copper sector initiation: risk/reward is improving€¦ · australian metals & mining

Australian Metals & Mining

Prepared by GMP Securities Australia Pty Ltd

Please see important disclosures on the last page of this report. April 28, 2013

GMP Mining & Metals

Levi Spry +612 9435 3217 [email protected]

Conrad Mulherin, Associate +618 6141 6321 [email protected]

Copper sector Initiation: Risk/reward is improving ASX producers and developers of the red metal

Despite concerns over increasing stockpiles driven by short-term weaker Chinese demand, we remain bullish on copper over the medium term. We are initiating coverage of the ASX copper sector, consisting of both producers and developers. We highlight industry themes of weak supply growth, lack of quality new projects, maturing producing assets, increased capex intensity and funding constraints. Our Australian market is broadly reflective of those same industry-wide issues and we believe the lack of new greenfield discoveries will continue to drive M&A. Given the recent pullback, we see the risk/reward equation improving and see selective opportunities as outlined below.

Company Ticker Recommendation Price Target (A$/sh) Last (A$/sh) OZ Minerals Ltd. OZL.ASX BUY $6.35/sh $4.35/sh Pan Australia Ltd. PNA.ASX HOLD $2.62/sh $2.22/sh Sandfire Resources NL. SFR.ASX BUY $7.41/sh $5.92/sh Blackthorn Resources Ltd. BTR.ASX HOLD $0.77/sh $0.39/sh Hot Chili Ltd. HCH.ASX BUY $1.15/sh $0.57/sh Rex Minerals Ltd. RXM.ASX HOLD $0.47/sh $0.32/sh

ASX copper stocks present good value versus their international peers. Over the past 12 months ASX copper stocks have underperformed the copper price by 24%, the broader Metals & Mining 300 (XMM.ASX) Index by 19% and their TSX peer group by 20%. ASX producers now appear marginally cheaper on earnings metrics than their TSX (Mid Cap Producer) peers but more expensive on P/NAV due to their weaker growth outlook.

Existing producers hold increasingly maturing assets and have shrinking growth options. Increasing costs/declining grades are not only an issue for the majors like Codelco, but OZL’s Prominent Hill and PNA’s Phu Kham are examples of maturing assets on our market that mirror an industry-wide problem. Growth projects have evaporated and operations are expanding throughput in order to maintain output as grades fall. On our forecasts, projects like OZL’s Carrapateena and PNA’s Inca de Oro require project optimisation and/or significantly higher copper prices before a positive decision to mine.

Lack of quality new projects means US$1.00/lb cash costs are a distant memory and ~US$15,000/t of annualised capacity capex is now the norm. Our own analysis of the 7 best producers and developers on the ASX takes us to 6 different countries through a number of different projects and sub US$1.50/lb cash costs (incl. royalty) now appear a good outcome. Capex intensity across the industry has ballooned, driven by lower grades, more remote deposits (infrastructure challenged) and relying on by-products to make up returns (e.g. magnetite), which requires more complex processing (grinding) and increased infrastructure. We have seen the capex intensity of ASX projects double from ~US$8,000/t to ~US$16,000/t over the past four years.

Capital constraints for pre-producers; only high IRR projects funded or taken out in M&A. Higher capex and opex projects (reduced returns) combined with tough markets mean companies continue to battle to source funding for their projects. Traditional financing (debt/equity markets) remains available for high-margin projects (e.g. SFR) while strategic partners, royalty companies, offtakers or Asian construction firms may be required for others (e.g. RXM). More robust projects, with high IRR’s like HCH’s Productora, are likely to be funded first or may be acquired.

April 28, 2013

2

TABLE OF CONTENTS Investment Summary 3

Copper Equity Performance 4

Macro-Copper Market 5

Capex Intensity 8

Australian Comps 9

International Comps 13

Recent Acquisition Multiples 14

ASX COPPER PRODUCERS 15

OZ Minerals (OZL AU) 17

PanAust Limited (PNA AU) 31

Sandfire Resources (SFR AU) 45

ASX COPPER DEVELOPERS 57

Blackthorn Resources (BTR AU) 59

Hot Chili (HCH AU) 75

Rex Minerals (RXM AU) 89

Appendix I—Global copper explorer/developer valuation 102

April 28, 2013

3

INVESTMENT SUMMARY Producers

Sandfire Resources7 (SFR.ASX), BUY PT $7.41/sh. SFR is the ASX’s highest-grade and second-largest pure copper producer. We believe the recent sell-off presents an opportunity. The production ramp-up is going well (removing any potential balance sheet stress) and management will begin to unlock the exploration story from mid-year with an underground drill program. A steady ramp-up and confirmation of potential mine-life extensions mean SFR should return to trading at a premium to its peers.

OZ Minerals7 (OZL.ASX), BUY PT $6.35/sh. Given our conservative assumptions, we are currently unconvinced on the viability of Carrapateena (GMPe requires ~US$4/lb copper for a 15% IRR). If it does not go ahead, OZL is no longer cum funding (~$2.5bn capex) and backing out its ~$650m cash and ~$200m of investments (SFR stake), then it offers compelling value on remaining production from Prominent Hill. Currently, we are paying circa half the EV of a PNA for ~50% more annual copper production (albeit for a shorter mine life) and slightly higher unit costs (reduced margins). Looking past CY13 when the large LOM cutback sees costs increase and production decline, we see value in OZL.

Tiger Resources (TGS.ASX), BUY PT $0.60/sh. Already covered by our affiliate GMP Securities Europe LLP (London), the company is not featured in detail here. The Kipoi HMS operation continues to operate above nameplate (9.5kt copper for March Q at ~US$0.60/lb payable). We estimate the existing HMS operation generates ~US$90m/per year of EBITDA and continues to accrue cash that it will add to a debt facility (US$80m) and potentially bring the Kipoi Stage 2 SXEW into production in 2Q CY14.

PanAust (PNA.ASX), HOLD PT $2.62/sh. Having completed the Phu Kham expansion and commissioned the Ban Houayxai Gold Mine (CY13 +1/3 group revenue from gold), the future remains bright for PNA. However, a pit cutback at Phu Kham should see lower production (grades of 0.45% Cu) for CY13 before improving grades and increased recoveries can be reflected in CY14 earnings. Growth options beyond Phu Kham and Ban Houayxai remain unclear with both Phonsavan and Inca de Oro undergoing project optimisation. PNA appears fairly valued on current production from its two long life (+10 year) assets.

Developers

Hot Chili7 (HCH.ASX), BUY PT $1.15/sh. HCH is the standout ASX copper development asset. Productora represents a large open-pit resource located at low altitude and close to infrastructure in Chile. Its potential production of ~60ktpa from late CY16 has already been identified by proven operators like LUN.TSX (7.7% shareholder). Catalysts include progress toward delivery of a BFS and decision to mine in mid-CY14.

Blackthorn Resources7 (BTR.ASX), HOLD PT $0.77/sh. The Mumbwa Project in Zambia represents a large copper resource (+1mt contained copper) but it appears current timelines are being driven by looming tenure expiry (Oct.’13), not the deposit. We await maiden metallurgical work before we can confidently model a potential operation. Contrary to BTR’s initial scoping study we believe the flowsheet will certainly include a SXEW plant, potentially an underground component and higher LOM capex and opex.

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Rex Minerals1 (RXM.ASX), HOLD PT $0.47/sh. RXM’s Hillside Project in South Australia contains ~2mt of contained copper metal but has a ~$900m capex bill (market cap of ~$60m) and moderate operating costs. We believe the introduction of a strategic partner and breaking the capex down into more palatable pieces may hold the key for Hillside to progress.

Valuations. Our price targets are based on 1.0xNAV for operations and 0.7x for projects, LT US$2.60/lb copper, US$1,575/oz gold, US$35/oz silver, US$13/lb molybdenum and US$115/t iron ore and 90c AUDUSD. We include nominal stock specific amounts for exploration.

COPPER EQUITY PERFORMANCE

Our selection of ASX copper names on average have underperformed the LME spot copper price and our ASX 300 Metals and Mining Index (XMM) by 24% and 19% respectively over the past 12 months.

Global peers like Lundin (LUN.TSX), First Quantum (FM.TSX), Antofagasta (ANTO.LSE) and Freeport McMoran (FCX.NYS) have all performed mostly in line with the XMM and the LME copper price..

Relative performance copper stocks vs. copper price

‐80% ‐70% ‐60% ‐50% ‐40% ‐30% ‐20% ‐10% 0%

LUN.TSX

FM.TSX

FCX.NYS

ANTO.LSE

RXM.ASX

HCH.ASX

BTR.ASX

TGS.ASX

SFR.ASX

PNA.ASX

OZL.ASX

XMM.ASX

COPP.LME

% Change

1 year % change Cu spot price vs. Cu producers and developers

Source: Company data

Increased market speculation of a surplus in 2H 2013 has been driven by weaker LME prices, declining premiums, rising inventories and higher TC/RCs.

Compounding this, there have also been stock-specific reasons for the underperformance of most ASX names recently.

Producers: OZL and PNA are both going through periods of higher costs while also dampening their prospects for growth from within their portfolios.

New producers: SFR is going through the commissioning phase at their operations and is also contending with normal commissioning issues before processing 100% fresh ore.

April 28, 2013

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Potential developers: BTR, HCH and RXM are all under increased scrutiny as the competition for funds increases and quality of projects (returns) decreases.

We believe the present industry theme of a lack of new, quality discoveries and consequent increased capex intensity in a difficult funding environment backdrop will drive corporates to pursue the “BUY” over “BUILD” roll out.

MACRO-COPPER MARKET

Chinese policy response key in the short term

While on the face of it China’s growth rates look robust, we are monitoring significant inventory build throughout the industrial materials complex, which implies to us that demand is not as strong as headline data would suggest. China’s manufacturing PMI is consistent at above 50 and still indicates growth but the rate of growth seems to be relatively anemic. We note relatively depressed levels of retail sales growth, continued efforts to slow residential construction and fixed asset investment focused on less materials-intensive transportation rather than more intensive utilities. We note that inventories of key metals such as copper, aluminium and zinc are on the increase and we believe that even though port inventories of iron ore are falling, that inventories at mills are increasing. We are tracking inventory build in manufactured goods as well which further raises concerns with regard to China’s demand.

In our view, Chinese policy response is likely to be the only major near-term catalyst for demand. Recent comments have not suggested that the Chinese will oblige with materials-intensive policies although they have reiterated their commitment to urbanisation as a long-term goal. We believe that the recent reacceleration in inflation is a major concern to the Chinese. In our view, we need to see renewed Chinese focus on major power and transport infrastructure projects in the near term to stimulate materials demand acceleration. In the longer term, we are looking for policies that support consumer demand.

Nascent recovery in U.S. residential construction very important

While the U.S., and indeed the Western World consumer, remains relatively depressed, a key area of strength in recent months has been U.S. residential construction. With housing inventories now under control the recovery in activity looks more sustainable and could start to be significant to global materials demand over the next 12–18 months; prior to the U.S. property collapse, construction accounted for 40–50% of U.S. metals demand.

We believe that a recovery in the U.S. residential property sector could also have significant knock-on impacts on the global economy via the U.S. consumer. We believe that there are two key factors keeping the U.S. consumer depressed: negative equity and high unemployment. We believe that a sustainable recovery in residential property could improve both, and a recovery in the U.S. consumer would have major knock-on effects on key export economies such as Germany, Japan, Korea and China. Hence this recovery in U.S. residential construction is a key indicator to watch.

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Weak near-term situation in copper…

We continue to track a significant inventory build in copper in all key exchanges globally and we understand that there is a significant off-exchange inventory build in China. While we understand that much of this material is tied up in financing, the magnitude of the build in recent months suggests to us an excess of supply over demand.

U.S. new and existing housing inventory vs. residential No. of days of metals inventories on exchange

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Jan-

01

Jan-

02

Jan-

03

Jan-

04

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

11

Jan-

12

Jan-

13

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

US Housing Inv Kunits LHS US resi constr'n US$m RHS

0

10

20

30

40

50

60

Jul-9

9

Jul-0

0

Jul-0

1

Jul-0

2

Jul-0

3

Jul-0

4

Jul-0

5

Jul-0

6

Jul-0

7

Jul-0

8

Jul-0

9

Jul-1

0

Jul-1

1

Jul-1

2

Jul-1

3

CopperAluminiumZincNickelAv erage

Day s

Source: Bloomberg Source: Bloomberg, COMEX, Shanghai Futures Exchange, GMP estimates

We note that at current levels there is over 50% downside to the marginal cost of production (75th percentile) in copper whereas there is little downside in other base metals. While the recent speculative net long position has changed to a net short, the magnitude of the net short is not enough at this point to imply a point of inflection.

Upside (downside) to marginal cost of production COMEX net speculative position in copper

-50%

0%

50%

100%

150%

200%

250%

2000 2002 2004 2006 2008 2010 2012

AluminiumCopperNickelZinc

-325

-225

-125

-25

75

175

275

375

475

575

01/0

507

/05

01/0

607

/06

01/0

707

/07

12/0

707

/08

12/0

806

/09

12/0

906

/10

12/1

006

/11

12/1

106

/12

12/1

206

/13

12/1

3

2000

3000

4000

5000

6000

7000

8000

9000

10000

11000Net spec open interest (fut. & opt.)Copper price US$/tonne RHSKt

Source: Bloomberg, CRU, GMP estimates Source: COMEX

We believe that if Chinese policy response is not forthcoming in the near future we will need to see some near-term supply response from producers in order to support prices, similar to what we saw in the 2001–03 cycle. If this is not forthcoming, we fear that prices could weaken further.

April 28, 2013

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…stronger in the longer-term

Notwithstanding the current cyclical weakness impacting copper, it is still one of our preferred commodities in the longer term. The reason for this is the lack of major discoveries in recent years, the relative dearth of major development projects coming on stream and, perhaps most importantly, the increasing costs of both developing and operating those projects.

There are two key factors at work that impact the latter point; the first is that operating costs at existing operations are increasing as head grades fall. This means that companies have to mine more material to extract the same amount of copper, raising unit costs significantly. Another key factor is that a lesser amount of truly world-class projects are being developed. Those that are being developed are generally lower grade than 10 years ago, which requires higher capex for mining equipment and throughput, and may be deeper or in less accessible areas. As a result, capital costs are rising significantly and so are forecast operating costs.

Declining head grade in copper Increasing marginal cost in announced development

0

50

100

150

200

250

300

350

400

450

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

US¢

/lb

Cu RC

Gov ernment take

By -products RC

Treatment charges

Processing cost

Mining cost

Cu price

Source: Brook Hunt Source: Company data, GMP estimates

The chart above highlighting marginal production costs suggested that the 80th percentile of operating costs is currently around US$1.80/lb but, as the chart above shows, the proposed operating costs for new projects are from 50–100% higher than that. Adding on the incentive costs for capital investment suggests that many new copper projects would require copper prices in excess of US$3.50/lb in the long term to be viable. Clearly, this is a significant change in the industry.

The conclusion is easy. Companies with long-life, low-cost development assets or those with high-grade, easily mineable discoveries are likely to outperform over the cycle.

April 28, 2013

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CAPEX INTENSITY Our ASX copper names confirm the industry-wide phenomenon of vastly increased capex intensity for new copper production. New world-class copper discoveries are increasingly scarce and our own analysis reflects themes of:

falling ore grades;

increasingly remote (greenfield) projects;

deeper (underground, e.g., Carrapateena) deposits;

increased reliance on by-product credits (e.g., magnetite);

higher infrastructure/power requirements compounded by the addition of bulk commodity by-product infrastructure and finer grind requirements (e.g. magnetite);

higher EPCM costs (reflecting higher wages and skilled labour shortages).

The combination of all these factors has resulted in the average capital intensity escalating to ~US$15,000/t for new greenfield projects, up from ~US$4,500/t in 2000 and almost double our own ASX sample over the last 4 years.

GMPe capex intensity sample (Cu only)

.ASX OperationCommission

YearTotal Capex

($m)

Copper production

(ktpa)

Capex Intensity (US$/tpa)

OZL Prominent Hill 2009 1,150$ 105 10,952$ PNA Phu Kham 2009 418$ 60 6,967$ TGS Kipoi 2011 161$ 25 6,440$ DML Boseto 2012 339$ 35 9,686$ SFR De Grussa 2012 400$ 65 6,154$

494$ 58 8,040$ PNA Inca de Oro 2015 594$ 50 11,880$ HCH Productora 2016 550$ 60 9,167$ RXM Hillside 2016 900$ 60 15,000$ CS.TSX Santo Domingo 2016 1,242$ 65 19,108$ BTR Mumbwa 2017 600$ 63 9,524$ FM.TSX Cobre Panama 2017 6,200$ 270 22,963$ OZL Carrapateena 2019 2,900$ 108 26,852$

1,855$ 97 16,356$ Average

Bui

ltG

MP

e

Average

Source: Co data and GMPe (assumes BTR add SXEW circuit)

Teck’s capex intensity analysis (Cu equiv.)

0

5,000

10,000

15,000

20,000

25,000

Restart Extensions Expansion to Existing Mine/Plant

Expansion New

Process Plant

Average Greenfield 1895‐2012

Greenfield Base Case

Greenfield Highly

Probable

Greenfield Probable

Greenfield Possible

Real 2011 $/t Cu Equivalent

Source: Teck

April 28, 2013

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AUSTRALIAN COMPS Having no production until FY17, we have excluded BTR, HCH and RXM from the following 2012–2016 production, cost and earnings data.

Production and cash costs (Cu only)

OZL and SFR are the largest copper producers on the ASX, producing +80ktpa and ~70ktpa respectively. PNA is expected to ramp up to steady state (90% equity share) of 60-65ktpa from CY15.

Copper production 2012-2016

0

20

40

60

80

100

120

OZL AU PNA AU SFR AU

Production (kt)

Production '12 Production '13 Production '14 Production '15 Production '16

Source: GMP estimates (OZL, PNA are CY while SFR is FY)

Once fully ramped up, SFR with its high grades (5% Cu) should be the lowest-cost ASX producer, followed by PNA with its competitive operating environment. OZL has a maturing asset on its hands in Prominent Hill, with CY13 a particularly high-cost year as the LOM schedule clears the cutback for remaining reserves.

Cash costs (incl. royalty) 2012-2016

$0.00

$0.50

$1.00

$1.50

$2.00

$2.50


Cash costs (US$/lb) incl royalty

Cash Costs '12 Cash Costs '13 Cash Costs '14 Cash Costs '15 Cash Costs '16


April 28, 2013

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PE and EV/EBITDA

SFR is the cheapest on ’14 PE ratios on 5.2x versus the average of 7.2x.

The average EV/EBITDA for ’14 is 3.5x with OZL the cheapest (2.4x) after backing out its ~$850m cash (~$650m cash + ~$200m listed equities) and post a tough CY14.

Price to earnings (2012-2016) EV/EBITDA (2012-2016)

0.0x

5.0x

10.0x

15.0x

20.0x

25.0x

30.0x

35.0x


Price to earnings (x)

P/E '12 P/E '13 P/E '14 P/E '15 P/E '16

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

8.0x

9.0x


EV/EBITDA (x)

EV/EBITDA '12 EV/EBITDA '13 EV/EBITDA '14 EV/EBITDA '15 EV/EBITDA '16

Source: GMP estimates (OZL, PNA are CY while SFR is FY) Source: GMP estimates (OZL, PNA are CY while SFR is FY)

Commodity exposure

The below figure shows our modeled gross revenue split for each of the stocks based on our production and commodity price assumptions. Of note is PNA’s relative greater gold revenue to OZL and the importance of by-products to both HCH and RXM’s projects, or, on the flipside, the lack of “help” BTR gets from by-products.

Gross revenue split

75%61%

86%98%

74% 73%

23%34%

12%2%

12% 11%

2% 5% 2%

5%10% 16%

OZL CY13 PNA CY13 SFR FY14 BTR FY17 HCH FY17 RXM FY17

Indicative Gross Revenue split (%)

Cu Au Ag Mo Fe

Source: GMP estimates

April 28, 2013

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Leverage to prices

As expected, longer-dated, higher-cost, cum-funding developers (like RXM) show the greatest leverage to higher (and lower) copper prices. Lower-cost producers (greater margin, e.g., SFR) with diversified revenue (by-products, e.g., PNA) and less gearing (OZL’s cash box) show less leverage.

NAV torque to higher (and lower) copper prices

‐500%

‐400%

‐300%

‐200%

‐100%

0%

100%

200%

300%

400%

500%

‐30% ‐20% ‐10% 0% 10% 20% 30%

NAV Sensitivity to copper p

rice move

(%)

% Change

BTR NPV HCH NPV RXM NPV OZL NPV PNA NPV SFR NPV


Project returns

Our analysis of the five development projects below shows that Productora is the most robust development project while Inca de Oro (PNA have stated it does not work at US$3.00/lb) and Carrapateena ($2.5bn capex) need some significant project optimization and/or much higher prices than our fairly conservative long-term copper price of US$2.60/lb.

Project IRR’s LT copper price (US$/lb) req’d for 15% IRR

‐2%

8%

12% 12%

19%

‐5%

0%

5%

10%

15%

20%

25%

Inca de Oro (PNA)

Carrapateena (OZL)

Hillside (RXM) Mumbwa (BTR) Productora (HCH)

GMPe Project IRR (%)

$4.96

$4.28

$2.94 $2.89 $2.40

$‐

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

Inca de Oro (PNA)

Carrapateena (OZL)

Hillside (RXM) Mumbwa (BTR)

Productora (HCH)

LT Copper price req'd for 15% IRR

Source: GMPe (Project IRR (%) at GMPe LT Cu US$2.60/lb and AUDUSD) Source: GMPe (Long term Copper price (US$/lb) required for 15% IRR at GMPe AUDUSD 90c)

April 28, 2013

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Diluted EV/resource and reserve lb

Stocks are trading between US$1.50/lb of potential reserve (developers) and US$5.00/lb for high-grade, high-margin production in the case of SFR and between US$0.25/lb and US$4.00/lb current resource dependent on quality.

While SFR is the most expensive on both metrics, we would argue it deserves a premium to its peer group given the quality of these lbs but also given our confidence about near-term incremental reserve and resource increases and potential discoveries from the mid-year underground drill program. As neither Carrapateena nor Inca de Oro work on our assumptions, we do not assume reserves for them.

Diluted EV/Resource and Reserve lb

$‐

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

DML AU OZL AU PNA AU SFR AU TGS AU BTR AU HCH AU RXM AU

Diluted EV/Resource & Reserve ($/lb)

EV/Resource lb EV/Reserve lb

Source: GMP estimates (Assumed reserve @ Mumbwa, Productora not Carrapateena nor Inca de Oro)

Diluted EV/production lb 2012–2016

Stocks are trading at between $3.00/lb for the short mine life and increasingly expensive production from OZL and $10/lb of annual production for the longest-life and low-cost PNA, which also derives significant non-copper revenue (~1/3 of revenue from gold). As expected, lower-cost/higher-quality/longer-life production costs more.

Diluted EV/Production lb 2012-2016

$‐

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

$18.00

$20.00


EV/ Annual production lb

EV/Prod '12 lb EV/Prod '13 lb EV/Prod '14 lb EV/Prod '15 lb EV/Prod '16 lb


April 28, 2013

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INTERNATIONAL COMPS Valuations

Our ASX producer names offer good relative value to our TSX basket.

The ASX producers appear cheaper than the TSX mid-cap names but more expensive than the higher-risk small-cap names on earnings metrics.

The ASX producers are trading at a premium (more expensive) to the TSX Mid Cap Producers on a P/NAV basis, possibly a reflection of their lack of growth options.

International Comps Price Market Cap Cash Debt EV EV / EBITDA

$/sh (MM) (MM) (MM) (MM) 2012 2013 2014 2015

ASX Mid Cap Producers

OZ Minerals Ltd OZL-ASX $4.35 $1,302 $659 $0 $651 6.35$ 0.68x 1.9x 5.1x 2.4x 2.5x

Pan Aust Ltd PNA-ASX $2.22 $1,388 $125 $165 $1,428 2.62$ 0.87x 6.7x 5.9x 4.5x 6.4x

Sandfire Resources Ltd SFR-ASX $5.92 $901 $100 $345 $1,146 7.41$ 0.79x na 7.8x 4.6x 4.5x

Average 0.67x 4.3x 27.2x 3.5x 4.1x

Average Ex. Min/Max 0.73x 0.0x 6.9x 3.5x 3.8x

TSX Mid Cap Producers

First Quantum Minerals Ltd. FM-TSX $16.47 $7,845 $313 $422 $7,954 N/A N/A 6.9x 4.9x 3.8x 2.7x

HudBay Minerals Inc. HBM-TSX $7.74 $1,331 $1,340 $521 $513 $13.00 0.6x 4.0x 2.8x 1.7x 0.9x

Inmet Mining Corp. IMN-TSX $67.59 $4,688 $2,416 $1,966 $4,239 N/A N/A 7.0x 6.8x 6.5x 9.3x

Lundin Mining Corp. LUN-TSX $3.84 $2,243 $274 $10 $1,979 $6.30 0.6x 5.8x 4.1x 3.3x 4.1x

Average 0.60x 5.9x 4.7x 3.8x 4.3x


TSX Small Cap Producers

Capstone Mining Corp. CS-TSX $1.94 $736 $498 $0 $238 $4.50 0.44x 2.1x 1.5x 1.6x 1.5x

Copper Mountain Mining Corp. CUM-TSX $1.87 $184 $24 $323 $483 $4.40 0.33x 8.0x 3.5x 2.1x 2.6x

Imperial Metals Corp. III-TSX $11.38 $846 $40 $126 $932 $17.00 0.68x 11.3x 9.4x 3.8x 2.9x

Mercator Minerals Ltd. ML-TSX $0.27 $85 $28 $128 $185 $1.00 0.26x 3.2x 3.1x 3.5x 4.5x

Taseko Mines Ltd. TKO-TSX $2.07 $396 $135 $253 $513 $4.50 0.45x 90.7x 4.4x 2.3x 3.4x

Average 0.43x 23.1x 4.4x 2.6x 3.0x


Note: FactSet consensus estimates for FM, IMN

Price Market Cap Cash Debt EV P / E P / CFPS

$/sh (MM) (MM) (MM) (MM) 2012 2013 2014 2015 2012 2013 2014 2015

ASX Mid Cap Producers

OZ Minerals Ltd OZL-ASX $4.35 $1,302 $659 $0 $651 8.7x na 14.6x 15.4x 3.0x 8.6x 4.4x 5.1x

Pan Aust Ltd PNA-ASX $2.22 $1,388 $125 $165 $1,428 8.7x 7.6x 5.8x 8.3x 6.9x 4.8x 4.1x 5.3x

Sandfire Resources Ltd SFR-ASX $5.92 $901 $100 $345 $1,146 na 8.8x 5.2x 5.0x na 5.0x 3.8x 3.5x

Average 8.7x 8.2x 7.2x 8.3x 5.0x 19.2x 3.6x 4.0x

Average Ex. Min/Max 0.0x 0.0x 5.5x 6.7x 0.0x 6.8x 3.9x 4.3x

TSX Mid Cap Producers

First Quantum Minerals Ltd. FM-TSX $16.47 $7,845 $313 $422 $7,954 14.1x 12.7x 10.1x 7.5x 11.3x 7.2x 6.1x 4.6x

HudBay Minerals Inc. HBM-TSX $7.74 $1,331 $1,340 $521 $513 34.4x 43.4x 14.8x 5.5x 9.3x 28.9x 7.4x 4.2x

Inmet Mining Corp. IMN-TSX $67.59 $4,688 $2,416 $1,966 $4,239 14.1x 13.9x 14.4x 22.0x 8.4x 10.0x 9.2x 10.6x

Lundin Mining Corp. LUN-TSX $3.84 $2,243 $274 $10 $1,979 18.2x 7.5x 5.8x 7.6x 11.7x 5.3x 4.5x 5.6x



TSX Small Cap Producers

Capstone Mining Corp. CS-TSX $1.94 $736 $498 $0 $238 11.1x 15.7x 10.9x 8.2x 6.5x 5.5x 4.9x 4.1x

Copper Mountain Mining Corp. CUM-TSX $1.87 $184 $24 $323 $483 9.7x 2.4x 1.6x 2.4x 0.0x 0.0x 0.0x 0.0x

Imperial Metals Corp. III-TSX $11.38 $846 $40 $126 $932 22.9x 22.3x 6.9x 3.9x 10.1x 12.3x 4.5x 3.0x

Mercator Minerals Ltd. ML-TSX $0.27 $85 $28 $128 $185 nm 16.7x 3.0x 7.2x 4.1x 2.5x 1.4x 2.3x

Taseko Mines Ltd. TKO-TSX $2.07 $396 $135 $253 $513 nm 6.9x 3.1x 4.7x 8.9x 3.6x 1.9x 3.4x



Note: FactSet consensus estimates for FM, IMN

BUY

BUY

SPEC BUY

BUY

P / NAV

NOT RATED

BUY

NOT RATED

BUY

BUY

BUY

BUY

HOLD

Rating

Company Ticker

Company Ticker Target


April 28, 2013

14

Political and fiscal regimes

We are happy to go where the deposits are and the ASX copper names featured take us to Australia (SA & WA), Burkina Faso, Chile, DRC, Laos and Zambia. But political and fiscal regimes are ever-changing and it is important to remain across them. For both its geology and political/fiscal regimes, South America (especially Chile) continues to rate highly on the map for our Mid Cap copper names as the go-to destination. Lundin (LUN.TSX) is on record saying it is looking for 50–70ktpa producing assets in South America and is a good bellwether for our Mid Cap sector.

