Market Update

General - RIO exploration - West African sorry, again - Gold Road

Good afternoon

well - no fun! Probably the expectation of at least a small year-end rally has been has been too much of consenus to come true! Relatively little things like the Huawei-story ( which country in the world does have the “right” to do what the US are doing???? )are rattling investors - but the weakness has to been seen as a mor egenral story more recently: Sell the rally - from previously : Buy the dip ! The - at least recently - inverse bond yield curve in the States has spooked investors as well, as has the BREXIT-story , with consquences, which are difficult to quantify.

We have made the experience over the last few years, that any corrections/runs etc are much more violent and much faster than say 10-15 years ago. The heavy involvement of machines/hedge funds is most probably responsible for that .

German factory orders - a volatile series - better again for a third month.

Equity markets in Europe as well as US futures are looking awful - base metals are weaker across the board, and oils is jittery as well, awaiting some OPEC news. Their decision should be a very difficult one this time - Saudi-Arabia under pressure to balance the trade-off between the killer-sultan being a nice guy for Trump, and oil prices. Clearly, a very political decision - so one should not expect too drastic cuts.

The best news perhaps today is hard to believe, but true: RIO has asked for permission to build a long road to connect the West Australian coast with their rumoured, major copper find 400 km inland. Contravening reports abouit it - one report is implying, that this could cost a couple of hundred million $, but I think more trustworthy is different information, which has put the cost of the planned road at 30 mill$. That´s bullish enough for me - building a road for 30 mill, an airstrip for 10 mill, and spending millions and milions of drilling, surveys, exploration camp etc are certainly confirming, that RIO got to be up to something very special here. My hope is, that BHP´s open discussion of their recent exploration success near Olympic Dam puts enough pressure on RIO to announce something soon.

West African - I have tried to understand the off-take agreement a bit better. I think it works this way: WAF deliver some gold to Taurus , and get paid the gold fix of that day. Similar to base metals, teh price is then beeing adjusted to the gold price of a certain period - I think it´s 8 days, and WAF receive a ( usually ) negative adjustment in line with the lowest price being paid during that time. The value of this offtake has a limit, and historically, looking at long time frames, it should amount to something like 15-17 US$/oz. Effectively this means, that WAF will receive 10-20 US$ less on their gold produced relative to not having the offtake. Clearly a way for Taurus to make some additional money over time - but given the excellent terms of the loan, I think perfectly ok. And let´s not forget: WAF will have ASIC of around 550 US$ - so I am not too worried about 10-20$ more or less for the gold price received.

One more thing with regards to the updated feasibility study expected in the 1st Quarter: Depending on the new reserve/resource estimate, my expectation is, that the company will construct a 2.5 millt plant, not a 2 millt plant, as currently expected by the analysts in their official research ( WAF have hinted previously of this being a possibility ). Pre-production capex should not change, as the difference will only be a few million$, and the company has a lot of fat being built into various parts of the feasibility study, which most probably will not be needed. This announcement could be another big positive for WAF, alongside more exploration news. Given, that no more equity will have to be raised, I sincerely hope, that in future positive announcements will indeed have a positive impact on the share price - i.e. investors cannot just wait for “the” placement to buy stock. I have heard, that some investors have been unhappy with WAF - especially with the placement price. But firstly: If you think, that it was too cheap, buy more at that price…and secondly, it really does not make a difference in the long run and for the valuation of the company, whether the placement would have been done at 27ct or 25ct…I am very happy, that it´s done - and in light of current markets, I think to get a full financing incl equity over the line, is a fantastic outcome and testimony to the nard work of Richard Hyde, the MD. As you know - I am talking my book - but as you can see, I am totally convinced as well!

Gold Road / Gold Fields - the companies updated on their 50/50 JV , Gruyere, which will see first gold in the 2nd Quarter 2019. Production will be slightly higher , but interestingly, costs are expected to rise from 945 A$ AISC to 1025 A$ AISC - the companies give higher diesel prices as well as higher labor costs as reason. I would think, that these pressures will impact many otehr miners as well. Having said this - diesel prices have probably come back already, and will come back more ( and , following the oil price, But labor costs would apply to most - at least in remote locations like this one. The companies had done the original LOM ( life of mine ) plan back in 2016, when we probably at absolute lows for labor costs, and also for oil.

Have a nice evening - well, you should not look at the screen, then!