Market Update

General - Highfield - genex - Panoramic - Paringa

Good afternoon

ok I admit - have been travelling again, this time to israel, where we enjoyed some tremendous hospitality, and great people + experiences.

The gold market has been under pressure from interest rate expectations, and therefore, also a strengthening US$ - gold is still under some pressure today, even though it´s recovering from the day´s lows during Asian trading, But my feeling is, that 1200 US$ needs to hold - otherwise all might be over again! ??

The A$ continues to be weak, and looks on target to retreat furtehr to the 68-70ct level against the US$, from the current mid-71 level. Obviously, this is helping the Aussie miners, which had a weak day today, but have held up relatively well recently. I had lightended up my gold holdings last week, and am waiting for 1200 US$ to hold, before committing again.

Base metals have been mixed - while copper last week edged higher, and zinc held up well anyway, nickel seems to be under pressure, still. I am sure copper sentiment has been helped by some corporate activity in the sector, which took place at prices, which imply a positive medium-term outlook. Today, the US as well as UK are closed  - so not much action!

Capex in Australia lst week was a negative number - mining capex looks set to drop to about 30 bill A$ vs more than 90 bill$ annualized during the good days in 2011 and early 2012.

Lithium speculation still continues to occupy investor´s minds...companies like General Mining, Magnis or Galaxy are still running, why the pure mention of some Lithium-JV drives  retail buying into the very junior end as well. Galaxy, one of the larger companies, today announced a merger with General Mining. I have to admit, that these stories escaped my attention - I was never quite asure about it, and still believe, that we will see a lot of blood on the streets in this sector. 

Genex - much to my delight, the first broker took up coverage last week - send me an email, if you want it. The solar project is developing nicely, and should be erady for financial close by the end of the 3rd Quarter this year, while the efasibility study for the - much more important and much larger - hydro-project will be finished next Quarter as well. Once this is done, the market will have visibility of future earnings for the first time, which should be a major trigger for sustained performance. The stock has started to move, but I am still of the opinion, that the Australian market is grossly uner-valuing this stock. The market down-under has little experience with enviromental power stocks, and while the risks are high, the returns could be as well! 

Highfield - today announced their first off-take agreement for 320.000t of potash p.a., which is a great start ( expected production in year 1 is 500.000t, rising to 1 millt ). The counterparts are regional distributors in Southern France and Spain, and the company is pointing again at the large freight advantage of the project. if planned costs will be met, HFR´s potash procution costs incl transport to the customer, will be around 120$/t - the enxt ebst competitors have costs of 150$, and the majority has 200$. HFR are also pointing out, that according to recent announcements, about 1 millt of European production will be shut between 2018- and 2019 - good timing for HFR to enter the market in early 2018 with a string of projects, which could produce 2 millt by 2020-2022. The stock has been a bit boring in recent times, as everybody is waiting for enviromental approval ( which appears a little bit buried in the Spanish administration, expecting the outcome of fresh elections at the end of June )...But I can only highlight the earnings power of this company, looking ahead a few years, and even more so, the strategic appeal for the majors. The major trigger will certainly be the enviromental approval - if we are unlucky, this is 4-5 month away, but it could also happen any day.

Panoramic - corporate update out today...some excellent exploration results from Savannah North again, with abest intersection of 23m with 2.1% nickel and 1% copper. Some drilling is being done for resource conversion, but also some extensional drilling, which will increase the resource and bring it closer to existing development.

The plant has been tested for some little changes in production rates, but also to improve recoveries, both of which has been very succesfull, as part of the feasibility study for Savannah North. The full study is expected late this year - officially in the 3rd Quarter, but I would not be surprised, if it needed a little longer due to the big changes possibly taking place in beefing up mining rates, as the plant could take more. 

The Savannah Mine itself is being put on care & maintenance and produced it´s last concentrate on the 20th of May - not without beating the old monthly production record from 2011. By the end of this Quarter we should have a very good feeling for how much cash will be left after redundancy costs etc. A very cheap and deep value company - but only for patient investors, I think....

Paringa - coal does have a life, contrary to what you read in the press...PNL have started the permitting process last week for their No.2 mine, which is now definitely going into production first. They have permits in place for the No.1 mine, so the process should be pretty straight. The previously announced sale-agreement with power stations has been changed to aplly to the No.2 mine as well, and the company expects some significant reductions to planned operating- as well as capital costs due to the state of the market. construction should start in 2nd Quarter 2017, and first production by mid-2018. The financing will be the major trigger, and given that total capex will only be around 40 mill $ US, that should not be such a crazy target! again, a cheap investment for the patient investor at current levels.

Have a nice evening


Wilhelm Schröder


Schröder Equities GmbH


80538 München


Tel. +49-89-4613440-0

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