Market Update

General - Strike - West African

Good afternoon

China market with big recovery, as government announced heavy tax cuts to bolster the economy.

I guess this also helped European equities and metal markets in London today. Initially, Italian bonds have been very strong - but selling off as the day progresses, as irresponsible Government keeps pushing an irresponsible budget…and teh same happening now to stocks as well.

West African Resources - announced more excellent drilling results from their M1 highgrade underground deposit, but also extensional results, extending the resources deeper down. The results could/should add another 1 year of underground production…potenbtially we now get close to 5 years at 250.000oz production p.a. …and I am assuming also arround 550 US$/oz AISC! But firm numbers will need to wait a little…new resource estimate in 1st Quarter 2019, as well as firming up of costs. Before that, we should see more drilling results, and announcements on planning progress, and fiirming up of debt-financing. Even so the company could potentially get 100% debt-financing, I am sure, that this would come at a price. But the extremely robust nature of the development, and strong interest from financiers, should limit any additional equity at say 50 mill$.

At least as important as the new drilling results below the exsting resource, the company announced first drill results from a parallel lode, just 180m from the main lode: 2m with 128g; 5.5m with 15.5 g; 8m with 6g. Early days - but potentially very exciting, as so close to the planned development! It´s completely beyond me, why someinvestors have been selling nearly 4 mill shares today…this stock is just sooooo cheap!

Strike Energy - not so good news from them today! A few things: Friendly takeover announced for UIL Energy, a 13.7 mill$ gas explorer with assets immediately adjacent to STX´s promising, Western Australian asset. Some resources already exist, and the acreage would certainly increase substantially in value, if STX´s exploration well, planned for March 2019, delivers what the company expects. Strike is very bullish on their asset - so the takeover makes a lot of sense strategically. Any larger company to get involved would prefer to have the acreage combined.

Secondly, and I admit, that this is a little disappointing, the company has announced plans to raise capital. Details to be announced. We all know, that STX needs additional funds, to drill the Western Australian asset, as well as to continue development of the Cooper Basin asset. I would have hoped for an even stronger share price before they would do the placement, potentially, following more news on Jaws No1. We know, that gas is flowing - but it´s early days, and another 4 weeks would have given us a better understanding of Jaws already. But then I guess the board had to follow good governance, and provide for enough capital to at least fulfill commitments - in this case, to drill one well at the recently aquired West Erregulla Gas Project. So…a touch disappointing for me to see more dilution of us long term holders - on the other side, if we are right with our hopes for JAWS No.1, it does not really make a big change, whether nbew fudns are being raised at 11ct or 16ct - the difference is just a small part of the company, and the potential valuation would still be fantastic, if they prove commercial flow rates!

have a nice evening

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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!

General - Paringa - Perseus

Good afternoon

metal markets are weak today…equities as well! FED minutes indicate further tightening…no inflation in the moment, but labor market will react at some stage to the strong economy with wages increases…

Still - I have no idea, why for example copper is under so much pressure today. All fundamentals are strong - but obviously, fundamentals are status quo, and not forward looking. Trump might well beef up rethoric ahead of the upcoming elections. These Americans seem to like his America First talk….I find it hard to bear! As we are coming towards the European close, the metals are looking a lot better - just copper down by 1%, the rest only marginally.

Paringa - US local coal prices seem to be very strong…talk is about 47-48$/t in the moment, and some analysts are expecting prices above 50 US$ during the winter. They call the current situation a perfect storm - relatively low stocks, excess coal being exported, mainly to Europe , and gas prices as alternative fuel also pretty high. It will be interesting to watch ARLP´s Quarterly Report on the 28th of October - they should give a strong indication of the health of this market. Paringa is on the verge of getting into production. The Quarterly should be out soon, giving us further update on construction progress.

Perseus - Quarterly out today, which was excellent. I might have been too cautious - if they can carry on like this, they could well be able to finance Yaoure, which will be their new flag-ship mine, from cash + cash flow + debt. The company is adament, that tehy will NOT need any fresh equity. That would clearly be very positive - a move from 200.000oz recently, to 300.000 and ultimately 500.000 oz incl Yaoure, without fresh equity - very formidable indeed! Guidance for the fiscal year 2019 is 260-300.00 oz at AISC of 925-1050 US$, clearly giving them nice cash flow - but still very high leverage to a hopefully improving gold price. During the last Quarter, PRU produced 54.500 oz at AISC of 1045 US$ from Edikan, and ( only ) 18.000 oz at 659 AISC from Sissingue, which was negatively impacted by heavy rain. If both tehse mines have a good Quarter this time, the operating margin will be evn better than last Quarters 27,4 mill A$. PRU also received a nice VAT re-payment of 13.4 mill A$. Very good numbers - and as you know, hardly any of the Australian producers are trading below their valuation - PRU does!

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

General - OZ Minerals

Good afternoon

equities are giving up some of their nice gains from yesterday…base metals largely unchanged…no major , market moving news so far today.

