Market Update

General - Sheffield

Good afternoon

Metals are having a good day - despite continued strength of the US$ against Euro. The Italian situation is still not under control - Italian 10 years are yielding 3.3% more than Germans - and I still would not want to own them! Equities initially sold off in Europe - driven by Italy and a relatively severe profit-warning by Daimler - but are mainly unchanged now, as Wall Street powers ahead on great results from Procter & gamble, Paypal and American Express.

Nickel and copper bouncing nicely today - perhaps helped by strength of Chinese equities today - rmour is, though, that the government bought to improve otherwise terrible sentiment there.

Chinese GDP made the headlines today “ deteriorating economy “ etc…I think that´s absolute bulls..t! 6,5% grwoth vs 6,6% expected, and vs 6,7% recently is a positive, in my view. Industrial output up 5,8% vs expected 6.0%; Retail Sales 9,2% vs expected 9%; Fixed Asset Investment + 5.4% vs forecast of 5.3% - really. nothing has happened here. But if Trump continues with his tariff-war games, that might well change. As I said before though - as soon as the elections are over, he will hopefully behave more sensibly.

Sheffield - announced a new project update today. On the surface, looks like a 115 mill$ cost increase…but this is not the case. As recently announced, SFX got a 65 Mill A$ Infrastructure Loan from the NAIF, + a 30 mill$ project development facility, which led to the decision, to build several infrastructure facilities themselves, leading to opex savings of 7.5 mill$ p.a. ( and I guess approx 4 mill$ in interest expenses . Hence the project got more “expensive” to build. The remaing 50 Mill $ are mainly used to increase the scope of the project, like throughput rates etc. What excatly this “scope” is, I can´t tell you - management has been on roadshow in Hongkong today and I could not speak to them. So I guess there will be a limited amount of cost increases of 20-30 mill$. I will find out more on Monday. In any case, I believe the negative market reaction today is well overdone. Initial analyst views stated, that the NPV of the project is basically unchanged - decreased opex, countered by limited capex increase. I understand, that the documentation of the 175 mill$ credit facility from Taurus has become a bit more complicated because of the new facility from NAIF, and will take a little longer. I would still expect the final documentation to be signed in November. Stock remains cheap!

Have a nice weekend!