update report august 26, 2011 · 2012. 4. 27. · 54/98 takane (mmatsiane, makhantlele, jumbo) 71.2...

eResearch Corporation www.eresearch.ca

Update Report August 26, 2011

BOTSWANA METALS LIMITED

(A$0.072, ASX: BML)

Recommendation Speculative Buy

Risk High

Price (August 26, 2010) A$0.072

52-Week Range A$0.19 - A$0.065

Target Price A$0.25 (Lowered)

Shares O/S 143,717,844

Market Cap A$10.4 million

Average Daily Volume 50-day: 371,800

200-day: 657,400

Year-End June 30

Book Value Per Share Jun. 30, 2010 A$0.09

Dec. 31, 2010 A$0.06

Cash Per Share July 28, 2011 A$0.02

Analysts Yuri Belinsky, BA, MA

Bob Weir, B.Comm, CFA

RECOMMENDATION

We maintain our Speculative Buy recommendation for the shares of Botswana

Metals Limited (“Botswana Metals” or the “Company”), but lower our 12-month

Target Price from A$0.35 to A$0.25 per share.

HIGHLIGHTS

Since our Initiating Report issued in December 2010, Botswana Metals has raised

A$2.87 million in equity financing. This became the focal point in the Company’s

exploration campaign: the exploration expenditures jumped from A$680,000 in

F2010 to A$3.56 million in F2011.

With this new funding, in fiscal 2011 Botswana Metals has:

Finished a VTEM helicopter survey of the Shashe River East, Shashe River

West, Airstrip, Maibele, and Dibete prospects in February 2011. The survey

identified 27 anomalies, and its results are now being finalized.

Drilled 6,000 metres in 93 holes at the Dibete prospect, and 1,361 metres in 16

holes at the Airstrip prospect. Preliminary results of the drilling show high

potential for copper-silver mineralization.

The Company is currently focusing on the Dibete, Airstrip Copper, and Maibele

North prospects. Maibele North, where drilling is scheduled to start in September

2011, may outpace all other prospects in getting a JORC-compliant resource; this is

expected to happen by June 2012.

Botswana Metals Limited Update Report


COMPANY PROFILE

Botswana Metals Limited was listed on the Australian Securities Exchange (ASX) in October 2007 as a result

of a decision by A-Cap Resources Limited to spin off its non-uranium assets into a separate company.

Botswana Metals is focused on base and precious metal projects (nickel, copper, silver and others). The

Company’s exploration tenements cover about 3,000 km2 in the Limpopo Belt in Botswana, situated between

the major nickel-producing mines of Tati Nickel (originally of LionOre Mining International Ltd., which was

acquired by Norilsk Nickel in August 2007) and Selebi-Phikwe (developed by BCL Ltd. of Botswana).

The Company completed 20,000 metres of drilling over a two-year period over two targets at the Airstrip

Copper and Dibete prospects. The drilling showed potential for primary and supergene Cu-Ag mineralization.

PROJECT LOCATIONS

The map below shows ASX-listed Discovery Metals and MOD Resources and TSV-V-listed Hana Mining which

have metal exploration programs in Botswana, as well as the location of the Company’s tenement package.

Map 1: Botswana Metals’ Prospects

Source: Company

PROPERTY PORTFOLIO

FRANCISTOWN

NATA MAUN

GABORONE

SELEBI PHIKWE Ni MINE

GHANZI ORAPA

BML Cu-Ag + Ni Prospects

Discovery Metals

Hana Mining

MOD

NAMIBIA BOTSWANA

SOUTH AFRICA

ZIMBABWE

200km

TATI Ni MINE

Exploration Focus

Licence Number Tenement Name Area in sq km

110/94 Magogaphate (Airstrip Copper, Maibele North) 27.4

111/94 Mokoswane (Dibete, Crescent) 31.4

54/98 Takane (Mmatsiane, Makhantlele, Jumbo) 71.2

14/2003 Majante 40.38

44/2004 Shashe East 131

47/2004 Gobe Shear 100

48/2004 Shashe West 226

059/2008, 070/2008 Shashe South 1228.4

360/2008 Mmadinare 456.2

158/2009 Lepokole 397.5



PROGRESS IN 2011

1. New Funding. In February 2011, Botswana Metals raised A$2.87 million (A$2.7 million in net proceeds) as a

result of a rights issue. The issue’s prospectus outlined the following expected use of funds:

