Lithium sector set to charge Specialty Minerals and Metals · from current levels, we highlight the...

Specialty Minerals and Metals

Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX | CF. : LSE)The recommendations and opinions expressed in this research report accurately reflect the research analyst's personal, independent and objective views about any and allthe companies and securities that are the subject of this report discussed herein.

Australian Equity Research16 December 2015

Company Rating Price TargetSpecialty Minerals and MetalsGMM-ASX Spec Buy A$0.20 A$0.40GXY-ASX Spec Buy A$0.09 A$0.16Share price data as of Dec 16, 2015

Reg Spencer | Canaccord Genuity (Australia) Ltd. | [email protected] | +61.2.9263.2701Tim McCormack | Canaccord Genuity (Australia) Ltd. | [email protected] | +61.407.195.774Larry Hill (Associate Analyst) | Canaccord Genuity (Australia) Ltd. | [email protected] | +61.2.9263.2789

Initiation of Coverage

Lithium sector set to chargeLithium-ion (Li-ion) batteries represent the largest and highest-growth segment of thelithium market. They are currently considered the preeminent battery technology in high-growth industries, such as portable electronic devices, hybrid/electric vehicles, andstorage batteries. We expect strong lithium demand growth in the coming years based onthe positive outlook in these industries.Demand growth is compounded by tight supply side conditions. Production issues fromexisting brine producers (poor capacity utilisation, expansion issues, new entrants still inramp-up phase, and the changing dynamics of the lithium mineral (spodumene) marketsupport the potential for significant lithium price increases in the near-medium term, inour view.

Initiating coverage: Galaxy Resources Ltd (GXY:ASX)• GXY is a globally diverse lithium development company. Primary assets include the

Mt Cattlin spodumene project in WA (subject to 50% earn in by GMM), the Sal de Vidalithium brine project in Argentina (100%) and the James Bay spodumene explorationproject (subject to 50% earn in by GMM) in Canada.

• GXY recently re-structured its business, having recently sold its underperforminglithium carbonate (Li2CO3) plant, reduced/re-structured its corporate debt, andestablished a JV with GMM to re-start production at Mt Cattlin in early 2016. Inaddition, GXY's Sal de Vida brine project offers optionality and potential strategic valuein our view, with options to reduce capex and fund a potential staged development nowbeing assessed.

• We value GXY on a NAV basis comprising 50% of our base case NPV10% for Mt Cattlin,our blended DCF/market based value for Sal de Vida, and exploration, net of corporateand other adjustments. We initiate coverage with a SPECULATIVE BUY rating and A$0.16/sh target price.

Initiating coverage: General Mining Corporation (GMM:ASX)Canaccord Genuity (Australia) Limited was the Lead Manager to the Placement of~40.3 million shares at $0.18 per share to raise ~A$7.3 million in December 2015.• GMM's primary asset is a right to earn 50% of the +15 year, ~110ktpa Mt Cattlin

spodumene project through sole funding a re-start of production (expected early 2016)and cash payments to GXY. GMM is also earning a 50% interest in the James Bayexploration project.

• Previous production issues at Mt Cattlin are being addressed through upgrades of theprocess plant, while project economics benefit from existing infrastructure, low initialstart-up capex (<A$10m), a lower A$ and improved spodumene product pricing.

• We value GMM on a NAV basis, consisting of 50% of our base case NPV10% for MtCattlin, exploration (James Bay), net of corporate and other adjustments. We initiatecoverage with a SPECULATIVE BUY rating and A$0.40/sh target price.

For important information, please see the Important Disclosures beginning on page 44 of this document.

2

Contents

Investment Summary: Galaxy Resources Ltd (GXY:ASX) 3

Initiating coverage with a SPECUALTIVE BUY rating & A$0.16 target price 3

Investment Summary: General Mining Corporation Ltd (GMM:ASX) 5

Initiating coverage with a SPECUALTIVE BUY rating & A$0.40 target price 5

Product Market Overview 7

LITHIUM 7

TANTALUM 10

Peer Comparison 12

Company overview: Galaxy Resources Ltd 14

KEY COMPANY MILESTONES 14

VALUATION 16

CORPORATE & FINANCE 17

Company overview: General Mining Corporation Ltd 19

KEY DEVELOPMENTS 19

VALUATION 20

CORPORATE & FINANCE 21

Asset Overview 22

MT CATTLIN SPODUMENE/TANTALUM PROJECT (GXY 100%, GMM EARNING 50%) 22

SAL DE VIDA LITHIUM BRINE PROJECT (GXY 100%) 31

JAMES BAY LITHIUM PROJECT (GXY 100%; GMM EARNING 50%) 39

Appendix I – Investment risks 43

Specialty Minerals and MetalsInitiation of Coverage

16 December 2015 2

3

Investment summary: Galaxy Resources Ltd (GXY:ASX)

Initiating coverage with a SPECULATIVE BUY rating & A$0.16 target price

Globally diverse lithium-development company: GXY is an Australian-based lithium

development company. Its primary assets are the near-term production, Mt Cattlin

spodumene/tantalum project in Western Australia (100% subject to 50% earn in by

GMM), the Sal de Vida lithium brine development project in Argentina (100%) and the

James Bay spodumene exploration project (100% subject to 50% earn in by GMM) in

Canada.

Figure 1: Asset summary & location map

Source: Company reports

Business re-structure to focus on up-stream lithium production: Over the course of the

last 24 months, GXY has undergone a significant transformation of its business to

now focus on the development of its primary lithium production assets. This has

included the sale of its previously troublesome Jiangsu lithium carbonate plant in

China, completion of a corporate debt reduction and restructure program, and the

establishment of a joint venture with General Mining Corporation to fund the re-start

of the Mt Cattlin spodumene operation in Western Australia in 1H’CY16.

