Market Update

General - Syrah - Mineral Resources - Metro

Good afternoon

German car sales falling strongly in June…

Mrs.von der Leyen should be a very good choice for the EU, I think….not everybody agrees!

Mrs.Kramp-Karrenbauer new Minister of Defence….hmmmm???? On the 1st of April, I would have taken this as an April-joke….these days, it seems to be true, as she was sworn in today…

Macron is fighting his tech-tax out with the US…about time, that the tech giants pay their fair share of tax! Good on him - fight on, please!

Many comments re the strong run of nickel again…Nobody believes, how strong it is! Well I could not believe for how long it has been so cheap! I think the answer to the recent rise might be a very easy one: Supply/demand is reasonably balanced - perhaps a small supply-deficit….somebody might just be taking a view, accompanied by some short-covering? On a 3-year view, I have absolutely no doubt, that nickel will be trading higher than today - and at times of ultra-low interest rates, it might just make sense for some consumer or a hedge-fund to build some stocks in Ni!

Gold just does not want to come down! up a few $ today, despite a relatively strong US$. For the last month or so, we have had the same pattern: every reaction gets bought quickly - and with rising lows. We are on the verge of making a new, recent high today. Gold ETF_holdings are at their highest since April 2013….The GDXJ in the States pretty strong and making another high today.

US-housing industry is a bit weaker….bonds very strong today across the globe.

Syrah - the Quarter just ended was another, relatively bad one for them. I have a lot of time for the Chairman - but this company looks not good…they have raised money the other day - so financially, they are currently very strong. But perhaps more important: They ssem produce the wrong type of graphite, and recoveries remain disappointing. They are ticking two boxes of issues, which usually are a NO-NO! I have lost confidence in them, and I have not enough vision perhaps to see them getting it right.

Metro Mining - announced a reserve increase today….Proven Reserves are now 13 years at the expanded rate of 6 millt p.a.-more than enough - and they have a lot more material of lower quality. I think the market might be concerned with pricing of their product, bauxite , as well as production costs. I expect, that both issues will be shown to not exist in the forthcoming Quarterly. Also, some investors might fear for another equity-raising associated with the near-doubling of production? Again, I think positive numbers in the Quarterly will also alleviated this concern. China needs bauxite - and tehy do not have enough of it, relying mainly on Guinea to fill their supply-gap. I have not been able to find out, what production costs in Guinea actually are - but I very much doubt, whether total costs incl transport on arrival in Shanghai will be any cheaper than from Metro in Northern Australia!

Mineral Resources - the Australian Fiancial Review published an article today, saying, that Stage 2 of the Wodgina lithium development would not yet have approval to go into production, due to seepage from residues in the tailings dam into the groundwater. According to the company, this seems to be formally correct. The company also states, though, that the tailings dam is performing in line with engineeringa nd expectations. They state, that as part of the comissioning, usually water is being used, not ore - this is very common for all new plants. This process does certainly create a much more fluid residue, than operation of the plant with ore would result in. Makes sense to me - so most probably, no reason to panic. I think the weakness in MIN today is a function of the market being extremely cautious, once something with the tailing dam is not in order - this follows the terrible drama in Brazil 7 month ago. Most probably, we have a typical storm in a teacup here!

Have a nice evening

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General - Panoramic/Horizon - Strike

Good afternoon

only a short report today, as I will be out of office for most of the day…

US reporting season is starting this week, battling with some very strong pcp-numbers, as the tax-cuts came in last year. Will interest rates continue to drive markets, or will the attention switch to corporate profits?????

Iron ore prices reach a new high in China today - strong steel production.

RIO will need at least another 1.8 bill$ to develope their giant copper underground mine in Mongolia - ground stability issues. Need additional 2 year approx to bring it into producton - now target 2022/2023. Lower grades at Kenencott and Escondida continue to put some pressure on existing production.

