - in A$ terms, it´s trading at the highest level since mid-2018 - in the moment at 19813 A$/t!!! Having said his, I have to admit, that the nickel price feels a bit overbought in the moment.

Panoramic - they enjoy these strong nickel prices. As I said the other day - company is driving development of Savannah North + drilling the ventilation shaft at the same time, as they ramp up production from the old Savannah ore body to full production. This is cash consuming…so good prices for now and hopefully a few more month are important to get cash in the door, before production increases from first ore from Savannah North late this year, and hopefully, cash will be coming in from the sale of North American platinum assets. Longer term, PAN are very cheap anyway - but we need to get to full production first! By the way - when nickel last traded at above 20.000 A$, PAN share price hit a high of 66 ct…Ok, we have had a few comissioning problems, but that does not change the long term picture!

51% owned Horizon Gold reported pretty exciting exploration stuff on their recent base metal find Altair today - not much response in the market, though, which is surprising. Horizon is probably pretty cheap on it´s existing gold resource alone, with gold continuing to trade above 2000 A$/oz. Also note, that HRN announced a resource increase for the gold deposits the other day, including some higher grade material, which might be worth trucking to a plant.

Strike - have encountered some hard formation to drill through…300m of it have been completed, 200m still to go…total depth now 3617m. Drilling seems to go a bit easier from here - so we will NOT reach the most important zone this week - maybe on the weekend. No drama - but for us, a few additional days to wait for the hopefully good news…Total depth is planned 4230m - then running wireline logs. Next week will be the week. The next formation is sandstone - easy to drill - so by the end of next week, we should have reached total depth and wireline logging will start to deliver flow rates ( well, if the gas is there! )

Have a nice day!

WS

Schröder Equities GmbH

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eingetragen im HR München, HRB 166985

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The information contained in this communication is confidential and is intended only for the use of the addressee. Unauthorised use, disclosure or copying is strictly prohibited. If you have received this communication in error, please delete it and notify us by telephone at +49-89-4613440-0, by fax at +49-89-4613440-10 or by e-mail at wschroeder@schroeder-equities.com immediately. Please note that this communication does not constitute and may not be construed as investment advice and / or referral to buy or sell financial instruments. Unless specified otherwise, the views expressed in this communication are solely subjective notions of the individual sender and / or the entity or individual stated as the author of any information submitted. Performance in the past may in no case be considered as an indication for future performance. Please also note that Schröder Equities GmbH and / or its officers or employees may have interests in financial instruments referred to this communication. A current list of shareholdings can be emailed on request. Furthermore, our clients are hereby informed that Schröder Equities GmbH renders advisory services to Nestor Australien Fonds, an investment fund administered by Nestor Investment Management S.A. Luxemburg. Please also note that e-mails can be intercepted by

General - Lucapa - Graphex - Dacian

Good afternoon

the headlines are like: Weakest growth since 1992…but the 6,2% GDP-growth announced by China is in line with expectations, and some numbers give also room for encouragement looking ahead.

Equities are continuing their mild growth-trend, while metals are mixed so far: copper strong compared to the Australian close, while other base metals see little change. Some volatility in nickel today, and it´s trying to end the day in positive territory, following the very strong finish on Friday. Prices are at around 1-year highs, in US$ as well as in A$. Finally, nickel stocks in Australia are also responding!

Oil has also recovered quite nicely - up about 10% now since mid-June, and gold is giving up a few$.

Lucapa Diaomonds - strong Quarterly out today. In Lesotho, the relatively new mine Mothae saw production 20% higher than planned, despite still mining from the low-grade part of the pit. Production from the higher grade part will start soon, for the first time. The company had deferred mining, as they have been building a dam to take the water , which will later be used as part of the production process. Cash operating costs were 14% better than planned, and importantly, the best-value diamond ( a 126ct-stone ) will only be sold in their next auction later this month. In Angola, production was in line with the previous Quarter - again, a large 130ct stone and a 46ct pink stone will be sold at the next auction, also in July. New equipment has arrived, and production will be substantially increased from this Quarter on. Cash flow to the holding company Lucapa should increase also from here - capex has been completed, and increased cash flow will start paying back the outstanding loan, which Lucapa has with the Angola-JV, as well as dividends to the JV-partners. I still believe, that LOM are very cheap - the reduced risk-profile from operating two mines now ( and both running very well! ) has not resulted in a higher valuation. I think the forthcoming sale of 3 very high-value stones + sales from normal operations will be positive - but the market will probably also re-rate the stock, once more meaningful cash will flow back to the company. So far, the market is questioning the cash being repatriated to Australia. This should start soon - I guess sometime late this Quarter.

