Market Update

General - Strike - Lucapa - Genex - Liontown

Good afternoon

I am reading so many negative headlines and views - yet equity markets are continuing to climb the wall of worry, as are base metals! And continued , strong inflows into the ETF´s as well as physical buying support the gold price at around 1720 US$. I have to say, though, that it has lost it´s momentum for now.

The A$ is still making up lost ground, and we are just 2ct away against the US$ from pre-coronma-crash levels, and about the same in percentage terms against the Euro. It feels like the currency wants to go back all the way to where it came from!

Strike - have made an important announcement today: Agreed with the JV partner on the drilling program this year for West Errgeulla. West Erregulla 3 and 4 to be drilled , whereby the drilling of WEG3 is planne for the 3rd Quarter 2020. Shortly thereafter, it´s planned to be West Erregulla 4, and by November, the JV will make a final decision as to drill WEG 5 immediately afterwards, to catch some cheap drilling rates. The official wording for the cost of WEG has been 15-20 mill A$ ( 100% ), but given the circumstances, I would not be surprised to see the costs closer to 15 mill A$ , and below that for the two subsequent wells. Strike is dficinetly financed for the next 2 wells, possibly 3 - but that will also depend on the cash burn for other activities. In any case, Warrego will need to find some cash or get diluted - tehy had just uner 6 Mill A$ left at the end of the last Quarter. So - some more wait until Aug/September to get another uplift in valuation - unless we will see some news on offtake agreements, which both companies try to negotiate, as well as project finance ( which would be very positive, as it will potentially finance Strike without having to come to the market this year).

Genex - revenue from the Kidston Solar Project was a strong 3,3 mill A$, from 31.500 Mwh generated. This was up by 31% from the previous Quarter, and back to normal. The project operated at a Capacity Factor of 32%, the highest of any solar farm in Australia.

Genex remains “deeply engaged” with other stakeholders, to complete the project financing for the pumped hydro project. That sounds positive - you will remember, that Energy Australia signed a binding offtake agreement, but the necessary sell-down of the project to a third party will need to be done for the equity part of the finance. Very important step - it will give us a valuation of the project, and will determine the future NPV of the pumped hydro pr0ject to GNX-shareholders. I would expect this process to be finalized by mid-year.

Liontown - Quarterly out…the company has been very busy to re-work the pre-feasibility study and adjust it to the new, much higher resource. There is also detailed metallurgical work being progressed, and the pre-feasibility is generally being update to show an improved outcome of +-15% vs the previous +-25%. The company jhjas submitted all completed drilling to the independant consultant, which will deliver an updated resource by the End of May/early June. Based on the excellent drilling results announced, I would expect anotehr sizeable resource upgrade from the previous resource of 139 Millt at 1,3% - already one of the leargest in Australia, 100% owned, and without any offtake-restrictions. The company has 5,8 Mill A$ left - all drilling is completed - and funds will be sufficient to complete the re-worked PFS. Liontown now has the added sex-appeal from exploration close to where stablemate Chalice discovered the recent nickel/PGM find. If they want to drill that one halfway properly, they would need some cash…we will see…interesting dilemma for the company: dilute a little bit at what is probably a low long-term valuation for added upside? I think they might want to watch the success of Chalice for a while, before they will make a decision. In any case, this is a nice worry to have!!

Lucapa Diamonds - good Quarterly in terms of production and exploration - but both mines are currently producing zero, being closed down by the corona virus….That´s tough…hence the company has announced a fresh capital raising at 5ct + 10ct options, to finance further exploration ( and I think they can do with some money at holding company-level ! ). The company assets are very promising…but the repatriation of cash from Angola still raises eybrowes. In the current context, probably no time to rush into buying LOM, I fear!

Have a nice evening

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General

Good afternoon

Trump is about to become completely crazy…he was apparently suggesting to inject bleach into the body of corona-patients, creating an uproar of doctors. Does this guy think he is god? Probably not, but one higher up - not god, but Trump!

Germans are wondering, wheather GDP could fall by 6-7% this year…they are making a big fuss out of the worst fall of business confidence since 1950! You wonder, in which world these economists live….certainly we see a big contraction in GDP - and certainly, business confidence is on it´s kneath! How would you answer, what business conditions look for the near future? Hey, we are having a lockdown - we have never had that before, so what do you expect! And nobody at this stage would have a clue, what conditions will look like in say 3 month time….so wait and see, and continue to be a cautious investor, investing only what you can afford to hold for the long term, just in case you have to! The same government advisors are expecting GDP to rebound by 5% in 2021.