Macquarie stays cautious on nickel for the short term - BUT stainless steel ( especially the nickel rich 300-series ) is still strong in China, which led to nickel making new highs currently In US$ terms. It has cleared resistance in US$ as well as in A$ - in A$ terms, it´s trading at the highest level since mid-2018 - in the moment at 19813 A$/t!!! Having said his, I have to admit, that the nickel price feels a bit overbought in the moment.

Panoramic - they enjoy these strong nickel prices. As I said the other day - company is driving development of Savannah North + drilling the ventilation shaft at the same time, as they ramp up production from the old Savannah ore body to full production. This is cash consuming…so good prices for now and hopefully a few more month are important to get cash in the door, before production increases from first ore from Savannah North late this year, and hopefully, cash will be coming in from the sale of North American platinum assets. Longer term, PAN are very cheap anyway - but we need to get to full production first! By the way - when nickel last traded at above 20.000 A$, PAN share price hit a high of 66 ct…Ok, we have had a few comissioning problems, but that does not change the long term picture!

51% owned Horizon Gold reported pretty exciting exploration stuff on their recent base metal find Altair today - not much response in the market, though, which is surprising. Horizon is probably pretty cheap on it´s existing gold resource alone, with gold continuing to trade above 2000 A$/oz. Also note, that HRN announced a resource increase for the gold deposits the other day, including some higher grade material, which might be worth trucking to a plant.

Strike - have encountered some hard formation to drill through…300m of it have been completed, 200m still to go…total depth now 3617m. Drilling seems to go a bit easier from here - so we will NOT reach the most important zone this week - maybe on the weekend. No drama - but for us, a few additional days to wait for the hopefully good news…Total depth is planned 4230m - then running wireline logs. Next week will be the week. The next formation is sandstone - easy to drill - so by the end of next week, we should have reached total depth and wireline logging will start to deliver flow rates ( well, if the gas is there! )

Have a nice day!

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General - Lucapa - Graphex - Dacian

Good afternoon

the headlines are like: Weakest growth since 1992…but the 6,2% GDP-growth announced by China is in line with expectations, and some numbers give also room for encouragement looking ahead.

Equities are continuing their mild growth-trend, while metals are mixed so far: copper strong compared to the Australian close, while other base metals see little change. Some volatility in nickel today, and it´s trying to end the day in positive territory, following the very strong finish on Friday. Prices are at around 1-year highs, in US$ as well as in A$. Finally, nickel stocks in Australia are also responding!

Oil has also recovered quite nicely - up about 10% now since mid-June, and gold is giving up a few$.

Lucapa Diaomonds - strong Quarterly out today. In Lesotho, the relatively new mine Mothae saw production 20% higher than planned, despite still mining from the low-grade part of the pit. Production from the higher grade part will start soon, for the first time. The company had deferred mining, as they have been building a dam to take the water , which will later be used as part of the production process. Cash operating costs were 14% better than planned, and importantly, the best-value diamond ( a 126ct-stone ) will only be sold in their next auction later this month. In Angola, production was in line with the previous Quarter - again, a large 130ct stone and a 46ct pink stone will be sold at the next auction, also in July. New equipment has arrived, and production will be substantially increased from this Quarter on. Cash flow to the holding company Lucapa should increase also from here - capex has been completed, and increased cash flow will start paying back the outstanding loan, which Lucapa has with the Angola-JV, as well as dividends to the JV-partners. I still believe, that LOM are very cheap - the reduced risk-profile from operating two mines now ( and both running very well! ) has not resulted in a higher valuation. I think the forthcoming sale of 3 very high-value stones + sales from normal operations will be positive - but the market will probably also re-rate the stock, once more meaningful cash will flow back to the company. So far, the market is questioning the cash being repatriated to Australia. This should start soon - I guess sometime late this Quarter.

