Market Update

General - Vanadium - Strike - Venturex

Good afternoon

Mixed numbers out today: New Home Sales in the US weak - PMI in the US strong, PMI in Germany still indicating growth, but falling and below expectations.

Boing reported a very good result, and a strong forecast…

European equities stronger, though not as strong as in the morning - US equities keep on falling. Bond markets strong across the world - except for our fellow Italians…and base metals/golds little changed - perhaps a good performance in light of a strong US$. Well - I wwrote the sentences at 4pm - now it´s 5.30 pm, and equity markets around the world are looking much uglier! Peak earnings?

Following George Soros the other day, the Clinton´s and Obama´s have been sent packages with explosives.

Vanadium stocks are getting some fresh attention, as it´s price is booming…up 70% since September, and up by 13 times since recent lows in early 2016. The metal is being used to harden steel - only a market of about 100.000t per annum. There are a few hopefuls in Australia with development projects - the only one I have been following a bit is TMT, Technology Metals, which has finished a PFS and is targeting to complete a DFS by June next year. The potential numbers at current prices for Vanadium are crazy - for example, these guys have used 13 US$/lb in their PFS. Potential costs are around 4.50 US$/lb….for production of 13.000t p.a. . I ahve not done enough work on these things as yet - but if you want to spend the time, it might be worthwhile! The use of vanadium in China is expected to grow strongly because of new regulations, which require harder steel to be used in construction. Currently, Chinese producers are using less vanadium than comparable producers in the West. Also, one of the new applications fr vanadium is for large scale batteries to store power. Their relatively high weight make them unusable for cars or any mobile applications.

Strike - announced timing fo the Shareholder Purchase Plan for retail investors. You will ahve to subcrbe before 16th of Nov. As usual, European banks will close the possible application a few days earlier. Every, in Australia registered shareholder can subscribe for up to 15.000 A$ at the placement price of 0,115 A$. Every holder here, whoholds his stock via the banking system, in fact IS A REGISTERED HOLDER, as his shares are being held in an AUSTRALIAN nominee account.You might have to kick a—e with your bank to be able to participate. The stock is trading ex rights to the SPP already. If you are interested, you might want to look at their new and very interesting presentation on the webpage. It shows excatly, where the company is at - early days, but we should have clarity, whether early gas flows at Jaws 1 will translate into a commercial flow before the end of this year. Results from the Western ustralian asset, Erregulla, will need a bit longer - drilling in march, results before the end of June. Two potential company makers - but both are not done yet, obviously! Excellent upside - but as the timing of the placement/SPP indicates, there is still some degree of uncertainty as to the success of JAWS 1. The Australian gas industry is following it with great interest - but some also with a degree of scepticism. As you know, I am very long, and I also participated in yesterdays placement.

Venturex - the company is coming to life again! At least 4 reasonable brokers are now publishing research, with valuations of 50-60ct, and like the project. I have one document in front of me, which expects 80-90 mill A$ EBITDA p.a. from production of 15.000t of copper and 30.000t zinc annually from mid 2020, with 170 mill$ in pre-production capital. Given that Northern Star own 19.9% of the company, and are very supportive, a good chance, that the project will go ahead. The project is a little bit on the small side to attract corporates, but as you can see, the profits potentially been generated are not small at all. My fund is holding a small position at this stage. There is certainly a good amount of fresh equity needed - I guess some in the not too distant future to speed up exploration, and one larger one to raise 50 mill$ or so some time next year. Apparently, the new MD is doing an excellent job - but I have not met him as yet. This project has been a long time coming!

But I fear before we contemplate to look at these things, we want general markets to calm down first - and hopefully see Mr.Trump calm down on his terrible tariff-politics after the upcoming elections in November! The world economy is showing relatively clear tendencies to be negatively impacted!

Have a nice evening, regardless!

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General - Horizn - Paringa - Breaker - Coronada - Resolute

Good afternoon

Caterpillar with an excellent Quarter, but also with a very cautious outlook, citing the highest steel prices worldwide in the US, and tariffs. Thank you, Mr.Trump - you are pressuring American manufacturers!!