Well positioned to capitalise on a favourable outlook for lithium: We consider the

company is now well positioned as a diversified, lithium asset development company

at a time when lithium prices are starting to rise on the back favourable supply and

demand dynamics. In our view, GXY provides diverse exposure to expectations of

increasing lithium demand for use in lithium-ion batteries in the portable electronic

device, hybrid and electric vehicle (EV) and storage battery industries.

Valuation: We value GXY on a net asset valuation basis, comprising a 50% interest in

our base case Mt Cattlin NPV10%, an average of our DCF and market based valuations

for Sal de Vida, 50% of our nominal valuation for James Bay, net of corporate and

other adjustments. While our initial target price of A$0.16/share offers ~75% upside

from current levels, we highlight the potential for further upside to our valuation due

to the potential for increased lithium/spodumene prices, production expansions at Mt

Cattlin, and any firm development pathway and funding solution for Sal de Vida.


16 December 2015 3

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Source: Company reports, Canaccord Genuity estimates


16 December 2015 4

5

Investment summary: General Mining Corporation Ltd (GMM:ASX)

Initiating coverage with a SPECULATIVE BUY rating & A$0.40 target price

Low capex, near-term lithium (spodumene) production: GMM is a lithium exploration

and development company focused on the development and re-start of production at

the Mt Cattlin spodumene/tantalum operation in Western Australia. GMM has the

right to earn a 50% interest in Mt Cattlin through A$18m in cash payments to GXY,

and by sole funding a restart of operations with initial start-up capex of <A$10m.

Mt Cattlin re-start expected in MarQ’16: Mt Cattlin was previously placed on care and

maintenance in 2013 due to low lithium prices, a high AUD, poor product quality and

an uneconomic operating cost base. GMM’s planned re-start of Mt Cattlin is expected

to see annual spodumene concentrate production of ~110ktpa over an initial +15-

year mine life, with previous product quality issues planned to be addressed through

upgrades of the current process flow sheet. The project benefits from significant

existing infrastructure (+A$100m in sunk capital), and we see the low capex and short

lead time to re-start operations as a distinct advantage over many other hard rock

lithium development companies.

Improved pricing and costs lead to improved economics: We anticipate project

economics should now benefit from higher spodumene prices (based on a favourable

outlook in both the refined lithium and spodumene markets) and an A$ which is now

~20% lower than when the asset was last in operation. We estimate average costs of

US$340/t of spodumene concentrate product, and based on expectations of further

increases in spodumene prices, we see the potential for solid operating margins once

at targeted production rates.

Valuation: We value GMM on a net asset valuation basis, comprising a 50% interest in

our base case Mt Cattlin NPV10%, 50% of our nominal valuation for James Bay, net of

corporate and other adjustments. We set an initial target price of A$0.40/share

(representing a P/NAV of 0.50x), but note that there is potential for upside in our

valuation through higher spodumene prices, and a potential expansion of production

at Mt Cattlin.


16 December 2015 5

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FINANCIAL SUMMARY General Mining Corporation Ltd ASX:GMM

Analyst: Reg Spencer Rating:

Date: 16/12/2015 Target Price: $0.40Year End: June

Market Information Company Description

Share Price A$ 0.20

Market Capitalisation A$m 60.6

12 Month Hi A$ 0.22

12 Month Lo A$ 0.00

Issued Capital m 310.73

ITM Options m 0.00

Fully Diluted m 310.73 Profit & Loss (A$m) 2015a 2016e 2017e 2018e

Revenue 0.00 18.94 42.34 44.28

Valuation A$m A$/share Operating Costs -0.4 -2.2 -14.8 -17.1

Mt Cattlin NPV10% 126.9 0.38 Corporate & O'heads -0.2 -1.7 -1.6 -1.7

Exploration & Other (James Bay) Estimate 15.0 0.04 Exploration (Expensed) -0.0 -0.6 -0.4 -0.4

Corporate (14.3) (0.04) EBITDA -0.6 14.4 25.5 25.1

Cash 9.7 0.03 Dep'n 0.0 -0.9 -4.5 -4.5

Debt - - EBIT -0.5 13.5 21.0 20.6

Unpaid capital 2.4 0.01 Net Interest 0.0 0.2 0.2 0.5

TOTAL 139.7 0.42 Tax 0.0 -0.2 -4.5 -6.0

Target Price 0.40 NPAT -0.5 13.5 16.6 15.0

P/NAV 0.49x Abnormals 0.0 0.0 0.0 0.0

NPAT (reported) -0.5 13.5 16.6 15.0

Assumptions 2016e 2017e 2018e

Lithium Carbonate (US$/t) 6,100 6,250 6,400 Cash Flow (A$m) 2015a 2016e 2017e 2018e

Spodumene Concentrate (US$/t) 431 463 474 Cash Receipts 0.0 3.5 36.4 43.5

Tantalum (US$/lb) 75 75 75 Cash paid to suppliers & employees -0.4 -3.5 -16.4 -18.8

AUD:USD 0.71 0.70 0.70 Tax Paid 0.0 -0.2 -4.5 -6.0

Net Interest 0.0 0.1 0.1 0.3

Valuation Sensitivity Operating Cash Flow -0.3 -0.0 15.5 19.0

Exploration and Evaluation -0.2 -1.7 -1.3 -1.2

Capex 0.0 -7.3 -5.3 -1.2

Other -0.1 -1.5 -6.0 -6.0

Investing Cash Flow -0.3 -10.5 -12.6 -8.4

Debt Drawdown (repayment) 0.0 0.0 0.0 0.0

Share capital 0.9 15.1 0.0 0.0

Dividends 0.0 0.0 0.0 0.0

Financing Expenses -0.1 -0.4 0.0 0.0

Financing Cash Flow 0.8 14.7 0.0 0.0

Opening Cash 0.1 0.3 4.4 7.4

Increase / (Decrease) in cash 0.2 4.1 3.0 10.6

FX Impact 0.0 0.0 0.0 0.0

Closing Cash 0.3 4.4 7.4 18.1

Balance Sheet (A$m) 2015a 2016e 2017e 2018e

Cash + S/Term Deposits 0.3 4.4 7.4 18.1

Other current assets 0.1 4.0 8.9 9.4

Current Assets 0.4 8.4 16.4 27.5

Property, Plant & Equip. 0.0 7.5 8.2 4.9

Production Metrics 2016e 2017e 2018e Mining, Expl'n & Develop. 0.7 26.8 27.7 28.6