Fiscal & Political Regimes Operating

JurisdictionSouth Australia

West Australia

Laos Zambia Burkina Faso Botswana Chile

Company OZL, RXM SFR PNA BTR BTR DML HCH, PNA

Tax/Profit Sharing

30% 30% 25% 30% 25% 22% 20%

Royalty rate5% royalty on metals

(increased from 1.5%)5% Cu Conc and

2.5% for gold4.5% metals in concentrate

6% (2012 increase from 3% for base

metals; 5% for precious metals)

5%* 3% 4%**

Mining codeMining Act 1971,

Mining Regulations 2011

Western Australian Mining

Act 19781997 Mining Law

New Mining Law /Act expected in 2013

The mining code currently under

review

Mines and Minerals Act,

1999

2006 amendment on taxation.

Status2013 increase to 5% royalty (from 1.5%)

Stable Stable Uncertain/Under review Under review Stable Stable

Gov. Carried interest

/ / 10-20% 10-20% 10% / /

Gov buy-in interest

/ / Negotiable Negotiable Under review 15%*** /

Tax Eq. Basis %

35% 35% 39% 36% 40% 25% 24%

Source: GMPe *Rolling royalties rate - <US$1,000/oz = 3%, US$1,000-1,3000/oz = 4% and >US$1,300/oz = 5%; ** Sliding scale tax on copper production from no royalties below 12ktpa to 5% above 50ktpa; ***Although apart of the law, the Botswana government has not acted on this to date.

RECENT ACQUISITION MULTIPLES Recent bids in the copper sector have been pitched at a diluted EV of US$9–$20/lb annualized production and US$0.35–$5.00/lb resource lb. While these bids (listed below) were launched in periods of different market confidence, the valuation range factored in: the quality (life, margin); operating regime (political and fiscal); discount for time to production (risk); and potential geological/production upside cases.

Based on these metrics, our ASX names currently appear to have good value..

Copper Acquisition Multiples Year Target Acquirer Value ($m)

Remaining Capex

EVCopper Production

(ktpa)Bid Price

(EV/US$/lb)Resources (Blbs) Reserves (Blbs)

Resource / US$/lb

2010 Citadel CGG Equinox 1,250$ 400$ 1,241.0$ 57.0 9.88$ 1.52 1.34 0.82$

2011 Far West Capstone Mining Corp 756$ 1,240$ 1,374.00$ 65.0 9.59$ 0.42 / 3.26$

201130% Santo Domingo

(Capstone)KORES 250$ 372$ 622$ 19.5 14.47$ 0.13 / 4.94$

2011 Equinox Minmetals 6,500$ -$ 6,346.0$ 203.6 14.14$ 8.33 6.08 0.76$ 2011 Equinox Barrick 7,690$ -$ 7,536.0$ 204.6 16.71$ 8.33 6.08 0.90$ 2012 Discovery Metals Cathay Fortune 828$ -$ 967.9$ 35.0 12.54$ 3.75 0.96 0.26$ 2012 Anvil Mining MMG $ 1,283 400$ 1,663.9$ 60.0 12.58$ 2.36 2.05 0.71$ 2012 Inmet First Quantum 5,200$ 6,200$ 11,670.4$ 270.0 19.61$ 32.88 22.94 0.35$

2,970$ 114.3 15.64$ 1.71$

2013 production 8.50$ 1.89$

2017 production 9.66$ 0.92$

Average

ASX Producer Average

ASX Developer Average Source: Company data & GMPe

April 28, 2013

15

ASX COPPER PRODUCERS

OZ Minerals (OZL.ASX) – BUY A$6.35 PT

PanAust Limited (PNA. ASX) – HOLD A$2.62 PT

Sandfire Resources (SFR.ASX) – BUY A$7.41 PT

April 28, 2013

16

Intentionally blank

April 28, 2013

17

OZ Minerals (OZL AU) Initiation of coverage: Value post a loss-making CY13 & without Carrapateena

WHATS CHANGED NEW OLD

Rating BUY na

Target $6.35 na

EPS CY13E ($0.11) na

EPS CY14E $0.29 na

CFPS CY13E $0.50 na

CFPS CY14E $0.98 na

Copper production (CY13E, kt) 79.4 na


SHARE DATA

Shares (mm, basic/fully diluted) 303.5

52-week high/low (A$/sh) 9.5 / 4.29

3M avg daily vol (000) 2,454

3M avg daily val (A$000) 14,308

Market cap (A$m) 1,302

Net cash (debt) (A$m) 651

Enterprise value (A$m) 651

Projected return 48%

FINANCIAL DATA

Year to Dec CY12A CY13E CY14E

Revenue (A$m) 962.3 811.6 844.1

EBITDA (A$m) 334.1 126.9 275.3

Income (A$m) 152.0 (33.0) 88.9

EPS (Ac/sh) 49.1 (10.9) 29.3

CFPS (Ac/sh) 141.1 49.8 98.1

PER (x) 8.7 (39.4) 14.6

PCF (x) 3.0 8.6 4.4

EV/EBITDA (x) 1.9 5.1 2.4

OPERATING DATA CY12A CY13E CY14ECopper production (mlb) 215.3 168.1 171.1C1 costs (US$/lb) $1.26 $2.30 $1.64Copper price (US$/lb) $3.59 $3.67 $3.861xNAV10% /sh (A$) $6.35Current P/NAV10% (x) 68%

BUY

OZL.ASX A$4.35/sh Target A$6.35/sh

We initiate coverage of OZ Minerals (OZL.ASX) with a BUY and a

$6.35/sh PT as it trades at a 32% discount to our NAV. OZL’s key asset is the Prominent Hill operation in South Australia, which will endure a tough CY13 of increased costs and reduced production, but looking past this, we see value in the remaining copper production (80–90ktpa). OZL continues development of underground projects Ankata and Malu, and its potential growth project Carrapateena will be advanced through studies, an exploration decline and delivery of a PFS in CY14.

OZL presents value post a loss-making CY13. Following a +50% share price fall in the past 12 months and backing out its large cash box (+$651m) and investments (~$200m incl. SFR stake), OZL is good value. It trades at a 32% discount to our NAV, 2.4x CY14 EV/EBITDA and 4.4x CY14 PCF.

Carrapateena contains +3.5mt of copper, but it is deep. At US$25,000/t annualized capacity ($2.5bn capex for ~100ktpa copper), its depth (underground block cave starting at ~450m) and infrastructure challenges (water) make production expensive. Cash costs should be competitive at ~US$1.00/lb once capex has been sunk. Under our modeled assumptions, the NPV for Carrapateena is negative and we believe it requires a ~US$4.00/lb (at 0.90AUDUSD) copper price for a 15% IRR. Further de-risking remains and the PFS is due mid-CY14.

If Carrapateena economics do stack up, then OZL is a seller of SFR stake (19.9%) but ~$1bn of further funding is required. We can see greater value in the “BUY vs. BUILD” argument currently, but if Carrapateena does get the go-ahead, then project finance/debt and strategic partners may be required to foot a ~$1bn funding shortfall.

We initiate coverage with a BUY rating and an A$6.35/sh price target. Our price target is based on 1.0xNAV for its Prominent Hill operation and we value Carrapateena at its $250m acquisition cost. We use LT prices of US$2.60/lb copper, US$1,575/oz gold and 0.90 AUDUSD. We also include $80m (A26cps) for all exploration.

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April 28, 2013

18

Investment summary

Tough CY13 at Prominent Hill but cash generation expected thereafter

We expect 2013 will be the peak for C1 cash costs at Prominent Hill as it mines a cutback for LOM open-pit reserves. Once through this, strip ratios should fall dramatically from +11:1 in CY13 to 6:1 in CY14 and to ~2:1 by CY18. Over this period, production (grades) should be relatively flat at 80-90kt copper and 130kozpa gold and cash costs should reflect the reduced open-pit mining component. Ankata underground will continue to ramp up and the first stoping ore is expected from the Malu underground in CY14.

Scaled-down Prominent Hill to allay fears of a production hiatus before Carrapateena comes online

The latest Prominent Hill Ore Reserves underpin mine life until 2019 with potential further upside of 1 to 3 years, contingent on near mine exploration. OZL believe operations will continue thereafter at ~4.5mtpa with ~3mtpa from underground being blended with low-grade surface stockpiles (1.5mtpa). OZL could transition between declining output at Prominent Hill and ramp-up at Carrapateena (~2018) if development and construction are on schedule at the latter.

OZL presents good value on remaining production at Prominent Hill

Backing out cash and listed investments ($858m or $2.83/sh), OZL is trading at a discount to our $1.19bn ($3.93/sh) NAV for Prominent Hill. It trades on 2.4x CY14 EV/EBITDA and 4.4x PCF.

Large Carrapateena resource (+3.5mt Cu) but deep and expensive production

Pre-feasibility studies are commencing for a mid-‘14 delivery before the BFS and decision to mine in mid-’15. The tunnel boring machine (TBM) is expected to drill the 4.5km exploration decline (A$100-110m) to top of ore body by Q4 2014. We model a 12mtpa underground block cave operation costing $2.5bn and producing ~100ktpa at ~US$1.00/lb. At US$25,000/t of annualized production it is expensive.

Exploration unsuccessful and growth options

OZL exploration is mainly focused regionally around Prominent Hill and Carrapateena and on expanding/updating the current resources. The 2013 budget allocates A$58m to exploration with the bulk to be spent regionally around the two projects. The remaining A$7m is to be spent by BD on global project generation.

Strong balance sheet but potentially big funding event looming

OZL remains debt-free but retains access to a US$200m corporate facility. It holds ~$650 in cash (Dec. 31) plus ~$200m in liquid assets (including 19.9% of SFR). As part of its ongoing capital management program, it maintains a dividend policy of 30–60% of operating profits. Our modeling shows OZL will need another ~$1bn (after SFR sale) to fund the ~$2.5bn Carrapateena project in mid-‘15 on delivery of the BFS and a positive decision to mine. OZL may consider conventional debt and equity or a JV/sell down to a strategic partner.

April 28, 2013

19

Valuation and sensitivity

Below are our modeled assumptions for both the Prominent Hill Mine and the Carrapateena Project.

Prominent Hill Parameters Modelled Carrapateena Parameters Modelled Resource Mt 210.4

Cu grade % 1.22%contained copper kt 2,569

Au grade g/t 0.50contained gold koz 3,200

Prominant Hill GMPeMill capacity mtpa 9.48

Cu Head Grade % 1.15%Cu Recovery % 0.89

Av Cu production ktpa 87Au Head Grade g/t 0.57

Au Recovery % 0.75Av Au production kozpa 120.3

Commissioning plant 2009Mine life remaining years 7LOM remaining production kt 577av C1 Cash costs per pound US$/lb $1.78

NPV 100% 1136

Resource Mt 292Cu grade % 1.31%

contained copper kt 3,767 Au grade g/t 0.56

contained gold koz 4,944

Carrapateena GMPeMill capacity mtpa 12

Cu Head Grade % 1.0%Cu Recovery % 90%


Au Recovery % 65Av Au production kozpa 125

Commissioning plant 2019Capex A$m $2,495Mine life years 20

LOM production kt Cu 1,985 koz Au 2,304

av C1 Cash costs per pound US$/lb $1.08

NPV 100% -305 Source: GMP estimates, company data Source: GMP estimates, company data

Our OZL valuation is dominated (~70%) by the current operation at Prominent Hill. At this stage, Carrapateena returns a negative NPV on our assumptions and we carry it at the $250m acquisition cost. We value Prominent Hill on a post-tax DCF basis using a 10% discount, 0.90 AUD/USD and US$2.60/lb copper price, US$1,575/oz gold price. We also attribute $80m (A26cps) for nearby exploration and growth projects.

In addition to ~$650m net cash (Dec. 31), OZL also maintains a $200m undrawn corporate facility to bolster its firepower for any further acquisitions/investments. A weak stock price means it may have missed its opportunity here and we note it retains a dividend policy of 30–60% of operating profits. Cash flow generation from Prominent Hill alone is not enough to fund the ~$2.5bn capex bill for Carrapateena.

Our OZL valuation is most sensitive to movements in the A$ with a 10% fall increasing our NPV by 14% or 98cps and a 10% higher copper price increasing our NPV by 12% or 79cps while a 10% higher gold price increases our NPV by 3% or 22cps. Our $6.35/sh price target and BUY recommendation are based on 100% of our DCF for Prominent Hill.

OZL valuation Sensitivity Sum of the Parts valuation A$m A$/shProminent Hill 1,136 $3.74 Prominent Hill exploration 50 $0.16 Carrpateena 250 $0.82 Carrapateena exploration 20 $0.07 Other exploration projects 10 $0.03 Sandfire stake (19.9%) 153 $0.50 Listed Investments 54 $0.18 Corporate (396) ($1.30)

Subtotal 1,277 $4.21 Other - $0.00 Net cash (debt) 651 $2.15 NAV 1,929 $6.35

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OZL DCF A$/sh

Change in price

Copper Price

Exchange Rate

Gold Price

Source: GMP estimates Source: GMP estimates

April 28, 2013

20

Catalysts and risks

We see upcoming stock catalysts for OZL as:

steady production and unit cost containment for CY13 as Prominent Hill goes through its peak material movement year;

further development and production ramp-up of the Ankata underground mine;

first ore from Malu underground ’14;

TBM delivery on site at Carrapateena Q4 ’13;

TBM commence exploration decline drilling Q1 ’14;

Q3 ’13 commencement of Carrapateena PFS for delivery Q4 ’14;

exploration and resource drill-out at Prominent Hill.

OZL Milestones and Timeline

Source: OZL

Financing: Under our assumptions Carrapateena will not get approval, leaving OZL in cash harvest phase from Prominent Hill. Early estimates for Carrapateena capex are for $2–3bn (GMPe ~$2.5bn for 12mtpa). Our modeling (current cash of $650m plus cashflows from Prominent Hill at assumed copper price and production) suggests a further ~$1.2bn of funding will be required (can realize $200m from sale of listed equities) if it does go ahead. Options aside from normal debt and equity instruments include selling down project equity to a strategic partner given the long-term nature of the project.

Political and fiscal risks: Despite changes to the royalty regime, South Australia is still considered a mining-friendly jurisdiction, actively seeking foreign and domestic mineral investment.

Costs: Cost pressure remains an issue in the global mining sector and South Australia is no exception despite the shelving of the Olympic Dam expansion project taking the pressure off in South Australia in the short-medium term.

April 28, 2013

21

Company description

OZL has purchased both its projects. In 2005, it bought Prominent Hill from Minotaur Exploration before completing the $1.15bn build in 2007 and commissioning the mine in 2009. Prominent Hill reached full production in 2010 with 112kt contained copper and 196koz of gold. It is expected to continue producing at 80-90ktpa copper until 2018 before running at a reduced capacity on 100% underground feed (60ktpa) thereafter. In 2010, OZL bought the Carrapateena project from Teck for $250m. It is due to start an exploration decline later this year before delivering a BFS and decision to mine expected in mid-2015.

OZL Project Location Map

Source: OZL

Having effectively been spun out of the merged Oxiana and Zinifex with the almost completed Prominent Hill project and significant net cash in 2008, OZL has been searching for a growth project for 5 years. It purchased 19.9% of Sandfire Resource (SFR.ASX) in 2010 for $3.85/sh and while it has done nicely on this trade it did not consolidate the production.

While its search for growth has been largely unsuccessful it has continued capital management through $389m in a capital return, a $200m buy back and paying $506m in dividends.

OZL has a significant landholding in and around Prominent Hill; however, exploration to date has not come up with any significant discoveries.

April 28, 2013

22

Prominent Hill The Prominent Hill deposit was discovered in 2001 by Minotaur Exploration. OZL subsequently gained 100% interest in Prominent Hill in 2005 and first production was achieved in 2009. 2010 was the first full year of production with 112kt contained copper and 196koz gold produced. It is located 650km NW of Adelaide within the Gawler Craton. The project is situated within proximity to operations at Olympic Dam (BHP.ASX) and close to road, rail and power infrastructure.

Geology

Prominent Hill is a Mesoproterozoic Iron Ore Copper Gold (IOCG) deposit. 100m of Mesozoic cover overlay the brecciated deposit within Gawler Range Volcanics basement rock. Copper mineralisation is primarily chalcocite, chalcopyrite and bornite associated with faulting and hosted by haematite-matrix hydrothermal breccias.

Prominent Hill geology

Source: OZL

Reserves and resources

While resources are large, further conversion requires much higher copper prices and current reserves only underpin a 7-year mine life at the current 10mtpa throughput. Some further resource-to-reserve conversion is expected from the Malu underground.

Prominent Hill Mineral Resource

Mineral Resources

CategoryTonnes

(Mt)Cu Grade

(%)Contained

CuAu Grade

(g/t)Contained

AuAg Grade

(g/t)Contained

AgMeasured 21.3 1.6 347.0 0.5 300.0 4.1 2800.0Indicated 76.4 1.4 1068.0 0.5 1300.0 3.2 7800.0Inferred 112.6 1.0 1154.0 0.4 1600.0 2.3 8300.0Total 210.4 1.22% 2569.0 0.5 3200.0 2.8 18800.0

Measured 10.1 0.1 10.0 1.0 300.0 1.9 600.0Indicated 19.1 0.1 16.0 1.6 1000.0 1.2 700.0Inferred 25.3 0.1 16.0 1.6 1300.0 0.8 600.0

Total 54.4 0.1 42.0 1.5 2600.0 1.1 2000.0

Prominent Hill Copper

Resource

Prominent Hill Gold

Resource

Source: OZL

Prominent Hill Ore Reserve Ore

ReservesCategory

Tonnes (Mt)

Cu Grade (%)

Contained Cu

Au Grade (g/t)

Contained Au

Ag Grade (g/t)

Contained Ag

Proved 32.6 1.0 326.0 0.6 635.0 3.1 3206.0Probable 37.2 1.1 422.0 0.6 693.0 2.8 3342.0

Total 69.8 1.1% 748.0 0.6 1328.0 2.9 6548.0

Prominent Hill Copper-Gold

Source: OZL

April 28, 2013

23

Mining

Prominent Hill started as a 10mtpa open-pit mine with an average LOM strip ratio of ~6.0:1. CY13 is a peak material movement (+90mt) year as the strip ratio increases to +11:1 as a cutback is completed for LOM reserves. This should steadily decline until 2018 when mill feed comes entirely from stockpiles and underground mining. Unit open-pit mining costs have been running at ~$3.40/t material mined.

Prominent Hill forecasted strip ratios

Source: OZL

The Ankata decline has a nameplate of ~3mtpa. After mining first ore in Q1 2012, the Ankata underground has ramped up to ~1.2mtpa from sub-level open stoping. This equates to 25kt copper and 12koz gold and currently has a ~5 year life. The Malu underground deposit is in development and on target for production of ~1.6mtpa from Q4 2014. Underground mining costs of ~$60/t are expected for Ankata, increasing to $80/t from the deeper Malu.

Prominent Hill Open Pit and Underground Components

Source: OZL

Processing

The flotation plant had an original nameplate of 8mtpa; however, over-engineering means it has been operating at ~9.5mtpa since ramp-up. Unit processing costs are fairly steady at $11/t.

April 28, 2013

24

Post 2018 and completion of open-pit mining, the plant feed is expected to be a blend of underground ore (3mtpa) and low-grade surface stockpiles (1.5mtpa). This means the plant may be run in batches at ~50% of its overall capacity or a smaller, more efficient plant may replace it.

Concentrates are transported to the Port of Adelaide or to Darwin via railway and shipped to offshore smelters.

Production profile

Prominent Hill is now an 80–90ktpa producer dependent on head grade. Early years saw higher gold grades and up to 180kozpa production and downward pressure on unit cash costs after gold credits. From here, gold production until 2018 is expected to be relatively constant at ~130kozpa before falling back in line with the reduced throughput.

Production guidance for CY13 (Mar Q 2013) has been lowered following the Q1 pit-wall failure to 82–88kt copper (GMPe 79kt) and 140koz gold (GMPe 135kt) at cash costs of US$1.65–1.80/lb before royalties (GMPe US$2.30/lb incl. royalty).

Prominent Hill Production

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Infrastructure

Prominent Hill is located 116km from the Adelaide-Darwin railway line, which is used for transporting concentrate to both the Port of Adelaide and Darwin. Prominent Hill uses the same electricity transmission line that services Olympic Dam. Water is sourced from the Arckaringa Basin, an independent basin from the Great Artesian Basin, where the well field is 65km from mine site.

Fiscal regime

In South Australia, Prominent Hill will pay a 5% royalty on mineral ores and concentrates from mid-2014 when the government increases the rate from the current 1.5%. Australia has a corporate tax rate of 30%.

April 28, 2013

25

Carrapateena

Location

The Carrapateena Project is 250km southeast of Prominent Hill on the eastern edge of the Gawler Craton in South Australia. The project lies 130km from Port Augusta at the top of the Spencer Gulf and 75km east of the Stuart Highway. The project comprises four exploration licences that cover 1,070km2.

Geology

The deposit lies within the eastern margin of the Gawler Craton. Sediments overlay the Archean-Mesoproterozoic basement comprised of volcanics and metasediments. The IOCG deposit is within a hydrothermal breccia system. Mineralisation is predominantly chalcopyrite and bornite mineralisation is structurally controlled. The ore body begins at roughly 470m depth from surface and is near vertical.

Carrapateena section

Source: OZL


Infill drilling during the 2012 programme outlined the resource, which was upgraded in the Dec. Q. Exploration drill activity at Carrapateena will not recommence until the exploration decline has reached the ore body in Q1 2015, at which time reserve drilling with take place.

Carrapateena Mineral Resource

Mineral Resources

CategoryTonnes

(Mt)Cu Grade

(%)Au Grade

(g/t)Copper Eq. (%)

Uranium Grade (ppm)

Ag Grade (g/t)

2012 Indicated 202.0 1.4 0.6 1.8 227.0 6.22011 Inferred 203.0 1.3 0.6 1.7 229.0 6.02012 Inferred 90.0 1.0 0.3 1.1 162.0 3.6

2011 Total 203.0 1.3 0.6 1.7 229.0 6.02012 Total 292.0 1.29% 0.48 1.6 207.0 5.4

Carrapateena 0.7% cut-off

grade

Source: OZL

April 28, 2013

26

Potential project scope

We model a 12mtpa (OZL guidance 10–15mtpa guidance) underground block cave operation. Simple benchmarking suggests this will be done in two lifts with haulage via a shaft and with potential for some selective mining of high-grade bornite ore (+2% Cu) in early years to maximise project NPV. We assume LOM head grades of 1.0% copper and 0.5g/t gold. Once fully ramped up, mining costs could be as low as $12/t.

We are not expecting any issues with metallurgy with typical recoveries like at Prominent Hill and Olympic Dam. We model 90% recovery for copper and 65% recovery for gold. Uranium resource grades of ~200ppm are in between those at Prominent Hill and at Olympic Dam and mean it will be leached from the concentrate but at this stage is not high enough grade to be a revenue stream. We model processing costs of $11/t. We model production of ~100ktpa copper and 120kozpa at cash costs of ~US$1.00/lb.

Potential Carrapateena Production Profile

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2009A 2011A 2013E 2015E 2017E 2019E 2021E 2023E 2025E 2027E 2029E 2031E 2033E 2035E 2037E 2039E

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Carapateena Copper in Conc (kt) Copper Price (US$/lb) Cash Costs (US$/lb)


Infrastructure

Road and power

Carrapateena is favourably located to road and power access. The Stuart Highway runs 75km to the west of the project and the Adelaide to Darwin rail line (which Prominent Hill uses for concentrate transport) is relatively close. The main power line servicing Prominent Hill has sufficient capacity and OZL would likely link into this with a short spur line.

Water

Water supply is the primary infrastructure issue facing the Carrapateena project (as it was for the Olympic Dam expansion). Although feasibility studies have not yet commenced, potential options include the construction of a desalination plant (~$500m) or using pumped sea water from the Spencer Gulf.

April 28, 2013

27

Fiscal regime

In South Australia, Carrapateena will pay a 5% royalty on mineral ores and concentrates from mid-2014 when the government increases the rate from the current 1.5%. Australia has a corporate tax rate of 30%.

OZL investments

OZL holds investments in a series of ASX-listed companies and appears a seller. The two most relevant are a 19.9% stake in Sandfire Resources (SFR.ASX) and a 40% stake in a Toro Energy (TOE.ASX). While its stake in TOE may prove difficult to exit, we believe all other holdings, including the 19.9% stake in SFR, may form part of the funding solution for the Carrapateena capex bill (CY16), if it goes ahead.

OZL Listed Investments

Company Shares (m) Last trade $/sh $mSandfire Resources NL 25.8 $5.93 $153Toro Energy Ltd 410.3 $0.09 $37IMX Resources Ltd 26.2 $0.08 $2Minotaur Exploration 8.0 $0.14 $1Royalco 10.0 $0.51 $5Beadell Resources 12.8 $0.65 $8Strategic Minerals 5.6 $0.03 $0

$207


April 28, 2013

28

Board

Neil Hamilton, Chairman

Mr Hamilton was appointed a Director of OZ Minerals in February 2010 and was appointed the Chairman in April 2010. Mr Hamilton is an experienced professional Company Director and Chairman. He has more than 28 years in the legal profession and in business with substantial experience in a number of industries including investment/funds management, insurance, banking and resources. Mr Hamilton has broad directorship experience across a range of ASX listed companies. Mr Hamilton is also a Senior Advisor to UBS (Perth office).

Terry Burgess, Managing Director and Chief Executive Officer

Mr Burgess joined OZ Minerals as Managing Director and Chief Executive Officer in August 2009. Prior to this Mr Burgess was the Head of Business Development for AngloBase, the base metals business of Anglo American plc, where he was responsible for growing Anglo’s base metals business. Mr Burgess was formerly the Global Head of Metals and Mining at ABN AMRO and the Managing Director and CEO of Australian listed mid-cap mining company Delta Gold, and its successor AurionGold before it was taken over by Placer Dome. Mr Burgess' earlier experience includes a number of senior mining management and operational roles in Australia, Africa and Europe. Mr Burgess is a Non-Executive Director of AMMA, a councilor of SACOME and a Director of the Minerals Council of Australia.

