Market Update

General - Paringa - Perseus

Good afternoon

metal markets are weak today…equities as well! FED minutes indicate further tightening…no inflation in the moment, but labor market will react at some stage to the strong economy with wages increases…

Still - I have no idea, why for example copper is under so much pressure today. All fundamentals are strong - but obviously, fundamentals are status quo, and not forward looking. Trump might well beef up rethoric ahead of the upcoming elections. These Americans seem to like his America First talk….I find it hard to bear! As we are coming towards the European close, the metals are looking a lot better - just copper down by 1%, the rest only marginally.

Paringa - US local coal prices seem to be very strong…talk is about 47-48$/t in the moment, and some analysts are expecting prices above 50 US$ during the winter. They call the current situation a perfect storm - relatively low stocks, excess coal being exported, mainly to Europe , and gas prices as alternative fuel also pretty high. It will be interesting to watch ARLP´s Quarterly Report on the 28th of October - they should give a strong indication of the health of this market. Paringa is on the verge of getting into production. The Quarterly should be out soon, giving us further update on construction progress.

Perseus - Quarterly out today, which was excellent. I might have been too cautious - if they can carry on like this, they could well be able to finance Yaoure, which will be their new flag-ship mine, from cash + cash flow + debt. The company is adament, that tehy will NOT need any fresh equity. That would clearly be very positive - a move from 200.000oz recently, to 300.000 and ultimately 500.000 oz incl Yaoure, without fresh equity - very formidable indeed! Guidance for the fiscal year 2019 is 260-300.00 oz at AISC of 925-1050 US$, clearly giving them nice cash flow - but still very high leverage to a hopefully improving gold price. During the last Quarter, PRU produced 54.500 oz at AISC of 1045 US$ from Edikan, and ( only ) 18.000 oz at 659 AISC from Sissingue, which was negatively impacted by heavy rain. If both tehse mines have a good Quarter this time, the operating margin will be evn better than last Quarters 27,4 mill A$. PRU also received a nice VAT re-payment of 13.4 mill A$. Very good numbers - and as you know, hardly any of the Australian producers are trading below their valuation - PRU does!

Have a nice evening



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