Mt Cattlin (50%) Other Non-current Assets 0.0 0.0 0.0 0.0

Spodumene concentrate (kt) 9.4 92.1 104.4 Payables 0.9 5.7 12.8 13.4

LCE production (kt) 0.0 3.7 7.7 Short Term debt 0.0 0.0 0.0 0.0

Tantalum concentrate (Mlb) 0.3 3.4 4.1 Long Term Debt 0.0 0.0 0.0 0.0

AISC (A$/tonne) 706 437 419 Other Liabilities 0.0 23.6 15.5 9.4

Net Assets 0.2 13.3 23.9 38.0

Shareholders Funds 13.0 28.0 28.0 28.0

Reserves & Resources Mt Grade (Li2O) Mt LCE Ta2O5 Reserves 0.4 0.4 0.4 0.4

Mt Cattlin (50%) Retained Earnings -13.2 -15.1 -4.5 9.6

Resources 16.4 1.08% 0.178 5.682 Total Equity 0.2 13.3 23.9 38.0

Reserves 10.0 1.04% 0.104 3.276

Ratios & Multiples 2015a 2016e 2017e 2018e

James Bay (50%) EBITDA Margin nm 76% 60% 57%

Resources 22.2 1.25% 0.278 EV/EBITDA nm 3.7x 1.6x 1.0x

Op. Cashflow/Share $0.00 $0.00 $0.05 $0.06

P/CF -191.1x -6911.6x 4.2x 3.4x

Directors & Management EPS $0.01 $0.04 $0.04 $0.05

Name Position EPS Growth -307% 290% 10% 8%

Michael Fotios Executive Chairman PER 19.2x 4.9x 4.5x 4.1x

Alan Still Non-exec Director Dividend Per Share $0.00 $0.00 $0.00 $0.00

Michael Kitney Non-exec Director Dividend Yield 0% 0% 0% 0%

ROE -218% 101% 69% 39%

ROIC -4% 47% 59% 52%

Substantial Shareholders Shares (m) % Debt/Equity 0% 0% 0% 0%

Investmet 45.00 14.5% Net Interest Cover nm nm nm nm

Book Value/share $0.00 $0.04 $0.07 $0.11

Price/Book Value 341.4x 4.9x 2.7x 1.7x

SPEC BUY

General Mining (ASX:GMM) is operator of the Mt Cattlin spodumene operation in a 50%:50% JV Galaxy

Resources Limited (ASX:GXY). Initial production from the facility will be for ~100ktpa of spodumene

concentrate grading ~6% Li2O with additoinal tantalum credits. GMM also have 50% earn in on the James

Bay hard rock lithium project in Canada.

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

-30% -20% -10% 0% 10% 20% 30%

Change i

n T

arg

et

Price

Spodumene Price (US$/t) Exchange Rate (A$:US$)

Tantalum Price (US$/lb) Discount Rate (@10%)


16 December 2015 6

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Product market overview

LITHIUM

Lithium is a soft, silver-white metal which under normal conditions is the lightest

of all metals and the least dense solid element. It has a wide range of industrial

applications including ceramics, lubricants and glass, but the largest (and highest-

growth segment) of the global lithium market is its use in the manufacture of

lithium-ion batteries (29% 2014 estimates, Figure 2). Based on expectations for

ongoing high growth rates in the use of lithium-ion batteries in the portable

electronic device, hybrid /electric vehicle and storage battery industries, we

expect the demand for lithium to continue to grow markedly over the coming

years.

Figure 2: Lithium applications

Source: Roskill, 2014

Lithium is produced from two main mineral sources:

Brines: lithium brine deposits are formed through the leaching of volcanic

rocks and basin depositional environments. Lithium is produced from brines

(most often in the form of lithium carbonate (Li2CO3)) via a process involving

the pumping of brine from the sediment basin, concentration via evaporation,

and purification through solvent extraction, filtration and ionic exchange.

Lithium is unusually more soluble at lower temperatures than similar alkali

metals such as sodium and potassium and it is this property that provides the

design basis for most of the processing steps.

Hard rock spodumene deposits: Spodumene is a lithium-bearing aluminium

silicate mineral that mostly occurs in lithium-rich pegmatites (granite-like

igneous rock composed of quartz, feldspar and mica). Spodumene is usually

recovered through conventional open pit mining methods and beneficiated via

conventional gravity techniques where the ore is typically concentrated from

1-2% Li2O to a grade of ~6% Li2O. This concentrate product is then converted

to battery grade lithium carbonate (>99.5% purity) through intensive thermal

and hydrometallurgical processing (roasting, leaching, ion exchange)

conducted at plants mostly located within China.

Supply

It is estimated that global production in 2014 totaled 190kt lithium carbonate

equivalent, or LCE (Figure 3), with global production dominated by several large

producers. Significant consolidation has taken place in the sector in the last

several years, with notable transactions including the acquisition of Tailson

Lithium (operator of Greenbushes) by Sichuan Tianqi (002466-SHE|Not rated) for

29%

14%

12%

9%

8%

6%

5%

5%

2%9%

Rechargeable batteries

Ceramics

Glass ceramics

Greases

Metallurgical powers

Polymers

Air purification

Primary battery

Aluminium

Other


16 December 2015 7

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C$848m in Mar’13. Subsequently in May’14 Rockwood obtained a 49%

ownership of Greenbushes for US$475m. Finally in Jan’15 Rockwood was

acquired by Albemarle (ALB-USA | Not rated) as part of a US$6.2B company

takeover.

