orenic/peartree: flow-through share market analytics mining q3 2014 report

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Flow-through share market analytics Mining Q3 2014 Report

Exchanges: TSX, TSX-V, CSESectors Covered: Flow-throughDate Range: 1 Jan. 2012 - 30 Sept. 2014 www.peartreesecurities.com

FLOW-THROUGH | September 30, 2014 | 2www.peartreesecurities.com

Market Commentary by Éric Lemieux

Mining is a major economic and social contributor to the growth and development of Canada. Today the mining industry is challenged by market-related parameters such as poor commodity prices and relatively high input costs resulting in an ongoing struggle to secure exploration and development financing.

To the credit of our sector resilience exploration funding has not been totally deterred as attested by the following pages that examine flow-through financing metrics. We note that precious metals (notably gold) remain the predominant commodity explored for by virtue of Canada’s mineral rich Archean green-stone belts and mining camps of the likes of Red Lake, Timmins, Kirkland Lake, Cadillac, Malartic and Val d’Or. Also, two-thirds of funds raised in flow-through financings are in the precious metal sector with nearly $900m raised since 2012. We note that flow-through financing remains a significant source of exploration capital (albeit less robust than in previous years). Since 2013, British Columbia, Ontario and Quebec dominate in terms of the number of transactions of 98, 86 and 139 financings totalling over $150m, $137m and $148m respectively. While gold occupies the most important sector by orders of magnitude, historical nimbleness and chance permit explorers to stumble on other commodities while exploring. With issuers exploring for over a dozen commodities it is inevitable that more gold and other multi-metallic wealth creating commodities will be found and developed.


Market Commentary by Éric Lemieux Cont.

Though major discoveries have been absent in Quebec since the Éléonore discovery in 2004 by Virginia Mines (VGQ-T), and the development of the Canadian Malartic mine by Osisko (now Osisko Royalty (OR-T)), we believe the sector in Quebec in particular is well positioned to ‘pounce’ back. Exploration activities have been maintained and interesting projects are emerging within the Abitibi’s Cadillac-Larder Lake Fault, the Detour Lake Trend as well as in the James Bay area of Quebec. Certainly Plan Nord + and an emerging more conducive mineral-friendly environment being fostered by the Philippe Couillard Government are new positive catalysts. We expect that perseverance by all actors in the Canadian mineral industry will lead to more new, world-class discoveries and development projects. In support of these activities are novel financing opportunities offered by PearTree enabling global institutional and strategic investment in what has traditionally been a financing modality only available to Canadian retail investors.

Éric Lemieux MSc, P. Geo Mining & Exploration AnalyticsPearTree Securities [email protected] 819 314 8081


Executive Overview

Anyone who has been involved in financing a resource exploration company over the past several years is well acquainted with how challenging it is to raise money on acceptable terms. In such environments, market participants seek out innovative solutions. In the flow-through market, more and more players have recognized that this means the better pricing, minimal dilution and expanded universe of buyers that PearTree’s structured flow-through financing options deliver. We’re proud to be the sponsor of this report unique to the flow-through market and of the leading position that PearTree has assumed in that market. With an annual growth rate of over 25% over the last 3 years (and expected to continue at that pace for at least 3 more), PearTree has become a significant contributor to the junior exploration market. As you will see in the following presentation, despite a continued downturn in both the number and average size of financings, PearTree participation continues to grow. Since early 2012, the junior mining sector has experienced higher than normal volatility, which has made capital raising activities more difficult. Both the number of financings and average deal size have dropped annually since 2012 highlighting the difficulties in exploration financing. Unfortunately this trend continues to be downward sloping. Despite the fact that the ‘health’ of the market as determined by the Oreninc Index is declining, share price premiums have increased in 2014, reducing dilution and increasing the amount of money available for exploration activities. As the attached data highlights, PearTree is a key contributor to this market trend.

Norman Brownstein MBA, CFA President, PearTree Securities [email protected] 613 3848 x426

Lisa Davis LL.B, ICD.D. CEO, PearTree Securities [email protected] 416 613 3848 x437


Flow-Through Dollars Raised by Province

Note: All dollars raised are listed in millions. PearTree participation includes only public company financings. Private company financings are not included in this report.