Paul Dowd, Non-Executive Director

Mr Dowd is a mining engineer and has been in mining for more than 40 years, primarily in the private sector, but also serving in the Public Sector as head of the Victorian Mines and Petroleum Departments. He has held senior executive positions with Newmont and prior to that Normandy, and was Managing Director of Newmont Australia Limited and Vice President Australia and New Zealand Operations for Newmont Mining Corporation and Managing Director of Phoenix Copper Limited. Mr Dowd currently has various advisory positions with SA Minerals and Petroleum Expert Group, Advisory Councils of CSIRO (MRSAC), the University of Queensland – Sustainable Minerals Institute, SA Training and Skills Commission (TaSC) and Aboriginal Workforce Development Inter-Ministerial Committee, government of South Australia. Mr Dowd is also Chairman of RESA (the SA Resources & Engineering Skills Alliance) and a former Non-Executive Director of Northgate Minerals Corp (Canada) and its (non-listed) Australian wholly-owned subsidiaries which were recently acquired by AuRico Gold. He remains a Director of the AuRico Gold wholly owned entities.

Brian Jamieson, Non-Executive Director

Mr Jamieson was Chief Executive of Minter Ellison Melbourne from 2002 until he retired at the end of 2005. Prior to joining Minter Ellison, he was with KPMG and its antecedent firms for over 30 years holding the positions of Chief Executive Officer Australia, Managing Partner and Chairman of KPMG Melbourne from 2001–2002. Mr Jamieson was also a KPMG board member in Australia and Asia Pacific and a member of the KPMG USA management committee. Mr Jamieson is a fellow of The Institute of Chartered Accountants in Australia. Mr Jamieson is also a Director and Treasurer of the Bionics Institute and a Director of the Sir Robert Menzies Foundation.

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29

Charles Lenegan, Non-Executive Director

Mr Lenegan was appointed as a Director of OZ Minerals in February 2010. Mr Lenegan was a former Managing Director of Rio Tinto Australia. He had a distinguished 27-year career with Rio Tinto where he held various senior management positions across a range of commodities and geographies. He is also a former Chairman of the Minerals Council of Australia and a former board member of the Business Council of Australia.

Rebecca McGrath, Non-Executive Director

Ms McGrath was appointed as a Director of OZ Minerals in November 2010. Ms McGrath was the former Chief Financial Officer and a member of BP’s Executive Management Board for Australia and New Zealand. Ms McGrath was also the former Vice President Operations BP Australia and Pacific and General Manager, Group Marketing Performance BP Plc (London). Ms McGrath is a former Director of Big Sky Credit Union and in addition to her Bachelor and Master Degrees, Ms McGrath is a graduate of the Cambridge University Business and Environment program.

Dean A. Pritchard, Non-Executive Director

Mr Pritchard has over 30 years’ experience in the engineering and construction industry. He was previously Chairman of ICS Global Limited, a Director of Railcorp, Zinifex Limited, Eraring Energy and Chief Executive Officer of Baulderstone Hornibrook from 1991 to 1997.

Andrew Coles, Chief Financial Officer

Sales and marketing, financial control, business planning, treasury, taxation, external and investor relations, IT and facilities, shared services, risk management and audit. Andrew has over 28 years experience in the resources industry, commencing his career with CRA Ltd (now Rio Tinto) where he held finance related roles in Melbourne, London and Dampier. He then joined Esso Australia where he held roles in treasury, business planning and public affairs in Melbourne and Houston, including as Treasurer of ExxonMobil Australia & New Zealand. In 2003, Andrew joined Pasminco during its administration as Group Treasurer then held the same role in Zinifex following its float in 2004. From 2007, Andrew worked primarily on M&A activities, including the IPO of Nyrstar in Belgium in 2007 and the merger with Oxiana in 2008. Andrew was appointed to Chief Financial Officer of OZ Minerals in June 2009.

April 28, 2013

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OZL Model

OZ Minerals financial summary Year-end 31 Dec

Sum of the Parts valuation A$m A$/sh Forecast assumptions 2011 2012 2013E 2014E 2015E 2016E 2017E 2018EProminent Hill 1,136 $3.74 Copper (US$/lb) $4.00 $3.59 $3.67 $3.86 $3.74 $3.25 $3.25 $2.60 Prominent Hill exploration 50 $0.16 Gold (US$/oz) $1,570 $1,632 $1,589 $1,575 $1,575 $1,575 $1,575 $1,575 Carrpateena 250 $0.82 Silver (US$/oz) $35.26 $34.50 $34.88 $35.00 $35.00 $35.00 $35.00 $35.00 Carrapateena exploration 20 $0.07 U3O8 (US$/lb) $60.00 $60.00 $65.00 $70.00 $70.00 $70.00 $70.00 $70.00 Other exploration projects 10 $0.03 AUDUSD 1.03 1.04 1.04 1.04 1.04 1.04 1.04 0.90Sandfire stake (19.9%) 153 $0.50 Listed Investments 54 $0.18 Production summary 2011 2012 2013E 2014E 2015E 2016E 2017E 2018ECorporate (396) ($1.30) Prominent Hill

Ore Processed (Mt) 9.9 9.6 9.5 9.5 9.5 9.5 9.5 9.5Subtotal 1,277 $4.21 Grade (Cu %) 1.16% 1.10% 0.95% 1.02% 1.02% 1.06% 1.09% 1.08%Other - $0.00 Recov ery (%) 90.5% 88.9% 88.7% 89.0% 89.0% 89.0% 89.0% 89.0%Net cash (debt) 651 $2.15 Copper production (kt in conc) 107.7 101.7 79.4 80.9 83.3 89.2 95.1 93.9NAV 1,929 $6.35 Copper production (mlb in conc) 228 215 168 171 176 189 201 199Asset valuation summary Gold production (koz in conc) 160.0 140.7 134.9 130.6 130.6 130.6 130.6 130.6

C1 (incl. royalty) $0.97 $1.26 $2.30 $1.64 $1.75 $1.77 $1.76 $1.29

CarrapateenaOre Processed (Mt) 0.0 0.0Grade (Cu %) 1.00% 1.00%Recov ery (%) 90.0% 90.0%Copper production (kt in conc) 0.0 0.0Copper production (mlb in conc) 0 0Gold production (koz in conc) 0.0 0.0C1 (incl. royalty) $0.00 $0.00

OZL C1 (incl.royalty) $0.97 $1.26 $2.30 $1.64 $1.75 $1.77 $1.76 $1.29

PROFIT & LOSS (A$m) 2011 2012 2013E 2014E 2015E 2016E 2017E 2018ERevenues 1,117.2 962.3 811.6 844.1 842.3 798.3 837.2 814.9Cost of sales 380.4 445.8 576.0 451.3 463.5 489.3 507.2 484.8

Target price calculation A$ Weight A$/sh Ex ploration w rite-off 77.7 114.1 42.4 36.0 18.0 18.0 18.0 18.0Prominent Hill $ 1,136 100% $ 3.74 Roy alty 16.5 14.8 12.2 27.5 42.1 39.9 41.9 40.7Carrpateena $ 250 100% $ 0.82 Corporate Ov erheads 55.8 53.5 54.0 54.0 54.0 54.0 54.0 54.0Ex ploration $ 80 100% $ 0.26 EBITDA 510.1 334.1 126.9 275.3 264.7 197.1 216.2 217.4Inv estments $ 207 100% $ 0.68 D&A 164.2 154.9 183.8 171.0 171.0 171.0 171.0 171.0Corporate $ (396) 100% ($1.30) EBIT 345.9 179.2 (56.9) 104.3 93.7 26.1 45.2 46.4 Other $ - 100% $0.00 Net interest income/(ex pense) 34.1 19.9 24.1 22.8 27.1 32.2 67.3 50.8 Net Cash $ 651 100% $ 2.15 Adjusted PTP* 380.0 199.1 (32.7) 127.1 120.8 58.3 112.4 97.1 Total $ 1,929 $ 6.35 Tax ation 114.7 47.1 0.3 38.1 36.3 17.5 33.7 29.1Average Post-tax income 265.3 152.0 (33.0) 88.9 84.6 40.8 78.7 68.0

Sig Items 9.2 - - - - - - - Target price A$/sh $6.35 Net income (adjusted earnings*) 274.5 152.0 (33.0) 88.9 84.6 40.8 78.7 68.0 Production summary Per share data (A$)

EPS (adjusted, diluted) 0.84 0.49 (0.11) 0.29 0.28 0.13 0.26 0.22

Shares outstanding (fully diluted) 310.3 303.5 303.5 303.5 303.5 303.5 303.5 303.5BALANCE SHEET (A$m) 2011 2012 2013E 2014E 2015E 2016E 2017E 2018EAssetsCash & equiv alents 886 659 524 677 806 1,681 1,269 778

Net tangible fix ed assets 2,136 2,427 2,299 2,203 2,186 2,623 3,092 3,587

Total assets 3,023 3,086 2,823 2,881 2,991 4,305 4,361 4,365Liabilities

Interest bearing debt - - - - - 1,350 1,350 1,350

Total liabilities 228 300 259 250 307 1,662 1,666 1,661

Shareholders equity 2,794 2,786 2,564 2,631 2,684 2,643 2,695 2,704Minority interests - - - - - - - -Net debt (886) (659) (524) (677) (806) (331) 81 572 CASH FLOW (A$m) 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E

Reserves (Jun '12) Mt % / g/t kt / koz EBIT 345.9 179.2 (56.9) 104.3 93.7 26.1 45.2 46.4

Prominent Hill 69.8 Total cash from operating 647.1 432.9 151.1 297.7 253.7 193.0 265.9 234.4Cu 1.10% 748 Net capital ex penditure (115.5) (298.9) (160.0) (70.0) (70.0) (625.0) (625.0) (675.0)Au 0.60 1,328 Ex pl & Net (acquisitions)/disposals - (114.1) (60.0) (60.0) (30.0) (30.0) (30.0) (30.0)

Cash from investing activities (377.8) (434.4) (225.0) (130.0) (100.0) (655.0) (655.0) (705.0)Carrapateena GMPe 244.5 Cash from financing activities (715.2) (225.7) (60.7) (14.8) (25.4) 1,337.8 (23.6) (20.4)

Cu 1.00% 2,445 Net cash flow (445.9) (227.2) (134.6) 152.9 128.3 875.8 (412.7) (491.0)Au 0.50 3,931 PROFITABILITY & VALUATION 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E

EBIT margin, % 31% 19% na 12% 11% 3% 5% 6%Resources Mt % / g/t kt / koz EV/EBITDA, x 1.5 2.2 5.9 2.7 2.8 3.8 3.5 3.4

Prominent Hill 210.4 PE (adj.), x 5.5 9.4 na 15.7 16.5 34.3 17.8 20.6Cu 1.22% 2,569

Au 0.50 3,200

Carrapateena (Oct '12) 292.0 kt / koz

Cu 1.31% 3,767

Au 0.56 4,944

* ex cluding non-recurring itemsSource: Company data, GMP estimates

Prominent Hill70%

Prominent Hill exploration

3%

Carrpateena15%

Sandfire stake (19.9%)

10%

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020406080

100120140160180

2011

2012

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E

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E

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E

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Carrapateena Prominent Hill

C1 Cash Costs (US$/lb) Copper price (US$/lb)

Group Copper prod (kt)

April 28, 2013

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PanAust Limited (PNA AU) Initiation of coverage: Laos copper and gold production


Rating BUY na

Target 2.62$ na

EPS CY13E 0.30$ na

EPS CY14E 0.39$ na

CFPS CY13E 0.48$ na

CFPS CY14E 0.56$ na



SHARE DATA


52-week high/low (A$/sh) 3.51 / 2.19

3M avg daily vol (000) 4,725


Market cap (A$m) 1,346

Net cash (debt) (A$m) (40)

Enterprise value (A$m) 1,385


FINANCIAL DATA

Year to Dec CY12A CY13E CY14E

Revenue (A$m) 712.7 781.7 857.1

EBITDA (A$m) 315.6 348.9 414.7

Income (A$m) 146.6 163.9 214.1

EPS (Ac/sh) 26.4 30.2 39.4

CFPS (Ac/sh) 33.2 48.2 56.4

PER (x) 8.4 7.4 5.6

PCF (x) 6.7 4.6 3.9

EV/EBITDA (x) 4.4 4.0 3.3

Dividend yield (%) 3.15% 2.69% 3.51%

OPERATING DATA CY12A CY13E CY14ECopper production (mlb) 130.9 129.6 141.9C1 costs (US$/lb) $1.37 $1.58 $1.48Copper price (US$/lb) $3.59 $3.75 $3.901xNAV10% /sh (A$) $2.62Current P/NAV10% (x) 85%

HOLD

PNA.ASX A$2.22/sh Target A$2.62/sh

PanAust Limited (PNA.ASX) operates two 90%-owned mines in Laos,

the Phu Kham Copper-Gold Mine and the Ban Houayxai Gold-Silver Mine. While Ban Houayxai is nearing full production (~100kozpa), a pit cutback at Phu Kham means lower-grade material will comprise the majority of plant feed for CY13 and 14. A return to reserve grades and the Increased Recovery Project (IRP) should see Phu Kham produce ~70ktpa copper from CY15. However, PNA appears fully valued and we initiate with a HOLD recommendation and a $2.62/sh PT.

Phu Kham (PNA 90%) 65ktpa Copper-Gold Mine in Laos. Ore Reserves support a 10-year mine life at production rates of 70ktpa Cu and 65kozpa Au. The Increased Recovery Project (IRP) was completed US$10m under budget at US$35m and is expected to lift copper and gold production by 5kt and 7.5koz, respectively. The pit cutback should see lower than reserve grades (0.46% vs. 0.53%) processed for all of CY13 and much of CY14, pushing out much of the uplift from increased recoveries.

Ban Houayxai (PNA 90%) 100kozpa Gold-Silver Mine also in Laos. Ban Houayxai was commissioned in mid-2012, following 15 months of construction. Current reserves underpin a 10-year mine life producing ~100kozpa Au and 560kozpa Ag at cash costs of ~US$673/oz incl. royalties.

PNA looking to add a third mine to its portfolio. A June 2012 PFS on the Inca de Oro JV (PNA 60%) in Chile showed further optimization (more high-grade resources, power and water solutions or much higher copper prices) were required before getting the go-ahead. An updated study is expected at year-end. The Phonsavan Copper-Gold project in Laos is now PNA’s most advanced project. PNA expect to complete a PFS on a potential 25ktpa project by 3Q CY13 (GMPe ~$300m capex). It recently secured a US$275M debt facility, replacing the previous US$100M facility, seeing its next project in Laos funded.

We initiate coverage with a HOLD rating and an A$2.62/sh price target. Our price target is based on 1.0xNAV for the Phu Kham and Ban Houayxai mines using conservative LT prices of US$2.60/lb copper, US$1,575/oz gold, US$35/oz and 0.90 AUDUSD. We also include $235m (A37cps) for all exploration and growth projects.

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April 28, 2013

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Investment summary

Phu Kham (PNA 90%)

The Phu Kham Copper-Gold Mine located in Laos is the flagship asset for PNA. The recent plant expansion and ongoing Increased Recovery Project will see it produce 65–70ktpa copper and ~60kozpa gold at ~US$1.30/lb cash costs. Current Ore Reserves support a 10-year mine life at reserve grades of 0.53% copper.

Ban Houayxai (PNA 90%)

The Ban Houayxai Gold-Silver Operation, also in Laos, was brought into commercial production in June 2012, following 15 months of construction and commissioning. Over the ~10-year mine life, PNA is expecting steady-state production of 100kozpa gold and 700kozpa silver at costs of US$500–600/oz (GMPe US$673/oz incl. royalty).

Growth options

PNA’s most immediate growth option revolves around the Phonsavan project (30ktpa for US$300m capex, largely brownfields given its location to Ban Houayxai). We should find out quickly here with a PFS due 3Q CY13 and a BFS and decision to mine by year-end. For now, Nam San (resource due 3Q) and Long Chieng Track (LCT) are a little further out, while $10m is being spent at Inca de Oro over CY13 to give an updated BFS, including the Carmen deposit and oxides, by early in CY14.

Corporate/funding

PNA declared a maiden dividend of 3cps after the June H result and another 4cps after the full year 2012. We expect a ~20% payout ratio going forward dependent on capex programs. In January 2013, PNA entered into a US$275m four-year debt facility to replace the existing US$100m revolving debt facility. PNA believes it is now fully funded to build another mine in Laos (Phonsavan ~$300m) but would need additional funding if the Inca de Oro project were to go ahead. The Business Development team continues to review projects (particularly in Asia and Chile) and the facility also provides flexibility if the right ~50ktpa copper project were to be identified.

April 28, 2013

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Our modeled assumptions for both Phu Kham and Ban Houayxai are below.

Phu Kham Parameters Modelled Ban Houayxai Parameters Modelled Resource Mt 227


Au grade g/t 0.22contained gold koz 1,509

Phu Kham GMPeMill capacity mtpa 18



Au Recovery % 0Av Au production kozpa 57

Commissioning plant 2009Capex A$m 235$ Mine life years 12

LOM remaining production kt Cu 680koz Au 574

av C1 Cash costs per pound US$/lb 1.42$

NPV 100% 925

Resource Mt 65.00Au grade g/t 0.93

contained gold koz 1826Ag grade g/t 7.20

contained silver koz 14139

Ban Houayxai GMPeMill capacity mtpa 4.2

Au Head Grade g/t 0.87Au Recovery % 90%

Av Au production ktpa 106Ag Head Grade g/t 6

Ag Recovery % 70%Av Ag production ktpa 526

Commissioning plant 2012Capex A$m 300$ Mine life years 13

LOM remaining production koz Au 1374Koz Ag 6839

av C1 Cash costs per ounce US$/oz 674$

NPV 100% 570 Source: GMP estimates Source: GMP estimates

Our PNA valuation comprises 55% Phu Kham and 35% Ban Houayxai. We value them both on a post-tax DCF basis using a 10% discount for Phu Kham (copper) and 6% for Ban Houayxai (gold), 0.90 AUD/USD and US$2.60/lb copper price, US$1,575/oz gold price and US$35/oz for silver. We also attribute $235m (A35cps) for all exploration and growth projects. In Jan. 2013, PNA secured US$275m in debt to help fund the expansion of copper and gold projects in Laos and growth in Chile. ANZ leads the syndicate of 7 banks that will provide the bulk of the debt, which replaces the previous US$100m facility from 2010. Our $2.62/sh price target and HOLD recommendation are based on 100% of our DCF valuations.

Our PNA valuation is least sensitive to changes in copper price of the ASX copper companies covered due to the large split of revenues coming from gold and silver (~40%). A 10% higher copper price increases our NPV by 11% or 29cps and a 10% higher gold price increases our NPV by 2% or 6cps.

PNA Valuation Breakdown Sensitivity Sum of the Parts valuation US$m US$/sh A$/shPhu Kham (PNA 90%) 925 $1.53 $1.47

Phu Kham exploration 100 $0.16 $0.16 Ban Houayxai (PNA 90%) 570 $0.94 $0.90

Ban Houayxai exploration 50 $0.08 $0.08 Phonsavan 50 $0.08 $0.08 Puthep 10 $0.02 $0.02 Inca de Oro 25 $0.04 $0.04 Corporate (118) $(0.20) $ (0.19)

Subtotal 1,612 $2.66 $2.56 OtherNet cash (debt) 40 $0.07 $0.06 NAV 1,652 $2.72 $2.62

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April 28, 2013

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Catalysts and risks

From here, newsflow and catalysts centre around consistent production from both Phu Kham and Ban Houayxai and progressing its series of growth projects through studies and further exploration results.

Consistent production from both Phu Kham and Ban Houayxai, including delivering the Increased Recovery Project at Phu Kham from mid-year

3Q CY13 Phonsavan PFS

Late CY13 Phonsavan BFS

3Q CY13 Maiden resource at Nam San

Early CY14 updated Inca de Oro BFS

Financing: With US$104m cash, US$137m debt and US$138m undrawn, PNA suggests it is fully funded for the potential $300m capex at Phonsavan but would require further funds for the next project (Inca de Oro or LCT). The new US$275m facility (January 2013) replaces its existing US$100m revolving debt facility, which was due to reach maturity in Sep.Q 2013. US$250m of the new arrangement is a revolving debt facility with a 7-bank syndicate led by ANZ Bank. The remaining US$25m is a working capital facility with ANZ (Laos).

Political and fiscal risks: Laos continues to prove a competitive operating environment when the investment risk profiles of mining destinations worldwide appear to be increasing. The Laos government holds 10% of mining projects through its investment arm and a royalty of 4.5% on metals contained in concentrate is payable. The Laos corporate tax rate is 25%.

Costs: Cost pressure remains an issue in the global mining sector but PNA’s operating record in Laos and ability to bring Ban Houayxai online within 5% of its $208m original capex estimate shows some shelter from these global pressures to date.

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Company description

PNA’s Lao-registered company, Phu Bia Mining, has a Mineral Exploration and Production Agreement (MEPA) with the government of Laos that regulates exploration and mining within the Phu Bia Contract Area. It covers more than 2,600sqkm and includes two 90%-owned mines, the Phu Kham Copper-Gold Operation and the Ban Houayxai Gold-Silver Operation. Also contained within this area are two advanced exploration projects, the Phonsavan project (incl. Tharkhek & KTL) and the Nam San (incl. LCT and Nam Ve).

Further afield, PNA holds 49% of the Puthep copper project in Thailand, which remains for sale, and 60.2% of the Inca de Oro copper-gold JV with Codelco in Chile. Infill drilling is ongoing at the Carmen copper-gold deposit and a revised Feasibility Study at Inca de Oro incorporating Carmen and oxides is due early 2014.

PNA Project Location Map

Source: PNA

Laos is landlocked in Southeast Asia, bordered by China, Vietnam, Cambodia, Thailand and Myanmar (Burma). Laos is a developing nation that has seen an expansion in the mining and hydro-power sectors in recent years, both of which have driven economic growth. Laos is a single-party socialist republic ruled by the Lao People's Revolutionary Party. With its stable government, ready access to power, water and roads, and the MEPA that sets out operating frameworks, Laos has provided PNA with an excellent operating environment.

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Phu Kham (PNA 90%)

At Phu Kham, CY12 production totalled 63,285t copper at an average C1 cash cost of US$1.11/lb after precious metal credits (pre-royalty). CY13 production remains on track for 62–65ktpa at a cash costs between US$1.15–1.25/lb pre royalty (GMPe US$1.58/lb incl. royalty). Average head grade in 2013 is expected to be ~0.46% Cu, below the Ore Reserve grade of 0.5% as the mine completes a cutback to arrest geotechnical issues identified in the Dec. Q and ore is sourced from a lower-grade area higher up in the pit.

Having completed the US$95m plant expansion (12mtpa to 16mtpa), PNA is now commissioning the Increased Recovery Project at the Phu Kham site, which has been completed for US$35m, US$10m under budget. Together these projects should see the operation run at up to 70ktpa copper and 65kozpa gold (at current reserve grades) for ~10years.

Geology

The Phu Kham deposit includes distal sulphide skarn, proximal silicate oxide skarn and stockwork mineralisation styles that are spatially related to intermediate porphyry dykes. The alteration, vein styles and intrusive associations of the deposit suggest it represents the upper portions of a classic porphyry copper gold system. The early production was from the leached gold cap with mining now in the skarn and stockwork hosted copper-gold deposit.


Current Phu Kham Ore Reserves support a +10 year mine life.

Phu Kham Mineral Resources and Ore Reserve Estimate (December 2012)

Mineral Resources

Category Tonnes (Mt) Cu Grade (%) Au Grade (g/t) Ag Grade (g/t)

Measured 139 0.51 0.23 1.9Indicated 75 0.45 0.21 2.3Inferred 14 0.36 0.21 1.8Total 227 0.48% 0.22 2.0

Ore Reserves Category Tonnes (Mt) Cu Grade (%) Au Grade (g/t) Ag Grade (g/t)

Proved 124 0.51 0.23 1.8Probable 52 0.46 0.23 2.1

Total 176 0.50% 0.23 1.9

Phu Kham Copper-Gold (0.2% Cu cut

off)

Phu Kham Copper-Gold

Source: PNA

Mining

Open-pit mining must now feed a 16mtpa plant (running at ~17mtpa) with the LOM strip ratio of 1.4:1. During the Dec. Q ‘12, a zone of geotechnical instability developed along the northern extent of the interim west wall of the Phu Kham open pit. The mining schedule has been adjusted to prioritise the mining of material above that zone. The instability does not present a risk to the ultimate open-pit design but access to an area of relatively high-grade copper ore, originally scheduled to be mined throughout 2013, will be deferred into the following year. Mining costs are reasonably steady at US$2.70/t waste (acid needs to be neutralised before stored) and US$2.50/t for ore.

April 28, 2013

37

Processing

The Phu Kham processing plant was successfully upgraded from 12 to 16mtpa with commissioning in the Sept Q 2012. The upgrade was completed within the US$95m budget and initial indications are that close to 18mtpa will be achieved while processing the softer oxide/transitional ore and the LOM throughput may be closer to 17mtpa. The process plant comprises a grinding circuit (one SAG mill and two ball mills, each rated 13 megawatts), with copper and precious metal recovery (mid-70s) by flotation.

Increased Recovery Project The Phu Kham Increased Recovery Project (+6% to 81% GMPe) uses less selective rougher flotation in combination with additional regrind and cleaner flotation capacity. It is expected to lift annual production by approximately 5kt copper and 7.5koz and, in doing so, reduce cash costs by ~5%. Commissioning has commenced after construction was completed for US$35m, US$10m under budget.

Infrastructure

Copper and gold concentrate is trucked ~1,000km to port at Sriracha Harbour, south of Bangkok and shipped to smelters throughout Asia. Water is abundant and sources from lakes/dams and power supply comes from a nearby hydro power line.

Fiscal regime

The Laos government holds 10% of the projects through its investment arm and a royalty of 4.5% on metals contained in concentrate is payable. The Laos corporate tax rate is 25%.

Production profile

Production (100%) may near 70ktpa Cu and +50kozpa Au from CY15 once head grades return to average reserve grade and recoveries increase to ~81%. We model an 11-year mine life, in line with current reserves.

Phu Kham (100%) Production profile

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April 28, 2013

38


Ban Houayxai is located 25km west of Phu Kham in north-central Laos. Following 15 months construction, the mine declared in May 2012 with commercial production from 1 June 2012, with capex within 5% of the US$208m budget. In CY12 (8 months), it produced 76,449oz of gold at an average C1 cash cost of US$537/oz after silver credits but pre-royalty. Steady-state production guidance is for ~100kozpa gold at cash costs of between US$500 and US$600/oz (GMPe 100koz at US$673/oz incl. royalty) over the next 8 years before 2 years at ~50kozpa when processing stockpiles only.

Geology

The Ban Houayxai gold-silver deposit is a combination of stockwork vein and disseminated mineralisation interpreted to represent the distal expression of a porphyry copper-gold system. Gold predominantly occurs within the veins, although significant amounts are disseminated in the altered host rock. The ore zone comprises a 40 to 50m thick oxide layer, overlying supergene enriched and primary mineralisation that persists to depths of 50 to 100m.


Current reserves support a 10 year mine life at the 4mtpa nameplate.