Figure 3: 2013 Lithium production by company Figure 4: 2014 global LCE production by operation (ex China)

Source: Roskill, 2013

*Acquired by Rockwood in 2014,

** Acquired by Albemarle in Jan’15; 51% of Talison’s Greenbushes mine subsequently sold to Sichuan

Tianqi

Source: Company reports, Roskill, signumBox, USGS, Canaccord Genuity estimates

*49% owned by Albemarle, 51% Sichuan Tinaqi

2014 global production was split approximately 50% (Figure 4) from hard rock

sources (primarily Greenbushes and Kings Mountain in the USA), with the balance

from brine production in Chile and Argentina (Salar de Atacama and Salar de

Hombre Muerto).

Global production capacity is estimated at ~270kt of LCE (Source: signumBOX

2014), which indicates that the industry is operating at only ~60% of capacity. In

terms of new supply, outside of China, only Orocobre (ORE : ASX : A$1.76 | BUY) is

likely to provide new brine-based supply into the market over the next 12 months.

We note that SQM (largest producer at ~48ktpa LCE) in Chile is currently having

environmental and government issues (these are not likely to be resolved anytime

soon and has the operation running at only 50% of capacity). Meanwhile, FMC in

Argentina (capacity of 23ktpa carbonate and hydroxide) is running at ~60%

capacity (14Ktpa), being constrained by technical issues related to un-lined

evaporation ponds and stressed relations with the local government which saw

water supply cut off during 2015. Lastly Albemarle’s La Negra lithium hydroxide

(LiOH) conversion plant in Chile (~15ktpa LCE) remains on standby due to the

hold up in approvals to increase brine pumping from 80,000m3/year to

170,000m3/year at the Salar De Atacama.

Spodumene market

The supply of spodumene is dominated by Albemarle and Tianqi’s Greenbushes

(formally Talison Lithium) operation located in Western Australia. This facility is

estimated to produce ~650ktpa of spodumene concentrate which supplies

~100ktpa (or 92%) of ex. China hard rock derived LCE. The only other meaningful

producers are Albemarle’s Kings Mountain spodumene operation (~8ktpa of LCE)

and the Jiajika project (unknown production) in China.

Spodumene concentrate pricing is more or less benchmarked against prevailing

market prices for the Greenbushes product, given its dominant position in the

market. We note recent tightness in the spodumene market which has resulted


16 December 2015 8

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from Li2CO3 demand pressure which has arisen due to the supply issues from the

incumbent brine producers. Furthermore, we understand that Albemarle are

assessing the construction of a ~50ktpa Li2CO3 and LiOH conversion plant, fed

from its share of Greenbushes spodumene production, to be online by 2020

(Source Albemarle Corporate Presentation).

Given an expectation that supply issues from brine producers are not likely to be

resolved in the near term (poor capacity utilisation from existing producers, new

entrants still in ramp up phase), and that a large proportion of Greenbushes

spodumene production could be re-directed from the market to its own conversion

facility, we anticipate that current tight spodumene market conditions could

persist for the near future.

Demand

As illustrated in Figure 2, the rechargeable battery (lithium and lithium-ion) is

currently the greatest source of demand for lithium with ~29% of the total market

in 2014. Figure 5 below shows that Li2CO3 represented ~45% of the market in

2014, with the other dominant form being LiOH. It should be noted that while

LiOH can attract up to a ~40% price premium over L2CO3 (due to its superior

lattice structure), L2CO3 is currently the dominant lithium source for battery

applications.

Figure 5: Lithium demand by compound Figure 6: Projected LCE demand

Source: signumBox 2014 estimates Source: Albemarle company presentation

While demand for lithium in industrial applications could be expected to show

modest growth (in line with global industrial activity, or GDP growth), we anticipate

that growth in demand for battery applications will continue to increase in the

coming years (Figure 6). This growth is expected to be driven by increasing

demand for:

Portable electronic devices

Hybrid and electric vehicles

Renewable energy storage batteries

Companies such as Tesla, Foxconn, BYD and LG Chem have all announced the

development of large Li-ion battery manufacturing facilities to meet the expected

rise in demand for Li-ion batteries from the above industries. In our view, this is

likely to support a significant increase in the demand for lithium in the coming

years.


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Outlook

Figure 7 below shows lithium carbonate (China, min 99% LCE benchmark) pricing

over the last 6 months. We highlight a significant increase in prices for L2CO3 in

recent weeks, with reports of “spot” pricing for Li2CO3 of +US$10,000/tonne. In

our view, this pricing reflects realisation of downstream lithium consumers of the

current tightness in the market. It should be noted however that L2CO3, like most

industrial minerals, is priced through negotiations with customers with various

influences such as contract terms, review frequency, quantity and product

specification on the price received.

As we noted above, existing producers are currently experiencing a wide range of

issues preventing them from expanding production (technical issues, permitting)

and utilising latent capacity, while new market entrants remain in ramp up phase.

Furthermore, the tightness in the spodumene market is interpreted to reflect the

production issues facing a lot of brine producers, with downstream demand now

putting pressure on carbonate conversion plants.

Figure 7: Lithium carbonate (+99% Li minimum LCE content)

Source: Asian Metal, Canaccord Genuity estimates

Based on expectations for continued supply side tightness (at least in the near

term), and the prospects of significant demand growth, we anticipate lithium

prices to remain at elevated levels versus recent longer run averages.

TANTALUM

Tantalum is a rare, highly corrosion-resistant metal that is an excellent conductor

of heat and electricity. Its melting point is only exceeded by tungsten and rhenium

and it is one of the five major refractory metals. It is primarily found in the mineral

tantalite, which is mostly found in pegmatite ore bodies.