Sorry but I have to dwell on this kashoggi-thing! It´s so annoying to see foreign-poilcy cynism at work! Just imagine, that some journalist would walk into the Russian embassy, and come out in pieces, because of some interrogation gone crazy….Trump and the entire west would fall over themselves to cry for new sanctions… With Saudi Arabia, the Americans will send them the next 100 bill$ in weapons…Pompeo looking like a little public servant, begging for some chocolate and a smile from the big man…

Anyway….

Macquarie yesterday came up with some rather nice EV sales estimates for last month. 200.000 EV´s have been sold in Sept - 74% increase in China and 110% increase in the US ( driven by the new Tesla model ). But other countries like Japan and Canada, coming from a small base , where also growing at nearly 100%. The big numbers are in market share - 1.6% market share for EV´s worldwide in 2017 will grow to 2,7% on Macquarie´s numbers. As teh average size of batteries is also growing, consumption of relevant metals is growing more strongly even - but they do not give detailed estimates for that.

OZ Minerals - another good Quarterly from this very well-run company! Producing 32.000t of copper and 36.500 oz of gold in the Quarter at AISC of 1,15 US$/lb ( I think average exchange rate during the Quarter was 73ct ) is certainly excellent, and a bit better than expected. The stock is not dirt-cheap, but ok priced - and if you like copper, it´s worthwhile to have some. If consensus is right, you might have to wait 2-3 years for substantially betetr copper prices - but in the meantime, 2% yield is not so bad. And contrary to before, OZL do have a growth pipeline now. I cannot see a project of the quality of a Prominent Hill there - but certainly incremental production a few years out. If that meets with rising copper prices, the outcome might not be spectacular, but very solid. And at no point of this growth cycle, the company will have any debt - not the worst position to be in, but I would actually prefer some limited gearing of say 15%, if it gives them more fantasy. Once Carapateena is up and running late next year, they will have to do something on the aquisition front again.

This continues to apply to basically all, reasonable, Australian gold producers - from St.Barbara to Saracen and Evolution. At a varying degree, all these guys are undergeared…especially SBM, who on top are relying on their very deep mine , and will need to find a replacement for Simberi. And last but not least, the Gwalia Mine cannot produce at grades substantially above reserve-grades forever…the 350 mill$ in cash ( and growing ) in their pocket will burn like hell!

Sheffield - more exploration results from the broader Thunderbird area - not as spectacular as the results the other day, but more indication, that there is a lot more to be found. The company is certainly doing everything possible to enhance the value for potential, strategic buyers!

Have a nice evening

General - Evolution - Metro

Good afternoon

BREXIT, Italy, Tariffs, Saudi Arabia - a lot to swallow for markets in the moment! And obviously, late last week, a little bit too much! In my opinion, markets have already taken more FED-action into their stride - except for one thing: oil prices are starting to bite and beef up inflation numbers - not only wages anymore. And Iran-trouble + potential Saudi-action could play havoc with oil prices - pushing inflation, and limiting growth. But being an old cynic, I think we will not see anything too drastic from Trump against his best friend, Saudi Arabia - whatever they have probably done to this journalst!

Certainly, the above is enough to bring some attention back to gold….the A$ gold price is now 1723 A$/oz - that´s just 5% less than the all time high in 2016….More importantly perhaps, the charts for US$ gold are looking interesting!

Equity markets as well as metal prices are stable today, with a slight upward bias. LME stocks for all metals continue their strong declines today…

Evolution - excellent Quarterly today…especially, as this was expected to be a little weaker. Ernest Henry once again was a fantastic money spinner and the stand-out this Quarter. 200.000 oz overall at 885 A$ AISC were a few thousand oz better than expected, but at slightly higher costs. Strong diesel prices are certainly not helping. The company is essentially debt-free now…only about 75 Mill A$ in net debt remaining. Cowal will be expanded - also helped again by good exploration results - to produce 300.000 oz p.a. on a sustainable basis for many many years to come. The stock bounced strongly last week, reflecting the better gold sentiment - so despite the strong result, the stock is only a hold in the moment, at around 3$/share. But gold is feeling strong - and EVN should continue to move with the gold price. 3% yield for EVN should continue for some time and is very sexy for a gold stock! EVN remains a core gold exposure through the cycle!

Metro Mining - production firgures for their recently comissioned bauxite mine had already been announced - at 822.000t for the Quarter the company is on track to produce the targeted 2 millt for this calendar year ( 1.2 millt produced so far ). Costs continue to come down as the operations are being ramped up to nominal capycity and fine-tuned . Cash + receivables at the end of the Quarter was 8 mill$ higher then 3 month earlier, at 38 millA$…this is the really important number!

There have been 3 main risks for MMI: 1 - the usual comissioning risk for a new mine - that´s gone now ….2 - marketing rsisks for the bauxite product - with all production for 2018 easily sold to 5 different customers , and already 80% for 2019 contracted - I think this risk is also largely gone now ….3 - price risk - well, that will always be there - but alumina market looks strong, still, and chinese bauxite production is still under pressure . This leaves mainly one risk - that´s wheather - and there is little they can do about that, although over time, some stockpile should also mitigate this risk. The stock is slated to generate very solid cash flow for many years to come - operationally, the company seems well on track to get there!

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