Market Update

General - Evolution - Strike - Breaker - Kingsgate - Syrah

Good afternoon

some anecdotal evidence, that there is still upside: I listended to three fundmanagers in a webinar yesterday - all multi-asset managers - and asked the question, why they would not hold any resources stocks, given their generally positive outlook. The answer was initially silence, and then some bullshitting on oil stocks. I also read a T.Rowe Price strategy document today - no mention of commodities, gold or resources stocks...This let me believe, that there might be a long way for these generalists ahead to reweight some of their exposure from FANG´s etc ( which are at risk from the regulator around the world ) and other darlings to our unloved sector. As I said yesterday - performance sucks, and these guys will come...

Jeffrey Gundlach, the famous bond manager, today said in his outlook for 2018, that they expect commodities as late-cycle movers to have a very strong performance - stronger than last year.

Finally: Bond yields have now seriously started their upward trajectory - and rising yields have been the best performance driver for resources in the past - definitely in the early stages of the move.

So as I said - 2018 will be our year!! increasing prices for commodities, accompanied by continued upward revisions of earnings, and money-inflow!! And all this ahead of the suckers-rally, which might still be to come in 2019!

No mention anywhere of gold - are the young blokes all buying Bitcoins instead???? I guess so - but is something like this adding stability to your portfolio??? I rather punt on lithium and nickel, than this virtual stuff!!

Metals are trading stronger today, helped by weaker US$ , probably based on some more hawkish comments by Europen central bankers ( I think these guys are VERY right ) and rising bond yields in Germany. Gold in particular is back up through 1320 US$oz , and now making new, recent highs at 1324 US$ ( I fear now down to 1320 again...)and nickel/copper are looking good!

Evolution - they have significantly underperformed since the beginning of last year - probably due to the relatively conservative way my gold-darling is being managed. The stock is just on the cheapish side in absolute terms, and much cheaper in relative terms, when I compare them to the other,midsized Australian producers. The stock is yielding 3% at current levels - fantastic for a gold miner - and has at least 10% upside in relative terms, and about the same in absolute terms vs the current gold price. I have been a little ( too ) cautious on the gold price lately - but I think on valuation grounds, EVN are getting cheap again. Good, core exposure to gold, and at a nice yield!

There has been some renewed talk on increased gold mining royalties in Western Australia - EVN would not be affected by this at all.

Strike Energy - the chairman is buing 1 mill shares at 7ct in the market. This is not a lot of money for him, but he is not the type of guy to waste any money voluntarely! Drilling of Jaws is getting closer - by the end of the month, we might see some punters comning into the stock.

Breaker - had been put in doubt late last year by some informal comments from the market, that their resource " would not hang together", and the extension of time wanted / needed to put a meaningful resource togther. Drilling results announced today - some with very high grades, and many with still good grades, but long intersections - should go some way to alleviated these concerns. The company continues to increase the resource footprint, as well as deepen- and confirming it. But the litmuas test will be the first resource estime, out later this Quarter. I am still a happy holder,awaiting some confirmation from the first resource estimate. Anything below 1 mill oz would be quite a disppointment for me - the potential upside is much larger.

Kingsgate - had their EGM yesterday, and the current board just managed to hang in there...54 to 56% is a very slim vote, though, and normally, would have the Chairman step down. But knowing Ross Smyth- Kirk, who has never sold a share , he will continue to fight like an english boxer to stay as their Chairman! I am very reluctant to punt on a court decision here, or an out-of-court settlement with the insurance, as well as with the Thai government. There are better opportunities around.

Syrah - got hit a little bit today by the decision of the local Parish Council, to not allow the proposed baterry graphite production plant at the planned site in Louisana, USA. The parish people do not want any more maufacturing in their area. SYR do not expect any delays for the production, though, as there are alternative proposals for a site in Louisana. Nevrtheless - a slight negative, as obviously, this site had been chosen for reasons and has been the companies preferred location for the plant. Even though the company does not expectso, I would not be surprised about a small time delay in constructing at an appropraite location.

Have a nice evening

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General - Foran - St Barbara - Australian Resources Conference 23.2. in Zurich

Good afternoon

German Industrial Production for Nov very strong...Exports very strong...

