Market Update

General - Perseus - Lucapa - Strike -St Barbara

Good afternoon

German PMI is VERY weak, and much worse than expected. Following the bad news, German 10-year bonds trading at a negative yield for the first time since 2016. In light of these facts, I think Angela Merkel might come under pressure to do something for the economy….probably,. she should!

The US PMI is also slightly weaker than expected, but still in growth-territory - contrary to the German PMI. Existing Home Sales very strong.

The US$ is pretty strong against the Euro today - but I think this is rather Euro-weakness than US$-strength, based on this crazy and stupid BREXIT saga.

Nickel stocks continue to fall at a strong pace…13.000t over the last 4 weeks ( of which 8.000 just in the last 8 days ! )…at this speed, LME stocks in nickel will be gone by the end of this year! Zinc stocks are even lower - hitting a 30-year low today. Base metals are flattish today, held back by a strong US$. Gold is up by a few $ - are Brexit-problems helping?

Martin Wolf and Phillip Stephens bot hammering Mrs.may in a way I ahve hardly read in the FT…right they are….A hard BREXIT becomes a distinct possibility….and I think equity markets in Europe are retreating today in fear of that. BREXIT will be a clear negative for us - but it will be devastating for the POM´s, I believe. Thank you Mr. Cameron!!

Perseus - looks very strong on the charts, having cleared 50ct…the next target is 60ct, which fundamentally would be justified as well. It´s very positive, that the stock is now trading nicely above the option exercise price of 44ct, maturity 15.4.. Financing for Yaoure should be all but a done deal now…55 mill A$ in additional equity are just what the company needed! Yaoure should get into construction this year now - financing I guess late in the 2nd Quarter?

Lucapa Diamonds - announced a very strong resource increase for their Angolan mine…Since the previous statement from 31.5.2017, the mine has produced 30.000 ct - nevertheless, the new resource has increased by 90% to a current 80.400 ct. The resource is only inferred - that is in light of the resource being entirely alluvial, which makes it impossible to have a higher-confidence resource. The consultant has estimated an average value/carat of 1.420 US$, which is an improvement of 17% vs the previous estimate. Probably very conservative, as the company has received an average price of 2.100 US$, which makes it one of the highest value diamond mines in the world. The announcement supports the companies plan to double the mining rate in Lulo this year. I think they are very cheap indeed - the stock is probably suffering from the bad performance of diamond stocks generally!

Strike - updated on Jaws today. The well is functioning as planned - thank´s god! Water is being pumped, and pressure is rising - the well is back to sporadic gas flares, and seems to be on the right track.

St Barbara - received an absolute hammering today! The company has cut guidance by about 15.000 oz this year - but the main story is, that the mining operations will not use hydraulic lifting , but trucks. The reason for this has been a doubling of potential capex….The mine will not run in the medium term on the assumed 1.4 millt p.a., , but at 1.1 millt - resulting in much lower production in years to come. Probably, the heavy fall today has been overdone - but the management has to live with the criticism, that they have not made the company less dependant on the Gwalia mine much earlier. Again, the story shows the vagaries of mining, and the fact, that risks can be mitigated by mining from a number of different mines! Look at Evolution….

Have a nice weekend!

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General - Tietto Minerals - West African Resources - Breaker

Good afternoon

jobs numbers in the States in line

base metals, platinum, palladium, gold, oil - all looking good in the morning - I guess thanks to the dovish statements from the FED - but some profittaking during the afternoon . More or less unchanged late this afternoon. The FED is worried about too little inflation, and the world ex US being very subdued….so most probably no interest rate hikes this year. The US$ was relatively weak initially, but is now recovering most of it´s losses and is unchanged by late afternoon as well.

Nothing stopping equities - but bonds also very strong,. as you would expect, around the world.

Swiss 10-year bond now at -0,4% yield…..the new reality: stop imposing tax on people - the government financing via bonds is making money instead!

Vale - one mine back on - another one voluntary closed down ( 10 mill t p.a. ), until full intergrity can be assured….