The use of tantalum can be broadly broken down into four product types:

Tantalum powder used in electronics

Tantalum metal has applications in chemical processing, medical devices and

alloys

High-grade tantalum oxide is also used in camera lenses and X-ray equipment

Tantalum carbide used in cutting tools

5000

6000

7000

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9000

10000

11000

12000

13000

14000

07/15 08/15 09/15 10/15 11/15 12/15

99%

min

LC

E (

US

$/t

)

Daily Price 30 Day Moving Average 90 Day Moving Average


16 December 2015 10

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Supply

According to the USGS, global tantalum production totaled ~1,200 tonnes in

2014, with a majority of global production (+79%) coming from Rwanda and the

DRC. Metal production from these countries is widely known to be associated with

illegal mining and conflict minerals.

A majority of production is from hard rock mines and the metal is often traded in

opaque long-term transactions between producers and end-users. Quoted prices

typically refer to spot Ta2O5 (tantalum pentoxide), which over the past decade has

been the subject of erratic highs and lows. The reality is that the spot market is

very thinly traded and term contracts have remained more stable, albeit trending

down over the past couple of years.

Figure 8: World share of global tantalum production (2014) Figure 9: Tantalum pentoxide prices over the past 5 years vs CG forward

assumptions

Source: US Geological Survey Source: SNL Mining, Canaccord Genuity estimates

Demand

Tantalum’s principal use is in high end capacitors (~60% of consumption), which

are found in all electronic devices, however we note that lower-cost ceramic and

aluminum capacitors currently dominate the market. The most up-to-date,

publically available information suggests that tantalum-based capacitors accounts

for ~10% of the total market by value.

Given tantalum’s association with “conflict minerals”, the SEC (US Securities and

Exchange Commission) instituted new rules in 2012 that required US companies

to disclose when they use minerals from conflict zones. This has led number of

Western end users to seek supply from legitimate, Western sources. However,

despite mine production declining (three legitimate mines have been closed in the

last ~6 years including the Wodgina mine in WA), prices for tantalite have actually

decreased markedly since 2010 (Figure 9). This suggests that increased demand

from non-Western end users is being satisfied from undocumented and/or illegal

sources.

Outlook

In our view, the outlook in demand for the metal is subdued and as such we have

taken a conservative view on our forward prices, assuming a flat US$75/lb Ta2O5

versus current market prices of ~US$90/lb (Figure 9).

0

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CGAu estimates


16 December 2015 11

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Peer comparison Figure 10: Analysis of current & planned lithium projects

Source: Company reports, Canaccord Genuity estimates, SNL Mining

2.153 5.323 Resource Li Grade

Company Listed Project Location Equity Status Lithium (Mt) ppm (brine) Notes

BRINE PRODUCERS % (h/rock)

Albermarle NYSE:ABLDiversified

Salar de Atacama Chile 100% Production 1.09 700 30ktpa (doing 25ktpa Li2CO3); Process plant in Antofagasta; Issue: Same as SQM. Have out in 5 applications to

expand. The La Negra plant in Chile (20kt) held up

Silver Peak USA 100% Production 0.03 400 As of February 2012, Rockwood was completing a $75 million expansion of its lithium production in the United

States which included an expansion of its brine pond system at Silver Peak, and construction of a battery grade

lithium hydroxide plant at Kings Mountain

SQM NYSE:SQM Diversified Salar de Atacama Chile 100% Production 5.30 700 Capacity: 48ktpa; Issue: licensing arrangement with Chilean govt for brine pumping to 2030; Govt wont issue

permits to pump more brine - permeability issues - salar surrounded by fresh water (could deplete acquifers).

Also a pink flamingo habitat

FMC Corp. NYSE: FMC Diversified Salar de Hombre Meurto Argentina 100% Production 0.85 850 18ktpa Li2CO3, 23ktpa LCE, running at 14ktpa; Issue: Recently expanded but having major technical issues

(new ponds werent lined); no further expansion plans; Poor govt relations; Have been buying LCE to fulfill sales

contracts

Orocobre ASX:ORE Pure play Olaroz Argentina 67% Production 1.20 690 First production from Olaroz in April 2015. Commissioning and plant ramp up delayed. Namplate production of

17.5kt of LCE expected during H2'16.

BRINE DEVELOPERS

Western Lithium WLC:TSX Pure play Cauchari-Olaroz Argentina 90% Feasibility 2.72 630 Using propritary POSCO extraction tech for carbonate and hydroxide production. POSCO finance capex to initial

2500 t rate in late 2016. Ramp up to 20kt expected in 2017.

Sentient Group (Private) n/a Pure play Salar de Rincon Argentina 100% DFS 1.57 400 Admiralty sold to Sentient for $22m in 2008. 2010 - Rincon was producing 1000t/month LCE from a pilot plant.

Sentient have indicated they have a propriertory process to recover LCE direct from brine.

Galaxy ASX:GXY Pure play Sal de Vida Argentina 70% Feasibility 1.57 750 DFS completed in 2013; assessing development & funding options.

International Lithium TSX: ILC Diversified Mariana Argentina 20% Feasibility 1.00 500 Ganfeng hold a 80% stake with TNR Gold Corp a 26%

Rodinia Lithium TSX:RM Pure play Diabilillos Argentina >90% Feasibility 0.53 560

Pure Energy Minerals TSX:PE Pure play Clayton Valley USA 100% Pilot plant 0.15 370 Announced in Feb 2015 test work underway on the application of Tenova Bateman's LiSX and POSCO's RIST

technology. Cornerstone supply agreement with Tesla (initially 5 years).