If it would not be sad, it would be funny: Saudi´s saying initially, that Kashoggi had left the embassy unharmed…and then they let somebody wearing his clothes ( but unfortunately, not his shoes! ) wander around in Istanbul past as many security cameras as possible….Crown Prince under even more presssure now…Their versions of the story are getting more untrustworthy by the day!

Markets under heavy pressure today from geopolitical issues…gold very strong. Base metals held up well until now - but also seeing some pressure now. For a change, bonds are strong - except for Italian bonds…I guess normal politicians with 1.300.000.000.000 Euro in debt would do everything they can to keep their interest rates low…these crazy Italians do everything they can to f..k up their bond market! It´s all quite funny…but I think European banks don´t find this Italian crisis funny at all…

The gold price looks like it wants to test the 1250 US$-level soon - 1300 would be the next target. In A$, the price is very exciting indeed: In this moment at 3.30 pm European time, it´s 1752! That´s less than 20$ below the 2-year high, and only 80$ below the all-time-high reached in 2016. No wonder our gold producers have been strong…and some more action starts to come to smaller gold producers now as well.

Horizon - extended the excellent drill intersection for zinc/copper at Gum Creek and will follow up with a full drilling programm in early November. It might not take all that much to add value to a company with an EV of only 10 mill$…letg´s hope for some more success shortly!

Paringa - Quarterly out today…sounds all good, making good progress now. Much remains to be done…but first production is now only a few month away, while the coal market in the US has improved substantially, as reported last week. The company has now sold out for 2019, and is 70% sold for 2020. PNL are reporting about record low coal stocks in the US , and observes expect more strength for coal. If these guys should be able to get say 50 US$/t from 2020, valuations would move quite a bit higher….Paringa could be a similar cash cow to Metro Mining, which strangely has made new lows today…

Breaker - very nice drilling results from Borborema …35 m with 3,8g / 22m with 3,12 g / 12 m with 3,2g / 12m with 3.4 g are exactly what the market wants to see. “Significant gold in all 37 drill holes, 57% of which are extensional ( holes ) “. I think there is very little doubt, that the 1.1 mill oz resource will grow. Next resource estimate will be subject to more drilling success, obviously. I am hoping for the 2nd Quarter 2019, and for another few-hundred thousand oz to show to the market, that Breaker could well become larger than the usual 100.000oz p.a. story…Stock had a nice move today - but tehre is still more than 50% upside to just reach the price level from March of this year, when the A$ gold price was lower tha today, and especially, when resource-expectations were generally around the 1-1.1 mill oz level . We should have considerable upside left in BRB…

Coronada Global listed today. Largest coal IPO I can remember - and yielding more than 20% ( !! ) at spot prices for coking coal. Bookbuild-Range was between 4- and 4.80 A$…placement was in the end done at 4$, and the price settled at 3.60 A$/share today. This is a very tempting story - large, long mine life, country diversity, debt free, and 100% of free cash will be paid in Div for the 2019 -results…followed by a 60-100% of free cash flow pay-out. Both types of coal are trading much higher than analysts expected only a few month ago. This stock at 3.60 A$ offers some fantastic upside for friends of coking coal! The fact, that it´s trading 10% below the issue price on day one, tells you something about the risk-adverse enviroment for resources stocks!

Resolute - a bad Quarterly, with very high costs…Syama especially was bleding, as the roaster had to be shut down, which was planned, for maintenance. But at teh same time, very wet weather hindered production from transitional ore, which was planned for treatment during that time. But all of that is not that important…more important is, that the sub level cave operation will start in December as planned. The “new” Syama underground mine is kind of a high-tech mine, with autonomous mining, sublevel-caving etc….so far, everything is on plan, but as always, the proof is in the pudding….and IF this process does not work properly, they might run into some financial problems. Net debt is about 50 mill$ now - not a major problem - but it will probably rise again this Quarter. No worries, if things go halfway ok - so let´s keep our fingers crossed! Once in production, the “new” Syama will be a great asset - with long mine life, pretty good costs, and ample exploration upside, as proven again during the Quarter. But I have to admit, that I would not dare to buy more in the moment…

Have a nice evening

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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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Geschäftsführer: Wilhelm Schröder

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

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80538 München

Tel. +49-89-4613440-0

Fax +49-89-4613440-10

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eingetragen im HR München, HRB 166985

Geschäftsführer: Wilhelm Schröder