Table 1. The Issue's Use of Funds, A$

Drill programs on Dibete, Airstrip Copper and Maibele North $800,000

VTEM air magnetic on Airstrip Copper, Dibete and Maibele North 550,000

IP Surveying 225,000

Assay 500,000

Geological consulting services 100,000

Botswana field crew and general ground operating costs 425,000

Administration and working capital generally 94,855

Costs of the issue 179,485

Total $2,874,340

Source: Company

The Company’s cash position, at A$5.4 million in late February 2011, allowed it to allocate around A$4 million for

exploration on its new targets discovered in 2010 on PL 110/94 Magogaphate (Airstrip Copper and Maibele North

Nickel prospects), 111/94 Mokoswane (Dibete prospect), 54/98 Takane, and at the Shashe PL’s 44/2004 and PL

48/2004.

2. VTEM Helicopter Survey. In February 2011, Botswana Metals completed a helicopter borne VTEM survey of

the Shashe River East and Shashe River West prospects (1,360 line km) and the Airstrip, Maibele, and Dibete

prospects (1,790 line km) for a total of 3,150 line km. Out of 27 anomalies identified by the VTEM survey, four

were previously identified (Airstrip, Maibele North, Dibete, and Mmamanaka) as having significant soil

geochemical anomalies, while 23 anomalies are new targets (see the map below). According to the Company, the

data is currently being finalized to clearly define new targets for follow-up drilling.

Map 2: Botswana Metals’ New Discoveries: Airstrip, Dibete, and Maibele North; VTEM

Anomalies Identified

Source: Company



3. Drilling Activities. In March-June 2011, Botswana Metals drilled 93 reverse circulation (RC) holes for 6,000

metres at the Dibete prospect. During the same period, the Company also undertook a 16-hole RC drilling program

totaling 1,361 metres at the Airstrip prospect.

COMMENT: The drilling at Dibete and Airstrip showed significant potential for primary copper-silver and

supergene copper-silver deposits (see Properties on pages 8-10 for more details).

CORPORATE PLANS 1. Key Prospects. Botswana Metals is currently focused on developing resources at its principal prospects of

Dibete and Airstrip Copper, which are primary and supergene Cu-Ag mineralizations, and Maibele North, which is

Ni-Cu-PGE primary mineralization.

COMMENT: One of the reasons for the Company’s focus on these prospects is that the respective Prospecting

Licenses were about to expire. The licenses for these prospects were extended earlier this year, and the Company

intends to continue exploration efforts at these prospects.

Further drilling should allow the Company to determine the extent of the mineralization at these prospects. The

Company expects that the exploration expenditure for March-September 2011 will amount to $4 million.

We expect that the Maibele North prospect will be the first to obtain a JORC-compliant resource estimate. Drilling

is scheduled to start in September 2011, and the Company expects that the prospect will get a JORC-compliant

resource by June 2012. Based on the geostatistical study by Hilmac Pty. Ltd., the Company defined the Exploration

Target for the prospect of 1.1-1.7 million tonnes, grading 1% Ni, or 4-7 million tonnes grading 0.6% Ni.

2. Other Targets. Additional potential exists in new targets found by the VTEM Survey. These include targets at

PL 54/98 Takane, which contains major prospects with good base metal-gold-nickel anomalies.

Map 3: Untested VTEM Anomalies at the Takane Prospect

Source: Company



VALUATION

(1) Property Ratio Valuation Method

We are using the eResearch-designed Property Ratio comparison method to derive an intrinsic value for Botswana

Metals. We are using the same peer companies as in our Initiating Report of December 8, 2010.

The three companies in our valuation comparison include the subject company, Botswana Metals Limited, and

comparatives, Discovery Metals Ltd., and Hana Mining Ltd. All three operate in Botswana, but are at different

stages of the mining cycle.