Breaker - many new drilling results, 60% of them to expand the resource, rest infill. Many intersections of 1-2g over good widths, but also strong results of 3-4-5-6g over several meters. Some deeper holes drilled as well, indication is for more potential underground sub 250m. The resource has not been closed off in any direction! The company is doing well, and there is only one way for the resource - that´s up. Only question - how much…very difficult to get a feel for that from the distance - but stock remains on my buying list.

Tietto Minerals - I saw them 1.5 years ago in Perth, prior to their IPO at 20ct. Company has a 700.000oz resource at 2 g in Ivory Coast, and has lately deliverd a range of excellent drilling results - some of them high grade. I think it´s very much assured, that the next resource estimate - due shortly, I believe - will show a strong increase - definitely over 1 mill oz. Not sure, whether drill density allows much of it to be in the indicated category - but looks like drilling results are hanging together quite well. Stock has a market cap of 38 mill A$ - not much, if you believe, that the resource has strong potential. I think it´s worthwhile to buy a few. The engative: The MD is a Chinese guy, who´s englisg is very hard to understand - despite him living in Australia for 30 years or so. As marketing of such a company is an integral part of management, not easy…hence, the register is full of Chinese names. As always with explorers, the next placement is probably not that far away - the comnpany has not raised any money since the IPO, and despite pretty low headoffice costs, cash will see an end later this year. They are spending about 1 mill in exploration per Quarter, and about 350-400.000 on headoffice and staff - so by the end of the current Quarter, will be down to about 2 mill A$ in cash. Certainly one too watch - I might buy a few. Ivory Coast is one of the better countries in West Africa these days.

West African Resources - thanks god, the stock has changed direction since INDABA - on strong turnover of 2-3-4 mill shares per day. I think a lot of loose hands might be gone, and the company should announce the updated feasibility study within a fortnight. I am hoping for 250.000 oz p.a. for 4-5 year at 550 US$/oz costs….and also a resource increase / reserve increase . The company has started construction earlier this year - planned production start is mid-2020. That is not a long time away! If the company delivers on my expectations, I think the share price should see a nice move. This is certainly a stock to revisite…remember, they are fully financed into production! And the current wave of M&A might well see them swept away….well, that´s what I am hoping for at least! A minimum of 60ct would be my target in a takeover.

Have a nice evening

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General - Paringa - Panoramic - Technology Metals - Crusader

Good afternoon

some profit-taking in equities ahead of the FED statement….German stocks hit especially hard, with Bayer very weak following court case in the US and BMW not having a lot of fun in the moment, depressing automobile stocks. Also, Deutsche Bank/ Commerzbank saga not helping…Does Germany really need a banking behemoth, given EU has a few? I am undecided here…1 bad bank + 1 bad bank might actually result in one reasonable bank, given a reported 30.000 jobs can be culled….In any case, you don´t want to own too much property in Frankfurt!!

Base metals looking good again - copper only unchanged, while nickel and especially zinc continue to run. While platinum/palladium combined price at record highs again, iron ore much weaker today. Vale has received a positive court verdict on one of the closed mines, but needs to go through approval process again - unclear, how long this could take.

Technology Metals - macquarie the other day initiated coverage of vanadium, and expects a deficit for the next few years - but also sees the current price of 16.50 US$ for 98% material as vulnerable. Expect the price to trade between 10- and 14 US$ for teh enxt few years, on demand increase by Chinese steel industry. TMT have used 13 US$ in their recent pre-feasibility study, which does not look unreasonable. On that basis, the PFS arrived at a NPV10 of 850 mill A$ for their project, IRR of 43%. The problem: 380 mill A$ in capital costs are a big call! Since the PFS has been announced, teh A$ is down by about 6%, improving the metrics somewhat. Not an easy project to get off the ground - it all depends on potential partners , and what they are willing to pay! In my opinion, Macquarie might be a bit conservative in their assumptions - the wild card could be the use of vanadium in battery-storage. I have a small foot in the door here.

Paringa - the rumored financing got announced today: 56 Mill US$ at Prime Rate + 7,5%…financing has got it´s price, but is not unreasonable. The company should be well financed now - a little bit of due diligence left to do as well, but should be ok. The only thing which makes me slightly nervous: The company has not provided us with a firm time table for being in full production. I trust the debt provider, debt fund Tribeca, have done their due diligence here. The financing will also assist with capex for the second mine, Cypress, to be brought on stream in 3 years time. I need to do some work here - but I think the stock is cheap…certainly worth holding, if you have some - and if you can stomache to hold a coal stock!