Graphex - have completed a 2.5 mill$ placement easily - though at a disappointing price of 20ct. I had some doubts as to easy the capital raising would be - given that no news has been out, and the still fickle market at the very small end, a placement is certainly not easy. However - it ended up being substantially oversubscribed, and the vast majority has been taken up by existing shareholders. The company I guess wants to demonstrate a certain degree of independence from major financier Castlelake. Within the next 3 month, we will have the final fesibility study, as well as -hopefully - all necessary documentation from the Tanzanian government to finish the financing with them. Compared to Walkabout, which has a nearly 5x larger market cap, I think GPX will show to have the better project! This is still a speculative investment - but within my portfolio, probably the one with by far the most upside!

Dacian - announecd production results from the June-Quarter - full Quarterly REport to follow later in June. The company produced 36.600 oz - very recent guidance was 36-38.000oz at 1500-1600 A$ AISC. Costs were at the lower end, with 1519 A$ AISC - that´s quite pleasing. I am waiting for the full Quarterly for an assessment…at this stage, I am neutral - the recent announcement containg the 5-year Life-Of-Mine plan seemed to be a bit on the bullish side, and there are still some lingering doubts, as to whether they need some more equity.

General - Breaker

Good afternoon

finally, there seems to be some activity in Australian small caps…not that insto´s are buying ( following the desasters in Dacian and Gascoyne they are still on strike! ), but it appears, that selling has dried up in most cases, and moderate interest is drving share prices higher. Certainly, the much better mood in gold also helps!

There is still a lot of deep value left at the junior end - just to mention a few names, like Sheffield, Metro, Panoramic , West African, Graphex, and probably also Breaker / Paringa / Australis / Tietto / Horizon, Liontown among others. Some of these names can do with a bit more cash - like Graphex, which is currently finalizing a placement - and that might well put some short term pressure on those names. But the mood is certainly better than it was 3 weeks ago!

Equities are continuing their more constructive mood, while bonds are seeing some pretty good selling today. The CPI in the States yesterday took the wind out of the bond-bulls for now! Metals are also looking better - copper is knowcking at the 6000$-level again, while nickel is having yet another strong day ( trading currently above 19.000 A$/t for teh first time since early March ( back then, it lasted up there for 3 days only ). Nickel stocks fell strongly again today - now at 150.500t vs 368.000t at the beginning of 2019. Not all of that is a sign of more demand than consumption, as more and more metal is being held in off-LME stocks these days -nevertheless, it´s a good indication of undersupply at a time, when the take-up of EV´s by consumers is only just starting ( and big numbers from EV´s are probably at least 12 month away ).

Breaker - announced some good drilling results from the recent start-up of drilling within their Borborema deposit, which is more and more shaping up to be a nice mine ( pre-feasibility study out in late September, next resource estimate out soon ). Especially with the A$ gold price at 2000 A$/oz, this remains a good prospect and a cheap stock! At least that´s what I believe - we will have a more definite chance to validate this view with the Pre-Feasibility in Sept

Have a nice weekend!

WS

Schröder Equities GmbH

Seitzstr.7a

80538 München

Tel. +49-89-4613440-0

Fax +49-89-4613440-10

email: wschroeder@schroeder-equities.com

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eingetragen im HR München, HRB 166985

Geschäftsführer: Wilhelm Schröder

 

The information contained in this communication is confidential and is intended only for the use of the addressee. Unauthorised use, disclosure or copying is strictly prohibited. If you have received this communication in error, please delete it and notify us by telephone at +49-89-4613440-0, by fax at +49-89-4613440-10 or by e-mail at wschroeder@schroeder-equities.com immediately. Please note that this communication does not constitute and may not be construed as investment advice and / or referral to buy or sell financial instruments. Unless specified otherwise, the views expressed in this communication are solely subjective notions of the individual sender and / or the entity or individual stated as the author of any information submitted. Performance in the past may in no case be considered as an indication for future performance. Please also note that Schröder Equities GmbH and / or its officers or employees may have interests in financial instruments referred to this communication. A current list of shareholdings can be emailed on request. Furthermore, our clients are hereby informed that Schröder Equities GmbH renders advisory services to Nestor Australien Fonds, an investment fund administered by Nestor Investment Management S.A. Luxemburg. Please also note that e-mails can be intercepted by