Market Update

General - Lucapa - St Barbara - Lucapa

´Good afternoon

just a quick note today..have been in Liverpool for the Champions League match with my son…Anfield Road…what a legendary place! And the match was good fun, even without any goals….I had to stand up for 120 min - that was the only bad news….And the POM´s ripped me off for a very expensive hotel night!

Just incredible, how equities are moving relentlessly higher…a bit scary…Loose monetary policy is doing wonders, once again - but this year, we do not ahve a nother round of tax-cuts in the States, to bolster earnings!

Much talk about the potentially devastating effect on Vale´s iron ore porduction in mInas Gerais, due to the use of wet tailings dams for 170 millt of iron ore production…nothing stopping the producers like BHP ( average result as expected ) Fortescue - see below, RIO and also Mineral Resources - but also very limited chance for these companies to substantially increase production.

The A$ gold price hitting new highs….currently 1877 A$/oz….what a dream, even for the “bad stories” like Gascoyne! Gold, gold stocks, PGM´s, and all base metals looking very strong indeed!

Fortescue - a sensational result! The discount for iron ore of lesser quality is reducing, still. The company has also been able to reduce shipping costs by using partially it´s own fleet now. And you all know, what iron ore price are doing in the moment! Just 20$ increase is driving an additional 3.4 bill $ in revenue = profit before tax! The company delivered also a nice dividend surpise - very shareholder friendly, as Andrew Forrest still controls 35% of the company and cannot be seen as a seller, obviously. Well , 30ct in dividends for the half year equals a nice 327 mill A$ in div for him - tax free due to being 100% franked! And at current levels for iron ore and the A$, another fantastic dividend for the current half to be expected! The stock is probably worth holding on to - even with a lot of future uncertainty re iron ore prices. The Australian producers are NOT using any wet tailings dams, and hence, will have a big competitive advantage vs Brazil.Australia remains lucky country!

St Barbara - result in line with expectations. The company declared a 4ct div - very very low, in my opinion. They pay out about 60% of free cash generation, while having a cash balance approaching 400 mill A$….Obviously, the company believes, that it´s stock is not that cheap - otherwise they would pay out heavy diiv instead of looking for aquisitions!

Lucapa Diamonds - I bought a small position in them the other day. Their new mine in Lesotho doing very well - plant exceeding design, grades better than reserve grade, large stones being discovered! At Lulo, their alluvial mine in Angola, the new sales process has delivered much improved prices, more large stones being discovered incl coloured ones - and production is planned to increase by 25% this year. The only negative news recently was, that exploration at their Australian asset Brooking has been less successfull than hoped - but i think success here has never been factored in anyway. The company is clearly getting more lukewarm on grassroots-exploration and will curtail spending there. LOM are benefitting of the strong interest in higehr-value ddiaomnds, and not exposed to a large degree to the weakness in the market for small stones.The company has really delieverd on it´s promises - and more - but the share price continues to go sidewas, because of the weakness of nearly all diamond producers in the world.

have a nice evening!

General - Palladium/Panoramic - Lefroy Exploration

Good afternoon

pretty exciting conference in Munich over the weekend…Merkel with a very good speach, and Pence got greeted with icecold silence. European/US-relationship caannot get any worse! In trying to understand Trump, I am pretty sure, that he will impose tariffs on German cars…he will want to show Merkel, who the boss is!

Also interesting news today from so far unpublished comments, that Trump believes Putin more than his own agencies! Also ineresting, that the import of German cars poses a security threat to the US!! ??????? Similar to calling a state of emergency relating to the US Southern boarder - these guys bend the truth wherever it suits their agenda! Unbeievable, that Pence links Iranian politics to the holocaust…Crazy weekend!