HARD ROCK PRODUCERS

Albemarle NYSE Diversified King's Mountain USA 100% Production 0.30 0.70% US$30m epxpansion completed in 2012 to produce ~ 5kt of LiOH product

Greenbushes WA 49% Production 0.84 2.10% 30ktpa LCE feeds into converter plants in China; under-utilised capacity. 50kpta LCE conversion plant proposed

HARD ROCK DEVELOPERS

Bacanora Minerals TSX:BCN Pure play Sonora Mexico 70% Feasibility 0.22 0.23% Rare Earth Minerals Plc s(30% owners) aid a new mineral resource estimate for the Sonora lithium project in

Mexico, a joint venture majority owned by Bacanora Minerals Ltd., saw the project's indicated and inferred

mineral resource increase to 8.8 million tonnes of lithium carbonate equivalent.

Galaxy Resources/ ASX:GXY/ Pure play James Bay Canada 100% Exploration 0.13 0.59% Acquired from Lithium One in 2012. In September 2015 GCXY announced a DFS would begin during 2016

General Mining ASX:GMM Mt Catlin Australia 50% Commisioning 0.08 0.50% Originally placed on care and maintenance Jul'13. Restart of operations (+100ktpa spod conc) planned for 1H'16,

A$7-15m capex

Rio Tinto ASX: RIO Diversified Jadar Serbia 100% Exploration 0.96 0.84% Still in early stage development after initial discovery in 200. Will take 6 years to develop according to RIO

European Metals ASX: EMH Pure play Cinovec Czech Republic 100% Scoping 0.17 0.21% Scoping released in 2015, 2mpta, lithium recovery at 70%, 19.4ktpa, opex of US$27/t mined + US$39/t treated.

Pre-production capex of US$326m

Western Lithium WLC:TSX Pure play Kings Valley USA 98% Feasibility 0.12 0.19% In June 2015, Western Lithium announced that it was continuing its optimization studies with Tenova Bateman

Technologies in order to complete an OoM study using solvent extraction technology. Pilot plant test work in

Germany was ongoing

Nemaska Lithium TSX: NMX Pure play Whabouchi Canada Feasibility 0.24 0.72% A feasiblity study indicated a production rate of 5.5Mt of spodumene concentrate per year over 26 years at a

capex of $448m. Environmental permitting is complete enabling construction to commence subject to financing.

RB Energy Receivership Pure play Quebec Canada 100% Care and

Maintenance

0.26 0.56% In receivership. Plant was designed on a capex of US$200m for 15 year mine life for 20kpta LCE at opex of

US$2,600/t. First production shipped to offtake partner Tewoo from July 2014. Funding uncertainty and kiln

issues placed project on C&M in July 2014.

Sichuan Tianqi Group 002466:SHE Pure play Jiajika China 100% Feasibility 0.48 0.59% As of July 2004, Sterling Group reported that the Jiajika lithium deposit could be mined using open pit method.

Using gravity and magnetic processing methods, lithium concentrates could be produced at an estimated 84%

Li2O recovery. Jiajika's initial capacity was estimated at 240,000 mt/y increasing to 900,000 mt/y.

Pilbara Minerals ASX: PLS Diversified Pilgangoora WA 100% Scoping 0.32 0.60% Worlds second largest hard rock depoist at 52Mt at 1.25% Li2. Capex estiamtes of A$100m for 200ktpa of 6%

Li2O spodumene concentrate over 20+ years.

Critical Elements TSX: CRE Rose Canada 100% PEA 0.16 0.44% Offtake signed in June 2015. PEA called for 27ktpa of LCE at capex of C$270 over 17 year mine life

Neometals ASX:NMM Diversified Mt Marion WA 45% Construction 0.32 0.65% 30ktpa LCE develpoment approved in 2010 but shelved due to funding. 2015: NMM and Mineral Resources jointly

owned subsidiary entered into a conditional MoU Jiangxi Ganfeng Lithium Co. Ltd for a 100% offtake and equity

investment of 25%. The offtake deal allowed for a final investment decision, construction started Nov'15 and

production is planned for mid-16.

Altura Mining ASX: AJM Pilgangoora WA 100% Scoping 0.14 0.57% Exploration stage

Lithium Australia ASX:LIT Pure play Lepidolite Hill WA 80% Exploration 0.10 0.60% Exploration stage

Glen Eagle Resources TSX: GER Authier Canada 100% Feasibility 0.04 0.45% Drilling since 2010, PEA highlighted a 103kpta 6% Li2O for 15kpta LCE

Liontown Resources ASX: LTR Diversified Mohanga Tanzania 100% Exploration Very early stage drilling of similar geology to Greenbushes in quartz-schist


16 December 2015 12

2

Figure 11 below ranks global hard rock lithium development projects according to

resource size and contained lithium grade. Resources at these projects are at

different levels of definition with both Jadar and Jiajika having only reported to the

Inferred level. It should be noted that for most hard rock projects the economic

cut-off grade is ~-0.2% Li with Cinovec, King’s Valley and Sonora projects

considering alternative processing to support project development at lower grade.

In Figure 12, we have ranked the same group of companies/assets according to

development stage, ultimate annual production and capital expenditure required

to develop the project. The chart illustrates that Mt Cattlin is one of the few low-

capex, hard rock projects expected to come on line in the next 12 months.

Figure 11: Hard rock lithium development projects – Grade vs contained

lithium Figure 12: Hard rock development projects – Project status vs capex

vs LCE production

Source: Company reports, Canaccord Genuity estimates Source: Company reports, Canaccord Genuity estimates

*Bubble size relates to LCE production. Note Grey bubbles indicate LCE operating projects

Figure 13 and 14 below ranks global lithium brine deposits according to two key

considerations, in lithium grades (ppm Li) and magnesium: lithium (Mg:Li) ratios.

Higher lithium grades support the potential for lower capex developments and

better operating margins while low impurity levels (i.e. Mg:Li ratios) support lower

production costs. GXY’s Sal de Vida development project ranks well in both

metrics, being second to only FMC’s Salar de Hombre Muerto in terms of grade,

while the project has among the lowest Mg:Li ratios in the peer group.