Botswana Metals is in the exploration stage (no resource estimate), whereas Hana Mining has a NI 43-101 resource

estimate and is at the development stage (about 2 years ahead of Botswana Metals), and Discovery Metals is

planning to start producing in H1/2012, having achieved a bankable feasibility study (about 3-4 years ahead of

Botswana Metals).

Table 2: Corporate Comparison (Property Ratio)

Botswana Discovery Hana

(C$1.000 = A$0.971) Metals Metals Mining

ASX: BML ASX: DML TSX_V: HMG

Financial Statement Date: December-10 December-10 April-11

Corporate: (A$) (A$) (A$)

Share Price (50-day Average) $0.08 $1.27 $1.72

Shares O/S 143,717,844 437,114,481 87,455,615

Market Cap (on 50-da avg) $12,029,184 $555,659,928 $150,566,442

Mineral Properties:

Book Value (Cost) (1) $7,878,294 $106,021,513 $38,128,222

Market Value $11,412,546 $443,509,283 $145,428,380

Difference $3,534,253 $337,487,770 $107,300,158

Property Ratio (x) 1.45 4.18 3.81

Average Peer Ratio 4.00

Adjusted Book Value (Cost)(1) $13,892,127

Adjusted Property Ratio 0.96

Selected Ratio (x) 3.40

Common Equity (Per Statements) $8,320,625

Adjusted Common Equity (Selected Ratio)(2) $46,664,598

Equity Per Share (Per Statements) $0.06

Adjusted Equity Per Share (Selected Ratio)(3) $0.25

Note 1: Adjusted Book Value is the Book Value adjusted for expected exploration expenditures of A$3.6 million in F2012.

Note 2: Adjusted Shareholders' Equity is adjusted for expected A$4 million in new equity in F2012.

Note 3: Adjusted Equity Per Share is calculated on expected 12 months forward shares O/S of 184 million.

Source: e Research



(2) Analysis

The Property Ratio valuation approach is based upon an analysis of the Property Ratio, which measures the

premium the market currently places on a company’s mineral properties. All else being equal, a higher premium

indicates the market is anticipating greater future value from the assets in the ground, while a lower premium may

represent an undervalued asset.

The Property Ratio for the peers is an average of 4.00x. This is above what we consider appropriate for Botswana

Metals, given that its peers are 2-4 years ahead of Botswana Metals in terms of their development. Taking into

account the recent spike in the Company’s exploration activity, where exploration expenses grew from A$1.9

million in 2010 to A$3.6 million in F2011, we apply a moderate discount to the peer average Property Ratio, 15%,

which yields a target Property Ratio for Botswana Metals of 3.40x.

(3) Target Price

The selected Property Ratio at 3.40x yields Botswana Metals an intrinsic value of A$0.25, which we choose as our

12-months Target Price. This is down from our previous Target Price of A$0.35 per share, and reflects a marked

negative change in investor sentiment towards junior mining exploration stocks.

COMMENT: We expect that, once the Company decides to commence a JORC-compliant resource estimate, the

shares will gain greater prominence with investors.

RISKS

Extension of PLs: The Company’s interests in the tenements it explores are governed by Botswana’s

legislation, which stipulates the guidelines and requirements for the granting of Prospecting Licences (PLs).

Each PL is for a specific term and bears minimum expenditure requirements, periodic relinquishment

requirements, and lease and license conditions. Botswana Metals may decide to surrender or relinquish areas of

tenements as priorities change, or to meet budgetary requirements. The Company applies to the Minister of

Mines for an extension that may, or may not, be granted as determined by the Minister, in his discretion, in

accordance with Section 17 of Botswana’s Mines and Minerals Act. If PLs are not extended by the Botswana

authorities: (a) the Company has no further right to conduct any exploration on these tenements; (b) all funds

previously invested in exploration activities on these tenements are lost; and (c) subsequently, any deferred

exploration expenditure capitalized in the Company’s accounts is written off. Recently, the Company received

an extension for the Airstrip Copper and Maibele North prospects (PL 110/94), while it is awaiting notice from

Botswana’s Department of Mining and Minerals that an extension has been granted for Dibete PL111/94 and

54/98.

