Market Update

General - Perseus - Evolution - Newcrest - Beadell - Kasbah - Middle Island - Fortescue

Good afternoon

equities in Europe continue the little set-back, which started in the US last are currently down by about 0,5% or so, also driven by a weaker US$. That´s helping gold, currently trading at 1345 US$/oz, and the base metals, which were pretty weak early on in Europe, and are now slowly but surely moving up again. Unfortunately, late this afternoon, everything is moving south again - especially nickel, which is down by more than 3%.

The US economy is still looking prices are rising fast, and consumer confidence is sky-high! Even the consumer outlook, which has lagged for some time, showed a strong increase today.

Perseus - Quarterly out - ok, but not great. 56.000 oz produced at all-in site costs of 1093 US$, which is a furtehr improvement, but not as much as hoped for. Grades were not great at 1.1g/t, and mining costs are rising, as the pit gets deaper. Anyway - a credible performance. The company is sticking to it´s guidance of around 150.000 oz this half, at around 1000 US$ all-in site costs - that includes Sissingue, which starts commercial production by 31.3., most probably. This is an excellent achievement, and once in full rpiduction, it will help to bring costs overall down. It has been a good decision to develope Sissingue, which at the time, was just ok - but at 1350 US$ for gold, it should make more than reasonable money for PRU, and reduce risk. Whether this is enough to develope Yaoure without having to do a capital raising? I am not sure - it gets tight, and we shoudl know by mid year. I would not be too surprised, if PRU would need to raise 50 mill A$ - and might raise as much as 100 Mill A$ to help kick start the development of this large mine. With a current market cap of about 450 mill$, this should not be a big problem. I think it all depends on the gold price - PRU are certainly extremely sensitive to better gold prices, as Edikan will always be a high cost producer, and as the current ( and even more so, the future- ) production / market cap is small in comparison. 

Beadell - as know before, not a great Quarter - and certainly not as great as planned by the company! certainly, the Quarter has been betetr in comparison - but if not, it would have been a catastrophe. If I am correct, we are now also entering the set season - not good for mining, not good for costs. And the company needs to do 30 mill$ in capex this half. Unfortunately, the chances for more equity are rising! I do not see them completing the upgarde without some fresh equity....As this is my view, no hurry to invest at all...and hence no reason to write here in much detail.

Evolution - I repeat´s getting a bit boring! EVN are delivering just Quarter for Quarter. While production was perhaps a few thousand oz less than some had expected, costs were down a little again...just amazing....186.500 oz at AISC of 784 A$ / oz ( or 602 US! ) have been produced, for an operating mine cash flow of 204 mill A$, and net mine cash flow of 134 mill A$. Not surprisingly, Ernest Henry with it´s significant copper by-product credit was the absolut standout, generating net cash of 55 Mill A$ in the Quarter!!! But Cowal as well as Mt.Carlton have also been good performers. Net bank debt has been reduced by 32% to 231 Mill A$ - at current metal prices, that will turn positive around mid-year.

EVN expect to comfortably exceed midpoint of the guidance for this financial year ( between 750.000-805.000 oz ) , and for AISC to be at the bottom or below guidance of 820-870 A$/oz.

Successfull exploration at Cracow should deliver mine life extensions, They proved again today, to be the premier gold miner in Australia, in my opinion - or at least on the way there!

Newcrest - the good news from their Quarterly is, that Cadia is up and running again. Telfer also had a good Quarter - but Lihir had some problems with their plant, which are now rectified. They had some regulatory problems with their Indonesian project - the government wants a larger slice. Not such an important asset anymore - but a slight negative. As Newcrest is a significant copper producer as by-product, the strong copper price could help them to keep cost just belwo guidance for the year. Certainly,  Newcrest is a good company - but I cannot see the big upside anywhere. Why pay a premium - just for size??

Fortescue - they are producing iron ore now at 12US$/t - great achievemnt for the last Quarter, which was headed by Nev Power. The large discount of their inferior iron ore is a bit of a worry - but the company expects it to get smaller again from the second Quarter on, when the winter curbs in China will not exist anymore. That should be righjt - but the dscount will certainly stay larger, than would have been expected only 6 month ago! A clear negative for FMG. The Quarter saw only production of 40 millt vs expectations of 42 Millt - I would not be surprised, if they did not produce more to avoid even more pressure on prices. 

The company wants to diversify in the long run - but not by aquistion of advanced assets, but by exploration - Lithium in Australia, copepr/gold in Columbia and Ecuador, where they have applied for massive ground positions.

Middle island - Kerry Harmanis, the legendary ex-boss of nickel producer Jubilee Mines, has bought 6% of the company. Kerry is certainly smart, but not always a successfull investor - I would not mind, if he will be right here! As I wrote before - ore sorting could be a game changer for them.

Kasbah - or sorting is also an option for them, and more details should become available with the delivery of their finalk feasibility study in June. KAS are developing a Tin mine in of the very few tin-assets around. Very small company, controleld by Pala Investment. KAS have a 55.000t reserve, and their old feasibility study, which was done prior to Pala´s involvement, arrived at an NPV of 51 Mill US$. Operating costs were then estimated to be 11.500 US$/t, and they used a tin price of 17.800 US$. Tin is today trading at 21.700 US$/t, with very good prospects going forward from increasing demand from the semiconductor industry especially. I expect the outcome of the enw study to be very different - but more positive. The involvement from Pala should also make financing easier. An interesting stock to watch - I am holding a very small position here.

Have a nice evening!


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