Market Update

General - Kingsgate

Good afternoon

the balance sheet repair of the resources industry continues...today Santos raised 1.5 bill A$ in a placement + SPP, and Stanmore Coal raised 15 mill A$ to be on the saver side of a tight cash balance in weather-sensitive area.

Chinese credit growth was stronger than expected and will ensure, that growth can continue at around current levels for the next few month at least. The last set of economic numbers has been very positive - it will be seen relatively early in the year, whether Trump will play hard ball or whether we can continue with business as usual. I am sure, that Apple will push very hard for "normal" trade relations with China at today´s meeting of Silicon Valley with Trump!

Trump has now filled all important roles in his government...I have to admit, that in a way, I quite like his refreshing hands-on approach to things. But I am still worried, when it comes to potential erratic foreign policy, and I am very worried about the outlook for the enviroment. Not very probable, that his Texas-boys will be looking after the quality of life of my children and ( potential ) grandchildren!

Strong producer prices in the States today....but all eyes are on the FED, which is almost 100% certain to increase rates - but I guess, alonside some pretty dovish commentary?? Strong bond markets today are telling this, at least!

Base metal prices have been in positive territory all day today - and for a change, it looks like the US is not selling them down.

Kingsgate - the Thai government has clarified it´s instructions, and while they will meet with the company next week, it is now as certain as it gets in Thailand ( that means 90%? ), that Chatree will be closed at the end of this month, after operating for 14 years, I think! Most of us have made good money with Kingsgate over the years - but the last few years have been very disappointing. I think the sometimes very blunt and harsh comments of the Chairman have not helped Thai relations - but it´s very hard to look after the curtain here. In any case - it´s now up to negotiations, and potentially international courts, to decide, whether KCN will get compensation for the asset. The only relief for shareholders: there is basically zero compensation seen in today´s shareprice!

Have a nice evening

Schröder Equities GmbH

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General - Kasbah

Good afternoon

following yesterday´s extremely strong settlement of 1.Qu 2017 coking coal prices, and a new high for iron ore at nearly 84 US$/t, the market today has decided, that this is as good as it gets. And in many, regards, the market is probably right.

Mining stocks are a weaker across the board today in London - some strong profit taking around. The same in metal prices today, which were strong in the morning, and are seeing some selling this afternoon - I guess mainly from the States.

Earlier, these markets had profited from good economic numbers in China: Industrial production up by 6,2 % ( vs 6,1% exp ), Retail Sales up by 10.8%, Fixed Asset Investment up by 8.3%. But all these numbers do not justify coking coal at close to 300 US$, and iron ore at the current, amazing levels. Steel production is not keeping up with strong imports of raw materials - some de-stocking seems inevitable, or at least, lesser demand over the next few month. I think market participants have prepared for the wet season in the North of Western Australia, and Queensland - and weather looks to be the only escape for these raw materials to stay up here.

Gold stocks in Australia have been weaker across the board, once again. The trend seems firmly entrenched - probably little in the way to stop it in 2016 - we will look again early in the new year, when Trump will have to fullfill some of the current, bullish sentiment for the economy with action!

The pricture might look a bit different for the base metals, which prices are probably more realistic. But they are also subject to financial flows - and tehy have undoubtedly been very positive, since Trump won the elction. Perhaps also time to see some consolidation here. I just hope, that our smalelr companies´share price don´t go down now - not having gone up by as much as they should have previously!!

I fear there is very little to report from the micro-front today!

Kasbah - an Australian court dismissed the merger of Asian Mineral Resources and Kasbah Resources today. Well, the tin price has moved 20%, since the company entered into merger talks with ASN...and the market enviroment is much more positive now. This could actually be a positive failure for Kasbah - negotiations will ahve sto start again, I guess.

have a nice evening

General - gold stocks - Paringa - Van Eck - Coking Coal - Kingsgate

Good afternoon

soory forgot to post this on Friday...

Biggest change today: Oil is through the roof! Looking very strong on the charts...but will shale start to see a come-back? I think it might well do so, limiting further upside. But for now, Saudi + Russia seem to be driving it hard - preparing Aramco for a nice IPO??

The $ continues it´s run - still, base metals are generally a little better, as are equities...but gold under renewed pressure today. The A$ is trying to make new, recent highs against the Euro..,.Ideal for us: It´s not rising against the US$, to keep Australian commodity producers halfway happy!