Title Risks: There may be areas in the tenements, which Botswana Metals has an interest in, over which

legitimate aboriginal title rights exist. This can affect the ability of the Company to gain access to tenements

(through obtaining consent of landowners), and/or to progress from the exploration phase to the development

and mining phases.

New Resources Tax: On May 2, 2010, the Commonwealth Government of Australia announced a proposal to

establish a resources super-profit tax from July 1, 2012. The tax will be applied to all mining and petroleum

projects. Full details of the new tax have not yet been confirmed, which makes its potential impact on the

Company’s finances unclear.



FINANCIALS Table 3: Selected Financial Statements

(A$) Year End Year End 12 months Year End

Statement of Income (Loss) Jun. 30/09 Jun. 30/10 Dec. 31/10 Jun. 30/12E

Interest Income 343,839 124,705 202,516 303,774

Other income 11,291 88,406 19,430 40,900

Total Non-Operating Revenue 355,130 213,111 221,946 344,674

Administrative & General (114,498) (180,670) (201,021) (207,052)

Corporate Expenses (80,523) (86,709) (125,202) (128,958)

Employment & Consultancy (718,755) (606,924) (678,975) (688,265)

Other expenses - - (32,026) -

Total Cash Expenses (913,776) (874,303) (1,037,224) (1,024,274)

Depreciation (50,522) (10,161) (11,787) (12,141)

Stock-Based Compensation (100,355) (755) (755) -

Impairment of deferred exploration expenditure (500,110) -

Foreign Exchange 208,194 (222,103) (359,475) -

Net Income/(Loss) (501,329) (894,211) (1,687,405) (691,741)

Total Shares Outstanding 106,087,760 106,087,760 143,717,012 183,717,844

Weighted Average Shares Outstanding 106,087,760 106,087,760 n/a n/a

Earnings (Loss) Per Share ($0.47) ($0.84) ($0.85) ($0.85)

Cash Flow Statement

Receipts from customers 12,420 104,379 (16,107) 33,564

Payments to suppliers and employees (916,713) (839,112) (1,069,678) (2,107,266)

Interest received 343,839 124,705 202,516 303,774

Cash Flow From Operations (560,454) (610,028) (883,269) (1,769,928)

Exploration Expenditures (988,562) (368,113) (1,916,575) (3,556,000)

Purchase of Plant & Equipment (143,592) (43,150) (58,724) (52,465)

Proceeds From Sale of Plant & Equipment - 6,012 6,012 -

Cash Flow From Investment (1,132,154) (405,251) (1,969,287) (3,608,465)

Equity Financing (450) - 31,796 4,000,000

Debt Financing - - -

Change in Cash (1,693,058) (1,015,279) (2,820,760) (1,378,393)

Cash, Beginning of the Period 8,013,577 6,320,519 5,955,638 3,266,000

Effect of ex rates on cash in foreign currencies (27,085)

Cash, End of the Period 6,320,519 5,305,240 3,107,793 1,887,607

Balance Sheet As At: As at As at As at As at

(A$) Jun. 30/09 Jun. 30/10 Dec. 31/10 Jun. 30/12E

Cash 6,320,519 5,305,240 3,107,793 1,887,607

Other Current Assets 64,269 48,296 151,489 53,068

Mining Properties 4,017,637 4,221,291 5,081,280 12,193,280

Plant & Equipment 197,175 166,508 154,369 194,694

Total Assets 10,599,600 9,741,335 8,494,931 14,328,649

Current Liabilities 202,124 237,315 174,306 989,764

Long-Term Debt - -

Shareholders' Equity 10,397,476 9,504,020 8,320,625 13,338,884

Total Liabilities & Equity 10,599,600 9,741,335 8,494,931 14,328,649

Book Value (S.E.) Per Share (cents) $0.098 $0.090 $0.058 $0.073

Source: Company and e Research E = Estimate by e Research



Financial Commentary

In the 12 months preceding December 31, 2010, Botswana Metals had no operating revenues;

