Market Update

General - Graphex - West African , new research

Good afternoon

IFO Institute downgrades GDP forecast for Germany from 1.9% to 1.1% for 2019 - main reason being weakness in the car industry. The ECB is forecasting 1.7% as at today. Draghi, as planned, will stop buying bonds with fresh money this month - but they will continue to re-invest maturing debt for some time. US jobless applications continue to fall. The Italian budget problem seems to come to a positive end!

Equities are ok today, being slightly up following two strong days is a pretty good effort!

Metal markets looking quite strong today. I had another look at the base metals, which are all ( ex alu ) in supply deficit this year, as also witnessed by LME stocks, which are approaching all time lows in terms of “stocks in weekly consumption” in the case of copper, zinc and lead. And while we feel, that prices have been week - tehy have really moved more or elss sideways for the last few month. With further deficits forecast for 2019, I dare to say:

IF Trump/Xi can find a way to to finish this trade war, we will have a pretty strong year in front of us. The trade war is clearly the biggest threat to markets in 2019 - if avoided, we might have a halfway ok year for equities, and an clear upward tednency for commodities. And given the share prices. especially at the smaller end of the sprectrum, there is a lot of value around! So for a change - good prospects potentially ahead! Let´s not forget, that the world is still growing - less so than expected say 6 month ago, but probably not much below 3%.

Graphex - you might remember, that the recently announced, comprehensive financing with US private equity group Castlelake is subject mainly to the bankable feasibility study being finished ( expected by June 2019 ), and the resolution of legislative and regulatory issues in Tanzania. The feasibility study is progressing, as planned. What is very positive is, that Graphex has had more communication with the government in the last month, than in the preceding 18 month! The Prime Minister has very actively supported the project, and solutions to many, though probably not all issues, are making very strong progress. Also, headlines today indicate, that Barrick´s new boss, legendary Mark Bristow, would be close to an agreement with the government re the Acacia-issue. Both of this indicates, that the Tanzanian government is actually getting it´s act together and is supporting much-needed investment in mining in the country. I am still holding a large position here, and while I am extremely unhappy with the share price, I am very happy with the progress of the company. Buy straw hats in winter - clearly, for Graphex, it´s an arctic winter in terms of price!!!

West African once again - today the Euroz Quarterly Mining Update was out. Euroz are their corporate broker, so they have an interest - but they are also probably the closest to the company. They talk about the upated feasibility study ( due in March ) and expect an average of 240.000 oz of production for at least 5 years. Within 2 years of production ( they forecast 254.000 oz in the year to June 2021, which might be a touch too positive , and also 1350 US$ for gold ). On that basis, they forecast the company to have net cash of 240 mill A$ by June 2022 - that´s after only 2 years of production, and compares to today´s market cap of 165 mill A$!!!!!!!!! Burkina Faso is clearly not as good a country as it was say 5 years ago - but it´s clearly not that bad!! I have not given up on takeover as well. I just looked at Iamgold´s numbers ( and those guys could easily afford a cash takeover ). If those guys mad a bid at a 100% premium, i.e. 340 mill A$, their EBITDA would increase by 75% in two years time, and their production by 31% - against a market cap of WAF ( at takeover valuation of 48ct ) of only 340 mill A$ vs Iamgold´s of 2.1 bill Can $ ( which is about the same as the A$ ). So for an outlay of 14% of IAMgolds market cap, they would get an uplift in production of about 31%, and in EBITDA by +70%, while improving their AISC substantially. For me, that´s a no-brainer! I bought a few more today.

Have a nice evening

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General - Breaker

Good afternoon

it´s this time of the year again - shutdown in prospect? The difference this time is, that this maniac might actually do it! Mrs.May probably gone later tonight? Fresh elections in Italy? Germany f…ed with Merkel´s successor? But markets are recovering today, thanks to some relief in the trade war?

Industrial output in Europe slightly better than expected.

Funny enough - and very disappointing - base metals have been the “trade-war hedge” on the way down - but on the way up, they disappoint. The old saying: down by the elevator, up by the stairs??