Oreninc Index

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Five-Week Moving Average Weekly State of the Market

Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014

2013 2012 2014

State of the Market Trendline

Oreninc Canadian Resource Financing Index

Note: The Oreninc Index tracks the state of the Canadian junior natural resources financing market and gives readers a snapshot idea of fundraising confidence in a given week. A sustained market above 100 is considered healthy.


Flow-Through as Percentage of Total Funds Raised

Note: The chart represents all flow-through financings across all natural resources sectors closed between January 1, 2012 and September 30, 2014.

Flow-Through as Percentage of Total Funds Raised


Flow-Through Raised by Quarter: 2012 – 2014

Note: The chart represents all flow-through financings across all natural resources sectors closed between January 1, 2012 and September, 30, 2014. Dollars raised listed in million-dollar units.


Sector Distribution by Dollars Raised

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Note: The charts and table represent all flow-through financings across all natural resources sectors closed between January 1, 2012 and September 30, 2014. Dollars raised listed in million-dollar units.


Flow-Through Comparison by Province: 2013 – 2014

Note: Flow-through dollars raised listed in million-dollar units. “Atlantic Canada” includes the provinces of New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland, and Labrador. PearTree participation only includes public company financings. Private company financings are not included in this report.


Dollars Raised by Offer Size

Note: The graph represents all flow-through financings across all natural resources sectors closed between January 1, 2012 and September 30, 2014. Dollars raised listed in million-dollar units.


Number of Financings by Offer Size

Note: The graph represents all flow-through financings across all natural resources sectors closed between January 1, 2012 and September 30, 2014. Dollars raised listed in million-dollar units.


Dollars Raised: Offer Size Below $5m vs. $5m+

Note: The graphs represent all flow-through financings across all natural resources sectors closed between January 1, 2012 and September 30, 2014.


Note: The graph represents all brokered flow-through financings across all natural resources sectors closed between January 1, 2012 and September 30, 2014. “Other” category includes 27 additional brokers that can be viewed on pages 18 and 19.

Broker Market Share

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Average Fees on Brokered Financings: Q1 2012 - Q3 2013 & Q3 2014

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$0-$10 $10-$25 $25-$50 $50-$100 $100-$500 $500-$1000

Average Cash Fees: Q1 2012 - Q3 2014 Average Total Fees: Q1 2012 - Q3 2014 Average Cash Fees: Q3 2013 - Q3 2014 Average Total Fees: Q3 2013 - Q3 2014

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All Sectors Q1 2012 – Q3 2014 & Q3 2014: Brokered Fees by Company Market Cap

Note: The graph represents all brokered flow-through financings across all natural resources sectors closed between January 1, 2012 and September 30, 2014. Total fees include cash and warrants.


Brokered Financings Across All Sectors: 2014

Note:The table represents all brokered flow-through financings across all natural resources sectors closed between January 1, 2012 and September 30, 2014. Financing size and total money raised listed in million-dollar units. (1) Share Price Premium unavailable at time of publication. (2) No financings have been completed in the Precious Metals sector in 2014 to date. +Median *Average


Brokered Financings Across All Sectors: 2013 & 2012

Note: The table represents all brokered flow-through financings across all natural resources sectors closed between January 1, 2012 and September 30, 2014. Financing size and total money raised listed in million-dollar units. (1) No financings were completed in the Iron Ore/Bulk sector in 2013. (2) No financings were completed in the Precious Metals sector in 2013. +Median *Average


All Financings Across All Sectors: 2014

Note: The table represents all financings across all natural resources sectors closed between January 1, 2012 and September 30, 2014. Deal size and total money raised listed in million-dollar units. +Median *Average


All Financings Across All Sectors: 2013 & 2012

Note: The table represents all financings across all natural resources sectors closed between January 1, 2012 and September 30, 2014. Deal size and total money raised listed in million-dollar units. +Median *Averagev

+

FLOW-THROUGH | June 30, 2014 | 20

Broker Stats: 2012 – 2014

Note: The table represents all brokered flow-through financings across all natural resources sectors closed between January 1, 2012 and September 30, 2014. Dollars raised and market cap listed in million-dollar units. +Median *Average

FLOW-THROUGH | June 30, 2014 | 21

Broker Stats: 2012 – 2014 Cont.

