Market Update

General - Dacian -Lucapa

Good afternoon,

Martin Wolf, the probably most highly regarded commentator of the FT, is writing today:

““In 1933, Joseph Goebbels stated that,”The modern structure of the German State is a higher form of democracy in which, by virtue of the people´s mandate, the government is exercised authoritatively while there is no possibility for parliamentary interference, to obliterate and render ineffective the execution of the nation´s will”. It is a measure of how far the UK has fallen that Boris Johnson, the prime minister, often sounds rather like this””.

Stark words, and probably a little overdoing it…but certainly remarkable and some truth in it! This is coming from an English writer!! And the same probably could be said about some other Head of State across the ocean!

Looks like today, on Jom Kippur, there has been an attack on a synagoge ( perhaps even two, unclear at this stage ) in Eastern Germany, with at least two people dying…

Back to markets….

Some signs for a small trade agreement….I guess both parties need some relief! Equities are rather strong in Europe, bonds weaker. No big changes in base metals…nickel stocks down by a new record amount, 8900t today…this is a lot of money, equivalent to approx 136 mill US$! Cancelled warrants are still showing a big position and high probability, that stock-withdrawals of nickel will continue. Some consumers are really worried - I doubt, whether somebody is “playing” this market so big, otherwise. The strange thing is, though, that analysts seem to be pretty convinced, that there is enough nickel around in the moment, and also enough stainless steel - and use of nickel in batteries is not all that large, at this stage - probably around 50.000t this year out of a 2 millt market, and of that, half suitable for batteries. Only time will tell! In any case, the situation supports the nickel price, which continues to trade at around it´s 5-year high.

Gold ETF´s had their 17th consecutive day of net-inflow in a row - the longest since the dark days of 2009! Investors as well as central banks are adding to their holdings very consistently…it feels like there is more to come! Total holdings of gold in ETF´s are still less than the net worth of Mr.Bezos!! If the world seriously turns to buying gold, we could see much larger quantities being needed! In today´s crazy markets, the current inflows are still only just a trickle…if they become a wave, we would be in for a lot of fun!

Dacian - an excellent production report for the last Quarter, ahead of the full Quarterly Report.The company delivered 42.000 oz gold last Quarter - at least in line with the stated guidance for the Half Year of 67-77.000 ounces . Looks like they have generated free cash of 19 mill A$ for the Quarter. I dare to say, that Dacian has turned the corner - whether they are still relatively cheap we might find out with the full Quarterly report in a couple of weeks.

Lucapa Diamonds - also an early production report out today - and very strong , indeed! Lulo in Angola produced 67% more than in pcp ( second best Quarter ever ) and the new mine in Lesotho, Mothae, had a record Quarter, Both mines also produced very large amounts of quality stones - very important in a market, which seems to be divided in a weak market for average qualities, and a strong market for good qualities. Whether this is true, we will find out shortly, once LOM have held their next tender! But all indications are, that this is a very cheap stock, notwithstanding the overall problems in the diamond market. Petra Diamonds seems to be on the cusp of going under with approx 500 mill$ in debt, and share prices of the entire sector are very depressed. But I think certainly in the case of LOM, this is very much overdone! Let´s wait for the tender results, to have more clarity!

Have a nice evening

Schröder Equities GmbH

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eingetragen im HR München, HRB 166985

Geschäftsführer: Wilhelm Schröder

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General - some more Trump-bashing ( sorry! ) - Liontown

Good afternoon

Trump, in his great wisdom, might finally have to send his tax-filings to the prosecutor. You wonder, why he has been fighting this so hard….In the meantime, somebody who is saying:…”As I have stated before, if Turkey does anything that I, in my great and unmatched wisdom, , consider to be off limits, I will totally destroy and obliterate the Economy of Turkey”……got to be clearly off limits himself? Or completely crazy???? Is this really somebody who is fit to be president of the USA? Time for Republicans to act - unless they don´t intend to look at themselves in a mirror ever again!

Boris not much better…is a non-deal Brexit unevitable?? All tehse things are not good….I am amazed, that equity markets still are, where they are…despite the all-important low-interest rate enviroment! Business moral is getting hit left, right & center….

Industrial Prduction in Germany- for a change - was surprisingly up last month.

PPI in the States is much weaker than expected.

Gold ETF´s holdings rise for the 16th consecutive day!!