Chinese inflation numbers surprised on the upside on Friday...while manufacturing around the world is doing pretty well, adding support to commodity prices. But higher inflation could be to the detriment of China´s growth support, if it´s staying above 3%. US consumer confidence very strong, following Trump´s election.

The CEO of Teck, a large zinc producer, sees prices for the commodity going higher than 1.50 US$/lb from 1.24 today, while they are cautious on copper until deficits arrive in 2018 or 2019. Goldman´s sees it differently - bullish for copper on 6-month view ( 6.200 US$ ), before increasing supply in 2018 will push it down again!

While gold is still not "clean" looking at the charts ( could fall another 80$ or so?? ), I think it´s time to have a look at this years´performance of gold stocks again with a view, to start buying some soon ( numbers as of Friday )

Stock Fall from recent high performance this year

Resolute - 47% + 398%

Beadell - 37% + 146%

Perseus - 16% + 83%

St Barbara - 42% + 53%

Oceana - 32% + 47%

Newcrest - 30% + 45%

Evolution - 39% + 36%

Northern Star - 41% + 24%

Regis - 37% + 17%

I think this table is quite interesting: while all stocks fell roughly the same from the recent high, around 35-40%, Perseus has substantially ourperformed recently! And within this group, Perseus is probably the highest cost producer!! Theoretically, and ceteris paribus, they should have fallen the most in the current enviroment! Partially, the stock might have been re-rated, due to the excellent growth prospects - but do you really pay for growth in a falling market?? As you know, I really do like PRU - but they might be just a bit on the expensive side in the moment - unless there is some corporate action coming up here! They might possibly also reweighted in the US Gold ETF? In any case - perhaps not a bad idea to let a few go. As this email has been forgotten to be posted on Friday - we now have clarity...125 Mill PRU need to be bought for the Index! sell a few at least int that...you can only buy cheap, when having sold high earlier!

On the other side, the benign performance of Regis is a stand-out. The company has done a good job, has low AISC, and has increased reserves following exploration success. Together with SBM and RSG though, they have a very large percentage of their stock ( about 17% ) held in the Gold ETF, which in my view, is a negative and probably is contributing to the weak performance. EVN for example, have only 5.5% of the company held by Van Eck. Nevertheless - in the current enviroment, Regis is yielding probably 4%, and are good value - followed by Evolution, which is having some positive copper exposure via the Ernest Henry-aquisition.

One word of caution: While the HUI Index looks like basing out already, most Australian producers have sort of 15% downside still on the charts - that would go along with another 60-80$ or so downside in the physical gold price. So one might have to be patient for a little longer - but the good days for our gold stocks will return - god knows, what Trump will do, once he is president, and once he will have to deliver good news to a market, which is currently re-rating in expectation of good things to come in the future!

Paringa - placed 8 mill$ at 42ct...enabling them, to not only finish feasibiliyt study on their first mine, incl the second seam, but also giving them some funding for early development from mid-2017.. There will need to be another 40 mill $ funding from somehwre - debt, convertible, equity, strategic investor - we will find out only during the first half 2017. I understand, that a couple of strong institutional investors took up the majority....Important, in my view - these guys are now more actively looking at the smaller sector !

van Eck - based on Index Changes, and of stocks which interest us, they have to buy 85 Mill shares in First Finance ( Chalice selling stake??? ), 83 mill shares of Ramelius, 75 mill shares of Silver Lake, and 128 mill shares of Perseus....People investing into this fund got to be pretty crazy!! Except for Alacer, which should get downweighted, otherwise we will see small up-weightings for Australian names, without having much significance.

Coking Coal prices - have been settled for the March 2017-Quarter at a sensational 285 US$/t, vs current spot of 270m US$....that is pretty amazing. macquarie say, that this price has been achieved vs their VERY recent expectations of 185 US$/t!! This new price leads them to upgrade earnings by 10% for BHP, and 12% for S32. Coupled with the strong oil price, and an iron ore price still trading above 80 US$, it makes BHP look pretty sexy! There will be a few more earnings upgrades coming, I guess!

Stanmore Coal will also profit strongly from these prices.

Kingsgate - produced 18.600 oz in November - that puts them a few thousand oz above budget for the Dec-Quarter. I am assuming, that they can stick to or even exceed their target of having 13 Mill A$ in net cash by 31.12.. There is ongoing wrestling about the mining license - the government has made some adjustments, but they are not suffiecient for KCN to keep going. They have therfore terminate most employees to the end of this month. I guess we will see some more on this.-...tehy continue to be an interesting speculation.