Ban Houayxai Mineral Resources and Ore Reserve Estimate (December 2012)

Mineral Resources

Category Tonnes (Mt) Au Grade (g/t) Ag Grade (g/t)

Measured 3 0.64 2.5Indicated 8 0.7 3.7Inferred 1 0.38 1.8

Sub-Total 12 0.66 3.2Measured 4 1 10.4Indicated 12 0.92 9.3Inferred 0.3 0.51 3.7

Sub-Total 16 0.93 9.5Measured 1 1.1 10.3Indicated 30 1.04 7.6Inferred 7 0.87 6

Sub-Total 37 1.01 7.4Measured 8 0.87 7.5Indicated 50 0.96 7.4Inferred 8 0.81 5.4

Sub-Total 65 0.93 7.2

Ore Reserves Category Tonnes (Mt) Au Grade (g/t) Ag Grade (g/t)

Proved 8 0.82 8.4Probable 1 0.41 1.5

Proved (low-grade)

33 0.82 8.1

Total 41 0.81 7.9

Ban Houayxai Oxide (0.25g/t

Au cut-off)

Ban Houayxai Transitional

(0.35g/t Au cut-off)

Ban Houayxai Primary (0.40g/t

Au cut-off)

Total Ban Houayxai

Ban Houayxai Gold-Silver

Source: PNA

April 28, 2013

39

Mining

Open-pit mining rates will sustain a ~4mtpa operation with an average strip ratio of ~1.2:1. We model mining costs of US$2.00/t material mined (US$4.40/t ore).

Processing

The 4mtpa conventional CIL plant is forecast to operate at slightly higher rates (4.2–4.3mtpa) while in oxide and transitional ore. Recoveries into gold doré are expected to be relatively constant at ~90%. We model processing costs of US$10.00/t.

Infrastructure

The location of the mine has meant it can leverage off Phu Kham’s established infrastructure.

Fiscal regime

The Laos government holds 10% of the projects through its investment arm and a royalty of 4.5% is payable. The Laos corporate tax rate is 25%.

Production profile

We believe LOM average ~100kozpa production may be bettered in early years while head grades remains above 0.9g/t. Initial lower silver production reflects the processing of oxide ore, which is partly silver depleted. Silver production is scheduled to increase over the next two years as higher silver grade transitional and primary ores are processed.

We model a 13-year mine life with the expectation that 30% more plant feed will be discovered over the next ~10 years.

Production Profile

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April 28, 2013

40

Exploration projects

Phonsavan Project (PNA 90%)—PFS on 25ktpa due 3Q CY13

The most advanced of PNA’s exploration projects, the Phonsavan Copper-Gold Project, lies in the northern part of the company's Contract Area in Laos and is focused on the KTL copper-gold deposit. It is close to existing road and power infrastructure, and the nearby town of Phonsavan. The Vietnam coast is 250km to the east by sealed road and provides a potential export route for concentrate product.

Current resources stand at 89Mt at 0.44% Cu, 0.18g/t Au and 1.7g/t Ag. A PFS is due 3Q CY13 and a BFS potentially by CY13 end. The scope of the study is for the development of an open-pit mining operation at the KTL copper-gold deposit feeding ore to a 7mtpa conventional milling and flotation process plant producing ~25ktpa copper and 20kozpa of gold in concentrate over a mine life of approximately 10 years. Initial capex estimates are ~$300m with ongoing work on grind size to dictate opex.

Nam San and Long Chieng Track (LCT) (PNA 90%)—3Q CY13 resource updates

The Phu Kham district is a high-priority target for exploration and resource development. Several exploration targets have been identified in a corridor that stretches at least 6km from Phu Kham northwest to the LCT deposit, and beyond to the Nam Ve prospect 7km northwest of LCT.

The LCT deposit outcrops and extends over a strike length of ~450m in a northeast-southwest direction, dipping steeply to the northwest. The deposit remains open down-dip and along strike. The January 2013 resource estimated 32Mt at 0.77g/t gold, 4.9g/t silver and 0.12% copper. The deposit comprises several mineralised zones. One discrete zone exhibits elevated copper (+4%), gold and silver grades that, subject to confirmatory test work, may be amenable to processing by flotation. The other mineralised zones identified are gold-silver–rich, and contain comparatively low levels of copper that, subject to confirmatory test work, may be amendable to conventional carbon in leach processing.

At Nam San, the initial phase of resource definition and exploration drilling concluded in early Jan. 2013. Nam San has been drill tested on 100-metre sections with a nominal 70m sample spacing across the main mineralised zone. The latest drilling results have demonstrated that the higher-grade mineralisation is dipping at 65–70 degrees, steeper than originally interpreted, and have indicated the potential to intersect higher-grade copper mineralisation up-dip of the current drilling.

At Nam Ve, a program of scout drilling was completed during the quarter at prospect which is located 7km northwest of LCT. Surface sampling previously identified a gold geochemical anomaly and the drilling is targeting a zone of high-grade gold veins that outcrop in the area. Drilling continues with maiden resources for Nam San and Nam Ve and an increase the LCT resource due 3Q CY13.

April 28, 2013

41

Inca de Oro (PNA 60.2%)—being optimised

PNA holds a majority interest in the Inca de Oro Copper-Gold Project in Chile through a joint venture with Codelco (29.8%), the world’s largest copper company, with a private group, Minera, holding the remaining 10%.

A 12mtpa (~60ktpa copper) Inca de Oro pre-feasibility study was completed in June 2012. It concluded that the cost profile after the first five years of production needed to be improved for the project to be economically robust. The JV partners agreed that there was significant potential to improve it through evaluation of the oxide resources at Inca de Oro and bringing in higher value mineralisation from nearby deposits.

PNA has a $10m budget for CY13 which will be split across Inca de Oro and drilling at the 100% PNA-owned Carmen deposit, 14km to the southwest. Carmen is a near-surface iron oxide copper-gold mineralised system, which, subject to a feasibility study, may support a low strip ratio satellite open pit to augment Inca de Oro mill feed.

Inca de Oro remains beneficially located near existing road, rail and smelting infrastructure, and just over 100km from the Port of Chanaral. However, access to power at a competitive price and to water remain challenges for the project. Delineating additional mineral resources (higher grade) is also key for the project’s future. Studies assessing these opportunities are scheduled for completion in late CY2013.

Inca de Oro Location Map

Source: PNA

Puthep Project (PNA 49%)—for sale

In Thailand, PNA holds a shareholding interest of 49% in the Thai-registered company Puthep Company Limited (Puthep). A publicly listed Thai entity, Padaeng Industry Public Company Limited (Padaeng,) owns the other 51%. Puthep has a concession agreement with the government of Thailand, covering two deposits (PUT1 and PUT2) that comprise the Puthep Copper Project. From PNA’s perspective, the project does not rank as highly as other growth opportunities the company has in its pre-development portfolio and, as a result, has commenced a trade sale process for the Puthep Copper Project on behalf of the joint venture.

April 28, 2013

42

Board Garry Hounsell, Chairman

Mr Hounsell is an accountant with significant experience as a director of large listed public companies. He is a Fellow of The Institute of Chartered Accountants in Australia and a Fellow of The Australian Institute of Company Directors. Mr Hounsell was a senior partner of Ernst & Young and Country Managing Partner and Chief Executive Officer of Arthur Andersen. From 2005 to 2007, he was an executive of Investec Bank (Australia) Limited. During the past three years, Mr Hounsell has also been a Director of the following ASX listed companies: Qantas Airways Limited, Orica Limited, Dulux Group Limited, Nufarm Limited, Mitchell Communications Group Limited.

Gary Stafford, Managing Director

Mr Stafford is a mining engineer with 30 years’ experience in the mining industry, initially in engineering and management positions at coal and gold mines with CRA, BHP and Barrack Mine Management before moving into company management with Saracen Minerals Limited (a subsidiary of Crusader Limited) and then PanAust. Gary Stafford has been Managing Director since 7 March 1996 and has presided over the Company’s growth from a junior exploration company to an S&P/ASX 100 mining company. Mr Stafford is also a member of the Nominations Committee.

Nerolie Withnall, Non-Executive Director

Mrs Withnall is a former commercial lawyer with specialist skills in the areas of corporate advice, capital raisings, securities and corporate trusts. Mrs Withnall is a former partner of the national law firm Minter Ellison and has previously served as a member of the Takeovers Panel and the Corporations and Markets Advisory Committee. Mrs Withnall is also a former member of the Senate of the University of Queensland. Mrs Withnall has also served as a Director of Campbell Brothers Limited, Alchemia Limited, Computershare Limited, Redcape Property Fund Limited (formerly Hedley Leisure & Gaming Property Partners Limited).

Andrew Daley, Non-Executive Director

Mr Daley is a Chartered Engineer (UK) and a Member of IOM3. Mr Daley worked with Anglo American and Rio Tinto in Africa before relocating to Australia with Fluor Australia in early 1981. Mr Daley has primarily worked in the resource finance sector, initially with National Australia Bank, then Chase Manhattan and as a director of Barclays Capital mining team in London and Sydney. In 2003, Mr Daley became a director of Investor Resources Finance Pty Ltd. Mr Daley has also served as a Director of Kentor Gold Limited, Dragon Mining Ltd, Minerva Resources plc, Uranex NL.

Geoff Handley, Non-Executive Director

Mr Handley is a geologist with over 30 years’ experience in the mining industry. Most recently, Mr Handley was Executive Vice President, Strategic Development with Placer Dome. Mr Handley has also served as a Director of Eldorado Gold Corp. (listed on the TSX, NYSE and the ASX), Endeavour Silver Corp.* (listed on the TSX and the NYSE), Mirabela Nickel Limited, (listed on the ASX and the TSX).

April 28, 2013

43

Geoff Billard, Non-Executive Director

Mr Billard is an economist who worked for CRA (now Rio Tinto) at Bougainville Copper, Argyle Diamonds, Pasminco and M.I.M. Holdings Limited. Mr Billard operated his own consulting business where he has previously assisted PanAust in forming and implementing corporate strategy and organizational change. Mr Billard previously served as a Director of Bougainville Copper Limited and Metal Manufacturers Limited.

Zezhong Li, Non-Executive Director

Mr Zezhong Li is the Vice President of Guangdong Rising Assets Management (GRAM). Mr Zezhong Li joined the Board following the completion of the share placement to GRAM in September 2009. Prior to joining GRAM, Mr Zezhong Li worked for the Poverty Alleviation Office of the State Council and was a consultant to the United Nations Development Program. Mr Zezhong Li has also served as a Director of Shenzhen Zhongjin Lingnan Nonferrous Metal Co.

John Crofts, Non-Executive Director

Mr Crofts has worked with BHP/BHP Billiton from 1987 to 2010 holding senior roles in marketing and business development. Mr Crofts served as an invited Director to the London Metal Exchange from 2007 to 2011. From 2000 to 2007, Mr Crofts was an Advisory Committee Member for the International Copper Association and Chairman of the European Copper Institute from 2003 to 2006. Appointed Director on 17 September 2010, Mr Crofts is also a member of the Sustainability Committee.

Ken Pickering, Non-Executive Director

Mr Pickering, a Mining Engineer from the University of British Columbia, Canada, has 35 years’ experience in the resources industry in Canada, Chile, Australia, Peru and the United States of America, with particular skills in major project development and mine management. He has held senior executive positions with BHP Billiton Base Metals in Chile from 1995 to 2010, including North American base metal activities from 2004. Mr Pickering was intimately involved in the development, operation and expansion of the Escondida Copper Mine, in Chile, serving at various times as Mine Development Manager, Mine General Manager, the President of the Escondida Joint Venture, the Executive Chairman of the Escondida Joint Venture, and President Major Projects, Business Development and Corporate Affairs (Chile). He is a member of the Association of Professional Engineers of British Columbia and the Institute of Engineers of Chile. Mr Pickering currently serves as a non-executive Director Enaex S.A , and THEMAC Resources Group Ltd.

April 28, 2013

44

PNA Model

Pan Aust financial summary Year-end 31 Dec

Sum of the Parts valuation US$m US$/sh A$/sh Forecast assumptions 2010 2011 2012 2013E 2014E 2015E 2016E 2017E 2018EPhu Kham (PNA 90%) 925 $1.53 $1.47 Copper (US$/lb) $3.43 $4.00 $3.59 $3.75 $3.90 $3.25 $3.25 $3.25 $2.60

Phu Kham exploration 100 $0.16 $0.16 Gold (US$/oz) $1,226 $1,570 $1,632 $1,575 $1,575 $1,575 $1,575 $1,575 $1,575 Ban Houayxai (PNA 90%) 570 $0.94 $0.90 Silver (US$/oz) $19.74 $35.26 $34.50 $35.00 $35.00 $35.00 $35.00 $35.00 $35.00

Ban Houayxai exploration 50 $0.08 $0.08 AUDUSD 0.92 1.03 1.04 1.04 1.04 1.04 1.04 1.04 0.90Phonsavan 50 $0.08 $0.08 Puthep 10 $0.02 $0.02 Production summary 2010 2011 2012 2013E 2014E 2015E 2016E 2017E 2018EInca de Oro 25 $0.04 $0.04 Phu Kham (PNA 90%)Corporate (118) $(0.20) $ (0.19) Ore Processed (Mt) 12.9 13.1 15.2 17.6 18.0 17.0 17.0 17.0 17.0

Grade (Cu %) 0.76% 0.65% 0.58% 0.46% 0.46% 0.50% 0.50% 0.50% 0.50%Subtotal 1,612 $2.66 $2.56 Recov ery (%) 70.3% 70.4% 72.3% 76.3% 81.0% 81.0% 81.0% 81.0% 81.0%Other Copper production (kt in conc) 67.9 59.9 63.3 62.0 67.1 68.9 68.9 68.9 68.9Net cash (debt) 40 $0.07 $0.06 Copper production (mlb in conc) 144 127 131 130 142 146 146 146 146NAV 1,652 $2.72 $2.62 Gold production (koz in conc) 58.2 53.6 59.5 60.3 60.9 56.6 56.6 56.6 56.6Asset valuation summary C1 (incl. royalty) $1.11 $1.29 $1.37 $1.58 $1.48 $1.41 $1.41 $1.41 $1.38

Ban Houayxai (PNA 90%)Ore Processed (Mt) 2.7 4.1 4.2 4.2 4.2 4.2 4.2Grade (Au g/t) 1.05 0.89 0.90 0.90 0.90 0.90 0.88 Recov ery (%) 88.8% 89.7% 90.0% 90.0% 90.0% 90.0% 90.0%Gold production (koz) 74.0 107.2 109.4 109.4 109.4 109.4 106.4Silv er production (koz) 134 519 527 527 527 527 527C1 (incl. royalty) $651 $717 $663 $663 $663 $663 $681

PROFIT & LOSS (US$m) 2010 2011 2012 2013E 2014E 2015E 2016E 2017E 2018ERevenues 573.9 577.9 715.6 785.5 864.1 776.2 780.0 785.0 690.6Cost of sales 215.6 268.3 351.4 368.1 375.1 363.2 363.2 363.2 363.2Ex ploration w rite-off 15.5 (9.1) (10.0) 10.5 10.5 10.5 6.0 6.0 6.0Roy alty 30.1 33.9 40.2 36.0 38.6 34.4 34.4 34.4 30.0Corporate Ov erheads 28.5 7.6 15.6 18.2 18.2 18.2 18.2 18.2 18.2EBITDA 283.2 275.0 315.6 348.9 414.7 339.0 343.5 343.5 248.6

Target price calculation A$ Weight A$/sh D&A 54.3 59.5 88.4 100.6 97.6 118.4 84.4 84.4 84.4SotP-deriv ed NAV $1,588 100% $2.62 EBIT 228.9 215.4 227.1 248.3 317.1 220.6 259.1 259.1 164.2EV/EBITDA v aluation 0% Net interest income/(ex pense) (12.9) (11.6) (14.8) (6.8) (2.1) 1.8 5.6 10.6 15.6 Average Adjusted PTP* 216.0 203.8 212.4 241.6 315.0 222.4 264.7 269.7 179.8

Tax ation 55.9 57.3 56.3 60.4 78.8 55.6 66.2 67.4 45.0Target price A$/sh $2.62 Post-tax income 160.1 146.6 158.6 181.2 236.3 166.8 198.5 202.3 134.9Production summary Sig Items/Minorities 16.7 0.2 12.0 17.3 22.2 16.7 19.9 20.2 13.5

Net income (adjusted earnings*) 143.4 146.4 146.6 163.9 214.1 150.1 178.7 182.0 121.4 Per share data (US$)EPS (adjusted, diluted) 0.05 0.25 0.26 0.30 0.39 0.28 0.33 0.33 0.22

Shares outstanding (fully diluted) 2955.2 594.0 606.2 606.2 606.2 606.2 606.2 606.2 606.2BALANCE SHEET (US$m) 2010 2011 2012 2013E 2014E 2015E 2016E 2017E 2018EAssetsCash & equiv alents 185 156 125 189 360 487 654 819 917Net tangible fix ed assets 696 1,037 1,279 1,369 1,369 1,403 1,396 1,383 1,341Total assets 880 1,193 1,404 1,559 1,730 1,890 2,049 2,202 2,258LiabilitiesInterest bearing debt 73 107 165 125 115 115 115 115 115

Total liabilities 438 192 202 299 380 297 286 327 326

Shareholders equity 678 894 1,024 1,262 1,444 1,563 1,723 1,876 1,933Minority interests 50 116 109 143 66 2 -56 -126 -218

Reserves (Dec '12) Mt % / kt / koz Net debt (111) (49) 40 (65) (246) (372) (539) (704) (802)

Phu Kham 176.0 CASH FLOW (US$m) 2010 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E

Cu 0.50% 880 EBIT 228.9 215.4 227.1 248.3 317.1 220.6 259.1 259.1 164.2 Au 0.23 1,223 Total cash from operating 265.2 225.2 199.0 289.0 338.6 262.0 293.5 287.9 196.8

Ban Houayxai 41.0 Net capital ex penditure (111.2) (232.2) (203.8) (87.5) (55.6) (44.6) (44.6) (39.6) (29.6)Au 0.81 1,003 Ex pl & Net (acquisitions)/disposals (26.3) (41.6) (67.9) (35.0) (35.0) (35.0) (20.0) (20.0) (20.0)Ag 7.90 9,785 Cash from investing activities (143.3) (288.0) (280.6) (145.1) (113.1) (102.1) (87.1) (82.1) (72.1)

Cash from financing activities (25.4) 34.2 50.5 (79.6) (54.4) (33.4) (39.7) (40.5) (27.0)Resources Mt % / kt / koz Net cash flow 96.6 (28.6) (31.0) 64.3 171.1 126.6 166.7 165.4 97.7 Phu Kham 227.0 PROFITABILITY & VALUATION 2010 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E

Cu 0.48% 1,090 EBIT margin, % 40% 37% 32% 32% 37% 28% 33% 33% 24%Au 0.22 1,509 EV/EBITDA, x 6.6 7.0 6.7 5.9 4.5 6.4 5.4 5.3 7.9

PE (adj.), x 42.1 9.3 8.7 7.6 5.8 8.3 7.0 6.9 10.3Ban Houayxai 65.0

Au 0.93 1,826 Ag 7.20 14,139


Phu Kham (PNA 90%)

53%

Phu Kham exploration

6%


33%

Inca de Oro1%

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01020304050607080

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E

Phu Kham (PNA 90%) C1 Cash Costs (US$/lb) Copper price (US$/lb)

Phu Kham Copper

April 28, 2013

45

Sandfire Resources (SFR AU) Initiation of coverage: High-grade Australian copper producer


Rating BUY na

Target $7.41 na

EPS FY14E $1.12 na

EPS FY15E $1.17 na

CFPS FY14E $1.55 na

CFPS FY15E $1.68 na

Copper production (FY14E, kt) 67.64 na


SHARE DATA



3M avg daily vol (000) 806


Market cap (A$m) 901

Net cash (debt) (A$m) (245)

Enterprise value (A$m) 1,146


FINANCIAL DATA

Year to Dec FY13E FY14E FY15E

Revenue (A$m) 525.1 583.9 595.5

EBITDA (A$m) 254.8 324.7 325.2

Income (A$m) 101.8 173.0 179.7

EPS (Ac/sh) 66.5 112.3 116.7

CFPS (Ac/sh) 116.0 155.4 168.1

PER (x) 8.8 5.2 5.0

PCF (x) 5.0 3.8 3.5

EV/EBITDA (x) 4.5 3.5 3.5

Dividend yield (%) - - -

OPERATING DATA FY13E FY14E FY15ECopper production (mlb) 143.7 149.1 163.7C1 costs (US$/lb) $1.87 $1.40 $1.34Copper price (US$/lb) $3.58 $3.88 $3.581xNAV10% /sh (A$) $7.41Current P/NAV10% (x) 79%

$0.00$1.00$2.00$3.00$4.00$5.00$6.00$7.00$8.00$9.00

$10.00

00.511.522.533.54

Pri

ce (A

$/s

h)

SFR- ASX


BUY

SFR.ASX A$5.92/sh Target A$7.41/sh

We initiate coverage of Sandfire Resources (SFR.ASX) with a BUY

recommendation and a $7.41/sh price target. As the highest-grade, lowest-cost copper producer on the ASX, we believe concerns over an extended commissioning period, short mine life, and potential balance sheet stress have presented a buying opportunity. We are confident on all three counts and see SFR as one of the best copper plays on the ASX with a profile of ~70ktpa copper at ~US$1.30/lb cash costs (incl. royalty).

DeGrussa plant commissioning and ramp-up progressing. While the Dec. Q commissioning figures show plant ramp-up and commissioning have a way to go, these figures were achieved from a blend of sulphide, transitional and oxide material from the Stage 2 open pit. We remain confident SFR will attain its nameplate throughputs of 1.5mtpa and get recoveries up to the BFS estimates of +90% once it has a stable supply of 100% sulphide ore from the underground. Underground mining activities are the critical path to ramp up but remain on schedule to achieve the 1.5mtpa rate from mid-year. We forecast 67kt Cu and 35kozpa Au for FY13.

Unlocking exploration story. While the exploration story lost momentum during the construction period, it is important to remember it is still only 4 years from discovery. We believe the culmination of recent work together with deep drilling results have given a step change to SFR’s understanding and expect newsflow to follow from the mid-year underground drill program.

Funding and corporate. SFR held $114m cash (Dec. 31) and we believe is well funded to meet its aggressive repayment schedule of $180m over CY13. OZ Minerals (OZL) and POSCO continue to hold ~40% between them. Now with an EV of ~$700m (SFR EV ~$1,100m) and with a looming $2.5bn upcoming capex bill for Carrapateena (2016) OZL is more likely a seller than a buyer of SFR.

We initiate coverage with a BUY rating and a $7.41/sh price target. Our price target is based on a 1.0xNAV for DeGrussa using conservative LT price of US$2.60/lb copper, US$1,575/oz gold and 0.90 AUDUSD. We also include $250m (A165cps) for all exploration.

April 28, 2013

46

Investment summary

DeGrussa Copper-Gold Project (SFR 100%)

SFR commenced commissioning of its 1.5mtpa DeGrussa open-pit mine in Western Australia in October 2012. Construction was completed largely on time and budget and ramp-up to date has progressed smoothly. Stage 1 of the open-pit has been completed with the extraction of very high-grade DSO (~10% copper) and Stage 2, designed to gain early access to ore for commissioning, should be completed this quarter. Underground production continues to ramp-up (106kt for March) and is due to achieve the 1.5mtpa rate by mid-year. SFR has issued FY13 guidance of 67–71ktpa Cu (GMPe 67kt) and 49koz Au. We see SFR as a ~70ktpa producer at ~US$1.30/lb for an initial 9 years.

Exploration looking up

DeGrussa is located in a 30km-long, 2km-wide faulted corridor, prospective for further VMS discoveries, but since discovery, exploration has been relatively quiet. However, we believe the culmination of recent work and deep drilling is unlocking the model. SFR retains a $20mpa exploration budget and we are looking forward to a mid-year underground drill program with confidence, as it tests the faulted offset positions of C1, 4 and 5.

No balance sheet stress

As at Dec. 31, SFR held $114m cash and a $380m fully drawn finance facility. It has since repaid $50m on March 31 and plans to repay a further $130m over the course of CY13. While aggressive, our modeling shows cashflows support this without any pullback in discretionary spending on average copper prices +US$2.90/lb for the remainder of CY13. Lower prices may mean it needs to reschedule but even this we do not see as a real issue, given the robustness of the project allowed such competitive terms in the first place (no hedging).

OZL and POSCO stake

Now with an EV of ~$700m (SFR EV ~$1,100m) and potentially with a looming $2.5bn upcoming capex bill for Carrapateena (2016), OZL is more likely a seller than a buyer of SFR. It remains more difficult to forecast the intentions of POSCO.

SFR corporate targets

We have seen SFR enter into some early stage greenfield exploration JVs around the world but we remain focused on near-term opportunities, especially if its plant shows significant extra capacity (once ramped up) and the exploration efforts fail to increase the resource base. Potential deposits within a 100km radius that may eventually meet requirements remain Ventnor Resources (VRX.ASX) and Sipa Resources (SRI.ASX).

April 28, 2013

47


Below are our modeled assumptions for the DeGrussa Copper Mine.

DeGrussa Project Parameters Resource Mt 11.9

Cu grade % 5.3%contained copper kt 627

Au grade g/t 1.8 contained gold koz 693

Reserve Mt 9.6Cu grade % 5.1%

contained copper kt 482Au grade g/t 1.7

contained gold koz 517

DeGrussa GMPeMill capacity mtpa 1.5



Au Recovery % 0.6Av Au production kozpa 48.5

Commissioning plant 2012Capex A$m 400$ Mine life years 9LOM Cu production kt 648av C1 Cash costs per pound US$/lb 1.30$

NPV 100% 1,175$


Our SFR valuation is dominated by steady-state production at DeGrussa. We value it on a post-tax DCF basis using a 10% discount, US$2.60/lb copper price, US$1,575/oz gold price and long term 0.90 AUD/USD. We also attribute A$250m (A165cps) for its nearby prospective exploration.

Mine life remains one of the biggest talking points when it comes to SFR. We model a 9-year mine life, which assumes conversion of remaining resources at Conductor 4 and 5 and additional 1.5 years of extensions.

While its high grades and high margins mean it is less leveraged to moves (up and down) in the copper price, with most of its costs denominated in A$ (like OZL), SFR remains highly leveraged to moves here. A 10% lower A$ increases our NAV by 16% or 115cps while a 10% higher copper price increases our NAV by 16% or 118cps. Our $7.41/sh price target and BUY recommendation are based on 100% of our DCF for DeGrussa.

SFR valuation breakdown Sensitivity Sum of the Parts valuation A$m A$/shDe Grussa 1,175 $7.75

De Grussa exploration 250 $1.65 Other 15 $0.10 Corporate (78) ($0.51)

Subtotal 1,362 $8.99 OtherNet cash (debt) (239) ($1.58)NAV 1,123 $7.41

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Risks

Financing: SFR held $114.8m in cash (Dec. 31), has made its first $50m repayment (March 31) and expects to repay a further $130m in roughly equal ($45m, $45m and $40m) installments over CY13. The remaining $200m is amortised over the following 3 years in a declining profile. The project robustness meant it was able to fund the project with 100% debt funding without any hedging. Its low operating costs mean that our modeling shows SFR can weather an average copper price of US$2.90/lb copper (at spot AUDUSD) for the remainder of the year and still meet this schedule without reducing discretionary spend (exploration etc).

Political and fiscal risks: While the recent introduction of the Mineral Resources Rent Tax (MRRT on iron ore and coal only) and introduction of the Carbon Tax, means mining investment risk in Australia is higher, it remains one of the premier mining investment destinations worldwide.

Costs: Cost escalation remains an issue in Western Australia, with large oil and gas and iron ore investments putting labour pools under strain. However, with capital largely sunk and high grades keeping unit costs low, our valuation shows limited sensitivity to either increased capex or opex. The exciting nature of the DeGrussa discovery and now production has meant that it has been an employer of choice in a competitive market.

Catalysts

From here, newsflow and catalysts will centre on the continued ramp-up of low cost production and success or otherwise of its exploration programs.

Continued ramp-up of the underground mine (tonnes and grade) and plant performance (throughput and recoveries)

Mid-year drilling commences from underground platforms

Scoping study on viability of SX/EW recovery option for Cu oxide ore

Regional exploration

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Company description

SFR operates the 100%-owned DeGrussa Copper-Gold Mine, located in its Doolgunna Project in Western Australia. The 400sqkm of tenure is in the Bryah Basin approximately 135km north of Meekatharra, 750km south of Port Hedland (concentrate export port) and 900km northeast of Perth.