But luckily, hopes for strong progress in the trade negotiations with China are succeding today

New all time high for palladium at 1455 US$, following bullish comments from several sources last week. At the same time, platinum is also a few$ stronger. The combined price is trading at around all time highs of 3200 A$/oz in A$ terms. You wonder, when one will see first reports about Panoramic´s two projects…especially Panton, containing 1.1 mill oz of Palladium and 1 mill oz of platinum - to my knowledge, the largest resource in Australia by far with a comined grade of 4.6g/t PGM´s. I know, that I have mentioned it before - but if you apply the same valuation of say Breaker´s gold resource per oz, it would be worth 115 mill A$ or 23/ct share. This is pretty hypothetical - no bankable feasibility study has been done in recent times - but you would think that develoment becomes a real possibility?? The world is screaming for more palladium, that´s for sure! In the moment, Panoramic does not have millions to pure into the project. But perhaps somebody else has? I am sure that Peter can talk about the project at our reseources conference this Friday.

Lefroy Exploration - the companies JV with Goldfields, where GFI are spending 25 mill over 6 years to gain 70% of the project, is now in full swing. GFI have to spend 4 mill$ before June 2020 to adhere to the JV-agreement and keep their options open The company is spending a total of 75 mill $ in total in the wider area , and commented very positively at their presentation. a major exploration program on the JV-ground commenced the other day, which will take 4 month to complete. As GFI is paying for the exploration, LEX can stay mean and lean - but at some stage in the summer, will need more equity. I have mentioned them before - a very interesting play to watch and perhaps to accumulate a bit of stock, as it is very tightly held ( Goldfields owns 18% ).

The US and Canada were closed today

Have a nice evening

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General - Lynas - Iron ore - Liontown - Silver lake/Doray

Good afternoon

Mnuchin calls trade talks so far “productive”…whatever that means! Perhaps more importantly, Xi also comments on significant progress!

Credit is growing strongly in China!

Equities continue to power ahead -strong as a bull! Remarkable, especially in light of most economic indicators coming in weaker lately!

European Car Sales down 4% in January….Europe erally not looking any good in the moment! Slowly but surely sliding into a mild recession, if we don´t get a US/China trade agreement soon??

Industrial Production in the US also weaker than expected

Iron ore - Macquarie expects reducing prices into the second half…sounds about right to me. The wildcard: More stringent measures taken by the regulator on “wet tailings” in Brazil, further reducing production tehre. About 40% of Brazilian production uses wet tailings dams. But under the line, I have doubts, whether the recent, very strong performance of BHP and RIO can be continued. perhaps time to take some profits? Don´t forget, that BHP have paid 2.50 US$ in dividends over the last 12 month as well, beside of performing very nicely. I think the very mining-friendly new premier in Brazil will not allow to get his main tax payer ( which is partly owned by government ) hurt too much - so I tend to go along with Macquarie´s assessment of iron ore prices going forward.

Liontown - completes a placement for 3 mill A$, and announces a 1:5 rights issue at 2ct to raise a total of just undr 8 mill A$. For the first time ( ever, I think ) Liontown will have sufficient funds to advance their two lithium projects. Tim Goyder, Chairman and largest shareholder, will take up his full entitlement. Directors also subscribed to an additional 350.000$ in the placement. I applied for some shares as well, and got cut back - I understand, tha the placement was quite substantially oversubscribed. Unusual these days - testimony to the strong results from their scoping study, excellent further drilling results, but also slowly improving sentiment towards small stocks. The company will present in Zurich enxt Friday, and I am looking forward to their prsentation - should be a good one! Worth accumulating during the rights issue, usually a great time to buy.

Lynas - have started to find a solution to one of their two residues - albeit the easier one. The difficult one, being very slightly radiocative weill be harder. The main point for me is, that they have founds a solution together with the government, giving me hope for a more constructive relationship between them.

Silver Lake / Doray Minerals - the shareholder meeting to approve the merger will take place on 22.3.2019 - shortly thereafter, the merger will proceed. Contrary to the merger mania at the big end of town, this merger makes a lot of sense in my opinion. Not only will headoffice costs be dramatiaclly reduced - the company will have more flexibility, improve purchasing terms, and will be more investable for larger players. I took an initial position in Silver Lake recently. I think the merger will create a reasonably good company, with room for improvement in terms of asset-quality. The great A$-gold price creates a good enviroment for players like this, which operate relatively high cost, underground operations with limited mine life. The opportunity will be there to spend the saved 7-8 mill$ ( my guess ) in administration costs on exploration, and continue with the aquisition of smaller-sized producers, which are too small for the EVN´s and NST´s, but are still able to improve the asset-quality. In a word - crating anotehr small Evolution. That is at least the opportunity! Delivery, certainly, will be the real test! The combined operations should produce around 230.000 oz pa and generate around 100 mill$ in EBITDA p.a., while having a very healthy balance sheet with some room to manoeuvre.

