Market Update

General - Sheffield - OZ Minerals

Good afternoon

Manufacturing in New York state very weak, business confidence in Germany at two-year low…I think if Trump would stop pressuring the FED, they might actually refrain from raising rates! But politically, tehy are almost pushed to show independance! Fundamentally, I think they should at least pause - all indicators are trending down, and very quickly so! I have one fear, though: That the market is weak because of significant, political uncertainty, and not so much because of the interest rate tightening. Hower - NO increase would at least give us some respite.

European Union agreed, that CO2 emissions of cars have to fall by 37.5% until 2030. VW immediately stated, that they would need to sell 40% of all new cars by 2030 as EV´s, and that current plans would have to be intensified.

Sheffield - placement stock has been issued and it emerged, that BlackRock and Commonwealth Bank funds between them took almost 17 mill shares out of a total of 25 mill shares. The positive view: Two of the most professional resources investors took the majority - the negative view: Very limited interest! I think both views are correct! Every day, we can see in the market how little interest there is currently outside of the top blue chips…risk-adverse stocks are relatively wanted ( if anything! ). BlackRock with 9,85% of the company could be material in giving some potential aquirer a good start…At least, no retail investor can winge now, that he did not get the opportunity to buy - the stock is trading at the placement price! Macquarie, by the way, is using a more or elss flat zircon price of 1580 US$ for the enxt few years incl 2022. On that basis, SFX will be an absolute screamer!

Acacia - yesterday it became public, that the English Serious Fraud Office is looking at Acacias activities in Tanzania. I always thought, that it was surprising, how quickly Barrick negotiated to pay them 300 mill$! The SFO is investigating possible corruption .

Oz Minerals - had a call with them today, to find out the state of new projects mainly. Carapateena is on track for commercial production in Q4 2019 - all going to plan. Roughly 450 mill A$ left in capex - that should be no problem, because that´s the cash held in the bank as at 30.9.2018 - and Prominent Hill, their existant mine, is printing cash in the moment - free cash flow after tax should be in the vicinity of 400 mill A$ in 2019. The company has stated, that tehy are planning to pay a div, develope Carapateena, and still be debt free. Carapateena as wella s Prominent Hill have growth options….Beside of those two - let´s call them existent - projects, the growth pipline is pretty full as well - though the big spending is still not decided, and will be from 2020 onwards. Brazil sounds very promising - two copepr mines for combined 50t of yearls copepr production look possible by 2022 - but potentially, more growth from them as well. And one gold mine by the same year - CebtroGold in Brazil. I would personally not be szrprised, if that would be dievsted at some stage? OZL see themselves very much as a copepr producer, with gold a welcome by-product. and last, but by no means last, the West Musgrave project in Australia, in JV with Cassini Resources, could produce 25-30.000t of copepr and 10-25.000t of nickel p.a.The scoping study was talking 750 mill A$ in capex…but again, some time away. PFD by the middle of next year, DFS by the middle of 2020.

OZL are a very well managed company, and with a yield of 2.3%, a more than sound balance sheet ( which some would call very lazy! ), and excellent management, I think they are a great bet on copper for conservative investors.

As you can see - not much to report!

Have a nive evening

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Economy - Resolute - Strike - Panoramic - Explaurum

Good afternoon

Hard BREXIT looks like a distinct possibility…and in light of Europe slowing down anyway, that´s the last thing we need. Disruption to business could - or better : will! - be very substantial, and this uncertainty is not good at all!

China definitely scraps the special car tax on US cars from the 1st of Jan - good news for the German car manufactures, which have substantial production and exports from US factories! China will also import a few mill t of US corn.

European car sales down again in Nov, European PMI still showing growth, but also less than expected.

News from China is not that much better: 5,4% Industrial Production growth is substantial - but expectations were for 5,9%. Retail is also slowing down further, to 8,1% - Fixed Asset Inv was better than feared at a respectable 5.9% in November.

The risks, they are increasing!! And equity markets are showing this today - base metals also down a little, while bonds are slightly stronger across the board. Today we are seeing multiple bad news from the economic front - I´d say heavy bombardement ! Not surprisingly, the US$ is strong today. It got further support from strong Retail Sales today, and very strong Industrial Production ( up by 0,6% vs expected 0,3%, but downward revision of previous month ). PMI weaker, but still very strong at 53.6

They finally caught this French terrorist - well, he got a bullet and I am not that sorry about that - despite one should not say this! French PMI down, impacted by the recent protests.

Resolute - has started the sub-level cave operation at Syama and have produced 400.000t of ore so far. Consistent ramp-up is planned to reach name plate by June ( 200.000t ) from just under 80.000t in Dezember. This is a good start, and the first step of de-risking the mine. Autonomous loading to start in may, autonomous hauling in August. Still, many risks remain - but so far, they are getting there. The share price probably has the risks priced in?

Explaurum - new offer from Ramelius for the gold developer, which offers just about 1/3rd of the updated NPV. I think in this market, the bid ( 1:4 shares plus 2ct/share cash = just above 13ct at todays share price of 0,45 A$ for Ramelius ) will have a realistic chance of success, despite the recent placement at 12ct to Alkane. Ramelius will probably have to make Ramelius a seperate offer for their 13- and 14ct options. All is a little disappointing for EXU shareholders - but recently, the stock has traded sown to about 8ct. We all know, how difficult it is for small commpanies to get the necessary equity for new mines - shareholders might well want to share the risk with Ramelius, for whom it would be much easier to finance all necessary steps ( one of them might be to truck the ore to Edna May ). My most important advisor on geology believes, that EXU has got very substantial resource potential above the currently known stuff.

Strike - had their AGM today. They publishd a detailed flow rate diagram for the first time from Jaws 1. Flows are clearly increasing and are currently around 150.000 cbm/day - definitely not comemrcial, though, as yet. But the company continues to be happy with the gradual increase . Water production has been pretty steady, gently falling now , which is accompanied by these rising gas flows. STX also published a time-based diagram with targets for the enxt 6 month. So called “Commercial Flow Rate” is targeted for about February on the time scale. Management is confident to not only achieve this, but produce even better. Only time will tell, and while the wait is a bit disappointing, it´s still looking on target otherwise! STX also very happy with more detailed work on West Erregulla in West Australia, where more early work, preceding the first well in March, has increased their confidence of a substantial gas resource there. The share price at only 9ct I think is partually due to a few smaller shareholders becoming bored, as much as I guess some selling from sharehodlers, who got their script through the UIL paper-takeover. Strike today announced compulsory aquisition of the remaining stock in UIL, having now reached the 90% threshold. All good here - except for two very important issues: Time and Price! More/higher of both is needed here, unfortunately!

Panoramic - my favourite base metal stock got a buy- recommendation from Macquarie, which had not covered the stock since halting production 2 years or so ago. Macquarie analysts see PAN trade at 0,9x EV/EBITDA for 2012 - that´s cheap in absolute terms and a lot cheaper than IGO ( 3.5x ) and WSA ( 2.4x ), which are the two existing, listed nickel producers in Australia. They value PAN with 70ct, and see 10ct/share increase in value for every additional year of mine life . In my opinion, not too hard to achieve this, as Sanannah North has only been partially drilled.

Have a nice weekend!

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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

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