Note: The table represents all brokered flow-through financings across all natural resources sectors closed between January 1, 2012 and September 30, 2014. Dollars raised and market cap listed in million-dollar units. (1) Fees unavailable at time of publication. (2) Share Price Premium unavailable at time of publication. (3) Deal recorded solely at close. +Median *Average


Appendix

Additional Sector Breakdown


Average Financing Size Across Sectors: 2014

Note: The table represents all flow-through financings across all natural resources sectors closed between January 1, 2014 and September 30, 2014. Dollars raised and average financing size listed in million-dollar units.



Note: The table represents all flow-through financings across all natural resources sectors closed between January 1, 2012 and December 31, 2012. Dollars raised and average financing size listed in million-dollar units.


General Disclaimer Oren Inc. data is based on all representative data from the range 1/1/2012 through 30/9/2014, except as otherwise noted. Some data has been provided by PearTree Securities Inc., the client for this report.

PearTree Securities Inc. (“PearTree”) is registered as an Exempt Market Dealer (“EMD”) in the provinces of Ontario, Quebec, British Columbia, Alberta and Manitoba. PearTree is a subsidiary of PearTree Financial Services Ltd., an unregistered firm that consults to charities on tax and other matters related to a flow through share donation program. PearTree has engaged Oren Inc. to prepare this presentation for general information purposes only. This document should not be considered a solicitation to purchase or sell securities. The information provided by Peartree to Oren Inc. for the purposes of the preparation of this report has been derived from sources believed to be accurate, but cannot be guaranteed. Any opinions or analysis herein reflect the views of Oren Inc. and not necessarily those of PearTree. Furthermore, these opinions/ analysis may be subject to change and PearTree does not undertake to advise the reader of such changes.

This report is Copyright 2014 Oren Inc., which reserves all rights in and to this report, subject to rights retained by the client in data provided by the client. This report MAY NOT BE REPRODUCED IN ANY FORM EXCEPT AS DIRECTED BY PEARTREE SECURITIES INC., AND IS FOR THE USE OF THE INTENDED RECIPIENT ONLY. Oren Inc. (“Oreninc”) is a research service providing customized reports for client companies and brokers in the mining and commodities sectors, as well as producing the ODL, a digest, updated daily, of financings in the mining and commodities space. This disclaimer statement is an integral part of our service, this report and the accompanying presentation. Oreninc is not an investment bank and does not currently have any investment banking relationships with any of the subject companies or brokers of its reports, nor does Oreninc make a market or act as a principal in any securities. Oreninc is not an investment broker-dealer, does not offer securities for purchase or sale, and is not licensed or qualified to provide investment advice. Oreninc reports do not constitute a solicitation or recommendation to buy or sell any securities whatsoever. Conflicts statement: Oreninc and its principal have a financial interest in Aston Bay Holdings Ltd. (TSX-V: BAY) (“Aston Bay”), which was not included in this report. Aston Bay is an early-stage exploration and development company with copper and zinc projects in Nunavut, Canada. All research reports and presentations issued and made by Oreninc are based on public information derived solely from publicly available sources such as, but not limited to, public company filings, company news releases, and financial data. In addition, this report may include data provided by the client for this report, PearTree Securities Inc. We have not verified the accuracy of such public information or information provided by the client, nor do we have any obligation or duty to update or correct any public information for any errors, misstatements, or material changes to such public information. You are strongly encouraged to verify all claims through your own thorough and independent research or due diligence. Oreninc research reports containing any valuations or fee targets and/or recommendations are believed but not guaranteed to have bases which may be substantiated as reasonable and adequate. Oreninc research reports are intended for informational purposes only, and are intended to inform the reader only. This Oreninc research report represents solely the Oreninc Analyst’s opinions regarding subject companies at the time of production of the report. The Oreninc Analyst bases his or her opinions exclusively on public information or client-provided information available at the time of production of the report. The Oreninc Analyst has not received any material non-public information regarding the subject companies or brokers. All estimates, opinions, and/or recommendations expressed in this report are subject to change without notice, and Oreninc is under no obligation to, and may not, update the opinions and recommendations expressed herein in light of any subsequent events. The price targets presented in Oreninc reports are based explicitly on a significant number of our own estimates and assumptions, based solely on previously disclosed public information, and there can be no assurance that our price targets will be met, or whether the assumptions/estimates regarding the client company’s actual financing outcomes will materialize. We may not publish any of our bases for such estimates and assumptions.