Equities are relatively weak today, bonds are stronger, no major changes in currencies….

Tsingshan, the world´s biggest stainless steel producers, was reportedly behind the recent LME -warehouse withdrawals of nickel…today, the record amount of 8100t to only 117.000t. I think it tells you a story, that it was them, and not a speculator….there is real fear of a supply shortage of nickel, once the Indo export ban takes hold on 31.12.2019! Nevertheless - nickel gave up some of it´s recent gains and fell by 1,6% in the moment, while other base metals were just a fraction lower.

Gold is strong - 1508 $/oz in the moment - no surprise, given the mental stability of the president of the most powerful country on this earth!

Exploration is still finding ready followers in Australia in the moment! Stavely Resources announced another two, excellent drill holes - mainly for copper - and seem to be on the verge of a potentially significant, but in case, high grade resource - stock is up another 15% today, to a market cap of 230 mill A$. Their fundraising most be getting very close!!! Chalice are moving much slower, but steadily as well..and they do NOT need any money at all! A much btter speculation, in my opinion, as are Carawine Resources - cashed up from a recent placement and with a good ground position surrounding some earlier, good drill results for gold. We should have more fun to come in the sector…

Amazing, that drilling companies and other mining services stocks are not moving in the moment….companies like Swick or Ausdrill are mainly active in the gold space, and as you know, all mid-sized Australian gold producers have dramatically beefed up their exploration budgets, as have most Canadians! Investors are still not keen to see M&A and if it happens, it has to be very well reasoned. Therefore, I think this exploration push is far from over, for as long as gold holds at reasonable levels. According to Bloomberg consensus numbers, SWK are trading at 2.84x EV/EBITDA and ASL at 4.3x for the current financial year, with prices going up, especially for drilling. I would be very surpised, if earnings for somebody like Swick would not rise by at least 20% this year.

Liontown - announced some excellent drill results from their main lithium project, Kathleen valley. Holes like 29m with 1,3% LisO, incl 13m with 1,8% / 16m with 1,9% / 10m with 1,9% and 21m with 1,2% have the potential to add 25-50 millt ( that the exploration target ) to the existing 75 millt resource , as tehy extend the orebody by 400m. Nobody wants lithium in the moment, and I understand that - we have more than enough of it for the current state of the EV market. but this will change in 2-3 years, and ore bodies like this one don´t come too often! Very worthwhile , I think, to keep them in the portfolio.

Have a nice evening

General - Resolute

Good afternoon

German Factory Orders as well as European Investor Sentiment continue to fall…

Trump is betraying the Kurds, who helped him fight ISIS…politics are dirty - but I guess they have always been!

Equity markets are grinding higher today, bonds don´t see much action - unusually, US-equities are lower . Base metals are up a little - nickel is consolidating last weeks strong peformance. LME stocks are down by another 7500t today! Looks almost as someone wants to influence the market?

China continued to buy more gold last month, and ETF holdings are still rising. The gold price, though, is trading just under 1500 US$.

Resolute - a difficult Quarter for them, even though the ehadline production number was quite good. Syama Underground, by far their most imprtant asset, is continuing to ramp up it´s fully automated mine - but seems to be not that easy ( which is not unexpected ). Ramp-up is pretty slow…partially explained by an 18-day outage of the sulphide circuit of the plant ( which processes the underground ore )…But only partially! The oxide circuit, which is processeing ore from a nearby satellite deposit, has done very well ( but has limited time to go ), as has newly aquired Mako Gold. Ravensthorp is still as difficult as it has been….So: production-wise, a very reasonable Quarter - but Syama being difficult, is not looming well for the next few Quarters. I think it´s fair t say, that it will take longer than planned to bring into full production..I still find Resolute an attractive company - but I am less positive than I have been following the last Quarter, and would wait with buying, until there is more clarity on Syama. What sounded pretty positive a few month ago, gives me reason for some caution this time around!

Have a nice evening

General - Nickel, again - Metro Mining - Panoramic - Breaker - St Barbara - Heron

Good afternoon

impeachment is gathering some pace in the US…incredible all these stories, which come to the daylight! They give a great view of the dirty stuff happening behind the scenes of international politics….Not really a surprise, I guess - but nevertheless, when you see them…still astounding…Financial markets seem to be completely unperturbed by all this stuff…the US market recovered quite nicely yesterday, while Europe did not do all that much in the absence of Germany, which had a public holiday.