European equities going slightly stronger throughout the day...as are metals...while gold is weaker at 1310US$ in the moment, hurt by a strong US$ today.

Conservative investors in Europe can sell already, as stocks are up by nearly 4% this year already!! I guess it´s fair to say, that investors with strong cash holdings will be very nervous...and nothing sucks more than your neighbour making money, and you don´t!! The famous cab-driver will enter this market soon!

St Barbara - have upgraded their yearly guidance by about 10.000oz...Gwalia produced 62.800 oz for the Quarter, and 127.100 for the Half, and Simebri 36.700 oz in the Quarter, and 70.600 for the Half. Grades at Gwalia have been very strong amid lower tonnage, but strong grades from Simberi have led to an upgrade of guidance by 10.000oz for this mine.Simberi for memory will only produce for another 2-3 years, hence it´s not that important. The company has got 216 mill in cash, following payment of 31 mill$ tax and two further investments totalling 10 mill$ in Catalyst, and Peel. Great numbers, once again - but you know my view ( which has been wrong so far ! ): Stock is fully priced.

Foran Mining - in this market, you rarely see stocks trading below a placement price! They raised 5 Mill$ at 49ct - but stock is still trading at a discount to this, even after a good jump yesterday. I guess institutional- or high net worth players don´t really go into the market for such a lightly traded company, as turnover is very small indeed.. The company has stated before Christmas to start drilling as soon as possible, to look for extensions of the ore body, and for infill drilling to satisfy Glencore, before they will enter the full feasibility study. The exploration drilling could be a game changer for this little company, which is very cheap anyway - and is one of my largest holdings.Strong copper / zinc prices are the key here! Theoretically, the stock is worth a multiple at current metal prices.

We have now confirmed most of our companies for the Australian Resources Conference in Zurich, on Friday, the 23rd of February:

Evolution Mining / Panoramic Resources / Perseus Mining / Apollo Minerals / Sheffield Resources / Graphex Mining / Finders Resources / Genex Power / Metro Mining and most probably Foran Mining.

A great mix of gold/nickel/copper/zinc/tungsten/mineral sands/graphite/bauxite/alternative power! The only hot commodity we do not have is lithium!

Invitations will be sent out very soon - but you can also let us know via return email, wether you will attend.We are also grateful for anyone inviting colleagues, for as long as they are serious people, and you let us know about their interest.

Have a nice evening

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

Happy Days!

Good afternoon

Happy New Year to everyone!! And this one could be happy, indeed - at least from a financial perspective!

The world is seeing concerted growth in a way not seen for many years...manufacturing around the world is booming....industrial production is strong....and the US have cut taxes ( whatever we might think about that) - what a scenario for our resources space!

The supply side is looking good as well - sharply reduced capex for new projects and exploration over the last few years since I think 2013 have brought the pipeline of large, new mines coming into production over the next 2-3 years to a trickle - and electric vehicles will require an increasing amount of many conventional metals like copper/nickel over the next few years - probably rather from 2020 onwards, than immediately.

I think this got to be the most constructive outlook in years - even shared by people, who are not "professional" resources bulls like myself!

The main risk for markets might well be stronger inflation than expected. Excessive - though obviously successfull! - money printing around the world might finally catch up on us. But even this would probably be bullish for commodities.

That leaves a major political crisis as risk - and this might well happen. I have to say, though, that things looked much riskier a few month ago, than today - except perhaps for Trump getting a real problem. That might be nice - but most probably, would be taken taken badly by markets.

The only thing which worries me is the fact, that everybody is getting bullish - this seems to be consensus!

And as I indicated a few times late in December, I think demand for battery metals will only start seriously in a few years time, when sufficient infrastructure will have been built, and when the large car producers finally will have a larger variety of models with better batteries for sale. The pricing of many stocks in the sector does not factor this in, I fear.

While the US are freezing, Sydneysiders are sweating! New South Wales probably only avoided energy-outages, as the worst of the heatwave hit on Sunday, when energy consumption tends to be quite a bit lower than during the week. The theme will be with us for some time to come.

Nothing to report as yet from the micro-side!

Have a nice evening, and a good start to the year!