Panoramic - the current 1:13 rights issue, following on from the small placement at 38ct, is depressing the market, as usual. Great buying opportunity, in my opinion, and privately, I am buying a few more. As reported, the company has had a few issues to bring Savannah back on stream - none of which were substantial problems, but a serious of small issues added up - hence the additional fund raising. Most of these issues had been resolved by the time of the placement 10 days ago. The biggest issue with PAN probably is, that serious production will start, once the new ore body, Savannah North, will be in production by approx year end. There is also risk for another small delay in time, given the fact, that a vent shaft has to be drilled, which is a lengthy process and which has some risk of time overruns. But again - we are talking a risk of 6 weeks delay or so - and currently, there is no indication for such a delay. The market is not only crying for more sulphide nickel for the use in batteries, but also for another pure nickel producer, as Western Areas as well as Independance have been serial disappointments. Also, the Nova Mine, operated by IGO, will cease production in 2025….

At 10% higher nickel prices in 2021, PAN should generate 100 mill A$ in EBITDA….and such a company should trade at say 4x EV/EBITDA…which could equal a market cap of 400-450 mill A$ vs the current 200 mill A$.

The wild card remains the Panton Palladium/Platinum project. I had a look at old announcements from 2012, when the previous owner completed a review of an old feasibility study on this project, which I believe to be the largest PGM-resource in Australia. The NPV then was only 25-40 mill A$, but since then, the combined PGM-price has improved by 25% - helped by the fact, that the resource holds 10% more Palladium then platinum. Cash operating costs back then were estimated to be 880 A$/oz - todays combined price of 1.1x palladium + 1x platinum / 2 is approx 1845 A$/oz . That should improve the margin by more than 50% from 600 A$/oz back in 2012 to 970 A$/oz today. Hard to say, what the project costs today would be vs 2012 - I guess no big change, as 2011/2012 have been boom years in mining capex? It might well be - as I wrote before - that this project will be worth 100 mill A$ in it´s own right a bit further down the track.

You will be well aware of supply/demand issues for nickel in light of strongly rising production of EV´s. Nickel has seen a few years of higher demand than supply , and this should continue going forward. It´s not unconceivable to have 20-30-40% higher nickel prices in a few years time.

I think the current weakness in the share price is purely technical, and should be seen as an unusual buying opportunity. You will be well aware, that I have a substantial interest in the stock…

Crusader - the company continues to disappoint…they have sold Juruena for 1 mill$ cash, 500.000$ worth of shares, and - conditional on more resources and a decision to mine - another 1.5 mill A$. Even in light of Brazil being a difficult place to operate in these days, I think the price is disappointing. CAS also announced, that 3.5 mill of the planned 4.2 mill A$ rights issue at 1ct are now underwritten. All of the above guarantees the immediate future of the company - but not much more! Still - at 1ct with a free option at 2ct, and older valuations of + 100 mill A$ for the Borborema gold deposit ( which would be about 10x the increased market cap post rights issue ) I think this stock is worth a punt. Don´t get me wrong - I am not really getting behind this company - too many mad moves over the years - but if you are a shareholder, you should probably protect your investment.

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General - Gascoyne - Kingsgate - Paringa - Liontown

Good afternoon

equities keep on running, metals keep on running….metal stocks falling still ( except for the large deliveries of copper late last week )….nickel at a new 6-year low….palladium/platinum strong as a bull…al being helped by a slightly weaker US$. Gold looking good aswell, and iron ore is seeing another leg up the last few days, as Vale had to close another mine in Brazil.

Factory Orders/ Durable Goods in the US relatively subdued…German investor confidence is rising again.

Kingsgate - has settled on Political Risk Insurance for a payment of 82 mill$….can now pay back all corporate debt, have enough funding for all other litigation. The company can now concentrate on a proper sales process for their Chilean silver assets…and will further pursue other litigation to fully recover the worth of the Chatree Mine in Thailand. I guess the chances to recover those insurances have risen now.