I personally continue to believe ( and that is a gut feel, not science! ) that everybody wants to have a go again as soon as possible, and that people will look ahead - that´s what the equity market usually does, and that´s why I thinlk we definitely have seen the lows. I am a bit surprised, that the market is VERY hesitant to have the correction I have been waiting for …..but perhaps it won´t happen?

I would not rule out something terrible like investors loosing confidence in central banks or currencies - but even in that case, I would much prefer to hold productive capital like equities, or hard assets like commodities and certainly gold! And what about gold equities? They are mostly making good money these days, and some - like good old Evolution - are paying a very handsome dividend as well. I think that dividend is much saver than a dividend from Deutsche Bank, Daimler or Caterpillar!

The sun is shining - spring in full swing - people are dragging their feet and want to get back to work and want to make some money - with fresh spirits! Perhaps that´s the reason why stock markets have been so positive??

let´s hope so - I don´t know!

Have a nice weekend!

General - Evolution - West African - Tietto

Good afternoon

PMI´s around the world have been weak, consumer confidence is very weak as well, Jobless Claims in the US are weak - but all of this is expected and is not important in the moment. Important is, wheather the economy can improve quickly again, as lockdowns are being reduced in many countries, or wheather this will take longer than one would hope for.

More important for us is perhaps, what European leaders will decide. The numbers touted around for support and a European development plan and mind-boggling, and can only be very very positive for friends of gold!

Equity markets are stronger again today…oil is very strong currently, and gold seems unstoppable!

Net inflows into gold ETF´s continue at a brisk pace, and total holdings reach new highs every day in the moment. Clearly, this is the major driver for the gold price in the moment. The big question is: Are investors buying it for coronavirus uncertainty - or are they buying for the world drowning in debt? They should do so for the latter, and if that´s correct, I can currently not see an end to continuing inflows.

Evolution - Quarterly out. A touch disppointing on produced ounces, but better on costs - and strong exploration. Production was 165.500 oz - expected was a touch more, 170-173.000 oz. Costs decleined by 7% AISC to 991 A$ or 650 US$ - excellent, and especially, as I royalties have gone up due to the better gold price. Net Mine Cashflow increased by 11% . Guidance unchanged for 725.000oz at 990 A$ AISC - might be 20-25A$ higher, if current gold price is maintained, as royalties would rise - but company states, that net cash flow would also be 90-95 mill A$ on that basis, despite lower copper-as-byproduct credits.

As at today, cash is 240 mill A$ and bank debt 570 mill A$, after paying for Red Lake, and paying 117 mill A$ in dividends.The current Quater will be stronger, as Mt.Carlton and Mt.Rawdon are both should see higher production.

Exploration is doing well at Mungari, Cowal, and Red Lake and delivered lots of positive results. A first underground mining reserve will be announced for Cowal in the second half.

Red Lake , the newly aquired mine, is making good progress, and the company has already lowered costs, increased development and exploration. The current and the enxt Quarter will be very active, and I expect, that in 6 month time, the market will get a much clearer picture emerging here.

Hedging is not large at 25.000oz / Quarter until June 2023 - that´s just about 15% of production, at just under 1900 A$/oz. Hurts, but small in the overall scheme of things. Evolution will again see higher net cash flow in the current Quarter, based on higher production, as well as the higher gold price. It will be good to see EVN have an increase of production per Quarter, following small falls every Quarter so far this financial year! My favourite gold miner should increase it´s value with the gold price, an underground mining reserve at Cowal, and a clearer future for Red Lake! By the end of the year, they will be underleveraged again, and ripe for another aquisition!

West African - I told you they would go up with hard facts of their success emerging! The Quarterly today was a stunner, and another “hard-delivery” Quarter will be coming, and in the September Quarter, underground stoping will make numbers look even better. For the Deceber Quarter, I expect that deep drilling for longer mine life will start again ( it was not started to keep movement of people to a minimum in light of corona ). The company is corona free.

