Market Update

General - Fortescue - West African - Technology Metals - Coronado

Good afternoon

markets are moved in either direction today - but look like loosing at the end of the day. I just cannot hear these stories about the trade war anymore….from car companies to semiconductor producers and Apple to Nike - everybody is worried to get hit …and we all will get a hit, if this thing is not going to end soon!

Barrick will mop up minorities in Acacia Mining to bring talks with the Tanzanian government to an end. Tanzania apparently refuses to talk to Acacia directly about an end to the long tax-dispute, which has harmed the investibility of the country big time.

BHP hosted their yearly strategy day today - and re.emphasized, that nickel is now much higehr on their agenda, as well as signalling the desire, to aquire more nickel sulphide assets ( = battery-nickel ) . They also revised their expectations higher for the market penetration of Electric Vehicled going forward, and clearly see a role for mining to help “de-carbonise the world”.

West African Resources - released their Technical Report according to North American standards, which contained no surprises. I understand, that the company currently has 800 people working on the construction side - obviously, it´s in full swing now. Underground development should start very soon, as the box-cut has been finished. The company is now working on fixing as many costs as possible and so far, I understand that everything is on budget - time as well as costs - and comissioning could begin as early as late in Qu 2 of 2020. The company should have some spare cash after development - but a serious push to explore for additions to the high grade, underground resource will have to wait until later this year, once there is more certainty on costs. In the moment, all drilling is going into grade control drilling, to make sure, that early production will hit the targest, and to avoid some problems companies like Dacian, and especially Gascoyne have seen in the early part of their mining activities. I think all is going very well at WAF…one exception, and that is not new: Burkina as a place to do business has not improved. The North and part of the East of the country are plagued by Jihadist/Terrorist(Criminal groups. So far, though, no mine in the country has lost any production, is exporting gold, and is paying taxes and royalties - even Iamgold´s mine, which is far in the North and close to where the action is. Nevertheless, there is some discount attached to companies operating in the country - though I believe, that the discount applied is larger for explorers/developers than it is for producers like Semafo, iamgold , Endeavour etc.

West African are certainly paying tribute to security issues, having employed a former captain of the French Army as Head of Administration, and more security personell ect than they would have had a few years ago. And - knock on wood - Sambrado is in a good area, government controlled and close to an army base. I also believe, tha th e recent, very positive update from Sprott Securities the other week has reinvented some interest in the stock, valuing them potentially at 75ct. I guess we would all be happy enough at 60ct - unless underground exploration would deliver more ounces for the early years!

Fortescue - ex 60ct fully franked dividend today - which is worth more than that to Australian investors due to the associated tax credit. The iron ore price remains above 100 US$, and the contracting discount of slightly lower grade iron ore vs the 62%-contract has narrwoed recently. Macquarie analysts believe, that FMG will receive something like 85 US$/t for their material currently, which still opens the door for a big earnings/dividend surprise coming. At spot prices, Macquarie see 150% upside to their FY2020 froecast at current spot ( they are using 70 US$ for 62%-iron ore, and a 72ct currency against the US$ ). Recent developments in Brazil, where a second, large tailings dam is moving and could break, make this prospect entirely possible…As usually, a lot depends on Trump and his holy war against China!

Coronado Global Resources - since listing in October 2018, the stock really has gone nowhere. The company is the largest, pure producer of metallurgical coal ( all sort of types, but mainly high quality coking coal ) in the world. The company still suffers a bit from the fact, that only 20% of the company were IPO´d - the rest stays with private equity - and hence, there is limited marketability ( only about 900.000 shares traded/day ). CRN paid a big Div for calendar year 2018 - 31ct/share - and consensus is expecting them to pay a 20% yield ( ! ) for the current year. Obviously, a lot depends on the pricing of coking coal - but that has been very stable so far this year, and contrary to thermal coal , of which the worls has plenty ( and which is seeing demand pressure from climate policy ), steel will be needed for teh foreseeable futue. Potentially, steel demand could even continue to rise, depending on urbanisation and the development of India, Africa etc…In any case, Coronado is worth a very good look at these levels, and I have bought a small position prior to their first dividend.

Technology Metals - announced a MOU today, which should lead to an offtake agreement, and potentially also to part-financing with a Chinese offtake partner. The company is a fully owned subsidiary of well known, and large China Nonferrous, which is a state-owned company. This is the first step to the first offtake agreemenet for the company, to a well-known consumer of Vanadium. I reckon this is good news, as it shows, that there is demand for vanadium out there - despite the recent fall in prices. Speciality- and thinly traded metals like Vanadium tend to overshoot. As much as the recent high ( only in November 2018 ! ) of 34$ was crazy, as crazy is today´s 8,80$, the lowest price since late 2017. The chinese steel industry is in rising demand of the metal, and this agreement is a clear indication for it…that´s the real news from this announcement. In the mdium term, there should be additional - but at this stage, hard to quantifyable - demand for Vanadium from large scale batteries as well. Even Largo Resources in Canada now seems to loose money - and I fear, that TMT shareholders will need better prices to see substantial advances in the share price! The next big step will be the release of the feasibility study by mid-year.

Have a nice evening


Schröder Equities GmbH


80538 München

Tel. +49-89-4613440-0

Fax +49-89-4613440-10




eingetragen im HR München, HRB 166985

Geschäftsführer: Wilhelm Schröder


The information contained in this communication is confidential and is intended only for the use of the addressee. Unauthorised use, disclosure or copying is strictly prohibited. If you have received this communication in error, please delete it and notify us by telephone at +49-89-4613440-0, by fax at +49-89-4613440-10 or by e-mail at immediately. Please note that this communication does not constitute and may not be construed as investment advice and / or referral to buy or sell financial instruments. Unless specified otherwise, the views expressed in this communication are solely subjective notions of the individual sender and / or the entity or individual stated as the author of any information submitted. Performance in the past may in no case be considered as an indication for future performance. Please also note that Schröder Equities GmbH and / or its officers or employees may have interests in financial instruments referred to this communication. A current list of shareholdings can be emailed on request. Furthermore, our clients are hereby informed that Schröder Equities GmbH renders advisory services to Nestor Australien Fonds, an investment fund administered by Nestor Investment Management S.A. Luxemburg. Please also note that e-mails can be intercepted by