The monthly operating cash burn rate went up from around A$85,000 in F2010 to A$102,000 in F2011 due

to the heightened exploration activities;

In February 2011, the Company raised A$2.7 million in equity financing;

Annual exploration expenditures amounted to A$3.56 million in F2011, more than 600% up from the

average for the last two fiscal years. We expect that the Company will maintain the same amount of

exploration expenditures in F2012. Given the Company’s cash position of A$2.8 million as of late July

2011, to maintain the same high pace of exploration in F2012 and be able to advance exploration in 2013,

Botswana Metals will have to raise about A$4.0 million in F2012;

The Company has almost 72 million options, exercisable at A$0.10, which could bring almost A$7.2

million and solve the F2012 financing problem. At the same time, the options’ expiration date is June 30,

2013 and many option holders may opt to keep the options near to this date, especially if the shares

continue to be “under water”.

PROPERTIES

NOTE: The following information on Botswana Metals’ properties was taken from various sources on the

Company’s website: http://www.botswanametals.com.au.

(1) Airstrip Copper Prospect (Magogaphate Prospect)

By August 2011, more primary copper mineralization was intersected (see the map on the next page).

A 16-hole reverse circulation drill program, recently completed to evaluate the supergene mineralization at

Airstrip Copper, intersected primary Cu-Ag mineralization associated with a second IP conductor. Hole

ACRC 067 intersected: 6m @ 2.7% Cu and 72g/t Ag from 68m, including 1m @ 8.8% Cu and 214g/t Ag

from 70m. This intersection confirms that this second IP conductor, some 250m to the south of the

discovery hole in the first conductor, is also associated with primary Cu-Ag mineralization.

The hole intersected the western end of a 400m long IP anomaly. At least 16 IP conductors have been

identified for a total strike length of 1,900m within the IP grid covering 1.5km x 1km. A further five IP

conductors and one VTEM anomaly are expected to be drill-tested; this commenced in late July 2011.

Part of the IP Survey area at Airstrip Copper showed interpreted conductors. Many conductors (total strike

1,900 m in IP area) are barely drilled, or are not yet drilled. Discovery area conductors may have a strike

length of 900 m.

Initial drilling in December 2009-January 2010 intersected the Airstrip Cu-Ag discovery in holes 3, 6, 7, 10

and 11. Holes 12-52 have now been drilled, to assess the Five Element type veins found to be present.

(2) Maibele North Nickel Prospect (Magogaphate Prospect)

Previous data (included from a regional drainage survey carried out by Clutha/MHB in 1989) indicates a

major extension of the nickel mineralization at Maibele North to the east with a minimum total strike

length of 4.5 km.

Reassessment of the project led the Company to conclude that this project is an attractive exploration target

which has been significantly explored. In the 1990s, Falconbridge completed 16 diamond holes at the

deposit, intersecting significant grades of massive sulfide nickel copper mineralization.

Due to positive results from the current drilling activity at Airstrip Copper (some 400 metres west of

Maibele North), the Company hired Phillip Mackenzie of Hilmac Pty Ltd (“Hilmac”) to perform a review

of the previous results and the possibility of completing a JORC-compliant Inferred Resource. Current

exploration is focused on defining resources to JORC-compliant status.

Geostatistical study has defined the scale of the Exploration Target and identified areas requiring additional

drilling. A recent VTEM survey identified untested potential that was not optimally drilled in the past.

An Exploration Target was defined on the basis of the geostatistical study by Hilmac. The Exploration

Target is in the order of 1.1 to 1.7 million tonnes at a cut-off grade of 0.6% Ni, with an average grade

http://www.botswanametals.com.au/



around 1% Ni or, alternatively, a target of 4 to 7 million tonnes at a cut-off grade of 0.3% Ni, with an

average grade around 0.6% Ni. The potential quantity and grade at the Maibele North exploration targets

are conceptual in nature; there has been insufficient exploration to define a Mineral Resource, and it is

uncertain if further exploration will result in the discovery of a Mineral Resource. No estimates have been

made for PGE and Cu present in the deposit.