Breaker - announecd some good drilling results today - some extensional success, especially from a target 2 km North of the existing pit, but mainly infill drilling for the enxt resource estimate. Company comments, that results will increase the existing 1.1 mill oz resource. Many results in the 1-2 g range - but also 15m with 5g and other higher grade results. The cut-off is 0,5g/t - so tehse results are looking good, if not outstanding. The weaker share price has nothing to do with the results today, which were excatly what you should expect going forward ( current resource is 24.6 millt at 1,4g/t, or 800.000 oz at 2.0g ), as todays results should confirm similar grades on average.

Not much to report today - have a noice evening!

General - Daimler - Sheffield - Paringa - Breaker - Antipa

Good afternoon

From a sluggish start, equities are gaining pace in Europe now, inspired by the fact, that Chinese and US officials are at least talking! Rumours, that China will cut import tax on US cars. Mr. Macron promises about 10 bill Euro to help the lower 20% by adding 100 Euro to the income of minimum wages earners, having pensioners with less than 2000 Euro not pay any social insurance etc. Basically, I think these measures are examplary - but who is going to pay for them? He has not given us any hints, and this will make the Italians very happy to keep on spending!! European politics remain difficult, to say the least - and in England, the POM´s are laughing at Mrs. May.

Metals are having a good day as well - LME stocks are now on 10year+ lows for lead, zinc and copper, and 5 year lows for nickel! In terms of % of production, the stock levels are even lower. IF Trump and Xi will get their act together, we could be in for a very good 2019 in metal markets…if their wouldn´t be this little “IF”! As you can see, I have not given up hope!

Metals except for gold are moving despite a tsrong US$, which started going higher following the PPI numbers.

PPI in the States at 2.8% ex Food and energy …some pricing pressure is there…but bonds in nearly all markets are holding their gains.

Daimler - orders 20 bill Euro´s worth of battery cells until 2030….they still have not understood - the technology is in the value! That´s almost like buying the engine in China! The number sounds very large - but I hope, that this will be only a part of what they need. Daimler´s revenue is about 175 bill Euro - across all divisions….so 20 bill over 11 years is not such a surprising number. Still - it certainly shows their strong commitment to EV´s….

Sheffield - had a long chat to them re their financing numbers, and I came back relieved. All these numbers quoted , which would result in about 260-270 mill A$ in equity needed, are extremely conservative and nothing has changed the capital numbers for the project. The biggest number as part of the increased financing package is about 50 mill A$ in cost overruns. It is important to remember, that SFX have agreed on an EPC contract with the engineering group GRD, which is quoting a fxed price for construction - and does not include a 50 mill$ cost overrun! It will also assign a healthy margin for GRD to be able to sign on a guaranteed price - I guess 20-25 Mill A$ at least. So as part of the financing, 50 + 25 mill A$ could be removed, IF SFX would get a takeover bid. As part of the financing package, there are also about 15 mill$ included as placement/advisory fees for a large equity raising - again, if a big boy takes SFX out, that would not be eneded - and last but not least, excessive requirements for SFX to keep working capital in the bank for a time frame, which again looks very conservative. So overall, one can deduct nearly 100 mill$ from the financing, IF the project would be financed by a large aquirer. In the end, we are arriving at numbers bang in line with the orginial numbers quoted by SFX.

This does not change one major issue: if SFX will go this alone, they will have to raise a very large amount of equity! But I guess none of the investors in Sheffield do expect this to happen - the only question being, whether some large producer/offtaker will take 50%+ of the project, or the whole company. And the latter is the only outcome, which makes sense to me!

This is a worldclass asset, in a worldclass jurisdiction, in a market, which is going into a substantial supply deficit - with a 40 year+ mine life! The valuations for takeover have not changed a bit ( they are around 2$, according to various analysts ), and everyone, who has not been able to take part of the placement or - for small investors - to take up the SPP, should buy SFX in the market. In the current, relative depresse market, it might well be, that SFX cannot realize full value - depending on the bidding tension they might or might not be able to create - but in any case, it would have to be substantially above current prices! I declare my substantial interest.