Have a nice evening

General - West African - Genex - Paringa - Strike Energy

Good afternoon

Metals have been strong this morning - profit taking from the US in the afternoon! It´s almost getting boring - but blue chips like RIO, BHP, Fortescue, Antofagasta or Anglo/Glencore, all with new highs today...and lacklustre trading at the junior end. New highs for iron ore and steel in China ( iron ore trading at 82,50 US$ yesterday in London !!)

labour market figures in the States in line, Chinese imports very strong today.

Draghi will continue to buy bonds, but will be reducing the scale of it. Markets a bit disappointed with that - bonds very weak in Europe, but equities continue to trade very strong.

Gold stocks as well as gold are trying to build a base - stocks especially are feeling much more positive than say a week ago.

West African Resources - the company has received enviromental approval for it´s planned new gold mine in Burkina Faso. This was certainly expected - but these days, you never know...They also appointed a very experienced COO , Lyndon Hopkins, who has bulit and managed the in-country aspects of the Bonikro gold mine in Ivory Coast, and the Rosemont Mine in Australia. They also appointed a sustainability manager, not unimportant in Burkina Faso. The market is now awaiting the bankable feasibility study for the project!

Genex - raised 9.3 mill$ at 22ct...Honestly, I did not know anything, when I speculated about it the other day. I certainly would not have thought, that tehy would do the raising at 22ct - I would have rather tipped 24-25ct! In so far, slightly disappointing for a company, which has been valued by analysts at 85ct with upside potential to double that! I am hearing, that a very large Australian small cap fund has been the cornerstone with an investment of 2 mill A$. I would have rather not have them in, but get a better price for existing shareholders. In any case - it´s done and dusted now, and the company should be fully financed now for the solar project!

Strike Energy - the rights issue closed oversubscribed - bids over the entitlement will be scaled back. Again - disappointing price, but it´s done now, and we look forward to receiving definite flow-rates at some stage in the next month ot two. Operations have gone well lately, so I remain hopeful of having results rather sooner than later!

Paringa - suspended today for an expected placement..I understand, that it ahs gone very well - more definite news tomorrow.

Have a nice evening

Schröder Equities GmbH

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80538 München

Tel. +49-89-4613440-0

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eingetragen im HR München, HRB 166985

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General - RIO - Graphex

Good afternoon

there is just nothing to stop these base metals/ minerals - and again, equities! Strong again in London today, and Steel + iron ore with new highs in China this morning!

J.P.Morgan was the latest investment bank to increase their forecast prices for commodities...after the increases, they are generally going for substantially lower prices than today...iron ore 60 US$ ( vs 80$% today ), coking coal 175 US$ ( vs 290 today ),.copper 2.26 US$/lb vs 2,66 US$ today...etec pp. Nevertheless, they have increased earnings estimates for many companies by 30% or so....There is so much more to come for us!!! These analysts will try to follow reality much the same way as they did between 2003 and 2007! Once they got really bullish, it was all over. We are certainly a very long way from this!

The Australian GDP contracted by 0,5% last Quarter - this was worse than expected, and certainly a one-off number. Most economists are expecting a reasonably strong economy for Australia next year, consensus is 2.8% - which makes sense!

RIO - if anything, want to increase their exposure to diamonds! That surprised many - some had expected them to divest diamonds...The diamond market has seen a meaningful uptick this year, especially in the better-quality segment of the market.

Graphex Mining - tests resulted in a 99,4% graphite concentrate , just by flotation, which is a very straightforward process. This would make their concentrate a desirable one for spherical graphite producers, for the use in batteries. These results do give GPX added optionality - but their plan is not to go this way, but to produce graphite of very coarse flake size, for the building industry. This product is very much sought after, and is the main reason that the Chinese are planning to finance the project. We should see more definite news of this early in the new year, I think.

Genex - suspended for a capital raising!! Honestly, I did not know anything, when I wrote my note yesterday - otehrwise, I would not have written it! More details tomorrow - stock should come with an announcement before the market opens. Just a remeinder, that recent research valued them at 85ct, with a potential valuation of 1.69 A$/share!

Have a good day!

Schröder Equities GmbH

Seitzstr.7a

80538 München

Tel. +49-89-4613440-0

Fax +49-89-4613440-10

email: wschroeder@schroeder-equities.com

website: www.schroeder-equities.com

eingetragen im HR München, HRB 166985

Geschäftsführer: Wilhelm Schröder