Degrussa Location

Source: SFR

Following its discovery in early 2009, DeGrussa is one of Australia’s fastest moving mine developments — with Sandfire completing a comprehensive resource drill-out, Definitive Feasibility Study and project financing for a $384 million mine development in less than three years from the discovery drill-hole. The first shipment of copper ore in May 2012 marked Sandfire’s transition to producer status in less than 4 years from discovery.

The DFS, delivered in June 2011, was based on LOM extraction of 10.72mt material grading 5.1% Cu and 1.7g/t for production of 480kt and 270koz of payable copper and gold, respectively. The deposit is mined mostly by underground methods with an initial small open-pit component. Stage I of the open-pit, including DSO and crushing, was completed in early Dec. 2012. Stage II progressed in sulphide material from Jan. 2013 and is expected to be mined out during Q2 CY2013. The underground continues to ramp up and is scheduled to reach the 1.5mtpa rate by mid-year.

The 1.5mtpa concentrator was commissioned in October 2012 and the maiden shipment sailed in late November 2012. March Q production was 13,683t copper and 12,063oz gold. The plant ramp-up continues as the throughput and sulphide blends continue to ramp up. At the 1.5mtpa nameplate we continue to expect production of ~70ktpa copper at costs of US$1.20/lb while head grades remain above 5% Cu.

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DeGrussa

Geology

The DeGrussa deposit lies within paleoproterozoic Narracoota Volcanics along a 22km strike. The deposit is a typical Volcanogenic Massive Sulphide (VMS), predominantly massive mineralisation of chalcopyrite, sphalerite, pyrrhotite and magnetite within sulphide-rich quartz veins. However, to date zinc grades remain uneconomic.

DeGrussa Minerals Field

Source: SFR


A reserve update is pending and while we are not expecting any game-changing additions we do expect some incremental conversion from better information in and around the deeper Conductor 4 and 5 deposits. Current reserves underpin a 7-year mine life.

DeGrussa Copper-Gold Ore Reserves (March 2012)

Ore Reserve CategoryTonnes

(Mt)Cu Grade

(%)Au Grade

(g/t)Contained

Cu (kt)Contained Au (koz)

Proved 0.6 1.7% 1.0 10.0 20.0Probable 9.0 5.4% 1.7 482.0 497.0

Total 9.6 5.1% 1.7 482.0 517.0

DeGrussa

Source: SFR

Current resources (soon to be updated) contain ~8 years of sulphide resources. We see strong potential for incremental increases especially from near-to and up-dip of C4 and C5.

DeGrussa Copper-Gold Mineral Resources (March 2012) Mineral

ResourcesCategory

Tonnes (Mt)

Cu Grade (%)

Au Grade (g/t)

Contained Cu (kt)

Contained Au (koz)

Au Laterites Measured 0.04 1.20 0.0 1.5Measured 0.23 0.80% 0.10 1.8 0.7Indicated 1.06 1.60% 0.50 17.0 17.0Indicated 0.23 1.79% 2.60 4.1 19.2

Inferred 0.19 4.40% 1.20 8.4 7.3Indicated 7.84 5.80% 2.00 454.7 504.2

Inferred 2.31 4.40% 2.00 101.6 148.6

DeGrussa Total 11.91 5.30% 1.80 587.6 698.6

Copper Oxides

Supergene chalcocite

Primary Massive Sulphide

Source: SFR

April 28, 2013

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Mining

Open Pit

Open-pit mining is completed using a contractor.

Stage I of the open-pit component at DeGrussa was completed in Dec. 2012. A total of 7.7 million bank cubic meters was mined from Stage I, which contained the DSO chalcocite reserves with copper oxides and additional sulphide material.

Stage 2 mining will continue through to Q2 CY2013, targeting massive sulphide to blend with underground or for processing, copper oxide is stockpiled and gold oxide is sold to the Plutonic Gold Mine (Barrick Ltd).

Degrussa Stages of Mining

Source: SFR

Underground

Ore from underground is mined using a mining contractor employing long-hole open stoping methods and cemented fill to achieve high extraction rates. Ore is then trucked up a single decline. The underground mine comprises 11km of vertical and 19km of lateral development and progress remains on schedule with over 25% of LOM development excavated. Mining rates from the underground will ramp-up to 1.5mtpa by mid-CY13, delivering 100% sulphide feed to the plant. We model $60/t mining costs.

Processing

Processing of the Direct Shipping Ore (DSO) consisted merely of a crush-and-screen circuit before being trucked to port and shipped to customers.

The main plant is a conventional 1.5mtpa flotation processing facility comprised of crushing, milling and classification circuits followed by flotation, dewatering and filtration to produce a ~27% copper concentrate with gold credits. After commissioning in the Dec. Q 2012, the plant is on track to ramp-up to its 1.5mtpa (125kt/month) nameplate by mid-year.

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During the Mar. Q, 310,727t of sulphide ore grading 4.7% Cu and 1.9g/t Au was processed, producing 48,085t of concentrate grading 21.8% Cu and 3.3g/t Au. Commissioning recovery rates are low, but as expected, initial recoveries from the underground are in the range of 80–90%, with >90% the target. Recovery rates from the open pit have been ~60% due to partial oxidation of ore.

Degrussa Copper Grades and Recovery

Source: SFR

Despite being a VMS deposit, currently resource/reserve grades do not warrant adding a zinc circuit but discovery of higher zinc grades may change this.

We believe that the plant has been heavily capitalised and once the mine and plant are fully ramped up we can see extra throughput capacity putting the pressure back on the mining operation and definition of more reserves.

Offtake

High-grade DSO mined at DeGrussa was sold into China under two contracts, the first with MRI Trading AG and the second with Yunnan Copper Corporation Ltd.

SFR has entered into four copper concentrate sales contracts for up to 3-year terms, which are set to cover up to 85% of the annual concentrate production. The remaining copper concentrate will be available for delivery in the spot market.

Gold (lateritic) produced from DeGrussa is processed by Barrick (Plutonic) Ltd. under the Ore Sale and Purchase Agreement.

April 28, 2013

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Infrastructure

Pacific Energy (7-year term from Feb. 1, 2012) built, own, and maintain the 20MW Power Station for operations at DeGrussa. It currently runs on diesel but definition of extra resources may make linking into the nearby gas pipeline viable. Concentrate produced at DeGrussa is transported by road to Port Hedland before being shipped to customers.

Fiscal regime

In WA, royalties are levied at 5% for copper concentrate sold and 2.5% for gold. The corporate tax rate is 30%.

Production profile

Having produced ~32kt of copper contained in DSO material in 1H FY13, SFR expects FY2013 production between 67–71kt of copper and 49koz gold. Thereafter, production rates should near 70ktpa while processing 5% copper ore at the nameplate 1.5mtpa throughput. C1 LOM cash cost guidance at around US$1.20/lb (GMPe US$1.30/lb incl. royalty).

Production profile

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April 28, 2013

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Near mine exploration

Surface drilling has intercepted:

The up-dip position of C4, including 10.6m at 4.5% Cu and 2.0g/t Au. This also included some of the highest grades of zinc to date (1.6% );

Much thicker intercepts (25m) leading to immediate upgrades to the C5 Resource once assays come back.

The culmination of recent work has led to an improved understanding of the fault controls. It is now believed C4 and C5 are merely the fault offset positions of C1 leading to resource upside chasing the deposits right up to the fault contact boundaries and up dip. Up-dip positions for the DeGrussa resource will also be tested.

An underground drill platform is being developed and should be drill-ready from mid-year, seeing results in the Sept Q.

SFR have committed $20 million annually for exploration at DeGrussa.

Production profile


Regional exploration

We have seen SFR enter into some early stage greenfield exploration JVs around the world but we remain focused on more near-term opportunities especially if its plant shows significant extra capacity (once ramped up) and the exploration efforts fail to increase the resource base. Potential deposits within a 100km-radius that may eventually meet requirements remain Ventnor Resources (VRX.ASX) and Sipa Resources (SRI.ASX).

April 28, 2013

55

Board Derek La Ferla, Non-Executive Chairman

Mr La Ferla has been legal advisor on a large number of corporate and commercial transactions over the past 25 years, including some of the most significant mergers, acquisitions and capital raisings undertaken in Western Australia. He has worked very closely with the boards and management of many public, private and statutory corporations, with a particular emphasis over the past eight years on corporate governance, director responsibilities and balancing commercial, legal and risk management considerations. Mr La Ferla has held previous board roles at Norton Rose, Katanna Capital Limited and Karratha Village Pty Ltd and has also been Chairman of Optimised Investments Limited. Mr La Ferla’s current role with Norton Rose is primarily to oversee the affairs and matters of major clients with offices and/or operations within Western Australia.

Karl Simich, Managing Director

Mr Simich is an experienced international mining executive who has been involved in the financing, construction, development and operation of five mining projects in New Zealand, Australia and Africa. Specialising in resource finance and corporate management, Mr Simich has been a Director of and held senior executive positions with a number of ASX-listed mining companies. Mr Simich is a Fellow of the Institute of Chartered Accountants and a Fellow of the Financial Services Institute of Australasia and has completed post-graduate studies in business and finance.

John Evans, Executive Technical Director

Mr Evans graduated from the University of Auckland New Zealand in 1970 with B.Sc. Major in geology. Between 1970 and 1987, he was employed by various divisions of CRA Limited, including being in charge of all field operations for iron ore in the Pilbara, Western Australia and gold and base metals in the Murchison, Western Australia. He was the managing director of Marymia Exploration NL for 12 years until 2002 and has been a geological consultant to numerous companies during and since.

Soocheol Shin, Non-executive Director

Mr Shin is the Managing Director of POSCO Australia Pty. Ltd. (a wholly owned subsidiary of the Korean steelmaker POSCO), which holds 15.8 percent of the company’s issued capital. Mr Shin joined POSCO in 1989 and has held a variety of positions throughout his career, including Project Manager, POSCO Australia Pty Ltd; Team Leader, Coal Procurement Group; Team Leader, Steel Making Raw Materials Procurement Group and Group Leader, Raw Materials Transportation Group. He was appointed Managing Director of POSCO Australia in February 2012.

Robert Scott, Non-Executive Director

Robert Scott is a Chartered Accountant with 35 years’ experience as an adviser on corporate services and taxation. He currently consults on corporate structuring and taxation planning for accounting firm, Gooding Partners Chartered Accountants. Mr Scott retired as an International Partner of Arthur Andersen in 1995 and founded a "start-up" company to develop remote monitoring technology. As Executive Chairman and major investor, he coordinated a successful trade sale of the company to a listed vehicle in 2000. Mr Scott also serves on the boards of Amadeus Energy Limited, CGA Mining Limited, Homeloans Limited.

April 28, 2013

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SFR Model

Sandfire financial summary Year-end 30 June

Sum of the Parts valuation A$m A$/sh Forecast assumptions 2011 2012 2013E 2014E 2015E 2016E 2017E 2018EDe Grussa 1,175 $7.75 Copper (US$/lb) $3.94 $3.70 $3.58 $3.88 $3.58 $3.25 $3.25 $2.93

De Grussa exploration 250 $1.65 Gold (US$/oz) $1,373 $1,682 $1,584 $1,575 $1,575 $1,575 $1,575 $1,575 Other 15 $0.10 Silver (US$/oz) $28.95 $34.65 $35.00 $35.00 $35.00 $35.00 $35.00 $35.00 Corporate (78) ($0.51) AUDUSD 0.99 1.03 1.04 1.04 1.04 1.04 1.04 0.97

Subtotal 1,362 $8.99 Production summary 2011 2012 2013E 2014E 2015E 2016E 2017E 2018EOther De Grussa (SFR 100%)Net cash (debt) (239) ($1.58) Ore Processed (kt) 661 1,520 1,600 1,600 1,600 1,600NAV 1,123 $7.41 Grade (Cu %) 5.10% 5.10% 5.10% 5.10% 5.00% 5.00%Asset valuation summary Recov ery (%) 71.8% 87.3% 91.0% 91.0% 91.0% 91.0%

Copper production (kt in conc) 2.2 65.2 67.6 74.3 74.3 72.8 72.8Copper production (mlb in conc) 4.9 143.7 149.1 163.7 163.7 160.5 160.5Gold production (koz in conc) 0.0 19.2 49.8 52.5 52.5 52.5 52.5C1 (incl. royalty) $2.98 $1.87 $1.40 $1.34 $1.31 $1.32 $1.21

PROFIT & LOSS (A$m) 2011 2012 2013E 2014E 2015E 2016E 2017E 2018ERevenues 4.8 23.0 525.1 583.9 595.5 552.5 553.0 548.6Cost of sales - 25.3 213.6 196.2 206.8 206.8 206.1 207.2Ex ploration w rite-off 52.1 26.4 21.8 20.0 20.0 15.0 10.0 10.0 Roy alty - - 24.6 29.1 29.4 27.0 26.5 25.8Corporate Ov erheads 9.6 5.0 10.3 14.0 14.0 14.0 14.0 14.0EBITDA (56.8) (27.8) 254.8 324.7 325.2 289.8 296.4 291.6D&A - 4.5 84.4 55.8 58.8 58.8 58.8 58.8EBIT (56.8) (32.3) 170.4 268.8 266.5 231.0 237.6 232.8Interest income/(ex pense) (0.0) (0.2) (24.2) (21.7) (9.8) (1.8) (0.0) (0.0)Adjusted PTP* (56.9) (32.6) 146.2 247.1 256.7 229.2 237.6 232.8

Target price calculation A$ Weight A$/sh Tax ation (29.8) (8.7) 44.4 74.1 77.0 68.8 71.3 69.8 SotP-deriv ed NAV $1,123 100% $7.41 Post-tax income (27.1) (23.9) 101.8 173.0 179.7 160.4 166.3 163.0 EV/EBITDA v aluation 0% Sig Items/Minorities - - - - - - - - Average Net income (adjusted earnings*) (27.1) (23.9) 101.8 173.0 179.7 160.4 166.3 163.0

Per share data (A$)Target price A$/sh $7.41 EPS (adjusted, diluted) (0.20) (0.16) 0.67 1.12 1.17 1.04 1.08 1.06 Production summary

Shares outstanding (fully diluted) 151.0 151.6 154.0 154.0 154.0 154.0 154.0 154.0BALANCE SHEET (A$m) 2011 2012 2013E 2014E 2015E 2016E 2017E 2018EAssetsCash & equiv alents 74 100 44 107 234 402 606 808Net tangible fix ed assets 99 429 549 514 468 421 383 345Total assets 173 530 593 620 701 823 990 1,153LiabilitiesInterest bearing debt 2 345 283 138 38 0 0 0Total liabilities 34 412 371 225 126 88 87 87Shareholders equity 138 117 223 396 576 736 902 1,065Minority interestsNet debt (72) 245 239 32 (195) (402) (606) (807)CASH FLOW (A$m) 2011 2012 2013E 2014E 2015E 2016E 2017E 2018EEBIT (56.8) (32.3) 170.4 268.8 266.5 231.0 237.6 232.8 Total cash from operating (0.5) (27.3) 177.7 239.3 258.9 238.9 235.8 233.2

Reserves (Mar '12) Mt % / g/t kt / Net capital ex penditure (23.4) (270.1) (72.5) (12.0) (12.0) (12.0) (12.0) (12.0)

DeGrussa 9.6 Ex pl & Net (acquisitions)/disposals (59.7) (31.3) (86.9) (20.0) (20.0) (20.0) (20.0) (20.0)

Cu 5.1% 482 Cash from investing activities (83.1) (298.2) (159.5) (32.0) (32.0) (32.0) (32.0) (32.0)Au 1.70 517 Cash from financing activities 101.8 351.7 (74.2) (145.0) (100.0) (38.0) - -

Resources Mt % / g/t kt / Net cash flow 18.2 26.2 (56.0) 62.3 126.9 168.9 203.8 201.2

DeGrussa 11.9 PROFITABILITY & VALUATION 2011 2012 2013E 2014E 2015E 2016E 2017E 2018E

Cu 5.3% 627 EBIT margin, % na na 32% 46% 45% 42% 43% 42%Au 1.80 693 EV/EBITDA, x na na 7.8 4.6 4.5 5.0 4.8 4.9

PE (adj.), x na na 8.8 5.2 5.0 5.6 5.4 5.5* ex cluding non-recurring itemsSource: Company data, GMP estimates

De Grussa82%

De Grussa exploration

17%

Other 1%

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De Grussa (SFR 100%) C1 Cash Costs (US$/lb)

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DeGrussa Copper

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ASX COPPER DEVELOPERS

Blackthorn Res. (BTR.ASX) – HOLD A$0.77 PT

Hot Chili Ltd (HCH.ASX) – BUY A$1.15 PT

Rex Minerals (RXM.ASX) – HOLD A$0.47 PT

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Intentionally blank

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Blackthorn Resources (BTR AU) Initiation of coverage: Zambian copper and Burkina Faso zinc


Rating HOLD na

Target $0.77 na

EPS FY16E ($0.58) na

EPS FY17E $0.05 na

CFPS FY16E ($0.58) na


Copper production (FY16E, kt) - na


SHARE DATA




3M avg daily val (A$000) 317

Market cap (A$m) 68




FINANCIAL DATA


Revenue (A$m) - - 259.1

EBITDA (A$m) (7.2) (7.2) 125.7

Income (A$m) (97.2) (97.2) 8.7

EPS (Ac/sh) (58.4) (57.8) 5.2

CFPS (Ac/sh) (58.4) (57.8) (4.5)

PER (x) (0.7) (0.7) 7.9

PCF (x) (0.7) (0.7) (9.1)

EV/EBITDA (x) (4.8) (4.8) 0.3


OPERATING DATA FY15E FY16E FY17ECopper production (mlb) - - 86.7C1 costs (US$/lb) $0.00 $0.00 $1.71Copper price (US$/lb) $3.58 $3.25 $3.251xNAV10% /sh (A$) $1.01Current P/NAV10% (x) 41%

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BTR- ASX


HOLD

BTR.ASX A$0.39/sh Target A$0.77/sh

Blackthorn Resources (BTR.ASX) holds 100% of a +1mt copper

resource at Mumbwa in Zambia and 27% of the Perkoa zinc operation in Burkina Faso. At Mumbwa, significant de-risking (PFS & Met work) remains before a potential decision to mine. We believe the Oct.’13 tenure expiry is driving the urgency behind studies/newsflow, not the deposit. At Perkoa, operations are ramping-up but we don’t envisage BTR receiving any dividends from its 27% stake before FY17, suggesting it may soon be cum funding for activities at Mumbwa. Ahead of significant de-risking of Mumbwa and clarity around a funding solution, we initiate with a HOLD recommendation and a $0.77/sh PT.

Mumbwa (BTR 100%) disappointing resource update. Our Jan. site visit confirmed Mumbwa as a large copper resource but we came away confused about the potential project scope with the resource very deeply weathered (oxide) and no metallurgy having yet been completed. The updated resource lost ~80mt of Inferred and reduced contained copper by ~50%. Ahead of a detailed estimate of oxide, transitional and primary mineralization and maiden metallurgical test work, confusion remains over how a project looks. At this early stage, we model in line with BTR’s scoping study assuming a 7.5mtpa open-pit operation. But we believe it will require combined oxide/sulphide processing and capex of $600m for ~60ktpa at US$1.90/lb cash costs. BTR’s PFS is due July ‘13.

Perkoa zinc project (BTR 27.3%) first concentrate sales in Q2 CY13. BTR recently diluted its stake to 27.3% (from 39.9%) instead of contributing its share of US$80m overrun/expansion capex. The operation is being expanded from 90ktpa to 120ktpa, which is due for completion CY13 end. BTR will only see first dividends from its 27.3% share once the JV repays operator Glencore (62.7%) US$90m in loans (GMPe late CY16).

Balance sheet: Cash on hand was $32m (Dec. 31) which sees it funded for the delivery of a PFS at Mumbwa by mid-2013. Further drilling, delivery of a BFS by mid-2014 and working capital are currently unfunded.

We initiate coverage with a HOLD rating and an A$0.77/sh price target. Our price target is based on 0.7x NAV for 100% of a potential operation at Mumbwa and 0.85x NAV for expected cashflows from its 27.3% share of the Perkoa zinc project. We use conservative LT prices of US$2.60/lb copper, US$0.85/lb zinc, US$1,575/oz gold and 0.90 AUDUSD.

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Investment summary

Mumbwa Copper-Gold Project (BTR 100%)

BTR’s Mumbwa Copper-Gold Project is located in a large IOCG province in Zambia. BTR’s September ’12 scoping study estimated potential economics and suggested the Mumbwa project had an open-pit mineable inventory of 84.5mt ore at 1.19% Cu with a strip ratio of 2.4:1. Throughput of 7.5mtpa would produce 55–75ktpa of copper contained in a 30% concentrate over an initial 13.5 years. Cash costs were estimated at US$31.45/ROM t ($1.49/lb. Cu) and start-up capital expenditure at US$377m. However, even before the ~50% resource (0.5% Cu cut-off) downgrade to 108.9mt at 1.09% (1,189kt Cu), we had unanswered questions on the potential project scope.

A PFS is underway (due mid-2013) and should give greater clarity on project scope including:

underground (accessing high-grade sulphide core early) vs. open-pit mining;

metallurgy (inventory and recoveries for flotation vs. leach);

Costs (capex and opex).

Tenure renewal (Oct.’13) driving current timeline but resource growth to come

BTR is striving to deliver a PFS to the Zambian government to apply for conversion to a Mining License by the Oct. ’13 expiry, hence the urgency around current timelines. Elsewhere, we are confident of resource extensions and note rigs have now been redeployed to step out the resource and to test regional targets like the Kakozhi prospect 6km to the northwest.

Perkoa zinc project (BTR 27.3%)—dividends a way off

Perkoa is a JV with Glencore International (62.7%), who is funding the development of the Perkoa Zinc Mine and will oversee operations, and the Burkina Faso government (10%). The high-grade VMS deposit in Burkina Faso has resources of 12.2mt at a mine head grade of 10.3% zinc for over 1.25mt of contained zinc. Commissioning is underway with first concentrate shipments expected to sail during Q2 CY2013. The 2013 budget and an updated reserve and resource statement are due for release by BTR shortly.

Burkina Faso gold exploration

Outside of regional exploration peripheral to the Mumbwa and Perkoa projects, BTR also holds a series of gold (and base metal) exploration projects in Burkina Faso. Exploration activities will ramp up on these later in CY13.

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Valuation and sensitivity We model a 7.5mtpa open-pit operation at Mumbwa producing ~65ktpa copper in concentrate. Our assumptions are outlined below.

Mumbwa Project Parameters Modelled Perkoa JV Project Parameters Modelled Resource Mt 108.9



Mumbwa GMPeMill capacity mtpa 7.50



Au Recovery % 75%Av Au production kozpa 7


NPV 100% 65$

Resource Mt 12.2Zn grade % 10.3%

contained zinc kt 1257Pb grade % 0.16%

contained lead kt 20Ag grade g/t 53.9

contained silver koz 21144

Perkoa GMPeMill capacity mtpa 1.00

Zn Head Grade % 12.5%Zn Recovery % 90%

Av Zn Production ktpa 103.5Pb Head Grade % 0.01

Pb Recovery % 85%Av Pb production ktpa 8.1

Ag Head Grade g/t 53Ag Recovery % 65

Av Ag Production mozpa 1.06Commissioning plant 2013Capex A$m 56$ Mine life years 13LOM Zn production kt 1346av C1 Cash costs per poun US$/lb 0.70$

NPV 27.3% 85$ Source: GMP estimates, company data Source: GMP estimates, company data

Given the early stage and lack of detail, Mumbwa is the highly leveraged driver of our BTR valuation as dividends from its share in Perkoa are longer dated and less important in the short term. We value Mumbwa on a post-tax DCF basis using a 10% discount, 0.90 AUD/USD and US$2.60/lb long-term copper price. We value BTR’s 27.3% share of cashflows from the Perkoa Zinc Mine using a 10% discount, 0.90 AUD/USD and US$0.85/lb long-term zinc price. While this remains a high-grade asset, any distribution of dividends to BTR comes only after Glencore is repaid US$90m in debt lent to the JV.

With ~$32m cash (Dec. 31), BTR is funded for the delivery of the Mumbwa PFS mid-CY13 but from there it will require funding. We risk weight our assumed Mumbwa project at 0.7xNAV and its share of the Perkoa Zinc Mine at 85% as it is de-risked toward production and is ramped up. Together, these give our $0.77/sh price target and HOLD recommendation.

Mumbwa is an early-stage project and our BTR valuation is very sensitive to inputs. A 10% higher copper price increases our NPV by 70% or 70cps.

BTR Valuation Breakdown Sensitivity Sum of the Parts valuation A$m A$/shMumbwa (BTR 100%) 65 $0.39

Zambian (Cu) Exploration 35 $0.21 Perkoa JV (BTR 27.3%) 85 $0.52

Burkina Faso (Zn) Exploration 10 $0.06 Other 1 $0.01 Corporate (48) ($0.29)

Subtotal 148 $0.90 OtherNet cash (debt) 18 $0.11 NAV 166 $1.01

‐$1.50

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BTR

DCF (A$/sh)

Change in price

Copper Price Exchange Rate Gold Price Mumbwa Capex Mumbwa Opex


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Risks

Financing: BTR has ~$32m (Dec. 31) in cash seeing it funded to delivery of the Mumbwa PFS. The Mumbwa BFS ($15-20m) and Mumbwa pre start-up capex (GMPe ~$600m) are yet to be funded. We do not expect any significant dividends from Perkoa until FY17.

Political and fiscal risks: Burkina Faso has been stable despite some of the turmoil encountered by its neighbours. The government holds 10% direct project equity in Perkoa. The corporate tax rate is 25% and Perkoa pays a 4% government royalty.

Zambia has a much more mature mining industry but its government has been seeking a greater share of profits in recent times and, in keeping with worldwide trends, its permitting, political and fiscal processes and policies are under greater scrutiny. The Zambian corporate tax rate is 35% and BTR will pay a 6% government royalty (and a 2% NSR to BHP).

Costs: Cost escalation remains an issue for the mining industry worldwide and Burkina Faso and Zambia are not exceptions.

Catalysts

Mumbwa

April CY13 maiden metallurgical test work for the PFS and mineralization split for the resource

Mid-CY13 Mumbwa PFS

Ongoing exploration results including Kitumba step out and regional targets, e.g., Kakozhi.

Mid-CY14 Mumbwa BFS

2H CY14 Mumbwa funding

Late CY16 Mumbwa commissioning

Perkoa

April CY13 updated reserves, final budgets/forecasts

Q2 CY13 first zinc concentrate shipment at Perkoa

End CY13 ramp-up of Perkoa and delivery of Stage 2 expanded project

FY17 (GMPe) expectations for maiden dividend distribution to BTR

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Company description Both BTR’s projects are in Africa. The company’s key asset is the 100%-owned Mumbwa IOCG project in Zambia and its other significant project is the 27.3%-owned high-grade Perkoa Zinc Mine in Burkina Faso. BTR has ongoing exploration proximal to both these projects as well as some early stage gold projects in Burkina Faso.

BTR’s African Projects

Source: BTR

Mumbwa Copper-Gold Project (BTR 100%)

The Kitumba IOCG deposit is currently the primary focus at Mumbwa with combined Indicated and Inferred Mineral Resource of over 1mt of contained copper (0.5% Cu cut-off, 108.9mt at 1.09% Cu). The Mumbwa scoping study was delivered in September ’12 and envisioned a 7.5mtpa open-pit operation costing ~US$337m and producing ~70ktpa at cash costs of US$1.49/lb. Following our site visit we are using slightly more conservative numbers. The PFS is due mid-’13, a BFS mid-’14 and ultimately production from Sept ’16.