You should understand that there is no guarantee that past performance by any companies will be indicative of future results by the same or different companies. Neither Oreninc nor any of its analysts, directors, or employees shall be liable to you, or anyone else, for any loss or damages resulting from the use of its research reports, opinions, and/or recommendations caused in whole or in part by negligence or contingencies beyond its control in procuring, compiling, interpreting, or reporting its research contents. Oreninc disclaims any and all liability as to the completeness or accuracy of the information contained in, and any omissions of material facts in, its reports. Companies should not rely solely on the recommendations and opinions contained therein. Any recommendation should not be taken as a substitute for the exercise of independent judgment and due diligence of the merits and risks of financings. Oreninc was compensated by its client, PearTree Securities Inc., for the production of this report. Oreninc was not compensated by any other bank, investment bank, broker, or other third party individual or entity for the production of this report. Oreninc has in place several business practices to ensure complete and objective editorial control over its research, including, but not limited to, the following: 1) No part of Oreninc research analysts’ compensation is related to the level of investment banking fees, stock price, or trading commission revenue generated by any of Oreninc’s clients; 2) Fees for research services are due and payable regardless of the opinion of the research; 3) Oreninc research analysts are not permitted to directly or indirectly promise any client company that they will generate a favorable research report or any specific price target; 4) Oreninc research analysts pledge that their reports accurately reflect their personal views about the subject securities and that none of their compensation was, is, or will be directly or indirectly related to the specific recommendations contained in their research reports; and 5) Oreninc research analysts are not permitted to accept any additional compensation or fees from client companies beyond what has already been paid to Oreninc for research services. Oreninc and its directors, employees, and analysts may from time to time purchase or sell securities in the open markets. However, once a research relationship has been initiated between Oreninc and the client, and unless a position in the client’s securities was established by the analyst or any member of his household prior to the initiation of the research relationship, Oreninc research analysts and their households are prohibited from executing trades in the securities of such client companies. Analysts personally holding a position in the client’s securities, or whose family members hold such a position, are prohibited from contributing to any research report developed for the client.

FORWARD-LOOKING STATEMENTS (SAFE HARBOR STATEMENT): The information set forth in Oreninc Research reports may contain “forward-looking statements” subject to certain risks and uncertainties that could cause actual future results, performance or achievements to differ materially from any historical results. Statements in reports which are not purely historical in nature, including statements regarding beliefs, plans, expectations or intentions regarding the future, are forward-looking. Statements that are not historical facts, including statements that are preceded by, followed by, or that include such words as “estimate,” “anticipate,” “believe,” “plan”, “intend”, “expect”, “may” or “should” or similar statements, are forward-looking statements. Risks and uncertainties include, but are not limited to, the risks associated with the impact of general economic conditions, competitive companies, market acceptance, and the availability of high quality, qualified personnel and management. Other risks include but are not limited to factors affecting access to capital to meet all of the client company’s financial requirements, and the company’s ability to control costs. There can be no assurance that client company’s efforts will succeed and ultimately achieve sustained commercial success. These forward-looking statements are made as of the date of the report, and Oreninc does not assume any obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. There can be no assurance that beliefs, plans, expectations or intentions of persons producing data upon which Oreninc analysts rely in this report will prove to be accurate.

General Disclaimer Cont.

orenic/peartree: flow-through share market analytics mining q3 2014 report

Business

development financing

exploration activities

secure exploration

financing modality

financing metrics

mining industry

development projects

canadian mineral industry