Further potential in newly recognised VTEM conductors at Maibele North is present. Maibele North is

only 50 km from the Selebi Phikwe nickel smelter.

Map 4: Airstrip Cu and Maibele North Geochemistry

Source: Company

(3) Dibete Prospect (Mokoswane Prospect)

A total of 116 reverse circulation drill holes were completed at the prospect by June 2011. The program

was designed to assess the orientation and geometry of the mineralization intersected in 2010, and also

included several holes at Dibete East.

Cu and Ag were intersected in both secondary and primary mineralization. The best results were in Hole

DBRC028: 3 metres at 8.16% Cu and 469 g/t Ag from 41 metres, underlying 8 metres at 3.1% Cu and 140

g/t Ag from 33 metres in the same hole. The best widths were: Hole DBRC081 with 17 metres at 2.73% Cu

and 41 g/t Ag, intersected from 16 metres, and released 38 metres at 1.72% Cu and 119 g/t Ag in

DBRC014.

Dipole – dipole IP surveys were carried out over 1,250 metres of strike at Dibete. The prospect is open in

both SW and NE directions. 3D modelling was carried out to assist in target definition (see the picture

below).

A supergene blanket of copper silver mineralization of up to 38 metres thick is present. Grades are up to

1.72% Cu and 119g Ag/t over a 38-metre intersection.



COMMENT: The Dibete prospect is only seven kilometres from the Airstrip Copper prospect, which Botswana

Metals believes to be a promising copper and silver mineralization prospect. Dibete has similarities to the Airstrip prospect, and may be part of a larger mineralized system encompassing Airstrip. The progress on the Dibete

prospect is leading to the defining of a body of mineralization on which a resource estimate study is expected to be

carried out after the next phase of drilling.

Map 5: 3D Model of Dibete’s IP Survey

Source: Company

(4) Crescent Prospect (Mokoswane Prospect)

A total of 3 RC holes were completed in December 2009 for 470 metres.

Independent laboratory results showed that several zones of anomalous zinc mineralization, associated with

disseminated sulphides, were intersected.

(5) Majante Prospect

A total of 36 km of ground Time Domain ElectroMagnetic (TDEM) survey was completed during 2009.

The survey covered an area that showed strong nickel and copper soil geochemical anomalies and

significant airborne anomalies.

(6) Takane Prospect

Mmatsiane Prospect: Grid recovery and IP survey have been completed and drilled targets were

identified. GEOTEM anomaly 21B, a significant Cu-Pb-Zn anomaly, was drilled and completed in

October 2010. A Cu-Pb-Zn-Au anomaly in a fold nose is associated with an extensive VTEM anomaly.

Makhantlele Prospect: This project has a strike length of 8km. Multi-element anomalies appear to be

coincident with major structures and potential for mineralization similar to that found at the Magogophate

Gold Prospect (i.e. Maibele North and Airstrip Copper), but on a larger scale. Jumbo Prospect: A review of VMS targets was conducted and exploration work commenced at this

project in October 2010. This prospect is potentially a strike extension of the Mmatsiane prospect.



(7) Mmadinare

Regional soil lines have identified a series of mafic bodies which have associated geochem anomalies,

indicating Ni-Cu mineralization. Drilling of selected anomalies is in progress.

(8) Other Prospects: No field work was undertaken in 2009-2011 on any of the following properties:

Gobe Shear

Shashe South

Lepokole

MANAGEMENT

Pat Volpe, Executive Chairman

Patrick Volpe, the Executive Chairman, is also Executive Chairman of CardiaBioplastics Limited.

Mr. Volpe has worked extensively in the stock-broking industry, gaining experience in many industries

including mining, manufacturing, banking, and taxation internationally, particularly in Africa and China.

He is a specialist in corporate restructuring, business acquisitions, investment advising and capital raisings, and

effectively spearheaded the ASX listing of both A-Cap Resources Limited and Dia-B Tech Limited.

Dr. Paul Woolrich, Director

Paul Woolrich is a geologist, and has a Ph.D. in Metallurgy and a Master of Science in Geochemistry.