Perkoa Zinc Mine (BTR 27.3%)

Perkoa is a high-grade VMS deposit located in central region of Burkina Faso. Commissioning of the Stage 1 ~90ktpa underground zinc operation is underway while it is concurrently expanded to ~120ktpa zinc and adding silver and lead by-products. The project is fully funded with BTR set to receive dividends from its share of cashflows once the JV repays the $70m (+US$20m overrun facility) loaned to it by major shareholder and operator Glencore (62.7%).

Burkina Faso Perkoa Project Exploration

Zambia Mumbwa IOCG

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Mumbwa (BTR 100%) The Mumbwa Project includes four exploration licenses covering 790km2. It was previously held in joint venture with BHP Billiton, but now owned 100% by BTR with BHP Billiton (having sunk $40m) retaining a 2% production royalty following its decision to exit from direct involvement in the project in 2011.

Location

The Mumbwa Project is located in west central Zambia, approximately 200km west of the capital, Lusaka. The Mumbwa tenement covers an area of approx 250km2.

Mumbwa Location Map

Source: BTR

Geology

It is being explored for Iron Oxide Copper Gold (IOCG) style mineralisation, similar to Prominent Hill and Olympic Dam in South Australia, and Ernest Henry in Queensland. Noticeably, mineralization contains much lower gold grades (credits) and uranium is neither high enough grade for a credit nor likely to be a nuisance for concentrate saleability.

East-West X-Section through Kitumba Showing Grade Envelopes

Source: BTR

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Within the Mumbwa tenement the main focus is on the Kitumba Deposit, with combined Indicated and Inferred Mineral Resources of over 1mt of contained copper (0.5% Cu cut-off, 108.9 Mt @ 1.09% Cu).

Updated Mumbwa Resource: copper tonnes down ~50% (April 2013) Mineral

ResourcesCategory

Tonnes (Mt)

Cu Grade (%)

Au Grade (g/t)

Ag Grade (g/t)

Contained Cu (kt)

Contained Au (koz)

Contained Ag (koz)

Indicated 87.6 1.17% 0.03 0.86 1,025 85 2,422 Inferred 21.3 0.77% 0.05 0.46 164 34 315 Total 108.9 1.09% 0.04 0.88 1,189 140 3,081

Mumbwa Copper

0.5% cut off

Source: BTR

The updated resource saw ~80mt of Inferred resources from the June 2012 estimate excluded and further drilling is required.

Previous Mumbwa Resource (June 2012) Mineral

ResourcesCategory

Tonnes (Mt)

Cu Grade (%)

Au Grade (g/t)

Ag Grade (g/t)

Contained Cu (kt)

Contained Au (koz)

Contained Ag (koz)

Indicated 79.9 1.33% 0.04 0.9 1,063 103 2,312 Inferred 107.1 1.00% 0.04 0.86 1,071 138 2,962 Total 187 1.14% 0.04 0.88 2,132 241 5,291

Mumbwa Copper

0.5% cut off

Source: BTR

Resource growth should come from stepping out Kitumba to the north and west and regional satellite targets identified, the highest priority of which is known as the Kakozhi prospect, located 5km to the northwest of Kitumba.

We effectively model the Scoping Study mined inventory of 84.5mt as a reserve but at a lower 1.0% copper grade.

Mining

A Pre-Feasibility Study has commenced and is due mid-year with the final BFS due mid-CY14. The September ’12 scoping study envisaged a 2.5mtpa open-pit operation ramping up to 7.5mtpa ROM ore in year 3 for a 13.5-year production life and a strip ratio of 2.5:1. The head grade is expected to increase over time due to the characteristics of the deposit. Ore feed grade ranges from approximately 0.9% Cu in early years to above 2% Cu in the latter years. The PFS forecast average copper metal production of ~52ktpa in first 4.5 years, increasing to 67ktpa for the remaining 9 years of mine life. We model a smoother profile.

BTR Scoping Study Mine Plan

Source: BTR

Given the early stage (and recent resource downgrade), we model a 7.5mtpa open pit, average strip ratio of 3:1, 1.0% Cu head grade and US$2.5/t mining cost.

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Mumbwa Pit (Section) Mumbwa Pit (Plan)

Source: BTR Source: BTR

Open pit vs. underground

The scoping study only examined an open-pit mining scenario; however, the orebody starts at 150m and grade increases with depth, suggesting underground mining could be optimal. The PFS is considering both options in parallel before one is selected to progress to the BFS stage.

Despite the increased risk profile of underground mining in Zambia, the optimal solution may be a combination of both open-pit and underground mining as early access and selective mining of high-grade zones (including the area that reported 200m at 4% copper from ~350m depth) as early as possible will surely maximize the project NPV.

Processing

The scoping study assumed a copper recovery of 80% based on industry averages for the anticipated ore blend and was prior to the maiden metallurgical test work. The early flow-sheet design consisted of 3-stage crushing process followed by a ball mill. The ground product is then treated in a flotation circuit, producing sulphide and oxide copper concentrates for sale to smelters. Combined flotation concentrate is thickened and filtered in a pressure filter and flotation tailings are disposed of in a tailings dam from which water is reclaimed.

The first metallurgical test work is due in April on the back of a categorized inventory of the various mineralisation types. Our site visit found mineralisation at Kitumba occurs as a combination of malachite, chalcocite and chalcopyrite and that ore will be relatively hard, given the iron content. Our own early stage analysis suggests much of the copper metal is contained in the supergene zone at depths of ~350m. An underground mine may be preferable to access the primary ore earlier and the amount of metal contained in oxide material may require a SXEW plant to process. BTR’s scoping study capital cost for the process plant is estimated at US$145m. The process operating cost is estimated at US$6.66/t ROM.

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We assume parallel processing routes of oxide SXEW and sulphide flotation, costing an average US$7.50/t.

Infrastructure

The site is well located for access to key infrastructure. Access to and from the site may be gained by upgrading the existing road at a length of approximately 55km to the township of Mumbwa located on the Mumbwa (M9) Highway. Product concentrate leaving the site can use the existing road network to access smelters located in the Zambian Copperbelt or for export. However, there is talk of the government introducing an export duty (of up to 10%) to encourage in-country processing.

The site power supply study assumed that power is gained by constructing a spur off the proposed Lusaka to North-West Province High Voltage (HV) transmission line. This is a ZESCO (Zambian power authority) grid development project underpinned by a recent agreement reached with First Quantum Minerals (FM.TSX) for power supply to its Trident project in the north.

A water supply study concluded that there should be sufficient supply capacity available from the Kafue River, located approximately 46km from the site. This is a secure water resource for this project subject to abstraction permission/fees which will be required from the relevant agencies.

Fiscal regime

Under Zambian law a potential operation at Mumbwa would pay a 6% royalty and a 35% corporate tax rate. The project tenure also has a historic 2% NSR over the ground payable to BHP. Our DCF10% for the BHP royalty based on our early stage assumptions and copper prices is ~A$36m.

Capex

BTR’s scoping study estimated start-up capital expenditure for the open-cut project is US$377m, comprising US$145m process plant, US$134m project development and infrastructure, US$35m pre-strip, and US$63m contingency. The capital estimate assumes the mining fleet and mobile equipment is leased and owner-operated. Given the depth of weathering and oxide component, we believe any operation would likely include dual oxide and sulphide circuits. We estimate capex of ~US$600m (~US$10,000/t) for dual processing infrastructure providing similar output.

Opex

The average cash cost (before tax) was estimated to be US$31.45/ROM t (US$1.49/lb. Cu). We are more conservative and, given the lack of by-product credits and high royalty rates, forecast an average US$1.90/lb including the 2% BHP royalty.

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Production profile

Our forecast production profile for a potential operation at Mumbwa is shown below.

Mumbwa (BTR 100%) Production Profile

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2012 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E 2028E 2029E 2030E

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$/lb

Co

nta

ine

d P

rod

uc

tio

n('

000

to

nn

es)

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Mumbwa Copper in Conc Copper Price (US$/lb) C1 Cash Costs (US$/lb)

Source: GMPe

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Perkoa JV (BTR 27.39%)

Location

The Perkoa Zinc Mine is located in the Sanguie Province of Burkina Faso, 120km west of the capital Ouagadougou. The project is 35km by road from the country's third largest town, Koudougou, which is linked to neighbouring states of Cote d’Ivoire, Ghana and Togo by tarred roads and by rail to Abidjan, capital of Cote d’Ivoire.

In late 2010, a joint venture between BTR (39.9%), Glencore International AG (50.1%) and the government of Burkina Faso (10%) was formed, which has allowed construction and development activities to progress the operation towards start-up. BTR recently elected to dilute its equity down to 27.3% instead of contributing its share (US$35m) of US$80m in project expansion and overrun costs. Glencore remains operator and now holds 62.7% of the project.

Geology

The Perkoa deposit is a classic VMS deposit hosted in the Lower Proterozoic Birimian Belt. The deposit is unusual for its high concentrations of zinc and barium mineralisation, and relatively low levels of lead and copper. The prospective Birimian rocks in Burkina Faso are the same sequences that host major gold deposits in neighbouring Ghana and Mali.


We expect updated reserves to reflect the expanded capacity in May.

Perkoa Resource (May 2012)

Mineral Resources

CategoryTonnes

(Mt)Zn Grade

(%)Ag Grade

(g/t)Pb Grade

(%)Contained

Zn (kt)Contained Ag (moz)

Contained Pb (kt)

Measured 1.49 13.1% 38.4 0.09% 195.19 1.8 1.341Indicated 5.66 10.5% 57.9 0.18% 594.3 10.5 10.188

M+I 7.15 11.0% 53.8 0.16% 786.5 12.4 11.44

Inferred 5.01 9.1% 54.1 0.17% 455.91 8.7 8.517Total 12.17 10.3% 53.9 0.16% 1,246.00 23 19.6

Perkoa Mineral

Resource

Source: BTR

Operations

Construction at Perkoa was suspended in July 2008, and the project was placed on a Care and Maintenance program, citing a decline in global metal prices. Construction activities resumed in December 2010 following the formation of the Glencore JV.

Stage 1: Pre-expansion production parameters were for a 720ktpa underground mine operating at 720ktpa at +13% zinc for an initial 9.5years producing ~90ktpa at ~US68c/lb. Commissioning is underway and first concentrate sales are imminent.

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Perkoa Stage 1 Mine Plan

Source: BTR

Stage 2: The Perkoa JV has since committed to an expansion that should see the plant capacity increased 40% to 1mtpa (120ktpa zinc), an open-cut operation and adding silver and lead concentrate product streams.

LOM recoveries are expected to be 90% for zinc into a 53% concentrate.

The 2009 estimated cash costs were US$0.68/lb. Cost-reduction strategies from the 40% increased throughput, adding silver and lead credits and adding lower cost open-pit tonnes should take care of some of the cost inflation since 2009. We model costs of US$0.63/lb based on $50/t for mining, $25/t for processing, $10/t for admin, US$100/t of concentrate for transport (1,000km) to port, treatment charges of US$230/t and standard 85% payability.

The expansion and other cost overruns resulted in Glencore providing an additional US$80m of equity funding (US$40m increased construction and commissioning cost and US$40m working capital and additional capital costs). This comes on top of Glencore’s previous funding package totaling US$140m (US$50m equity and US$90m debt).

Infrastructure

Despite the high quality of the deposit, infrastructure has initially been a challenge. It sources its power from three 2MW diesel generators (a fourth currently being added) and water from its own dams (on lease storage facilities). Glencore and BTR plan to truck concentrates to Ghana for shipping from the Tema Port.

Offtake

Glencore has the rights to all concentrates.

Fiscal regime

The Burkina Faso government has a 10% free carry in the project. The operation will pay 5% on metals contained in concentrates and a 25% corporate tax rate.

BTR will receive its share (27.3%) of cashflows once Glencore has repaid its US$90m of debt afforded the JV.

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Production profile

Our forecast production profile for Perkoa is shown below.

Perkoa JV (BTR 27.3%) Production Profile

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Perkoa Zinc in Conc Zinc Price (US$/lb) C1 Cash Costs (US$/lb)

Source: GMPe

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Board

Bill Cash, Chairman

Bill Cash joined the Blackthorn Resources' Board in May 2007 as a non-executive Director following an 18-month engagement as a consultant advising the company mainly on base metals concentrates quality and marketing matters and product transport and shipping logistics in relation to the development of the Perkoa Zinc Mine. In January 2008, he was appointed Chief Executive Officer and Managing Director until August 2008, and as an executive Director until December 2008 when he was then appointed Chairman of the Board. On 1 July 2009, Bill retired as an executive Director, but remains the company's Chairman on a non-executive basis.

Scott Lowe, Managing Director

Scott Lowe is a senior business executive with extensive experience in the mining and maritime logistics industries. Scott is currently employed as Managing Director and CEO with Blackthorn Resources Ltd. Senior management roles have also been held in BHP Billiton, Peabody Pacific and P&O. A post-graduate qualification is held in Business Management (MBA) along with tertiary qualifications in Mining Engineering, a Mine Manager's Certificate of Competency (Australia), and a Diploma in Marine Terminal Operations from King's Point Merchant Marine Academy New York USA. Scott is also a member of the Australian Institute of Company Directors.

Nicole Bowman, Non-Executive Director

Nicki Bowman joined the Blackthorn Resources' Board having gained extensive experience as a corporate and commercial lawyer in private practice within a Top 10 Australian law firm. Nicki has held senior corporate counsel positions in BHP and Bluescope Steel, before moving into senior management and executive positions. Her experience included key roles in Merger and Acquisition transactions, leading contract negotiations, and managing corporate restructures. Nicki holds Bachelor of Economics and Bachelor of Law degrees from Sydney University and is a member of the Australian Institute of Company Directors.

Michael Oppenheimer, Non-Executive Director

Mike Oppenheimer is a senior executive with over 30 years’ experience in the resources sector. He has extensive business leadership and value delivery experience in the international mining industry. Now a principal and founder of a mining investment and advisory group, Mike’s most recent CEO position was with Ferrexpo Plc, where he established the iron ore company’s business model and led it through a successful IPO in London in 2007. Under his leadership, the company experienced strong growth in share value resulting in Ferrexpo being included in the FTSE 100 index. Prior to his successful stewardship of Ferrexpo, Mike was with BHP Billiton since 1988 in senior positions, including roles on the Executive Committee reporting to the CEO. His experience includes leadership of BHP Billiton’s businesses in minerals and petroleum, and he played a significant role in the BHP and Billiton merger, integrating the energy coal businesses.

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Derek Carter, Non-Executive Director

Derek Carter has over 40 years’ experience in exploration and mine geology, including 17 years in management of ASX-listed exploration companies. He held senior positions in the Shell Group of Companies and Burmine Ltd before founding Minotaur Exploration in 1993. Derek was Managing Director of Minotaur from its inception until 2010 when he became Chairman of the company. He is also Chairman of Petratherm Ltd, and is a director of Mithril Resources Ltd and Toro Energy Ltd, all of which are listed on the ASX. Derek was Vice President and later President of the South Australia Chamber of Mines and Energy, and Chairman of MEAG (Minerals Exploration Advisory Group), a body advising the Federal Minister on issues affecting exploration within Australia. He is currently a member of the South Australian Resources Development Board and the South Australian Minerals and Petroleum Experts Group. He is also a Board member of the AusIMM (The Australasian Institute of Mining and Metallurgy).

Peter Kalkandis, Non-Executive Director

Peter Kalkandis is a full-time employee of Glencore Australia Pty Limited, a subsidiary of Glencore International and is Head of Glencore’s Base Metals Desk in Australia.

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BTR Model

Blackthorn Resources financial summary Year-end 30 June

Sum of the Parts valuation A$m A$/sh Forecast assumptions 2012 2013E 2014E 2015E 2016E 2017E 2018EMumbwa (BTR 100%) 65 $0.39 Copper (US$/lb) $3.70 $3.58 $3.88 $3.58 $3.25 $3.25 $2.93

Zambian (Cu) Exploration 35 $0.21 Lead (US$/lb) $0.96 $0.95 $1.09 $1.03 $0.95 $0.95 $0.85 Perkoa JV (BTR 27.3%) 85 $0.52 Zinc (US$/lb) $0.90 $0.92 $1.09 $1.05 $1.00 $1.00 $0.93

Burkina Faso (Zn) Exploration 10 $0.06 Gold (US$/oz) $1,682 $1,584 $1,575 $1,575 $1,575 $1,575 $1,575 Other 1 $0.01 Silver (US$/oz) $33.65 $35.00 $35.00 $35.00 $35.00 $35.00 $35.00 Corporate (48) ($0.29) AUDUSD 1.03 1.04 1.04 1.04 1.04 1.01 0.90

Subtotal 148 $0.90 Production summary 2012 2013E 2014E 2015E 2016E 2017E 2018EOther Mumbwa (BTR 100%)Net cash (debt) 18 $0.11 Ore Processed (Mt) 0.0 4.6 7.5NAV 166 $1.01 Grade (Cu %) 1.00% 1.00% 1.00%Asset valuation summary Recov ery (%) 85.0% 85.0% 85.0%

Copper production (kt in conc) 0.0 39.3 63.8Copper production (mlb in conc) 0 87 141Gold production (koz in conc) 0.0 4.5 7.2C1 (US$/lb incl. royalty) $0.00 $1.71 $1.93

Perkoa JV (BTR 27.3%)Ore Milled (kt) 100 860 1,000 1,000 1,000 1,000Grade (Zn %) 13.2% 12.5% 12.5% 12.5% 12.5% 12.5%Zinc prod in conc (kt) 11.3 96.8 112.5 112.5 112.5 112.5Zn production (mlb) 24.8 213.3 248.0 248.0 248.0 248.0Grade (Pb %) 0.0% 0.5% 1.0% 1.0% 1.0% 1.0%Lead prod in conc (kt) 0.0 4.3 8.5 8.5 8.5 8.5Silv er production (moz) 0.00 0.55 1.11 1.11 1.11 1.11Zinc C1 US$/lb (incl. royalty) $ 1.52 $ 0.72 $ 0.63 $ 0.63 $ 0.63 $ 0.62

Target price calculation A$ Weight A$/sh PROFIT & LOSS (A$m) 2012 2013E 2014E 2015E 2016E 2017E 2018ESotP-derived NAV Revenues - - - - - 259.1 407.9Mumbwa (BTR 100%) $ 65 60% $ 0.24 Cost of sales - - - - - 103.5 167.9

Perkoa JV (BTR 27.3%) $ 85 85% $ 0.44 Ex ploration w rite-off 0.2 0.6 1.2 1.2 1.2 1.2 1.2 Exploration/Other $ 46 100% $ 0.28 Roy alty - - - - - 22.7 36.0

Corporate Ov erheads 5.2 6.0 6.0 6.0 6.0 6.0 6.0Corporate $ (48) 100% $ (0.29) EBITDA (5.5) (6.6) (7.2) (7.2) (7.2) 125.7 196.8 Net Cash $ 18 100% $ 0.11 D&A 0.0 0.0 - - - 37.0 60.0Total $ 166 $ 0.77 EBIT (5.5) (6.7) (7.2) (7.2) (7.2) 88.7 136.8

Interest income/(ex pense) 0.5 0.7 (45.0) (90.0) (90.0) (90.0) (90.0)Target price A$/sh $ 0.77 Adjusted PTP* (5.0) (5.9) (52.2) (97.2) (97.2) (1.3) 46.8 Production summary Tax ation - - - - - 7.3 16.4

Post-tax income (5.0) (5.9) (52.2) (97.2) (97.2) (8.6) 30.4 Perkoa Div idends (0.4) (0.4) - - - 17.3 15.1 Mumbw a Minorities - - - - - - - Net income (adjusted earnings*) (5.3) (6.3) (52.2) (97.2) (97.2) 8.7 45.5 Per share data (A$)EPS (adjusted, diluted) (0.03) (0.04) (0.32) (0.58) (0.58) 0.05 0.27

Shares outstanding (fully diluted) 164.5 164.7 164.7 168.1 168.1 168.1 168.1BALANCE SHEET (A$m) 2012 2013E 2014E 2015E 2016E 2017E 2018EAssets

Cash & equiv alents 6 18 830 438 47 22 87

Net tangible fix ed assets 60 79 115 410 704 721 685Total assets 66 97 945 848 751 742 773

Liabilities

Interest bearing debt - - 900 900 900 900 900

Reserves Mt % / kt / koz Total liabilities 2 2 902 902 902 902 902Mumbwa (GMPe as modelled) 87.1 Shareholders equity 64 95 43 -54 -151 -142 -97

Cu 1.00% 871 Minority interestsAu 0.04 112 Net debt (33) (1) 266 462 853 878 813

CASH FLOW (A$m) 2012 2013E 2014E 2015E 2016E 2017E 2018EPerkoa JV 6.3 EBIT (5.5) (6.7) (7.2) (7.2) (7.2) 88.7 136.8

Zn 13.9% 876 Total cash from operating (3.4) (4.6) (52.2) (97.2) (97.2) (7.6) 90.5 Pb 0.16% 10 Net capital ex penditure (0.2) (10.2) (30.0) (288.5) (288.5) (11.6) (18.8)Ag 53.9 10,919 Ex pl & Net (acquisitions)/disposals (7.6) (11.6) (6.0) (6.0) (6.0) (6.0) (6.0)

Cash from investing activities (7.8) (21.4) (36.0) (294.5) (294.5) (17.6) (24.8)Resources (April '13) Mt % / kt / koz Cash from financing activities 2.2 37.7 900.0 - - - -

Mumbwa (0.5% Cu cut-off) 108.9 Net cash flow (9.0) 11.6 811.8 (391.7) (391.7) (25.2) 65.7 Cu 1.09% 1,189 PROFITABILITY & VALUATION 2012 2013E 2014E 2015E 2016E 2017E 2018EAu 0.04 140 EBIT margin, % na na na na na 34% 34%

EV/EBITDA, x na na na na na na 0.7Perkoa JV 12.2 PE (adj.), x na na na na na 7.9 1.5

Zn 10.3% 1,257 Pb 0.16% 20 Ag 53.9 21,144


Mumbwa (BTR 100%)

33%

Zambian (Cu) Exploration

18%

Perkoa JV (BTR 27.3%)

44%

$0.00$0.50$1.00$1.50$2.00$2.50$3.00$3.50$4.00$4.50

010203040506070

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

2019

E

2020

E

2021

E

2022

E

2023

E

2024

E

2025

E

Mumbwa (BTR 100%) C1 Cash Costs (US$/lb) Copper price (US$/lb)

BTR Mumbwa copper prod (kt)

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Hot Chili (HCH AU) ASX Chilean copper developer


Rating BUY BUY

Target $1.15 $1.20

EPS FY16E ($0.18) ($0.18)

EPS FY17E $0.13 $0.14

CFPS FY16E ($0.18) ($0.18)

CFPS FY17E $0.10 $0.10

Copper production (FY16E, kt) - -

Copper production (FY16E, mlb) - -

Copper production (FY17E, kt) 34.5 34.5

Copper production (FY17E, mlb) 76.1 76.1

SHARE DATA


52-week high/low (A$/sh) 0.785 / 0.38



Market cap (A$m) 154




FINANCIAL DATA


Revenue (A$m) - - 310.3

EBITDA (A$m) (7.0) (8.0) 145.9

Income (A$m) (63.0) (64.0) 47.7

EPS (Ac/sh) (18.6) (17.8) 13.3

CFPS (Ac/sh) (18.6) (17.8) 10.0

PER (x) (2.8) (2.9) 3.9

PCF (x) (2.8) (2.9) 5.2

EV/EBITDA (x) (16.9) (14.8) 0.8


OPERATING DATA FY15E FY16E FY17ECopper production (mlb) - - 76.1C1 costs (US$/lb) $0.00 $0.00 $1.16Copper price (US$/lb) $3.58 $3.25 $3.251xNAV10% /sh (A$) $1.64Current P/NAV10% (x) 32%

$0.00$0.10$0.20$0.30$0.40$0.50$0.60$0.70$0.80$0.90$1.00

00.20.40.60.811.21.41.61.82

Pri

ce (A

$/s

h)

HCH- ASX


BUY

HCH.ASX A$0.57/sh Target A$1.15/sh

Having previously initiated coverage of Hot Chili (HCH.ASX) following

two site visits, we maintain our BUY rating and risked $1.15/sh price target. HCH continues to advance its Productora Copper Project in Chile. A number of studies are underway and a PFS on track for delivery in mid-2013. With ~$40m cash, we believe it is well funded to de-risk Productora toward delivery of a BFS and decision to mine by mid-2014. We continue to see HCH as one of the best copper development stories on the ASX.

60ktpa production at ~US$1.30/lb expected from late CY16. With a second resource update due mid-CY13, we are confident that along strike and up-dip additions on the eastern flank will see it approach 250mt (GMPe) at 0.6% Cu. Pre the mid-‘13 PFS (and mid-’14 BFS), we model $550m capex (+US$9,000/tpa), for a 10.9mtpa open pit and plant producing ~60ktpa copper at cash costs of ~US$1.30/lb for ~20 years.

Funded to decision to mine. Following a $35m raising ($0.50/sh) in Dec. 2012 and $4.25m placement to CAP, HCH holds ~$40m cash with potentially more to come from option conversion. CY13 outgoings are $22m for resource drill out, $4m on exploration and admin, $8m for the PFS and $18m for the BFS before project funding in 2H CY14.

Drilling at HCH’s second Chilean project, the Frontera Porphyry. Three rigs are completing a 7,000m drill program at the ex Noranda project that could ultimately provide more Productora feed. Initial results included 256m grading 0.5% copper and 0.3g/t gold and more will soon follow.

Takeover appeal. With the recent purchase of Inmet (IMN.TSX) by First Quantum (FM.TSX) and the supply side dominated by maturing assets and increasing capex intensity, we continue to expect increased M&A in the copper sector. Mid-cap base metal producers searching for 50–70ktpa copper assets include Lundin Mining (LUN.TSX), OZ Minerals (OZL.ASX) and PanAust Ltd (PNA.ASX), and Chile would be at the top of their jurisdiction rankings, making HCH an attractive target.

We maintain a BUY rating with a $1.15/sh PT. Our price target is based on 0.7xNAV for Productora using conservative LT prices of US$2.60/lb copper, US$1,575/oz gold and 0.90 AUDUSD. We also include A$145m (A49cps) for all exploration.

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Investment summary

Productora Copper Project

HCH’s flagship project is its Productora Copper Project, 500km north of Santiago near the regional mining centre of Vallenar. Competitive advantages of Productora include grade, location (near coast, low altitude) and access to infrastructure. The project is located 5km from the Pan-American Highway and adjacent to CAP-owned rail lines. The base case water supply sees a ~60km sea water pipeline running along CAP’s rail corridor from the Port of Huasco. Productora is located 17km from a HV substation with the central grid having sufficient capacity in the region. Ahead of the mid-year resource upgrade (GMPe ~250mt), PFS delivery in 2H 2013 and mid-’14 BFS, Productora economics look robust.

~60ktpa copper production expected from late CY16

We believe the large resource will underpin a long life 10.9mtpa open-pit operation producing ~60ktpa copper in concentrate at ~US$1.30/lb cash costs after credits (gold, moly and iron ore). Productora’s access to infrastructure and strategic partner in CAP mean it will be competitive on capex intensity metrics. We estimate $550m (+US$9,000/t annualised capacity).

Partnering with Compañia de Aceros del Pacifico (CAP)

Aside from the recent funds ($4.25m) and 5.5% shareholding, HCH’s strategic relationship with CAP de-risks its permitting and infrastructure access as it steps through its milestones to production. CAP is increasing its iron ore output and is hungry for additional sources. It also owns and operates the rail line running adjacent to Productora to the Port of Huasco (CAP 51%) where it is looking to build a copper-concentrate export business. We believe the company also has influence when it comes to other infrastructure access (power) and facilities.