Liontown - has found an extension of their lithium resource at Kathleen Valey, which could be sizeable. Very good drill results, with grades looking better than the current resource….

Gascoyne - strange situation…company got suspended for failing to release financial reports prior to the 15th of March. In a statement today, the company said,that they will issue further guidance later this week, following a worse than expected mine performance in the current Quarter so far. This does not sound good at all….looks like the refinancing has hit a snag as well???? Nothing you can do in the moment…stock suspended anyway….But be prepared for a bad statement later this week.

Paringa - Australian newspapers report about a full refinancing of debt - Macquarie Bank to be paid back, a hedge fund to provide an increased loan to the company. Stock is also suspended - but I guess a statement will be released tomorrow, and stock shoudl come out of suspension. I am sure, that the ehadge fund has not handed out any presents to Paringa - but a refinancing would be very good news and certainly better, than another equity issue at depressed share price! The market has been very sceptical about PNL´s ability to get into production without any further dilution of equity…

Have a good evening

Schröder Equities GmbH

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General - Perseus - Lucapa - Strike - Prairie Mining

Good afternoon

terrible racist attack in NZ - looks like three Australians are the terrorists!

Consumer sentiment in the uS quite strong - New York State manufacturing numbers only very slightly expansionary.

Another large inflow of copper into LME stocks - they are still very low, but also at a 6-month high. Stocks of other metals fell - especially nickel with quite a large fall of 1360t today and now at a 6-year low. Surprisingly, copper slightly stronger today, as is nickel - zinc/lead down a little.

Strike Energy - Petra Capital, a small but respected broker, issued the fisrt research report on STX in a long time…available on request. They have a unriekd NPV10-valuation for the Western Australian asset alone of 450 mill A$, while they only value the original Cooper Basin project at 53 Mill A$….the latter might be very conservative…But in any case, a total valuation of 350 Mill risked and 500 mill unrisked is certainly very welcome by long suffering shareholders! I also understand, that the company has made strong progress in making sure, that tehy will get the approx 4 mill$ R&D subsidy from the government, which would represent a very important step, as otherwise, they might run into problems to pay for the 11 mill$ West Erregulla well!They have a few other options - but none of them certain. The pumping of Jaws 1 has fully restarted - they are now needing about 6 weeks to make up for the lost time, and proper flow results are expected for May.

Lucapa - discovered a large, 85ct stone at their new Mothae mine in Lesotho -but this one is not of gem-quality. Gem Diamonds sold a pink stone the other day for a staggering 660.000US$/ct - their mine is just 5 km away. Broker Euroz continues to value LOM at 61ct, with guidance for Mothae production expected shortly, and Lulo in Angola ramping up production this year. Euroz points out, that there is a two-tiered diamond market - strong demand for large, quality stones, and subdued prices for smaller stones ( both mines of LOM are producing at the quality-end of the market ). But the Argyle mine in Australia, home to most of the world´s pink stones ( 90% market share ) and 10% of world diamond production of smaller stones, will be closing down in 12-18 month, after being in production for nearly 35 years.

Perseus - the share price seems to establish itself above the all-important exercise prise of options at 44ct ( not 45, as I said the other day ) by mid-April . The proceeds of more than 50 Mill A$ woudl be extremely important for getting the Yaoure-financing done ( even though the company claims, that tehy might be able to do it without - which I doubt ). So - strong turnover at around 45ct is a key-positive for the company, with a market cap of around 500 mill A$ and potential production of 500.000 oz p.a incl Yaoure., they would be very cheap vs the market.

Prairie Mining - JSW said in a press conference today, that they will sign a term sheet before the end of April to take over control of Prairie. Stock is up by 12% on 3 mill shares traded in Poland - equivalent of 37.5ct in A$, and up to 39ct in London. After all the wait, I would be surprised, if JSW would have to pay less than 50ct/share for control? That would still be a far cry from what PDZ should be worth….but I guess both companies have to agree to a face-saving deal here! Remember, that PDZ bought the assets for less than zero!

Have a nice weekend

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Geschäftsführer: Wilhelm Schröder