Save the date - Sheffield - Beadell - Finders

Good afternoon

SAVE THE DATE FOR OUR ZURICH RESOURCES CONFERENCE : 23rd of FEBRUARY 2018

some micro-stuff first:

Beadell - had a much improved Quarter - but not sure, whether it has been good enough to avoid anotehr raising - might just be ok. They wanted to produce 60.000 oz as declared 2 month ago, and will now produce "around" 50.000 oz. This will also impact costs. They claim, that some of the planned production will only be transferred into 2018. They have had a number of smaller production issues. I still remain very cautious here - in any case, no reason to be there for now. At the current gold price, cash generation will be very difficult to achieve in 2018, and some debt-repayments might stretch the company.

Finders - new reserve statement. Reserves for about 7 years remaining, and reserve is only marginally below levels, when they started the operation. Indonesian issues like necessary approvals for additional ore bodies remain - but I think the takeover has been avoided now. Any increased bid in the high twenties might be succesfull - we will find out in the new year, whether the Indonesian bid has been entirely opportunistic, or whether it flashes out another suitor. Good to see, that a large parcel of 23 mill shares today went to institutional- and high net worth investors. The seller was a private equity group, from what I have heard, which had to be out by the 31st of Dec.

Sheffield - had a very unexpected, but rather unfortunate news yesterday: Some technical issues with the Native Title approval will delay approval for a few month. This came totally out of the blue for company as well as investors. Rather than let the bureaucrats rule about a new approval, I think tehy might choose to give Aboriginals a slightly higher royalty. This might impact the valuation by a few cent - but I think time is important, and the outlook for mineral sands is just too good to miss this great market. On the more positive side, tehy announced another binding offtake agreement with a large, Chinese entity. Stage 1 of their proposed mine is now nearly sold out, and the comany expects further news to this regard. SFX have an excellent project, and the current weakness should prove a great buying opportunity. The company has ample cash to live with a few month longer, to have full approvals in place. At this stage, tehy do not expect any big time delay for production start, as some early works are still taking place, as planned.

Last but not least some bad news from Novo Resource, the Canadian Wunderkind...they have found out, that much larger samples are needed to establish a resource for their new-style type of gold. No surprise really to me - that´s the kind of issue with nuggety ore, and has been so often in the past - even if this is now called "conglomerate", which really is only another word....I dare to say, that the new gold rush for Pilbara conglomerates is over for now!

Aother exciting year is over, also delivering some profits, and certainly many, exciting developments! Not to mention a lot of volaitily, asking for some endurance and a lot of nerves!

As BHP said mid-year - this has been the year, when electric vehicles took off, generating a lot of interests in base metals as well as in battery metals.

But it has also been a year or major volatility again! After a great start into 2017, we reached the high for many stocks in February, only to fall back heavily until mid-June. The big recovery coincided with the above mentioned BHP-comments, and a great research report by UBS, which for the first time highlighted the massive, potential EV- impact on our sector and raised a lot of attention. For mining investors, the year has been only mildly positive, which can be seen in the only single-digit performance of funds like Black Rock World Mining Fund, Earth Exploration, Craton Capital Resources or my own fund, Nestor Australien ( all in Euro-terms ). The weak A$ has not helped either, falling by 6% in Euro-terms, and the US$ by nearly 12% over the year.

And last, but not least, the world economy did progressively improve throughout the year, helping not only demand for commodities, but also changing investor-perspective on our belagured sector! And what is even better: The outlook for 2018 is better today than at any time during 2017, giving me much hope for another good year coming!!

Major base metals are finishing the year near multi-year highs ( with the exception of nickel, where large stocks are holding the price back ), a stellar performance of smaller metals/minerals like cobalt, lithium, palladium etc, a reasonable gold price and much optimism! Iron at at 73 US$, coking coal at 236 US$, and even thermal coal at 100$ are trading at levels nobody would have expected this time last year! And last but not least, base metals/ gold look like having a nice pre-christmas finish today, Over the last few days, we have always seen some profit-taking early in the day, and then finishing off strong , on US-buying.

So what to expect from 2018??