He has over 30 years’ experience in the mineral exploration and mining industry.

Massimo Cellante, Director

Massimo Cellante is also Chairman and a Managing Director at Australian company, Bell IXL Investment

Limited, where his role includes identifying and investing in undervalued publicly-listed companies.

Richard Baker, Company Secretary

Richard Baker has a Masters of Commercial Law, a Bachelor of Economics, and is a Certified Practising

Accountant.

He has over seven years of experience in his role in listed companies.

Peter Temby, Consulting Geologist

Peter Temby is an Economic Geologist at Anpet Exploration Pty Ltd. He has extensive experience in his

previous work with Stockdale and CRA Exploration.



STOCK CHARTS

A. Three-Year Chart

The following chart shows the daily trading pattern for Botswana Metals for the last three years. The stock hit its

all-time high of A$0.19 in early November 2010 after the Company confirmed that drilling intersected further high-

grade zones of copper and silver mineralization at the Airstrip Copper prospect.

B. Six-Month Chart

The second chart shows the daily trading over the last six months. The stock reacted positively to the news about:

(1) the granting of PL extensions for the Dibete and Majante prospects in late April 2011; and (2) the

significant mineralization found from drilling on several structures at Dibete in mid-July 2011. However, in each

instance, the shares could not hold their gains, bottoming in each instance around A$0.07, which is near current

trading levels.



ANALYST CERTIFICATION

Each Research Analyst who was involved in the preparation of this Research Report hereby certifies that:

(1) the views, opinions, and recommendations expressed in this Research Report reflect accurately the Research

Analyst’s personal views concerning any and all securities and issuers that are discussed herein and are the

subject matter of this Research Report; and

(2) the fees, earnings, or compensation, in any form, payable to the Research Analyst, is not and will not, directly

or indirectly, be related to the specific views, opinions, and recommendations expressed by the Research

Analyst in this Research Report.

eResearchAnalysts on this Report:

Yuri Belinsky, B.A., M.A: Yuri Belinsky has extensive experience in equity research, with emphasis on mining

and oil & gas companies. He had a successful track record in the capital markets in Ukraine, progressing from an

analyst to the head of research for a team of 12 analysts. He also has experience as a portfolio manager. Mr.

Belinsky has a B.A. in Economics and two M.A. degrees, in Public Administration and in Social Research and

Evaluation.

Bob Weir, B.Sc., B. Comm., CFA: Bob Weir has 44 years of investment research and analytical experience in

both the equity and fixed-income sectors, and in the commercial real estate industry. He joined eResearch in 2004

and has been its President, CEO, and Director of Research since May 2005. Prior to joining eResearch, Mr. Weir

was at Dominion Bond Rating Service (DBRS), latterly as Executive Vice-President responsible for supervising the

firm’s 34 analysts and conducting the day-to-day management affairs of the company.

Analyst Affirmation: I, Yuri Belinsky, and I, Bob Weir, hereby state that, at the time of issuance of this research

report, I do not own, directly or indirectly, any shares of Botswana Metals Limited.

eRESEARCH ANALYST GROUP

Director of Research: Bob Weir, CFA

Financial Services Robin Cornwell

Life Sciences Scott Davidson

Christopher Neuman

Manufacturing and

Industrial Products Bill Campbell

Energy Yuri Belinsky

Eugene Bukoveczky

Achille Desmarais

Special Situations Bill Campbell

Shash Patel

Mining & Metals Yuri Belinsky

Eugene Bukoveczky

Shash Patel

Mining Advisors George Cargill

Graham Wilson

eResearch Disclaimer: In keeping with the policies of eResearch concerning its strict independence, all of the

opinions expressed in this report, including the selection of the 12-month Target Price and the Recommendation (Buy-Hold-Sell) for the Company’s shares, are strictly those of eResearch, and are free from any influence or

interference from any person or persons at the Company. In the preparation of a research report, it is the policy of eResearch to send a draft copy of the report, without divulging the Target Price or Recommendation or any

reference to either in the text of the report, to the Company and to any third party that paid for the report to be

written. Comments from Company management are restricted to correcting factual errors, and ensuring that there are no misrepresentations or confidential, non-public information contained in the report. eResearch, in its sole

discretion, judges whether to include in its final report any of the suggestions made on its draft report.



eRESEARCH RECOMMENDATION SYSTEM

Strong Buy: Expected total return within the next 12 months is at least 40%.