The only weakness today is in the US$…metals are looking ok, gold is slightly stronger, not much action in bonds - this is before the labor numbers in the US. New jobs came out slightly weaker than expected, average weekly earnings as well. But looking at markets incl gold, some must have been going for even weaker numbers! as the day progresses, equities are gaining some upward momentum.

Nickel tightness for cash delivery seems to be quite extraordinary. Another record draw-down of 7700t from LME stocks today, following a 7.000t fall yesterday , a to a new 6-year low today ( just 133.000t left ). Bloomberg is reporting about a bit of buyer-panic, in light of the upcoming Indonesian export ban for nickel ore from 1.1.2020. The backwardation is at it´s highest since the lofty days of 2007! Prices are up by another 1% today - not sure, how sustainable they will be, in light of world growth slowing down heavily in the moment!?

Gold ETF´s see their 14th, consecutive inflow! No surprise, that gold is looking very solid!

Metro Mining - quick production update yesterday, ahead of the detailed Quarterly later this month. This not so little thing is going absolutely gangbusters! July and August had been good month, with 443.000 and 476.000t resp. produced and about the same shipped - September shot the lights out with a record 501.000t , for a total of 2.3 millt for this year so far. The guidance is for 3.3-3.5 millt this calendar year. The mine will close down by about Christmas for the wet season, until about the end of March - so we will have about 2.6 month left to go. Even if I assume, that December will be a little lower ( as we might have the first wet days in that month ), it should be very easy to get to the top of the guided range, and very probably, higher…

In the June Quarter, the mine produced an onsite-EBITDA ( i.e. before headoffice costs ) of 9.1 mill A$ ( that was on production of 880.000t only ). The Quarter just ended has produced 1.420.000t…but we do not know price received as yet ( which should be ok ) , nor shipping rates ( all this will be contained in the Quarterly ). But in any case, I would expect record EBITDA from the mine, which should result in MMI being net-cash positive for the first time . One thing to note here: There will be no production / shipments in the first Quarter as usual, which might bring them back slightly to net-negative cash…but that remains to be seen.

The EBITDA margin in the June Quarter has been just under 11 A$/t….whatever prices received will be for the Quarter just ended, mine operating costs will have been much lower, given the great numbers as above.

Just imagine, how profitable MMI will be, once the expansion to 6 millt pa ( from the current 3.5 millt ) will allow them to load larger ships, which in itself should cut shipping costs by 4-5$/t, before any economies of scale!

MMI already is a great little cash machine now, and will be generating unusual levels of cash, once the expansioin has been completed in 2021. The only missing piece of the puzzle is the delivery of the final feasibility study, and the financing of the expansion. I am assuming, that it will be done easily with the banks - but the share price tells me, that the market wants to see this as a fact, before a probable re-rating of the stock should occur. I think Metro Mining are a highly unusual opportunity to make some money, and I have consistently increased my postions. Sorry, that the comment sounds a bit pushy - but I am convinced!

Breaker Resources - they have put themselves on the market! Corporate and strategic review, with all options open! Well - in reality, probably most options - as Tom Sanders is a big believer in his story and the ceredentials of his ore body, I think anything else but full value will not be enough for him to sell his baby! But what could happen, in my opinion, is a large placement to an incoming strategic or ,more probable, corporate investor, at a good placement price . Breaker would face the enxt placement in the not too distant future - and most probably, at a discount again. These placements are a constant drag on performance, and it might make more sense, to sell part of the house for say 15 mill$ in exploration funds, and limit the upside ( as such a move would pretty much remove competitive tension in any takeover for the company). This assumes, that exploration would deliver increased esources - but I think the past of the company has shown, that the gold is there - but complexity needs a lot of drilling to fully evaluate this interesting asset. I would be supportive of a large placement to a corporate - in any such move, shareholders would have to approve the placement!

Panoramic - the Chairman, Brian Phillips, announced his intention to step down at the AGM on the 4th of November, following 12 years on PAN´s board. Most of you have met Brian - an absolute gentleman, and a very experienced miner, with a distinctive career. Him and Peter Harold have run the ship together for a long time, and it´s no surprise, that the pair is leaving at about the same time. I would not be surprised to see them pop up together once again, at some stage! But for now, the job remains for Peter Harold, to properly start production from Savannah North, before he leaves his baby! In any case - a shame to see Brain leaving - but do not expect company issues to be the reason!