As indicated above , I am bullish...almost reminds me of this great comment by Jim lennon, who claimed , that he e foreseen 5 of the last 3 bull markets in nickel!! But a world economy growing at recent record-levels, a sector still driven by returns than by expansion, and a US$, which seems to be past his best, are a base for a lot of fun to come. And with a bit of luck, we might actually have not only 1 good year ahead! the demand for EV´s should really take off in 2019-2020, when a myriad of new models from established car manufacturers will hit the market. By then, we shoudl also have overcome soem of biggest obstacles, like limited endurance, limited chargebility and limited charging infrastructure.

Our sector is still very reasonably priced - from large/larger caps like BHP or Oz Minerals, Mineral Resources etc to smaller ones, like Panoramic, Foran Mining, Finders Resources and many others - they are either/and trading at sexy yields and undemanding P/Cash flows, or at very low, prospective PE´s. No exhuberance aroudn as yet!

This might be slightly different, when it comes to battery-metal producers/developers. We have seen some frentic activity here, and some massive share price moves. There could well be some disappointment in 2018, and I have trimmedmy exposure, especially to lithium, a little bit. Strong prices are usually triggering a production response - we will see more of this, as the year matures, in these speciality commodities - this is contrary to the "normal" base metals, where a supply response is nowhere to be seen as yet, mainly due to the very long lead times involved, and the limited price recovery of underlying commodity prices.

2017 has also been remarkable as a year of renewed tension around the world. Readers of my blog will undoubtedly have noticed, how disgusted I am by Trump´s actions - the man who is heading the country, which once was our biggest ally. I just hope, that he does not do anything stupid to derail all of the above hopes!

And 2017 has been another year, in which the "have´s" like us have profited at the expense of the "have-not´s"...central bank printing by nature helps property, equities and bonds - but the people, who do not own the above, can only profit by keeping their job, if they are lucky! Not good, and something politicians will need to address more to avoid more countries to fall victim to lunatics like Trump!! I realize, that this is not easy to do in a sensible way, but education will be central to offer better chances to the lower 20% of income earners.

I wish you Happy Christmas, and a prosperous and fulfilling New Year, with lots of fun in Australian investing!

Wille

Pilbara - Mineral Resources

Good afternoon

finally, some more action!

Metals are having a positive day...all green, and especially nickel about to hit 12.000$ again...copper through 7.000$/t, cobalt nearly back to the old high and above 74.000$/t. Looks like we will have a nice finish for the year!

Still a lot of interest in resources stocks generally, but battery-stocks especially! But I am inclined to switch a little bit from lithium stocks to "normal" base metals...in the end, nickel and copper demand will profit greatly , if the story continues to evolve, but with much less risk than say Pilbara or Kidman, to name just a some. The basic information, that tehre is a lot of lithium around in this world, is still true, and I have no doubt, that a lot of it will go into production over the next 18 month. Not unimportant is, that SQM , one of the largest ( perhaps the largest, not sure ) producers of lithium in battery form, looks like coming to a compromise with the Chilean government, to substantially increase their amount of yearly production. This could have an impact on supply/demand down the track as well.

Pilbara - announced two meaningful deals today. They will sell ore to Atlas, their neighbour, who will crush it in their existing facilities and then ship it as direct shipping ore- 100.000t p.m. starting mid 2018. They will also sell 1 millt or tantalite ore to Greenbushed for further processing, further increasing cash receipts. Tanatalite is more or less doubled in price over the last 12 month as well. Nevertheless - soo comments above! Great story, but about to get ahead of it itself.

Mineral Resources - announced a JV to produce very high grade graphite for use in batteries. Nice move downstream, and value adding! In my opinion, the further downstream these lithium producers get, the safer they get - protecting margins by downstream is something I like, and MIN is a company, which has shown multiple tiems, that tehy know, what tehy are doing, and execute well. Still - one very small warning: This area is also new to them! MIN is one of the few companies in this space, which I still like...3.5% div-yield and rising, multiple earnings streams from mining services, all sort of lithium - product, iron ore, and now graphite. More downstream for lithium is planned as well, and all these energy-intensive businesses supported by in-house gas as the source of power, if their current takeover for AWE goes through. There have been rumours, that this bid will be increased. I could imagine, that they pay an additional 5ct cash on top of the existing bid. I do like MIN´s long term strategy!!!

Have a nice evening!