Have a nice weekend!

Schröder Equities GmbH

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General - Panoramic - Caravel - Newcrest

Good afternoon

The Chinese Year of the Pig is strating well. I am a ChinesePig, which might not surprise you - but it´s actually a good sign: Usually nice guys, not overly intelligent, but always some money! I cannot suscribe to the “always” in the latter, but things are certainly improving! So let´s hope, that the Year of the Dog ( which was a real prick of a year! ) is behind us not only in the Chinese calendar!

Equities just don´t want to stop going up in the moment, and metals are also looking quite healthy today, as gold is down a few dollars without great activity. At least this was the case at lunch time! Later, the worst Retail sales numbers in teh States were published - a great excuse to take some profits in equities. I guess these weak numbers won´t last, as wages are growing, as is employmen. In December we had the very long governmant shut-down - i am sure, that this did not help consumer confidence at all! In any case - bonds are having a strong afternoon! The same applies to base metals - looked good in the morning, but slightly weaker in the afternoon!

The increased risk appetite is now slowly but surely - and long last!!! - coming down to our stocks…some nice support developing for things like Graphex, Black Rock, West African Caravel or Venturex, to name a few. Suddenly these things are trading 10-20% higher…which is still a very unsactisfactory level, but at least it´s going into the right direction. And last but not least, Breaker has put on 30% over the course of the week!

Johnson Matthey published their yearly review of PGM´s and expect a Palladium deficit for many years to come. Hard to see, where all this stuff should be coming from! They explain at great length, that it´s not so easy to replace palladium with platinum in catalysts. Hence one should expect the platinum price to remain under pressure. All mines produce both, to a varying degree - in Russia more palladium, in South Africa more platinum. And in Panoramic´s case, it´s more palladium as well. I can only repeat myself - PAN´s 2.4 mill oz PGM deposit near Savannah will be worth 50 mill$ one day!? Or more?

Panoramic - first shipment is sailing towards China! 7500t of nickel concentrate for 8.5-9 millA$ are on their way! Peter Harold will be delighetd to be a nickel miner again! The enxt thing now is to ramp up to full production , which should be achieved over this Quarter - and then development of the new Savannah ore body will take centre stage. Full production will only be reached, once the new part of the orebody has been developed, which will happen towards the end of the year. The market is pretty aware of it, and analyst numbers are expecting this. From then on, we will see a more agressive move into exploration. Should be a clear and straight path forward. After that, everything depends on the nickel price - and if the take-up of EV´s is happening as expected, better nickel prices over the course of the next few years should be relatively certain - except for the world going into recession, which we do not expect!

Newcrest - I do like their very stupid comments today: They have set themselves a deadlind to the end of 2020, to aquire another Tier 1- asset - that is 300.000oz for at least 15 years, and a couple of Tier 2 assets over the next decade! If you like to own a potential money-destroyer, buy Newcrest! Add a declining production profile at Cadia, and the risk of another “seismic” event - and you definitely don´t want to own it! I save myself to even look into details of their result, which was up strongly, but if anything, weaker than expected.

Caravel Minerals - announced a nice resource upgrade for their copper project in Western Australia, just 160km North of Perth, increased to 1.28 millt of copper : 366 millt at 0,35% copper and 66 ppm molybdenum, using a 0,25% cut-off grade. The company has done a scoping study a few years ago, which gave the project excellent profitability, but high capex front up, making it hard to finance. the current management has been working on a smaller plant, higher initial grades, and hence, lower capex with a faster pay-back. This has had some initial success, with good drilling results recently. Still - I think we need better copper prices, to get this project off thebground, and/or more higher grade material, which can be put through the plant early. Both is possible, though - and arguably, Caravel is one of the best - if not the best - long dated call on copper! I think the secret here will be to find a strong partner. For now, though, the company wants to add more value by drilling and is in the middle of a rights issue.