The stunner for the Quarter finished: WAF brought it´s first mine on line at least 3 month earlier than planned ( that has been known ), but also 20 Mill US$ under budget!!!! They have built the 17 MW power plant themselves, at own costs ( differently to originally planned ) , which increased numbers again by 18 mill US$, but will reduce operating costs over the entire mine life. The other stunner: Amazing grade control drilling results, which augur very well for first production from underground stoping in a few month time.

Overall, a fantastic success! The company is sitting on 94 mill $ in cash, and has 200 mill$ in debt - incredible results - and is already producing free cash, after being in production for 6 weeks or so!! I wrote down numbers a few days ago - they remain unchanged, and could even be beaten, if grades are shaping as as well as grade control drilling promises. But in my opinion, and even applying a discount because of Burkina, the stock should be trading 50% higher. If nobody is smart enough to take them over, they have to do it themselves, to reduce the one-mine and one-country risk. This increases the risk in a way as well, as management is unproven as a corporate aquirer so far. But in my opinion, there are good targets at very reasonable prices around in the developing space.

Congrats to Richard Hyde - the geologist ( ! ) who had to prove, that Australians actually can deliver mines under budget in terms of costs and time! He must have a first-rated team around him! What a story - from 20 mill A$ or so market cap 4 years ago, to 500 mill A$+ in operating cash flow in 5 years! At the current 1730 US$/oz, WAF should prodzce 300.000 oz x 1100 US$ x 0,9 ( ownership 90%, 10% government ) = 520 mill A$ after all costs ( AISC will probably be below 500 US$, but I ahve reserved 130 US$ for other costs like corporate, interest and exploration ).

Bellevue - what WAF have done, tehy have in front of them: Drilling inferred resources into indicated status, perform a pre- and a feasibility study! Sounds like a long time to go, but the first indicated resource we will see in June, and exploring around an old underground mine, the going-into-production process should not be all that hard. It looks as if they will also have some open-pittable material, allowing for early cash flow. As usual, they have had many first-class drill results in the Quarter, and the resource has nowhere been closed off so far. Intense drilling is continuing for resource conversion as well as infill drilling. Dewatering of old underground mine is going tompla, and will make resource conversion a lot cheaper and faster. Negotiations for approval to drill highly prospective areas are making progress as weel. And lastly, tehy have 37 mill A$ cash in the bank, allowing for continued, frantic exploration, which might be hampered a little because of corona. But I still believe, that Belelvue will not have to develope this mine on their own. There are several aquisitive miners with strong cash flow around, who would love to get this asset…BGL is not a stock to make you rich - but I would not be surprised to eventually see 1$ being the valuation here - at current gold prices. Cash flow for the strong Australian producers is rising with the gold price, and Goldfields is also next door…they will want to find some cheap and low-risk growth, without having to go to West Africa!

Tietto - announced a lot of drilling results from their Ivory Coast project, Abujar. None of the results are spectacular - but probably more important: They have had numerous lower grade intersections between 0,5-and 1g, which will add to resources of the project. They also have had some smaller, 1-2 m inersections with strong grades. But for this project, I think it´s important to show, that the ounces are hanging together. It´s hard to mine 1 m with 6 g - but it´s a lot easier to mine 8m at say 0,8g gold/t. The avrage is, what is important - and that it´s halfway easy mineable is equally important. So I think another round of successfull drilling here! 25.000m of the planned 50.000m have been completed, and drilling is ongoing. The enxt resource stimate is due in the 3rd Quarter - I guess rather later than sooner in the Quarter. 25.000m drilling does take some time! 2000 assays are currently with the laboratory, so newsflow will continue - but you might need some patience, as the market will want to see a big number ( hopefully 3 mill oz ) before substantially rerating this stock, which is overdue in my opinion.

Have a nice evening

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 - Gold looking sexy ( unfortunately! )

Good afternoon

like the markets, and probably like you., I am very divided currently…. while I am expecting some retracement of very quick and strong runs across the world in equity markets, and potentially even a second leg - especially once the reporting season fo the current Quarter will see some very ugly numbers in June, the story from last years could also be turn out to just continue: Central banks around the world keep everybody flush with liquidity, and governments are spending big time and in never before seen numbers…interest rates will stay very low , and the money has to go somewhere in the hunt for returns! This could even happen, if we get some inflation - no country I know of could sustain much higher interest rates! And asequity markets tend to look forward by about 12 month, what they see, could be pretty good again!

So I am very hesitant to reduce my exposure…

And especially not in resources with some inflation, equities could be a good investment - but resources equities should be an even better one!