Figure 13: Brine deposits – ranked by lithium grade Figure 14: Brine deposits – ranked by Mg:Li ratio

Source: Company reports, Canaccord Genuity estimates Source: Company reports, Canaccord Genuity estimates

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16 December 2015 13

3

Company overview: Galaxy Resources Ltd

COMPANY BACKGROUND

GXY is an Australian-based lithium development company. Its primary assets are a

100% ownership (subject to 50% earn-in by GMM:ASX) of the Mt Cattlin

lithium/tantalum operation in Western Australia, 100% of the Sal de Vida lithium

brine project in Argentina, and 100% of the James Bay spodumene project in

Canada ((subject to 50% JV earn-in by GMM:ASX; see Asset Overviews)

A company history summary is detailed below in Figure 15.

Figure15: GXY company history summary


KEY COMPANY MILESTONES

Merger with Lithium One Inc – Mar’12

GXY completed a merger with TSX-listed Lithium One Inc, in Mar’12. The 1:8 scrip

offer valued Lithium One at C$112m at the time of the announcement and

represented a 27% premium to Lithium One’s previous trading price.

The merger delivered to the combined group the Sal de Vida lithium brine project

in Argentina, and the James Bay spodumene project in Canada.

Sale of Jiangsu lithium carbonate plant – Apr’15

GXY completed construction of the US$100m lithium carbonate facility, located in

Jiangsu province, China, in 2011. The plant at the time was one of the largest

lithium carbonate converter plants in SE Asia, and was developed in order to take

spodumene concentrate from Mt Cattlin to produce a higher-value lithium

carbonate product for sale into Asian markets.

In 2012, the plant suffered a major disruption with an explosion killing two

workers. Production was halted until 2013.


16 December 2015 14

4

Production at Jiangsu re-commenced in 2013; however, spodumene feed was

sourced from Talison’s (now Albemarle/Tianqi) Greenbushes operation due to the

suspension of spodumene production at Mt Cattlin in 2012.

In 2014, GXY negotiated a sale of the plant to Sichuan Tianqi Lithium Industries

(Tianqi is now a 49% owner of Talison Lithium) for a total value of US$230m

(comprising cash of US$122m and assumption of all Chinese debt of US$108m).

The consideration for the sale was revised in Feb’15 to US$173m (cash of

US$72m and assumption of Chinese debt). The sale process was completed in

Q2’15.

General Mining Mt Cattlin agreement – Sep’15

In Feb’15, GXY executed an agreement with General Mining whereby GMM was

granted the right to recommence production and solely operate Mt Cattlin for

three years, with an option to purchase the asset for A$30m and a 3% NSR

royalty. Under the agreement, GXY was set to receive an annual lease fee of

A$2.5m and a 10% production royalty (on tantalum sales). Under the deal, GMM

had the right to all revenues from the sale of tantalum from Mt Cattlin, with

spodumene sales revenue shared equally.

In Jun’15, the terms of the agreement were revised with GMM given the sole and

exclusive right to earn a 50% equity interest in Mt Cattlin for total consideration of

A$25m (comprising sole funding A$7m of capex to re-start production and three

annual instalments of A$6m payable monthly in arrears from the commencement

of production).

The deal also saw GMM granted the right to earn 50% interest in James Bay

through the expenditure of A$5m over three years.

Corporate debt reduction & restructure – Sep’15

In the last two years, GXY has successfully reduced and re-structured its corporate

debt facilities from a peak of +A$210m (comprised US$118m Chinese debt

facility associated with the Jiangsu carbonate plant, A$60m in convertible bonds,

and +A$30m in other debt) to ~A$35m.

This has been achieved through the sale of the Jiangsu plant and associated debt,

the re-purchase (at a discount to face value) of half of the convertible bonds, and

a terming out of the remaining bonds through a three-year facility. Net debt

reduction is illustrated in Figure 16 below.

Figure 16: GXY net debt (2013-2015)


-182.7 -182.5

-213.0-197.9 -202.1

-21.5 -20.3

-250.0

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$m

)


16 December 2015 15

5

VALUATION

We have valued GXY using a net asset valuation approach, comprising GXY’s 50%

interest in Mt Cattlin base case (see Mt Cattlin project valuation), an average of

our DCF and market based valuation approaches for Sal de Vida (see Sal de Vida

project valuation), 50% of our nominal valuation for James Bay, net of corporate

and balance sheet adjustments.

As discussed in the Mt Cattlin and SdV project valuation sections of this report, we

note the potential for further upside to our valuation which include:

Higher spodumene (Mt Cattlin) and Li2CO3 (SdV) prices

The potential for an expanded production scenario at Mt Cattlin, which under

our modelled expanded case would add a further A$0.045/share to our NAV.

A firm development scenario and funding plan for SdV.

Figure 17: GXY Net asset valuation estimate

Source: Canaccord Genuity estimates. P/NAV Based on 9/12/2015 price

Valuation sensitivity

We have run sensitivity analysis on our GXY NAV estimate based on the metrics as

shown in Figure 18 below. Our analysis shows our GXY valuation to be most

sensitive to the NPV discount rate for Sal de Vida, the prevailing AUD/USD FX rate,

and spodumene prices received at Mt Cattlin.

Figure 18: GXY NAV sensitivity

Source: Canaccord Genuity estimates

Valuation A$m A$/share

Mt Cattlin NPV10% 132.6 0.10

Sal de Vida Estimate 130.6 0.10

Exploration & Other (James Bay) Estimate 15.0 0.01

Corporate (53.8) (0.04)

Cash 13.0 0.01

Debt (35.5) (0.03)

TOTAL 201.9 0.16

Target Price 0.16

P/NAV 0.54x

$0.05

$0.10

$0.15

$0.20

$0.25

$0.30

-30% -20% -10% 0% 10% 20% 30%

Change in T

arg

et

Price

Spodumene Price Exchange Rate (A$:US$) Tantalum Price

GXY Discount Rate (@10%) Sal de Vida Discount rate (@10%)


16 December 2015 16

6

CORPORATE & FINANCE

Capital structure

GXY’s capital structure is detailed in Figure 19 below:

Figure 19: GXY capital structure

Source: Company reports, Factset, Canaccord Genuity estimates

Cashflow & balance sheet

We estimate GXY has cash balance of ~A$13m as at the end of DecQ’15,

following the re-purchase of A$31m convertible bonds in Nov’15 (completed at a

13% discount to face value).