Have a nice evening

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General - Evolution - Northern Star - Gascoyne - West African

Good afternoon

the torrential rains in Northern Queensland ( which have finished late last week and brought up to 2400mm of rain in about 10 days ) have cost the lifes of up to 500.000 poor cattle…Australian Agricultural alone is estimated to have lost up to 80.000 cattle!

CPI in the States - headline is fine, but underlying inflation a little stronegr than expected at 2.2%. Not sure, whether this is the reason for gold creeping a little higher to 1317 US$ currently, or 1850 A$!!

Equities are higher, again! Almost to good to be true…S&P is up by exactly 10% this year and has recovered a touch more than the terrible fall in december. Trade hopes are cited as the main reason for it. For my taste, equity markets are very ripe for a correction, or at least a pause….

Oil is clearing chart restistance today…not sure, whether I like that, but I guess it will bring attention to commodities generally.

Evolution - Half-Yearly result out today, which was down on pcp, but marginally better than expected. Operating cash flow was 388 mill vs 415 mill A$ pcp. The company is forecasting a materially better result for the second half, if the current gold price will be maintained. All mines of Evolution have been generating cash, with greates distribution from the stunning Ernest Henry, Mt.Carlton and Cowal. The company is spending quite heavily to extend mine life at it´s operations, which is averaging about 10 years now. Net debt is nearly gone, despite capex and dspite of spending quite ehavily ( 30 mill$ ) in exploration, which I think is good news. Dividend was higehr than expected at 3.5ct for the interim.The company continues to use an extremely conservative gold price as basis for the reserve calculation. Jake commented, that EVN are reluctant to aquire projects in a rising gold price enviroment. I totally agree - we have too many companies destroying investors money through aquisitions at the wrong price, and through constantly increasing the gold price forecast. Growth for growth´sake is not what EVN are all about.The company is maintaining guidance of around 750.000 oz at around 875 A$ AISC. The company experienced surpisingly few problems with the Quennsland-based mines - Mt.Carlton lost just one week of production, while disruptions at Ernest Henry were “minimal”.

More detail from the devils mouth at our resources conference in Zurich next Friday www.schroder-equities.com/conference !!

Northern Star - also a strong result out. Bill Beamont is making very positive statements about Pogo, which has been their first aquisition outside of Australia. He said, that Pogo is delivering all he expected, and more. If he can repeat, what he has done with the ageing mines he bought in Australia, than it will be a great win for the company. Nevertheless - costs are around 1100 A$ AISC, while EVN experience 225 A$ less. Nobody worries about it at the current gold price - but we all know, that this can change quickly!

Gascoyne - have published a new presentation, which should go a long way to alleviate market concerns - but only, if they start to deliver! They are probably one of the main beneficiaries of the current, very strong A$ gold price -100 A$/ozu make a hell of a difference for them right now, with costs of around 1600 A$, ehile the stripping continues. I do not dare to buy any more….but I think somebody ( corporate ) will, if they deliver over the next few month! There are several smaller producers in Australia with nice cash balances or at least strong balance sheets, which can afford the risk - and I think we will see a lot more M&A among junior producers this year, as tehy are trying to become investable for institutions.

West African Resources - I have nothing to report - but my feeling is, that the share price has turned the corner! Big turnover over the last few days is clearing out the loose holders, while the stock is slowly moving up. I ahve written numerous tiems about them, and look pretty stupid, as the share price has consistently moved in teh wrong direction - despite a lot of good news, and despite being fully financed. The stock is trading at less than half it´s future worth, with no placement to come any more! Insted, I expect strong news from the updated feasibility study, which is expected to confirm 25.000 oz of production over 5 years at AISC of 550 US$/oz. Just too good to be ignored by corporates - and they will get nervous, seeing the stock turning higher!

have a nice evening

Schröder Equities GmbH

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eingetragen im HR München, HRB 166985

Geschäftsführer: Wilhelm Schröder