Well funded to decision to mine

After the recent $40m (institutional and CAP) raising at $0.50/sh, HCH holds ~$40m cash. It may also realise up to $4.8m from Nov. ’13 20c options and ~$30m from Nov. ’14 options. The CY13 use of funds includes $22m resource drill out, $4m exploration and administration, $8m PFS and $18m BFS before project funding mid-CY14. We estimate it will need +US$600m to fund the US$550m capex (+US$9,000/t annualized capacity) and ongoing expenses.

New copper production and concentrate supply highly sought after

Just as new copper production remains scarce (hence the expected interest from corporates), new supply of copper concentrate remains equally sought after and consequently we believe HCH will attract significant interest from offtakers and they may form part of a funding solution for Productora.

April 28, 2013

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We continue to model a 10.9mtpa open-pit operation at Productora producing ~60ktpa copper in concentrate. Our assumptions include ~$550m capex, ~US$1.30/lb opex, head grades of 0.6% copper (with potential upside from higher grades in early years), 92% recovery and production commencing September 2016.

Productora Project Parameters Modeled Resource Mt 165

Cu grade % 0.60%contained copper kt 920


Mo grade g/t 132contained moly kt 22

Productora GMPeMill capacity mtpa 10.9



Au Recovery % 83%Av Au production kozpa 42Mo Head Grade % 0.01%

Mo Recovery % 75%Av Mo production ktpa 2.4


NPV 100% 361$


Our HCH valuation is dominated (~70%) by a potential operation at Productora. We value Productora on a post-tax DCF basis using a 10% discount rate, 0.90 AUD/USD and US$2.60/lb long-term copper price. We also attribute $145m (A49cps) for all exploration, including unmodelled lbs at Productora and the 4 other early-stage projects. With ~$40m cash, and more expected to come from option conversion, we believe HCH is well funded for CY13. It then requires ~$550m in capex funding for Productora. Given the project robustness, available offtake and strategic partner in CAP, we believe a significant portion of this could come from traditional project finance.

As a cum funding copper developer, we risk weight our Productora DCF at 70%, giving us our $1.20/sh price target and BUY recommendation.

As expected, our pre-production valuation for HCH is sensitive to copper price with a 10% higher price increasing our NPV by 34% or 57cps.

HCH Valuation Breakdown Sensitivity Copper, gold, grade, forex, capex & opex Sum of the Parts valuation A$m A$/shProductora 361 $1.22 Exploration 90 $0.30 Los Mantos 25 $0.08 Chile Norte 10 $0.03 Banderas Project 10 $0.03 Frontera Project 10 $0.03

Corporate (55) ($0.26)


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HCH DCF A$/sh

Change in price

Copper Price Exchange Rate Gold Price

Capex Opex


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Risks

Financing: HCH has ~$40m cash and potentially more to come in from option conversion, seeing it well funded through to a decision to mine at mid CY14. Construction funding will most likely be a combination of debt and equity.

Political and fiscal risks: Chile is the largest producer of copper in the world and it remains one of the premier mining investment destinations globally. However, in keeping with worldwide trends, its permitting, political and fiscal processes and policies are under greater scrutiny. The Chilean corporate tax rate is 21% and HCH will pay an effective government royalty on metals contained in concentrates of 4.9%.

Costs: Cost pressure remains an issue in the global mining sector and Chile is no exception. However Productora’s location, access to infrastructure, partner in CAP and simple open-pit operation should minimize its exposure.

Catalysts

From here, newsflow and catalysts centre on de-risking Productora toward a decision to mine and ultimately production.

Ongoing drill results from Productora drill out (four rigs) and additional drill results/assays from Frontera (three rigs)

Mid-2013 resource upgrade number 2

PFS in mid-2013

Potential TSX listing CY13 end

Early CY14 crystallize CAP relationship through:

o iron ore studies and offtake in return for CAP’s 35% share in part of Productora resource;

o infrastructure sharing agreement.

Mid-2014 DFS, decision to mine and project funding

Late ’16 production

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Company description

HCH’s project portfolio comprises 5 copper projects in central Chile, north of Santiago. All projects are close to the coast and the Pan-American Highway.

HCH’s 5 Chilean Copper Projects

Source: HCH

Its flagship project is the advanced-stage Productora copper project located 15km south of Vallenar, the regional mining hub, and roughly 60km inland from the port city of Huasco. Significant historical drilling and current activities have revealed wide zones of copper, gold, molybdenum and iron at the IOCG project.

Current resources stand at 165mt at 0.6% copper (~1Mt contained copper) and we anticipate 250mt (GMPe) by mid-2013 as it adds near surface tonnes up dip on the eastern flank and extends the deposit both north and south along the 9.5km strike.

This resource update will form the basis of the BFS due mid-2014 and ultimate decision to mine. Our early-stage estimates are for a 10.9mtpa open pit and process plant producing ~60ktpa copper at cash costs of ~$1.30/lb after credits and costing ~$550m in start-up capital (+US$9,000/t annualised capacity).

HCH’s partnering with the local magnetite producer CAP should help realise Productora’s infrastructure advantages that are very apparent from site visits (access to power, water, rail, road and township of Vallenar).

The Frontera Porphyry Project (ex Noranda) is currently being drilled (3 rigs) and first assays unveiled solid results. Los Mantos (36m at 1.4% Cu from 49m) and other projects will take a back seat while the entire focus is on Productora but each looks like an attractive early-stage project in its own right.

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Productora

Location

The Productora project is located in the Atacama region, 650km north of Santiago and 15km south of Vallenar, which lies roughly halfway between La Serena and Copiapo. The project is situated 5km off the main sealed Pan-American Highway, 60km from the Port of Huasco and 375km south from the Port of Chañaral.

Location Map

Source: HCH

Geology

In the Atacama region, the project is underlain by mid-Cretaceous andesites, rhyolitic tuffs, arenites and quartzites. Volcanic rocks of the primary mineralized trend have a rhyolitic composition and siliceous characteristic. The project area lies along a NNE-trending fault zone, adjacent to the Atacama Fault Zone. Metasomatic and hydrothermal alteration is intense and widespread.

Rhyolitic breccias host the Productora mineralization, located in two significant zones of copper, gold, molybdenum, cobalt and uranium surface alteration. In addition, the breccia zone is flanked along its western margin by a vertical zone of magnetite. Fault zones and mineralization are strongly associated at Productora. Cross-faults and regional fault jogs are obvious targets for mineralization where favourable lithological units are present. Pyrite, chalcopyrite, bornite, molybdenite and magnetite primarily comprise the ore mineralogy, which has developed as breccias, vein and cavity fill, and disseminated through brecciated host rocks.

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Current resources at Productora stand at 165mt at 0.6% Cu, 0.1g/t Au and 132ppm Mo. A second resource upgrade is due midyear.

Productora Mineral Resource (February 2013) Mineral

ResourcesCategory

Tonnes (Mt)

Cu Grade (%)

Contained Cu (kt)

Au Grade (g/t)

Contained Au (koz)

Mo Grade (g/t)

Contained Mo (kt)

Res Upgrade 1 34.4 0.6 230 0.1 150 124 5

Central Resource 31.2 0.6 190 0.1 110 159 5

Sub-Total 70.6 0.6 420 0.1 260 140 10

Res Upgrade 1 40.60 0.5 200.0 0.1 130.0 110.00 4.0

Central Resource 54.00 0.6 300.0 0.1 180.0 138.00 8.0

Sub-Total 94.60 0.5 500.0 0.1 310.0 126.00 12.0

Res Upgrade 1 80.00 0.5 440.0 0.1 290.0 117.0 9.0

Central Resource 85.20 0.6 480.0 0.1 290.0 146.00 13.0

TOTAL 165.20 0.6 920.0 0.1 580.0 132.00 22.0

Productora Indicated

Productora Inferred

Productora Total

Source: HCH

Mining will start on the higher grades, improving payback and project economics and presenting upside to our valuation.

Productora Mineral Resource (February 2013)

Source: HCH

Mining

With ore basically outcropping, we assume Productora will be mined via open-pit methods with minimal pre-strip. Preliminary geotechnical work, ore hardness and wide mineralized zones suggest good mining conditions. Our early estimates are for a ~4:1 strip ratio and US$2.20/ material moved, for a mining cost of US$11.00/t ore.

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Productora Landholding and potential layout

Source: HCH

Processing Mineralization comprises pyrite, chalcopyrite, bornite, molybdenite and magnetite with no deleterious elements. We assume a centrally located plant at Productora rated at 10.9mtpa producing a ~27% copper concentrate with gold and moly credits and a magnetite sale arrangement. Metallurgical work continues through CY13 but early results show 93.5–96% rougher copper recoveries at a coarse grind size into a 27% concentrate. We model a ~92% copper recovery and ~83% recovery for gold. We assume processing costs of ~US$9/t. Ore is hard at around 20 BWI, suggesting a SAG-Ball circuit, but offsetting this is extra power consumption for the very coarse grind required of ~170µm.

Infrastructure Unlike most new copper supply from LatAm (particularly Chile), the Productora project is well serviced by infrastructure and located at only ~800m above sea level. This should directly result in a reduced lead time to production and reduced capex. Productora is 15km south of Vallenar, adjacent to the Pan-American Highway and only 60km from the Port of Huasco. HCH signed a Letter Of Intent (LOI) with Chilean iron ore major and shareholder CAP in July 2012 to negotiate joint infrastructure access, including port, rail, easement corridor and maritime/surface rights.

Available infrastructure for Productora

Source: HCH

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Water and power remain the key concerns for all Chilean developers.

Water: The acceptance of seawater for processing as the base case and Productora’s proximity to the coast alleviate water-related issues for the project. Early indications are for pumping seawater up the existing rail corridor (56km) via the construction of a water pipeline and two pump stations (~$60m capex).

Power: Power is a key concern in Chile as supply to the north (where the copper is) remains an issue and will remain so until the hydro-rich southern line is connected. We estimate players in the north will pay USc25-30/kWhr until ~2018, when the southern grid joins northern one and it reduces costs to ~USc15/kWhr. Productora’s location at the southern end of the northern-central grid means it should access cheaper power. We understand HCH has competitive indicative terms from Chilean power suppliers of ~USc17/kWhr until 2018, which could then reduce further to ~USc12/kWhr after connection of the northern and southern central grids in 2018.

Offtake

Productora copper concentrate will be sought after but remains unaccounted for. Locking in an offtake partner or partners could form part of a funding solution, with many traders/smelters aggressively looking for quality concentrate.

Fiscal regime

The Productora operation will pay a 4.9% royalty and a 21% Chilean corporate tax rate.

Capex

Capex for the Productora project is estimated at US$550M. This brings Productora in below the new industry average capex intensity of ~US$15,000/t of annualised capacity because of its infrastructure advantages.

Opex

Our estimated opex of US$1.30/lb (incl. royalty) is based on US$11.00/t mining cost (~4:1 strip ratio at US$2.20/t moved), US$9.00/t processing cost, US$1.50/t for admin, US$30/t for concentrate transport, port handling and shipping, US$70/t and US7c/lb treatment and refining charges and 4.9% royalties.

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Production profile

Our Productora production profile is shown below.

Productora Production Profile

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Exploration projects

Los Mantos

Los Mantos is located approximately 60km south of the coastal city of La Serena, at low altitude and adjacent to the Pan-American Highway in Chile’s IV region. The project is at an advanced stage with an operating small-scale mine, and extensive historical underground and surface development.

The company has recognized a zoned multi-commodity IOCG system at the project. Extensive mantos and breccia-style mineralisation is exposed over 2.5km in strike length in surface development and outcrop.

Final assay results received from an 11,500m Reverse Circulation (RC) drilling program completed in 2011 highlighted the potential for Los Mantos to contain breccia-hosted bulk tonnage copper-gold mineralisation. The last assay results from this drilling included the widest drilling intersection recorded to date at Los Mantos, with hole MNP0056 intersecting 36m grading 1.4% copper and 0.2g/t gold from 49m down-hole.

Although little work was undertaken over the project during CY12 year owing to HCH’s focus on Productora, exploration is scheduled to recommence at the project late in 2H 2013. Work will focus on delineating the size potential of high-grade, bulk tonnage copper mineralisation intersected by drilling within the southern extent of the project.

Los Mantos

Source: HCH

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Chile Norte Project

Chile Norte is located approximately 50km south of the coastal city of Iquique, at low altitude and adjacent to the Pan-American Highway in Chile’s IV region. HCH is in its third year of a five-year agreement with CODELCO to earn an interest in a large contiguous landholding that adjoins the company’s own landholding in the project area.

HCH is exploring to locate a large IOCG-style target within the Chile Norte project. It completed its second major airborne magnetic and radiometric survey over the Chile Norte project during the year, as well as a surface-mapping and geochemical rock-chip sampling programme over a number of high-priority targets.

Banderas Project

During July 2012, HCH executed several agreements to acquire major interests in the Banderas copper project. The project is located at low altitude (<1,000m), 50km directly north of the Productora project adjacent to the Pan-American Highway in Region III of Chile. The project is at an early exploration stage and has seen some historical, small-scale copper mining within an extensive, large-scale alteration system.

Along with the Frontera project, HCH intends to explore the project in the coming years for the potential to identify and delineate nearby copper resources as an additional supply source to a copper production hub centered on Productora.

Frontera Project

In July 2012, HCH announced that it had exercised a 100% purchase option agreement to acquire several leases at the Frontera copper project. The Frontera project lies 70km directly south of Productora in Region IV of Chile and is also located adjacent to the Pan-American Highway and the existing power transmission corridor.

Frontera is a large copper-gold porphyry system (>2km diameter) drilled by Noranda in the 1990s and has been partially mined via small open pit. Three rigs are on site as part of a 7,000m drill programme. First assays have been positive including:

256m grading 0.5% copper and 0.3g/t from 72m;

188m grading 0.5% copper and 0.4g/t gold from surface

122m grading 0.5% copper and 0.3g/t gold from 244m, open at depth

73m grading 0.5% copper an d0.3g/t gold from 96m

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Board

Murray Black, Non-Executive Chairman

Mr Black has over 35 years’ experience in the mineral exploration and mining industry and has served as an executive director and chairman for several listed Australian exploration and mining companies. He part-owns and manages a substantial private Australian drilling business, has interests in several commercial developments and has significant experience in capital financing.

Christian Easterday, Managing Director

Mr Easterday is a geologist with over 12 years’ experience in the mineral exploration and mining industry. He holds an honours degree in geology from the University of Western Australia, a masters degree in Mineral Economics from Curtin University of Technology and a masters degree in Business Administration from Curtin’s Graduate School of Business. Mr Easterday has held several senior positions and exploration management roles with top-tier gold companies including Placer Dome, Hill 50 Gold and Harmony Gold, specializing in structural geology, resource development and mineral economic valuation. For the past five years, Mr Easterday has been involved in various aspects of project negotiation. This work has involved negotiations and valuations covering gold, copper, uranium, iron ore, nickel, and tantalum resource projects in Australia and overseas. Mr Easterday is a member of The Australian Institute of Geoscientists.

Dr Allan Trench, Non-Executive Director

Dr Allan Trench is a geologist/geophysicist and business management consultant with over 20 years’ experience across a broad range of commodities. His minerals sector experience spans strategy formulation, exploration, project development and mining operations. Allan holds degrees in geology, a doctorate in geophysics, a Masters degree in Mineral Economics and a Masters degree in Business Administration. He currently acts as independent director to a number of emerging resources companies, both in Australia and overseas.

Allan has previously worked with McKinsey & Company as a management consultant, with Woodside Petroleum in strategy development and with WMC both as a geophysicist and exploration manager. He is an Associate Consultant with international metals and mining advisory firm CRU Group and has contributed to the development of that company's uranium practice, having previously managed the CRU Group global copper research team.

Allan maintains academic links as an Adjunct Professor to the Western Australian School of Mines, Curtin University of Technology.

John Sendziuk, Company Secretary

Former RSM Bird Cameron accountant Mr Sendziuk is the Company Secretary.

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HCH Model

Hot Chili financial summary Year-end 30 June

Sum of the Parts valuation A$m A$/sh Forecast assumptions 2012 2013E 2014E 2015E 2016E 2017E 2018EProductora 361 $1.22 Copper (US$/lb) $3.70 $3.58 $3.88 $3.58 $3.25 $3.25 $2.93 Exploration 90 $0.30 Gold (US$/oz) $1,682 $1,584 $1,575 $1,575 $1,575 $1,575 $1,575 Los Mantos 25 $0.08 Iron Ore (US$/t) $215 $175 $209 $187 $163 $163 $139 Chile Norte 10 $0.03 Banderas Project 10 $0.03 AUDUSD 1.03 1.04 1.04 1.04 1.04 1.01 0.90Frontera Project 10 $0.03

Production summary 2012 2013E 2014E 2015E 2016E 2017E 2018ECorporate (55) ($0.26) Productora

Ore Processed (Mt) 0.0 0.0 6.3 10.9Subtotal 451 $1.52 Grade (Cu %) 0.60% 0.60% 0.60% 0.60%Other Recov ery (%) 92.0% 92.0% 92.0% 92.0%Net cash (debt) 36 $0.12 Copper production (kt in conc) 0.0 0.0 34.5 60.2NAV 486 $1.64 Copper production (mlb in conc) 0 0 76 133Asset valuation summary Moly production (mlb in conc) 0.0 0.0 1.4 2.5

Gold production (koz in conc) 0.0 0.0 25.0 43.6Iron Ore (Mt) 0.00 0.00 0.62 1.09C1 (US$/lb) (incl. royalty) $0.00 $0.00 $1.16 $1.25

PROFIT & LOSS (A$m) 2012 2013E 2014E 2015E 2016E 2017E 2018ERevenues 0.8 0.1 - - - 310.3 531.8Cost of sales - 0.1 - - - 140.3 267.1Ex ploration w rite-off 0.5 2.0 1.2 - 1.0 2.0 2.0 Roy alty - - - - - 15.2 26.1Corporate Ov erheads 4.2 5.1 6.0 7.0 7.0 7.0 7.0EBITDA (3.9) (7.2) (7.2) (7.0) (8.0) 145.9 229.6 D&A 0.0 0.0 - - - 31.3 54.5EBIT (3.9) (7.2) (7.2) (7.0) (8.0) 114.6 175.1 Interest income/(ex pense) 0.1 0.1 - (56.0) (56.0) (55.0) (51.0)

Target price calculation A$ Weight A$/sh Adjusted PTP* (3.8) (7.1) (7.2) (63.0) (64.0) 59.6 124.1 SotP-deriv ed NAV $486 70% $1.15 Tax ation - - - - - (11.9) (24.8)

EV/EBITDA v aluation 0% Post-tax income (3.8) (7.1) (7.2) (63.0) (64.0) 47.7 99.3 Average Sig Items/Minorities - - - - - - -

Net income (adjusted earnings*) (3.8) (7.1) (7.2) (63.0) (64.0) 47.7 99.3 Target price A$/sh $1.15 Per share data (A$)Production summary EPS (adjusted, diluted) (0.02) (0.03) (0.02) (0.19) (0.18) 0.13 0.28

Shares outstanding (fully diluted) 210.0 296.0 320.0 359.0 359.0 359.0 359.0BALANCE SHEET (A$m) 2012 2013E 2014E 2015E 2016E 2017E 2018EAssetsCash & equiv alents 17 24 1 392 47 28 83Net tangible fix ed assets 16 46 65 340 620 661 653Total assets 33 69 66 732 667 689 737LiabilitiesInterest bearing debt - - - 700 700 675 625Total liabilities 0 1 1 701 701 676 626Shareholders equity 33 69 66 33 -31 17 116Minority interestsNet debt (36) (15) 139 308 653 647 542 CASH FLOW (A$m) 2012 2013E 2014E 2015E 2016E 2017E 2018E

EBIT (3.9) (7.2) (7.2) (7.0) (8.0) 114.6 175.1

Total cash from operating (2.3) (6.2) (7.2) (63.0) (64.0) 35.8 149.3 Net capital ex penditure (0.2) (3.4) (13.3) (275.0) (275.0) (18.8) (32.7)

Reserves (GMPe) Mt % / kt / koz Ex pl & Net (acquisitions)/disposals (14.9) (25.7) (6.0) - (5.0) (10.0) (10.0)

Productora 202 Cash from investing activities (15.1) (29.2) (19.3) (275.0) (280.0) (28.8) (42.7)

Cu 0.60% 1,215 Cash from financing activities 29.3 43.2 4.8 729.8 - (25.0) (50.0)Au 0.15 976 Net cash flow 11.9 7.8 (21.7) 391.8 (344.0) (18.0) 56.6

PROFITABILITY & VALUATION 2012 2013E 2014E 2015E 2016E 2017E 2018EEBIT margin, % na na na na na 37% 33%

Resources (GMPe 2H CY13) Mt % / kt / koz EV/EBITDA, x na na na na na 2.2 1.1Productora 250 PE (adj.), x na na na na na 4.3 2.1

Cu 0.60% 1,500 Au 0.15 1,206 Mo 0.15% 45


Productora71%

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Rex Minerals (RXM AU) Initiation of coverage: Large copper deposit in South Australia


Rating HOLD na

Target $0.47 na

EPS FY16E ($0.48) na

EPS FY17E $0.30 na


CFPS FY17E $0.45 na



SHARE DATA





Market cap (A$m) 60




FINANCIAL DATA


Revenue (A$m) - 93.1 619.3

EBITDA (A$m) (8.2) 20.9 257.5

Income (A$m) (104.2) (90.1) 56.4

EPS (Ac/sh) (55.1) (47.7) 29.8

CFPS (Ac/sh) (55.1) (49.6) 44.6

PER (x) (0.6) (0.7) 1.1

PCF (x) (0.6) (0.6) 0.7

EV/EBITDA (x) (1.6) 0.6 0.1


OPERATING DATA FY15E FY16E FY17ECopper production (mlb) - 22.5 152.9C1 costs (US$/lb) $0.00 $1.81 $1.47Copper price (US$/lb) $3.58 $3.25 $3.251xNAV10% /sh (A$) $0.67Current P/NAV10% (x) 47%

HOLD

RXM.ASX A$0.32/sh Target A$0.47/sh

Rex Minerals (RXM.ASX) holds 100% of the Hillside Copper Project in

South Australia. Hillside represents a large copper resource (~2mt copper) and a Bankable Feasibility Study is due 3Q CY13. Initial capex estimates of ~$900m are in line with those of most new industry supply (~$15,000/t annualized capacity) but funding it remains a big ask for a ~$60m company and we see a solution here as the biggest catalyst for the stock. Ahead of the BFS and funding solution we initiate with a HOLD and $0.47/sh price target.

The Hillside PFS showed robust economics. A 15mtpa open-pit operation producing 70ktpa copper, 50kozpa gold and 1.2mtpa 67% Fe magnetite concentrate for cash costs of ~$1.20/lb. Approvals and financing are expected in 2H CY13, potential development 1H CY14 before first production early CY16. As a large, low-grade operation, it shows significant sensitivity to inputs (costs, grades, recoveries) and we await more confidence around these from the upcoming BFS (Q3 CY13).

Our modeling suggests unit costs may be higher than the suggested US$1.20/lb. Our forecast cash cost of US$1.79/lb (incl. royalty) is based on a $2.30/t mining cost ($11.50/t ore mined at a +4:1 strip ratio), $8/t processed, $1.50/t admin, $30/t transport, loading and shipping. The South Australian royalties increase in mid ’14 to 5% (from 1.5%) on metals in concentrate and 2.5% on gold.

Financing required of +$900m means strategic investors needed. Aside from greater confidence around inputs, we see financing as the biggest overhang for the stock. We believe EPCM finance from (Asian) contractors or investment from strategic offtake partners (iron ore/copper) could break it down into more palatable pieces before more equity is inevitably required.

We initiate coverage with a HOLD rating and an A$0.47/sh price target. Our price target is based on 0.7xNAV for an operation at Hillside, using conservative LT prices of US$2.60/lb copper, US$1,575/oz gold and 0.90 AUDUSD. We also include $35m (A19cps) for all exploration.

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Investment summary

Hillside BFS due Q3 CY13—targeting 70ktpa copper

The Hillside PFS showed robust economics for a 15mtpa open-pit operation, producing 70ktpa copper, 50kozpa gold and 1.2mtpa of a 67% Fe magnetite concentrate for cash costs of ~$1.20/lb. Approvals and financing are expected in 2H CY13, construction start 1H CY14 before first production 1H CY16. As a large, low-grade operation, it shows significant sensitivity to inputs (costs, grades, recoveries) and we await more confidence around these from the upcoming BFS (Q3 ‘13).

Higher cost but plenty of leverage

Our modelling suggests unit costs may be higher than the suggested US$1.20/lb. Our forecast cash cost of US$1.79/lb (incl. royalty) is based on a $2.30/t mining cost ($11.50/t ore mined at a +4:1 strip ratio), $8/t processed, $1.50/t admin, $30/t transport, loading and shipping. The South Australian royalties increase in mid-’14 to 5% on metals in concentrate and 2.5% on gold. RXM is the most highly leveraged company in our universe to higher (and lower) copper prices. A 10% increase in our long-term copper price (US$2.60/lb to US$2.86/lb) increases our NPV by 140% or A66cps to $1.13/sh.

Funding of +$1bn required to see through to production

The PFS estimated capex at $900m, in line with new copper production globally at $15,000/t of annualized capacity (after including extra equipment/infrastructure for the magnetite product). Aside from greater confidence around inputs, we see financing as the biggest overhang for the stock. We believe EPCM finance from (Asian) contractors for a portion or investment from strategic iron ore/copper players could break it down into more palatable pieces before more equity is required. It remains a large funding event for a ~$60m company.

One alternative is for the iron-ore concentrate facility to be financed independently and built with the initial plant or delayed and financed with internal cash flows. This is being assessed in line with marketing and financing discussions.

Exploration to step up again later in CY13

Near mine exploration will focus on strike extensions and, in the future, turn to depth (underground) extensions. While regional exploration has slowed ahead of the BFS, we expect activities to ramp up later in CY13.

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We model a 15mtpa open-pit operation largely in line with the Oct.’12 PFS.

Hillside Project Parameters Modeled

Resource Mt 330Cu grade % 0.60%

contained copper kt 1,980Au grade g/t 0.15

contained gold koz 1591Fe grade % 14.1%

contained iron kt 46029

Hillside GMPeMill capacity mtpa 15.00



Au Recovery % 84%Av Au production kozpa 56

Fe Head Grade % 12%Fe Recovery % 43%

Av Fe production ktpa 56.3Commissioning plant year 2016Capex A$m 905$ Mine life years 15LOM Cu production kt 998av C1 Cash costs per pound (Cu) US$/lb 1.76$

NPV 100% 100$


We value Hillside on a post-tax DCF basis using a 10% discount, 0.90 AUD/USD and US$2.60/lb copper price, US$1,575/oz gold price and US$115/t iron ore long-term. We also attribute $35m (A19cps) for all exploration including unmodelled lbs at Hillside and regional exploration.

With ~$47m cash, we believe RXM is well funded for CY13 and delivery of the BFS before it requires +$900m in funding for Hillside. Given this is a significant amount for a ~$60m company, this remains the largest de-risking item for RXM. As a (heavily) cum funding copper developer, we risk weight our Hillside DCF at 70%, giving us our $0.47/sh price target and HOLD recommendation.

As expected, our RXM valuation is the most sensitive of our companies to changes in the copper price, with a 10% higher price increasing our NPV by 140% or 67cps.

RXM Valuation Breakdown Sensitivity Copper, gold, grade, forex, capex & opex Sum of the Parts valuation A$m A$/shHillside 100 $0.53 Exploration 35 $0.19 Other 1 $0.01 Corporate (56) ($0.30)


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Risks

Financing: $900m in capex funding remains a challenge for a ~$60m company. Breaking it down into manageable pieces with the help of strategic partners seems the most likely outcome.

Political and fiscal risks: While the recent introduction of the Mineral Resources Rent Tax (MRRT on iron ore and coal only) and introduction of the Carbon Tax mean mining investment risk in Australia is higher, it remains one of the premier mining investment destinations worldwide. Royalties in South Australia increase from 1.5% to 5% on metals contained in concentrate from mid-2014.