Paringa - got a new MD…A pretty senior ex-M&A/Capital Markets banker from the US, born in Mt.Isa, Australia, Mining Engineer by education. Even though he has not worked as mining man in 20 years, he could be a good choice. I assume, that he has enough mining experience around him - but I have not met him , not to talk about his operations guys - so I cannot judge. After having made a bad choice with the last MD, I am sure, that chairman Ian Middlemas has tried his best to get this guy. He does not come cheap - salary as normal, but 5 mill performance shares, depending on coal production targets. Otherwise, I have heard very positive comments from people, who should know, very recently - project is making good progress, and perhaps of similar importance, the market for Paringa´s type of coal is looking very healthy in the States. Trump tries to help coal where he can - whatever we think about that - and prices for natural gas in the US are as high as they have not been since 2014, making coal very competitive indeed - despite rising coal prices. PNL will most probably announce in January ( hopefully early January ) first coal production - derisking starts from here!

PNL´s performance has been pretty disappointing - but I think this journey is coming to a positive end now! And who knows - a M&A banker at the top might know, who would be a buyer? I always thought, that Alliance Resources Partner are the natural buyer of this asset - but given their strong emphasis on dividends, I assume, that they are only interested in producing assets. Well - we are almost there! Worth having another look, I am sure…or averaging down!

Breaker - Tom Sanders was granted 3 mill Options, exercisable at 46ct. Some people might not like this - but Tom has supported his company through thick and thin, even putting another 500.000$ into the last placement, and working for a very modest salary for years- so I am happy with this modest grant of options - even though it might not have been terribly smart - in the end, Tom is more than motivated to make this a success ( he owns 22 mill fully paid shares , even prior to this announcement ).

Antipa - stock well quite heavily today, following an update of exploration within the RIO JV. RIO have not done all that much - taken into account their 11 mill$ spending so far ! - showing us again 1. that large companies are very expensive exploreres and 2. sometimes have a different agenda than the junior JV partner! I hope, that we will get some indication soon, that RIO will spend some more money, and sensibly so, as they are not obliged to do so. I guess the big boy is very much concentrating efforts on their 100%-owned ground, and unless the ercent AEM survey does give them a strong hint of something, they might well continue to do so!

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 malaise - Bellevue - Highland - Sheffield

Good afternoon

well - it got even worse on Friday! European equities are actually holding up reasonably well today, in light of the late sell-off in the States on Friday. Metals not bad either - down by 0,5% or so. - OK - this was written by early afternoon…but as I am finishing, the rout continues…metals halfway ok at minus 0,7% or so….Huawei/Trade War, BREXIT, Italy, now India - just too much for markets to contend with!

Chinese import/export numbers pointing to more pressure on their GDP growth rate, while German export numbers were better thane xpected. Also, import numbers for copper were down in Nov, which worries some analysts.

Some profit-taking in gold, but holding well at 1245 US$ or 1727 A$/oz - very nice price for the Australian producers.

Bellevue Gold - announced some more, strong exploration results, indicating more strike length of their Viago lode. They have 4 drill rigs working - more results shoudl come out relatively soon, and if they can continue with these results, another resource increase will be on the cards in Feb/March.

Highland Pacific - interesting result from the feasibility study for the Frieda River project in PNG…HIG own 20%, the rest is held by the Chinese owners of PanAust. Pre-production capital of 2.8 bill US + 500 mill US$ for mining fleet and slurry pipeline for 175.000 t of yearly copper and 230.000 oz of gold. On top of this, a hydro-electric powerstation for 3.2 bill US$, which will also be used as tailing- and waste rock facility. Even though the power station would also supply other customers, I dare to say, that this project ( which has a time line of 7 years anyway ), will not go ahead until we will see substantially higher copper prices. A good example for how hard it is to establish a sizeable mine in remote locations!

Sheffield - completed a 16 mill A$ capital raising, and announced a SPP for retail shareholders to apply for up to 15.000 A$ at the placement price of 65ct. The proceeds will be used for advaning the project, working capital, and enough time to look for a suitable JV partner. The announcement also details capex , working capitala nd etc costs - looks too high for me and I will need to ask a few questions first. In any case, numbers eem to include 50 mill$ in cost overrun facility, and excessive working capital requirements for 3 years. More tomorrow…

Have a nice evning…

Special Info

Good afternoon

life is too frustrating today! I cannot be bothered…This market sucks!

Will go and see my girls riding their horses - much better fun and I think time much better spent today1

Have a nice weekend - will be back with fresh spirit on Monday!