Buy: Expected total return within the next 12 months is between 10% and 40%.

Speculative Buy: Expected total return within the next 12 months is substantial, but Risk is High (see below).

Hold: Expected total return within the next 12 months is between 0% and 10%.

Sell: Expected total return within the next 12 months is negative. ________________________________________________________________________________________________________

eRESEARCH RISK RATING SYSTEM

A company may have some, but not necessarily all, of the following characteristics of a specific risk rating to qualify for that

rating:

High Risk: Financial - Little or no revenue and earnings, limited financial history, weak balance sheet, negative free

cash flows, poor working capital solvency, no dividends.

Operational - Weak competitive market position, early stage of development, unproven operating plan,

high cost structure, industry consolidating, business model/technology unproven or out-of-date.

Medium Risk: Financial - Several years of revenue and positive earnings, balance sheet in line with industry average,

positive free cash flow, adequate working capital solvency, may or may not pay a dividend.

Operational - Competitive market position and cost structure, industry stable, business model/technology is

well established and consistent with current state of industry.

Low Risk: Financial - Strong revenue growth and earnings over several years, stronger than average balance sheet,

strong positive free cash flows, above average working capital solvency, company may pay (and stock may

yield) substantial dividends or company may actively buy back stock.

Operational - Dominant player in its market, below average cost structure, company may be a consolidator,

company may have a leading market/technology position. ________________________________________________________________________________________________________

eRESEARCH DISCLOSURE STATEMENT

eResearch is engaged solely in the provision of equity research to the investment community. eResearch provides published research and

analysis to its Subscribers on its website (www.eresearch.ca), and to the general investing public through its extensive electronic

distribution network and through newswire agencies. With regards to distribution of its research material, eResearch makes all reasonable

efforts to provide its publications, via e-mail, simultaneously to all of its Subscribers.

eResearch does not manage money or trade with the general public, provides full disclosure of all fee arrangements, and adheres to the

strict application of its Best Practices Guidelines.

eResearch accepts fees from the companies it researches (the “Covered Companies”), and from financial institutions or other third parties.

The purpose of this policy is to defray the cost of researching small and medium capitalization stocks which otherwise receive little or no

research coverage.

Botswana Metals Limited paid eResearch US$10,000 to have it conduct research on the Company on an Annual Continual Basis.

To ensure complete independence and editorial control over its research, eResearch follows certain business practices and compliance

procedures. For instance, fees from Covered Companies are due and payable prior to the commencement of research. Management of the

Covered Companies are sent copies, in draft form without a Recommendation or a Target Price, of the Initiating Report and the Update

Report prior to publication to ensure our facts are correct, that we have not misrepresented anything, and have not included any non-

public, confidential information. At no time is management entitled to comment on issues of judgment, including Analyst opinions,

viewpoints, or recommendations. All research reports must be approved, prior to publication, by eResearch’s Director of Research, who is

a Chartered Financial Analyst (CFA).

All Analysts are required to sign a contract with eResearch prior to engagement, and agree to adhere at all times to the CFA Institute

Code of Ethics and Standards of Professional Conduct. eResearch Analysts are compensated on a per-report, per-company basis and not

on the basis of his/her recommendations. Analysts are not allowed to accept any fees or other consideration from the companies they

cover for eResearch. Analysts are allowed to trade in the shares, warrants, convertible securities or options of companies they cover for

eResearch only under strict, specified conditions, which are no less onerous than the guidelines postulated by IIROC. Similarly,

eResearch, its officers and directors, are allowed to trade in shares, warrants, convertible securities or options of any of the Covered

Companies under identical restrictions.

http://www.eresearch.ca/

update report august 26, 2011 · 2012. 4. 27. · 54/98 takane (mmatsiane, makhantlele, jumbo) 71.2...

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