Costs: Cost pressure remains an issue in the global mining sector and South Australia is no exception; however, delays to the Olympic Dam expansion and a weak state economy means it is less exposed. Hillside’s location, access to infrastructure and simple open-pit operation should minimize its exposure despite its scale.

Catalysts

From here, newsflow and catalysts centre on de-risking Hillside toward production through studies, funding and further exploration results.

Bankable Feasibility Study Q3 CY2013

Decision to mine

Secure financing Q4 CY2013

Obtain approvals (ML applied for April ’13)

24-month project construction

Early 2016 production ramp-up

Exploration across the Pine Point Copper Belt

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Company description

RXM has 100% ownership of exploration licenses on the Yorke Peninsula, covering an area of over 1700km2 that hosts the Hillside Project. The Hillside Project is a hidden greenfield discovery made by RXM in late 2008. The Hillside Project is 150km (2hr drive) by sealed roads to the city of Adelaide. RXM is focused on development of a large-scale copper-gold-magnetite project at Hillside and is aiming to finalise the BFS in Q3 CY13 before permitting and funding in Q4 CY13 and potential production early 2016.

Location Map

Source: RXM

The Oct.’12 Hillside PFS showed robust economics for a 15mtpa open-pit operation producing 70ktpa copper, 50kozpa gold and 1.2mtpa 67% Fe magnetite concentrate for cash costs of ~$1.20/lb. As a large, low-grade operation, it shows significant sensitivity to inputs (costs, grades, recoveries) and we await more confidence around these from the upcoming BFS (Q3 ‘13).

Aside from greater confidence around inputs, we see financing as the biggest hurdle for the stock. PFS capex estimates are for $900m, suggesting RXM is looking for +$1bn to get it through to production. We believe EPCM finance from (Chinese or Korean) contractors or investment from strategic iron ore/copper players could break it down into more palatable pieces before more equity is required. One alternative is for the iron-ore concentrate facility to be financed independently and built with the initial plant or delayed and financed with internal cash flows. This will be assessed in line with marketing and financing discussions.

Near mine exploration will focus on strike extensions and, in the future, turn to depth (underground) extensions. While regional exploration has slowed ahead of the BFS, we expect activities to ramp up later in CY13 and to follow up a recent soil sample program.

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Hillside

The Hillside PFS, released 31 October 2012, identified a potential mine life of 15 years with annual production of 70kt copper, 50koz gold and 1.2Mt iron ore at cash costs of US$1.20/lb after by-product credits (pre-royalties). The BFS is due for completion 2H2013.

Location

This project is located in South Australia along the Yorke Peninsula, roughly two hours’ drive from Adelaide. The project location has infrastructure advantages for access to port, power and water and relatively shallow ore.

Geology

The Hillside project lies in the Pine Point Copper Belt of the Gawler Craton in South Australia. Copper-gold mineralisation occurs on three separate structures—the Zanoni, Parsee and Songvaar. These structures are broadly defined by a magnetic anomaly that exists over an area that is 2km long and 500m wide.

The mineralization at Hillside forms part of a large regional alteration system. Copper occurs as chalcopyrite and the deposit contains ~14% Fe as magnetite, with Earnest Henry being the closest analogy.

The Hillside ore system is built on regional north-south trending mineralizing structural channels that carried copper- and gold-bearing hydrothermal fluids. Copper/gold mineralization is hosted by a sequence of intensely altered metasediments and skarns.

Drillout and Zanoni, Parsee and Songvaar mineralized structures

Source: RXM

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The Hillside resource at a 0.2% cut-off contains 1.98mt of contained copper at a 0.6% grade.

Hillside Mineral Resource (February 2013)

Indicated 19 0.55 0.21 14.49 104.5 128.3 2,754.5

Inferred 1 0.5 0.1 14.1 5.0 3.2 139.5

Indicated 14 0.59 0.2 14.81 82.6 90.0 2,092.7

Inferred 1 0.7 0.1 11.5 7.0 3.2 102.9

Indicated 129 0.59 0.15 13.83 761.1 622.1 17,502.5

Inferred 167 0.6 0.1 14.1 1,002.0 536.9 23,293.4Hillside

Copper-GoldTotal 330 0.6% 0.15 14.1% 1,980.0 1,591.5 46,028.8

Oxide Copper

Secondary Sulphide

Primary Sulphide

Contained Cu (kt)

Contained Au (koz)

Contained Fe (kt)

Mineral Resource

Category Tonnes (Mt)Cu Grade

(%)Au Grade (g/t) Fe Grade (%)

Source: RXM

RXM released the maiden Ore Reserve for Hillside in Feb 2013 that detailed an 8-year LOM producing approximately 70,000tpa copper (>100,000t CuEq) and a copper reserve grade of 0.53% (copper equivalent grade of 0.77%). Higher grades will be targeted for preferential treatment in early years.

Hillside Ore Reserve (February 2013)

Probable 120 0.53 0.14 12.8 636.0 540.0 14,500.0Proven / / / / / / /Total 120 0.53% 0.14 12.8 636.0 540.0 14,500.0

Contained Au (koz)

Contained Fe (kt)

Hillside Copper-Gold

Category Tonnes (Mt)Cu Grade

(%)Au Grade (g/t) Fe Grade (%)

Contained Cu (kt)

Ore Reserve

Source: RXM

Mining

With an initial 120mt open-pit reserve and over 210mt of resources still to be converted, Hillside will be a very large open pit. At an estimated 4:1 strip ratio, material movements will require +75mtpa post the pre-strip (~$100m). The reserve grade of 0.53% copper includes assumed dilution. This will remain a critical input to the operation’s success with the bottom line very sensitive to the head grade. High-grade copper outside the PFS open pit will be reviewed for potential underground access in the future.

Hillside PFS Mine Layout

Source: RXM

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Processing

Initial capex estimates for the 15mtpa processing plant are for $680m (~US$10,000/t annualised production). Conventional flotation technology will be used to produce a 25% copper/gold concentrate containing up to 70ktpa copper and 50kozpa gold. The tailings will then be treated to recover a 67% Fe magnetite product to be sold separately.

Expected recoveries have improved with further test work to 88% for copper (compared to ~85% in the PFS) and 84% for gold recovery (compared to 82% in the PFS).

Tailings treatment will utilise conventional magnetic separation to recover 1.2mtpa of magnetite with an average iron ore grade of ~67% iron and low impurities (based on PFS mineral processing test-work). Due to project location, capex is expected to be $120m and iron ore product can be processed at costs less than A$40/t, within the lower quartile of global iron-ore production. RXM are considering copper-gold and iron ore concentrate transport via a 12km slurry pipeline from the processing plant to the port of Ardrossan. Costs of pipeline and facilities on either end are included in the project capex.

Infrastructure

Capital costs at Hillside do benefit considerably from its close proximity to infrastructure and ability to access existing key services such as power, water and port facilities.

Power

The existing power network, both adjacent to and throughout the Yorke Peninsula has adequate capacity to deal with the needs of the Hillside Project. The current network has a132kV line capacity within 10km of the site with the ability to further enhance this capacity by linking the larger 275kV line capacity into the Hummocks substation, which is located at the top of the Yorke Peninsula. Further details about additional power options, which will again provide mutual benefits to Rex and other industries surrounding the Hillside Project, are expected to be announced later in 2013.

Water

RXM has an agreement with SA Water that ensures required fresh water for Hillside will be available before projected commissioning in 2015.

Port

The Hillside Project’s proposed development will produce two concentrates from a 15Mt per annum processing plant situated adjacent to the Hillside open-pit mine. The PFS contemplates transporting both the copper-gold concentrate and the iron ore concentrate via a slurry pipeline, which will be only 12km long, from the process plant to the port of Ardrossan. The construction of the slurry pipeline and washing/drying facilities close to the port are included in the estimates for capital required for the project. The option of having a short slurry pipeline to the port brings the benefit of not requiring the use of road or rail transport, and delivers the products to the port at a minimal cost.

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Hillside Potential Water Supply South Australia Existing High Voltage Network

Source: RXM Source: RXM

Fiscal regime

In South Australia, RXM will pay a 5% royalty on metals in concentrate and 2.5% on gold.

Capex

Capex for the Hillside project is estimated at A$900m, including A$100m for pre-strip and mining infrastructure, A$680m on process plant and surface infrastructure and A$120m on iron ore plant and infrastructure. This also includes $90m of contingency. This brings Hillside in on the new industry average capex intensity of ~US$15,000/t of annualised capacity.

Opex

Our estimated opex of ~US$1.80/lb (including royalty) is significantly higher than company guidance of US$1.20/lb. Our estimate is based on $11.50/t mining cost (~4:1 strip ratio at $2.30/t moved), $8.00/t processing cost, $1.50/t for admin, $30/t for concentrate transport, port handling and shipping, US$70/t and US7c/lb treatment and refining charges and 5% royalties.

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Production profile

Our modelled production profile for Hillside is shown below.

Hillside Production Profile

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Exploration

Near mine exploration will focus on strike extensions and, in the future, turn to depth (underground) extensions. While regional exploration has slowed ahead of the BFS, we expect activities to follow up a recent soil sample program later in CY13.

Regional Exploration Targets

Source: RXM

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Board

Paul Chapman – Non Executive Chairman

Mr Paul Chapman is a chartered accountant and has over twenty years of resources experience gained in Australia and the U.S. He has worked in a number of commodity businesses, including gold, nickel, manganese, bauxite/alumina and oil/gas. Mr Chapman’s career includes 17 years with WMC where he held various senior commercial positions. Mr Chapman has held senior management roles in public companies of various sizes and is Chairman of ASX listed uranium explorer Encounter Resources Ltd and also Chairman of listed gold company Silver Lake Resources Ltd.

Richard Laufmann – Non Executive Director

Mr Richard Laufmann is a mining engineer with a proven track record in the resources sector both in Australia and overseas. Mr Laufmann’s career includes 11 years with WMC as a mining engineer and in various management roles. His extensive operational experience includes three years as General Manager of St Ives Gold in Western Australia. Mr Laufmann also previously led WMC Resources Limited’s Gold Business as General Manager – Operations. Mr Laufmann is currently the Managing Director of Indophil Resources, an ASX listed company operating in the Philippines.

Alister Maitland – Non Executive Director

Mr Maitland is a former Executive Director of the ANZ Banking Group with background in international finance whose banking experience extended beyond Australasia to cover Asia, the Sub Continent, the Middle East, Europe and America. His professional experience has included global business expansion, internal and external consulting, treasury projects and international political agendas. As Chief Executive of ANZ Bank for New Zealand, he was responsible to the local board for the countries operations. He has been a non-executive director of a number of publicly listed ASX companies and government bodies covering a wide range of activities including property services, mining, banking, asset management and health. He is a former chairman of Ballarat Goldfields NL and director of Lihir Gold Ltd. Currently a Director of Malayan Banking Berhad (Maybank) headquarted in Kuala Lumpur. Director since 2011.

Mark Parry – Managing Director and CEO Mr Mark Parry is an experienced senior executive with over 30 years of experience gained within light and heavy manufacturing, mining, project development and contracting within Australia. Mr Parry’s career includes over 15 years with BHP, over 11 years with OneSteel (now Arrium) and 1 year with Leighton Contractors where he held various management and executive roles. His operational and executive experience includes over 7 years as Chief Executive of OneSteel’s Whyalla business including full P&L responsibility for iron ore mining (pit to port) and the integrated steelworks. This included oversight and responsibility for Project Magnet and the subsequent iron ore capital development program which saw the transition of the steelworks to magnetite based pellet feed and an increase in external iron ore sales from 1mtpa to 6mpta at a total capital cost exceeding $600m.

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Steven Olsen – Executive Director Mr Steven Olsen has over 16 years’ experience in the resources industry with a background of 14 years working as a mine geologist and exploration geologist, predominantly in Western Australia and Canada, on nickel and gold deposits. Mr Olsen has had continued exploration success for both nickel and gold mineralisation throughout his career. Mr Olsen’s qualifications include a B.Sc. (Hons) University of Melbourne, a Masters in Mineral Exploration from Queens University, Ontario and a Graduate Diploma of Applied Finance and Investment from the Securities Institute of Australia.

Amber Rivamonte – Company Secretary

Ms Amber Rivamonte was originally appointed as company secretary with Rex in July 2007. Ms Rivamonte is a CPA and previously held the roles of CFO and company secretary at Rex Minerals and Ballarat Goldfields NL. Ms Rivamonte also previously held the role of company secretary at Indophil Resources NL and has over 16 years’ experience in the financial management of public listed exploration companies.

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RXM Model

Rex Minerals financial summary Year-end 30 June

Sum of the Parts valuation A$m A$/sh Forecast assumptions 2012 2013E 2014E 2015E 2016E 2017E 2018EHillside 100 $0.53 Copper (US$/lb) $3.70 $3.58 $3.88 $3.58 $3.25 $3.25 $2.93 Exploration 35 $0.19 Gold (US$/oz) $1,682 $1,584 $1,575 $1,575 $1,575 $1,575 $1,575 Other 1 $0.01 Iron Ore (US$/oz) $215 $175 $209 $187 $163 $151 $115 Corporate (56) ($0.30) AUDUSD 1.03 1.04 1.04 1.04 1.04 1.01 0.90

Subtotal 80 $0.42 Production summary 2012 2013E 2014E 2015E 2016E 2017E 2018EOther Hillside (RXM 100%)Net cash (debt) 47 $0.25 Ore Processed (Mt) 2.5 13.5 15.0NAV 127 $0.67 Grade (Cu %) 0.60% 0.60% 0.60%Asset valuation summary Recov ery (%) 76.5% 85.3% 88.0%

Copper production (kt in conc) 10.2 69.4 79.2Copper production (mlb in conc) 22 153 175Gold production (koz in conc) 7.7 50.6 56.7Magnetite conc (Mt) 0.2 1.0 1.2C1 (excl. royalty) $1.60 $1.21 $1.29 (incl. royalty) $1.81 $1.47 $1.67

PROFIT & LOSS (A$m) 2012 2013E 2014E 2015E 2016E 2017E 2018ERevenues 0.0 - - - 93.1 619.3 687.9Cost of sales 0.0 - - - 59.4 322.4 358.5Ex ploration w rite-off - 0.6 1.2 1.2 1.2 1.2 1.2 Roy alty - - - - 4.7 31.2 34.7Corporate Ov erheads 3.6 6.8 7.0 7.0 7.0 7.0 7.0EBITDA (3.6) (7.4) (8.2) (8.2) 20.9 257.5 286.6 D&A - 0.1 - - 15.0 81.0 90.0EBIT (3.6) (7.4) (8.2) (8.2) 5.9 176.5 196.6

Target price calculation A$ Weight A$/sh Interest income/(ex pense) 3.1 1.1 (96.0) (96.0) (96.0) (96.0) (93.0)SotP-deriv ed NAV $127 70% $0.47 Adjusted PTP* (0.5) (6.3) (104.2) (104.2) (90.1) 80.5 103.6 EV/EBITDA v aluation 0% Tax ation - - - - - 24.2 31.1 Average Post-tax income (0.5) (6.3) (104.2) (104.2) (90.1) 56.4 72.5

Sig Items/Minorities - - - - - - - Target price A$/sh $0.47 Net income (adjusted earnings*) (0.5) (6.3) (104.2) (104.2) (90.1) 56.4 72.5 Production summary Per share data ($)

EPS (adjusted, diluted) (0.00) (0.03) (0.55) (0.55) (0.48) 0.30 0.38

Shares outstanding (fully diluted) 189.0 189.0 189.0 189.0 189.0 189.0 189.0BALANCE SHEET (A$m) 2012 2013E 2014E 2015E 2016E 2017E 2018EAssetsCash & equiv alents 70 40 930 420 15 66 152Net tangible fix ed assets 114 137 343 749 1,063 1,068 1,006Total assets 184 177 1,273 1,169 1,078 1,135 1,157LiabilitiesInterest bearing debt - - 1,200 1,200 1,200 1,200 1,150Total liabilities 5 3 1,203 1,203 1,203 1,203 1,153Shareholders equity 179 174 70 -35 -125 -68 4Minority interestsNet debt (47) 15 525 780 1,185 1,134 998 CASH FLOW (A$m) 2012 2013E 2014E 2015E 2016E 2017E 2018E

Reserves (Feb '13) Mt % / kt / koz EBIT (3.6) (7.4) (8.2) (8.2) 5.9 176.5 196.6

Hillside 120.0 Total cash from operating 0.3 (5.0) (104.2) (104.2) (93.8) 84.4 171.4

Cu 0.53% 636 Net capital ex penditure (4.5) (0.4) (200.0) (400.0) (305.0) (27.0) (30.0)Au 0.14 540 Ex pl & Net (acquisitions)/disposals (44.8) (24.3) (6.0) (6.0) (6.0) (6.0) (6.0)

Fe 12.8 14,500 Cash from investing activities (15.3) (45.2) (206.0) (406.0) (311.0) (33.0) (36.0)

Resources (July '12) Mt % / kt / koz Cash from financing activities 39.7 - 1,200 - - - (50.0)

Hillside 330.0 Net cash flow 24.7 (50.2) 889.8 (510.2) (404.8) 51.4 85.4 Cu 0.60% 1,980 PROFITABILITY & VALUATION 2012 2013E 2014E 2015E 2016E 2017E 2018EAu 0.15 1,591 EBIT margin, % na na na na 6% 29% 29%Fe 14.1% 46,029 EV/EBITDA, x na na na na na 0.4 0.3

PE (adj.), x na na na na na 1.4 1.1


Hillside73%

Exploration26%

Other 1%

$0.00$0.50$1.00$1.50$2.00$2.50$3.00$3.50$4.00$4.50

0102030405060708090

2012

2013

E

2014

E

2015

E

2016

E

2017

E

2018

E

2019

E

2020

E

2021

E

2022

E

2023

E

2024

E

2025

E

Hillside (RXM 100%) C1 Cash Costs (US$/lb)

Copper price (US$/lb)

Hillside Copper prod (kt)

April 28, 2013

102

APPENDIX I—GLOBAL COPPER EXPLORER/DEVELOPER VALUATION COPPER Dev't Shares o/s Price Mkt cap Net debt EV Ownership Resource Grade Cont. Cu EV/Resource Cu equiv Cont. Cu EV/Cu equiv

Key ops Ticker stage m Local CCY US$m US$m US$m % Mt % Mt US$/t grade % Equiv Mt US$/t

Explorers/developers - Australia

Cudeco Australia CDU AU Ex pln 199.88 3.42 701 -130.7 625 100% 273 0.2% 0.5 1,288 0.3% 0.9 669

Hillgrove Resources Australia HGO AU Dev 't 1022.76 0.08 83 29.5 119 100% 32 0.9% 0.3 411 1.1% 0.3 341

Rex Minerals Australia RXM AU Ex pln 188.91 0.32 61 -71.5 0 100% 329 0.6% 2.1 0 0.7% 2.4 0

Venturex Resources Australia VXR AU Ex pln 1435.36 0.02 24 -3.1 19 100% 26 1.2% 0.3 61 2.3% 0.6 31

Australia average 869 0.6% 3.2 242 0.9% 137

Explorers/developers - Africa

Blackthorn Resources Zambia BTR AU Ex pln 164.29 0.41 69 -7.0 35 100% 440 0.7% 3.0 12 0.8% 3.6 10

Sunridge Gold Eritrea SGC CN Ex pln 175.16 0.17 29 -1.7 21 100% 78 0.8% 0.6 35 1.6% 1.3 17

Africa average 98 0.7% 3.6 15 0.9% 11

Explorers/developers - Latin America

AQM Copper Peru, Chile AQM CN Ex pln 105.57 0.04 4 -9.3 0 50% 176 0.4% 0.8 0 1.0% 1.8 0

Baja Mining Mex ico BAJ CN DFS 340.21 0.05 17 314.6 19 49% 167 0.6% 1.0 18 2.1% 3.5 5

Candente Copper Peru DNT CN PFS 122.05 0.29 34 -18.3 19 100% 910 0.4% 4.0 5 0.5% 4.7 4

Coro Mining Argentina, Chile COP CN Dev 't 138.29 0.20 26 -2.1 24 100% 200 0.5% 1.0 25 0.6% 1.2 20

Lumina Copper Argentina, Peru LCC CN Ex pln 46.01 8.21 368 10.0 360 100% 3,086 0.4% 12.9 28 0.5% 16.0 23

Metminco Peru, Chile MNC AU Ex pln 1749.54 0.03 52 -14.9 37 100% 2,358 0.4% 9.6 4 0.5% 11.5 3

Panoro Minerals Peru PML CN Ex pln 204.66 0.35 70 -7.3 55 100% 558 0.4% 2.4 23 0.6% 3.3 17

LatAm average 571 0.4% 31.7 16 0.6% 13

Explorers/developers - North America

Abacus Mining Canada AME CN PFS 213.76 0.14 29 -1.3 28 100% 586 0.3% 1.8 16 0.4% 2.6 11

Augusta Resource Corp US AZC CN Dev 't 144.14 2.45 344 56.1 402 100% 1,121 0.4% 4.6 88 0.5% 5.1 78

Copper Mountain Mining Canada CUM CN Constr'n 98.57 1.92 184 291.0 553 75% 221 0.3% 0.7 812 0.4% 0.9 609

Duluth Metals US DM CN Ex pln 125.75 1.54 189 -13.4 176 60% 1,176 0.5% 6.3 28 1.6% 18.6 9

Foran Mining Canada FOM CN Ex pln 77.20 0.38 29 -14.6 20 100% 22 1.1% 0.2 82 2.5% 0.5 37

Nevada Copper Corp US NCU CN PFS 80.50 2.57 202 -53.5 139 100% 1,008 0.4% 4.1 34 0.4% 4.1 34

Northern Dynasty Minerals US (Alaska) NDM CN Dev 't 95.00 2.44 226 -26.8 198 50% 5,389 0.3% 18.3 11 1.1% 61.2 3

NGEx Canada NGQ CN Dev 't 168.63 2.40 394 -17.7 376 63% 2,121 0.4% 7.9 48 0.5% 10.9 35

Polymet Mining US POM CN Ex pln 183.25 1.14 204 25.7 230 100% 838 0.3% 2.2 105 0.7% 6.0 38

Quaterra Resources US QTA CN Ex pln 162.99 0.15 24 -11.9 23 100% 911 14.5% 132.5 0 14.6% 132.7 0

Western Copper Corp Canada WRN CN Dev 't 93.78 0.73 67 -32.7 33 100% 2,753 0.2% 4.7 7 0.4% 11.0 3

North America average 1,891 10.6% 183.2 12 10.8% 8

Explorers/developers - RoW

Altona Mining Finland, Australia AOH AU Dev 't 528.94 0.19 103 -4.9 106 100% 288 0.6% 1.7 61 0.8% 2.4 44

Avalon Minerals Sw eden AVI AU Ex pln 464.84 0.05 21 -1.8 21 100% 47 1.1% 0.5 39 1.1% 0.5 39

Bezant Resources Philippines BZT LN Ex pln 64.99 28.50 28 -6.5 11 100% 400 0.4% 1.5 7 0.7% 2.8 4

EMED Mining Public Ltd Spain EMED LN Re-start 1177.17 9.38 168 -9.9 158 100% 205 0.5% 0.9 168 0.6% 1.2 133

Entrée Gold Mongolia, Austra ETG CN Ex pln 146.73 0.26 37 1.3 38 72% 2,357 1.7% 39.9 1 2.0% 47.4 1

Finders Resources Indonesia FND AU Dev 't 319.72 0.14 46 10.0 54 100% 9 2.5% 0.2 255 3.0% 0.3 210

Highlands Pacific PNG HIG AU Dev 't 789.34 0.09 72 -15.0 57 18% 515 0.4% 2.3 25 0.9% 4.5 13

Indophil Resources Philippines IRN AU FS 1203.15 0.28 346 -241.1 102 38% 934 0.6% 5.2 20 2.0% 18.4 6

Intrepid Mines Indonesia IAU AU Ex pln 555.79 0.22 125 -9.7 116 80% 2,264 0.5% 10.5 11 0.9% 20.1 6

Turquoise Hill Resources Mongolia TRQ CN Constr'n 1005.61 5.71 5,595 705.1 6,331 66% 2,478 1.0% 24.4 260 1.9% 47.7 133

Marengo Mining PNG MMC AU Ex pln 1137.87 0.09 99 154.0 154 100% 580 0.4% 2.4 65 4.5% 25.8 6

Orsu Metals Kazakhstan OSU CN Scoping 157.70 0.10 15 -10.1 1 95% 15 1.6% 0.2 3 1.6% 0.2 3

RoW average 6,656 1.2% 89.6 80 1.8% 41

Explorer/Developer average 10,085 6.6% 311.3 32 6.9% 18

Producers

Antofagasta Chile ANTO LN Prodn 985.86 883.00 13,274 -2,407 12,561 58% 8,881 2.6% 227.6 55 2.6% 231.2 54

Capstone Mining Mex ico, Canada CS CN Prodn 379.28 1.92 710 -487 441 75% 489 0.5% 2.2 197 0.9% 4.3 102

Discovery Metals Botsw ana DML AU BFS 486.99 0.34 170 148 307 100% 207 1.3% 2.7 116 1.5% 3.1 99

First Quantum Minerals DRC, Zambia FM CN Prodn 583.80 16.43 9,346 92 9,988 94% 3,259 0.6% 18.4 542 0.8% 25.9 385

Freeport-McMoran Global FCX US Prodn 949.53 28.56 27,119 -178 31,525 70% 12,471 0.4% 48.6 648 0.7% 88.9 355

Imperial Metals Corp Canada III CN Prodn 74.36 11.95 866 85 954 87% 3,077 0.2% 6.8 140 0.4% 12.0 79

Inmet Mining Americas IMN CN Prodn 69.37 67.59 4,568 -450 4,359 80% 6,348 0.3% 18.9 231 0.4% 22.3 195

Katanga Mining DRC KAT CN Prodn 1907.38 0.68 1,264 601 1,806 75% 344 3.4% 11.7 154 6.8% 23.3 78

Kazakhmys Kazakhstan KAZ LN Prodn 523.72 340.00 2,715 707 3,428 Various 6,081 0.5% 30.3 113 0.6% 37.8 91

Lundin Mining DRC, Europe LUN CN Prodn 584.16 3.85 2,191 -296 1,887 42% 404 2.1% 8.6 219 3.3% 13.4 141

Mawson West Ltd DRC MWE CN Prodn 168.14 0.65 106 8 119 91% 9 4.1% 0.4 324 4.4% 0.4 302

Mercator Minerals US, Mex ico ML CN Prodn 315.31 0.29 88 95 185 100% 642 0.2% 1.3 142 0.3% 1.9 100

OZ Minerals Australia OZL AU Prodn 303.47 4.29 1,335 -676 651 100% 477 1.1% 5.3 122 1.1% 5.4 121

PanAust Ltd Laos PNA AU Prodn 615.91 2.22 1,403 41 1,551 73% 839 0.4% 3.2 490 0.5% 4.3 359

Sandfire Resources Australia SFR AU Ex pln 153.65 5.62 886 251 1,160 100% 13 5.1% 0.7 1,669 6.6% 0.9 1,302

Southern Copper Peru, Mex ico SCCO US Prodn 845.55 32.37 27,370 1,620 29,015 Various 25,415 0.3% 74.8 388 0.3% 81.6 355

Taseko Mines Canada TKO CN Prodn 191.07 2.10 391 115 509 88% 1,723 0.3% 4.7 109 0.4% 7.6 67

Tiger Resources DRC TGS AU Dev 't 674.77 0.23 159 -29 161 77% 51 1.8% 0.9 177 2.0% 1.0 154

Producers mkt cap weighted average 93,961 1.6% 467.1 396 1.8% 278

Source: Bloomberg, company data, GMP estimates. Contained copper using current spot prices; does not include an estimate of recovery; attributable share of resources. As at: 23-Apr-13.

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