Graphex - have completed a 2.5 mill$ placement easily - though at a disappointing price of 20ct. I had some doubts as to easy the capital raising would be - given that no news has been out, and the still fickle market at the very small end, a placement is certainly not easy. However - it ended up being substantially oversubscribed, and the vast majority has been taken up by existing shareholders. The company I guess wants to demonstrate a certain degree of independence from major financier Castlelake. Within the next 3 month, we will have the final fesibility study, as well as -hopefully - all necessary documentation from the Tanzanian government to finish the financing with them. Compared to Walkabout, which has a nearly 5x larger market cap, I think GPX will show to have the better project! This is still a speculative investment - but within my portfolio, probably the one with by far the most upside!

Dacian - announecd production results from the June-Quarter - full Quarterly REport to follow later in June. The company produced 36.600 oz - very recent guidance was 36-38.000oz at 1500-1600 A$ AISC. Costs were at the lower end, with 1519 A$ AISC - that´s quite pleasing. I am waiting for the full Quarterly for an assessment…at this stage, I am neutral - the recent announcement containg the 5-year Life-Of-Mine plan seemed to be a bit on the bullish side, and there are still some lingering doubts, as to whether they need some more equity.

General - Breaker

Good afternoon

finally, there seems to be some activity in Australian small caps…not that insto´s are buying ( following the desasters in Dacian and Gascoyne they are still on strike! ), but it appears, that selling has dried up in most cases, and moderate interest is drving share prices higher. Certainly, the much better mood in gold also helps!

There is still a lot of deep value left at the junior end - just to mention a few names, like Sheffield, Metro, Panoramic , West African, Graphex, and probably also Breaker / Paringa / Australis / Tietto / Horizon, Liontown among others. Some of these names can do with a bit more cash - like Graphex, which is currently finalizing a placement - and that might well put some short term pressure on those names. But the mood is certainly better than it was 3 weeks ago!

Equities are continuing their more constructive mood, while bonds are seeing some pretty good selling today. The CPI in the States yesterday took the wind out of the bond-bulls for now! Metals are also looking better - copper is knowcking at the 6000$-level again, while nickel is having yet another strong day ( trading currently above 19.000 A$/t for teh first time since early March ( back then, it lasted up there for 3 days only ). Nickel stocks fell strongly again today - now at 150.500t vs 368.000t at the beginning of 2019. Not all of that is a sign of more demand than consumption, as more and more metal is being held in off-LME stocks these days -nevertheless, it´s a good indication of undersupply at a time, when the take-up of EV´s by consumers is only just starting ( and big numbers from EV´s are probably at least 12 month away ).

Breaker - announced some good drilling results from the recent start-up of drilling within their Borborema deposit, which is more and more shaping up to be a nice mine ( pre-feasibility study out in late September, next resource estimate out soon ). Especially with the A$ gold price at 2000 A$/oz, this remains a good prospect and a cheap stock! At least that´s what I believe - we will have a more definite chance to validate this view with the Pre-Feasibility in Sept

Have a nice weekend!

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General - Oz Minerals - Panoramic - Genex - Bellevue

Good afternoon

so it looks like the FED will help us again in July - at least that´s the indication from yesterday´s hearing…

CPI ex food and energy rises a much stronger than expected 2,1% YoY, driving bonds down a bit despite Powell´s comments.

Equities reacted mildly positive on the FED - but as it looks, the market had already assumed relatively dovish comments from Mr.Powell…The continuing Iran-saga does not help, and oil is making a new , recent high.

Metals are generally flat - nickel is stronger, though, which follows a very strong close yesterday for all base metals, and especially nickel. It´s trading at the highest since early April, and is even stronger in A$- terms. Gold cannot hold todays highs, but is still strong at 1414 US$/oz in the moment, profiting from the low-interest rate enviroment.

South African gold production falls at the strongest pace ever so far this year.

OZ Minerals - updated today on their Brazilian operations. I do not want to go into all the details here, as they are very small vs the Australian activities. But it´s important to say, that OZL is paying it´s school money in Brazil! In my opinion, they have overpaid for the Avanco-aquisition…The compnay is at pains to stress, that they have bought a lot of country-expereince, and very prospective ground. That may well be true - but you could gain that cheaper than for 400 mill - that´s what they paid for it. Not a major desaster -but this has not been the best action performed by the otherwise very highly regarded team! I have seen many companies burning their fingers in Brazil…not an easy country!