St Barbara - a weak Quarterly production update pretty much across the board! Gwalia produced only 38.100 oz of gold - limited by the ongoing Gwalia Extension Project, which is competing for ventilation with mining of the orebody, and lower grades. Simberi saw lower grades this Quarter as well, and the newly aquired assets of Atlantic Gold performed more or less in line with ( not so strong ) expectations. The stock remains under pressure - and while they have come down from a lofty 5$ in Feb to the current 2,75 A$, I still think it´s too early to revisite them. IF they don´t turn around Gwalia again, the capex for Atlantic Gold over the next two years or so might become a burden…

Heron Resources - following a long suspension, the company will now be recapitalised…at a big cost. Three private equity funds, who have been the largest shareholders as wella s creditors already, are taking the lead of the 91 mill A$ funding package…at a substantial cost. Their convertible bonds will carry at least 15% interest, with 2% upfront free, and convertible only at a 25% premium to the price other shareholders will eb able to subscribe new shares at. That´s pretty insane - but I guess it also shows the risks involved. The start-up of this new mine ran into massive problems, incl a large claim of the construction company for overruns. Not sure, who is to blame here - I am not close enough. Not being a shareholder, there is absolutely no need to get involved! HRR will need a long time to trade themselves out of this debt-trap! Shows you again, that you need to structure debt with private equity investors very well, otherwise they can get you by the feet!

Have a nice weekend

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 - Bellevue - Tietto

Good afternoon

is there a change in perception on interest rates coming? More and more I am reading about central banks around the world disovering, that low interest rates don´t do their job: To increase growth! If that perecption should gain acceptance, it could herald bad news for equities, as well as for gold!

But I don´t believe in a change as yet…if interest rates should rise, the world will be f…ed! It´s more important probably to come to some kind of a trade agreement,and to stop this de-globalisation - at least for the sake of economic growth.

In any case: Difficult times ahead!

The top 5 German forecasters cut their expectation for growth for next year to 1% from 1.8% - but they are seeing downside risks from this number. Looking at the world as at today, I think they might be pretty optimistic with this number! As I said above - we need an end to the trade war, which is undermining confidence big time in the moment! And a raft of crazy tweets don´t help, as is Boris…as is Hongkong…as is Syria…as is Yemen…….

Equities continue their march downwards…the rather shocking PMI in the States has really done some harm! As I said the other day - what will happen to the US-budget deficit, if the States go to zero growth????And nobody is talking about it, yet! Impeachment is grabbing all the headlines.

As you would imagine, gold is profiting - as are platinum/palladium, the latter will probably finish the day at a new closing high close to 1700 US$! In A$ terms, it definitely will, as the A$ is trading below 0,67 US$ again.

Funny enough, base metals are holding their ground today - nickel is even up by 2% today, as LME stocks fell another 4400t to 147.700t today. This is despite some bearish talk about stainless steel stocks/prices in China, and big & rising supply of NPI. For my little Panoramic, 17500 US$ = 7,94 US$/lb or 11.87 A$/lb are absolutely fantastic prices - for as long as Savannah North will perform. For the Quarter just ended, the bad production numbers for July/August let me expect nothing good….the important test will be, when tehy reach the new ore body in November, and when numbers should start to improve!

Tietto - finally, they got what I was missing so far: Some long intersections! 20m with 14.8g and 82m with 3,14% incl 26m with 9.5g are teh kjind of results, which bring tons to the resource. So far, they have had many intersections with nice grades, but only 1-2 m . The company is drilling full steam ahead , prior to a new resource estimate late this year. Tietto is one of the more hopeful explorers, and substantial additions to the current resource of 15.7 m t at 2,1g will be very valuable, and drive them into a feasibility study.

Bellevue - as expected, more exciting drilling results also from them: 3.8m with 14g gold as an extension of previous, excellent results from the Deacon Lode are important. Other results within the Deacon Lode are expected - visible gold in the drill core. The resource is open in all directions, I ahve no doubt about substantial extensions to their already large resource will come, eventually driving it to hopefully 2.5 mill oz at very high grades.

Have a nice evening