Norilsk - is now expecting a 100.000 oz palladium surplus. Only a few month ago, they expected another large deficit ! The car industry is on it´s knees in the moment, and they are the biggest consumer of it. They also expect a surplus of nickel…150.000t or about double the size as expected by Macquarie. On the other side, I am reading of a very difficult re-opening of South African mines - the unions are not happy with the security of the workplace ( and tehy are probably right?).

BofA are seeing the gold price at 3000 US$ in 18 month time! Unusual for a major investment bank to come up with such an agressive recommendation for gold! In any case, there seems to be a lot of buy-the-dip buying around, and gold is looking good again today….back up through 2700 A$/oz as well! When I read about Europe preparing a 2 Trillion package, I can only say one thing: Buy the only currency not backed by a bancrupt country!!

Not much on the micro-side…

Have a nice evening

General - Horizon Gold

Good afternoon

this morning I called around and asked, how much I would get paid to fill up my heating oil on the farm! Well this is a joke, certainly - but last night we could see, what happens, if speculators dominate commodity market, and not the reality! In this case, hedge funds/oil traders tried to make money out of the future spread, and got completely buried! People desperate to get rid of phsysical delivery exposure from contracts expiring today, were taken to the cleaner! The unthinkable happened: Some investors ended up paying 37 US$barrel for WTI, just to get rid of their oil! The Balck Swan called Corona, hit these guys badly. While I cannot disguise some happines about this, it´s not good for anyone…Let´s hope, that we do not discover over the enxt few days, that a fe whedge funds or oil traders will become insolvent!

This has little to do with fundamentasl - at least only indirectly, as oil demand is obviously very weak in the moment. We just have to look out of the window to see that! But equally obvious is, that the corona crisis will end at some stage - and probably rather sooner than later, bringing demand back on except for a few less airplanes flying around. An the market in oil equities telling us just that: From Australia to London, oil stocks are down just by a little more than markets generally! But they are still relatively weak - WTI a few month out is tradinng at 30 US$/barrel, which is still not sufficient to keep most shale producers alive, and certainly not enough to get anyone enthusiastic to drill and develope new projects! And Friday for future? Well the days of substantially falling oil demand are far away, probably 15-20 years - even with corona probably impacting on businesstravel, some tourism etc going forward. Germans will be driving from Munich to Sylt instead - wheather we like this or not - and I have no doubt, that the market will be a market again . Potentially, the weakness in capital investment in the oil industry, and the potential destruction of large parts of shale production, will push prices back up substantially over the next few years.

I can only reiterate - oil stocks with strong balance sheets are probably a great buy, if you have some time…

Also note, that future prices are way higher - for example Brent, which also got a hammering today, is trading at 22$ for the actual contract, and at nearly 35$ 6 month out.

The oil price chaos, nevertheless, reverberates through financial markets today. Base metals are weak, gold is weak, the A$ is weak, equities are weak…Hedge Funds probably have to adjust positions, as have commodity ETF´s…as I said - a big mess ! But don´t worry too much - markets went up by 20-25% from their recent lows recently - why not fall 7-8-10% again? It´s well possible - but in the medium term, equities will continue to go well, I think!

Teck´s Antamina Mine in Peru ( produces about 400.000t of copper ) declares force majeur…

germany business expectations as reported by ZEW are very strong for the second half 2020.

Horizon Gold - the company has finally got an Executive Director…previously named to the board, Jamie Sullivan has become ED, while Mr.Morrison as representative of the major shareholder, zeta, has become Chairman. Mr. Suullivan is the borther of Panoramic. he gets a very mdest salary of 120.000 A$ - still, I am not overly happy at all with this cozy arrangement. I will have to make a few enquries re him. But overall, the major shareholder is tightening his gripp on the company. Given recent experience, this is not good. I am hoping, that they will now decisive action to raise the necessary funds to convert inferred resources to indicated resources. I think that there is a good chance, that they will losse some of the excellent gold grades on the way, and a few to as well - but as I said before: The udnerlying value of HRN is probably several times it´s current price. Once tehy will allowed to publish the scoping study, the wider market ( and not only board and major shareholder! ) will be able to see this…It´s certainly helping, that Middle Island is making good progress on their asset, as toll treatment through MDI´s plant should be one of options to get production going!

Nothing much happening on the microside today…

And you have a nice evening!