Panoramic - came out with early production report for the June-Quarter. Much improved, but not there yet! Recoveries, ore milled, metal production, grade - all up more or less strongly. But mining rates are not quite where the company wants them to be. During the Quarter, 1520t of nickel have been produced . Very positive is, that development of Savannah North is going much better now, after a few contract miners had arrived - it´s up by 38% vs previous Quarter. Also, drilling of the 4.1m hole down to 900m or so to build a vent rise is now finally making better rogress - but it will take well into the calendar year 2020 to have this finished.- company expect it to be completed early in the June Quarter. Panoramic have 26 mill A$ in cash, of which some is restricted. The 9 mill Can$ for the sale of Thunder Bay North in Canada, should come in by Sept/Oct, which would be good - especially, as the asset has been valued at zero by analysts before. There remains the need for the aquirer to raise sufficient equity - currently they have 6 mill$. The full Quarterly will be out in late July.

Some people saw the extension timetable for the vent as pretty negative, because they assume the vent rise being paramount to the mining of Savannah North, which is incorrect. The ongoing development of this orebody should be advanced enough by early in the Dec-Quarter, to deliver nickel ore to the plant, without the vent shaft being finished. However, to reach the full 100% of planned production I think does depend on the ventilation shaft being completed. Especially at the current state of operations - production from the old ore body, but at the same time, development of Savannah North + drilling of the vent rise costing money - it´s great to see the nickel price so strong! I have no doubt, that PAN will reach the planned production levels - but it´s a gradual path to get there. Once at final production rates, the stock can easily double over the next 12 month - certainly also depending on the nickel price

Genex - finally, the NAIF financing is there! The Northern Australian Infrastructure fund approved a loan of up to 610 mill A$ for GNX´s hydro-project. It is believed, that the loan will be done just a little margin above of what the government pays for it. The analyst of Morgan´s assumes debt at 2,5% interest rate, fixed for at least 25 years. That is certainly a very preferential loan!! The financing is a major step forward for GNX - but a few issues are remaining to reach financial close: 1.The transmission agreement is taking longer than expected. The counterpart here is the Queensland gvernment, which has stated the strong support a few times. I believe the hurdles to be largely of bureaucratic nature. 2. Board approval from Energy Australia for the offtake-agreement and 3. the expected government grant of 40-50 mill A$, which has been hoped for already and could be announced any day. It has been disappointing to see relatively large turnover in the stock, and for it to trade below 30ct, still…it´s always the same: Every placement is having a few opportunistic subscribers!

Even Morgan´s analyst, who is the most conservative of the 4 analysts following it, has a valuation now of 36ct - that´s about 40% higher than today´s price.

Bellevue Gold - have today announced their next resource increase by 270.000 oz to 1.8 mill oz at a 3.5g cut-off grade. Importantly, they also announced a resource of 1.6 mill oz at average grade 13.3g/t , which is indicative of the robustness of the resource, and should also indicate a strong conversion ratio from resources to reserves. The resource increase came from the Viago and Tribune lodes only. There is a strong likelihood, that further resource increases from these lodes, as well as from the Bellevue Surrounds will be announced by the end of this year. Also interesting to note is, that the company has had many sniffs from the surrounding area - none of those have lead to resources for now, but should do, once these areas have seen more drilling. The company has 6 drill rigs currently running full steam ahead - expect more good hits to come from this extremely active drilling program, as well as solid upgrades to the indicated resource status. The company has 20 mill A$ cash in the bank - enough to keep this pace going until at least the end of the year. One should expect another eauity raising by December or so - possibly after the next resource increase. I think Bellevue are positioning themselves increasingly as a takeover target for the larger, Australian gold miners ex Newcrest , all of whom are keen to grow at reasonable prices , without decreasing their asset-quality. BGL are ok for both these conditions!

Have a nice evening

Schröder Equities GmbH

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