The balance of the convertible bonds (A$31m) were re-financed in late Nov’15

through the establishment of a secured three-year term facility through OCP Asia.

Other terms include an 8% p.a. interest rate and the issue of 10m warrants with a

floor exercise price of A$0.08.

We also note that GXY has A$189m in accumulated tax losses, which may be

used to offset income tax payable from any profits from Mt Cattlin.

Our forward cashflow and balance sheet forecasts (see Page 4, GXY financial

summary) represents our base case forecasts, and excludes any provision for

development of the Sal de Vida project. Our cashflow forecasts suggest GXY has

sufficient funding to repay current debt but we note that should GXY proceed to

develop Sal de Vida, additional capital will be required (see page 37, Sal de Vida

Project Development, timetable & funding)

Major shareholders

GXY’s substantial shareholders (+5%) are Acorn Capital (6.9%) and Paradice

Investment Management (5.3%).

Board of Directors

Martin Rowley, Non-Executive Chairman

Mr Rowley was a co-founder of TSX and LSE-listed First Quantum Minerals Ltd and is

currently that company’s Executive Director, Business Development. He was

previously non-executive Chairman and director of Lithium One Inc., which was

acquired by Galaxy in July 2012.

Anthony Tse, Managing Director

Mr Tse has 20 years of corporate experience in numerous high-growth industries such

as technology, internet/mobile, media & entertainment, and resource & commodities

– primarily in senior management, capital markets and M&A roles across Greater

China and Asia Pacific in general.

Charles Whitfield, Executive Director

Mr Whitfield is the Principal Investment Officer of Drumrock Capital, an investment

firm providing capital and advisory services to start-up and early round companies. He

Price Expiry

Issued Shares m 1264.4 $0.09

Options 1 m 4.0 $1.11

Options 2 m 2.9 $1.16

Options 3 m 12.0 $0.08 19/09/2016

Options 4 m 25.0 $0.03 1/04/2018

Options 5 m 34.1 Share perf rights

Options 6 m 10.0 $0.08 OCP warrants

Total Options m 88.0

Fully Diluted m 1352.4

Market Cap. A$m 115.1

Market Cap. (Fully diluted) A$m 123.1


16 December 2015 17

7

was formerly a Managing Director with Citigroup where he held the position of head of

the corporate equity solutions group (Asia Pacific). Prior to this, he worked for

Deutsche Bank where he was head of the strategic equity transactions group (Asia

Pacific) from 2000.

Jian-Nan Zhang, Non-Executive Director

Mr Zhang is the Deputy General Manager of Fengli Group (Australia) Pty Ltd, a

subsidiary of the Fengli Group in China, which is a leading private industrial group in

China, with diversified interests in iron and steel, commodities trading, shipping and

wharf operation related businesses, and is also a shareholder in the company.


16 December 2015 18

8

Company overview: General Mining Corporation Ltd

COMPANY BACKGROUND

GMM is an Australian based lithium development company. Its primary asset is a

right to earn 50% of the Mt Cattlin lithium/tantalum operation in Western

Australia, and right to earn 50% of the James Bay spodumene project in Canada

(see Asset overview, Mt Cattlin & James Bay)

A company history summary is detailed below in Figure 20

Figure 20: GMM company history summary


KEY DEVELOPMENTS

Galaxy Resources Mt Cattlin agreement

In Feb’15, GXY executed an agreement with GMM whereby GMM was granted the

right to recommence production and solely operate Mt Cattlin for three years, with

an option to purchase the asset for A$30m and a 3% NSR royalty. Under the

agreement, GXY was set to receive an annual lease fee of A$2.5m and a 10%

production royalty (on tantalum sales). Under the deal, GMM had the right to all

revenues from the sale of tantalum from Mt Cattlin, with spodumene sales

revenue shared equally.



A$25m (comprising expending A$7m of capex to commence production and three


of production).

The deal also saw GMM granted right to earn 50% interest in James Bay through

the expenditure of A$5m over 3 years.


16 December 2015 19

9

VALUATION

We have valued GMM using a net asset valuation approach, comprising a 50%

equity interest in Mt Cattlin (base case), 50% of our nominal valuation for James

Bay, net of corporate and working adjustments.

Our per share valuation (Figure 21) is based on a diluted share count of 334m

shares, which includes the recent A$7m placement at A$0.18/sh, and 23.7m ITM

options at an average exercise price of A$0.10/share.

As discussed in the Mt Cattlin project valuation section of this report, we note the

potential for further upside to our valuation which includes:

Higher spodumene prices at Mt Cattlin

The potential for an expanded production scenario at Mt Cattlin which under

our expanded case valuation scenario (see page 30) would add a further

A$0.20/share to our NAV.

Figure 21: GMM net asset valuation estimate

Source: Canaccord Genuity estimates. . P/NAV Based on 9/12/2015 price

Valuation sensitivity

We have run sensitivity analysis on our GMM NAV estimate based on the metrics

as shown in Figure 22 below. Our analysis shows our valuation to be most

sensitive to the AUD/USD FX rate, and spodumene prices received at Mt Cattlin.

Figure 22: GMM NAV sensitivity


Valuation A$m A$/share

Mt Cattlin NPV10% 126.9 0.38

Exploration & Other (James Bay) Estimate 15.0 0.04

Corporate (14.3) (0.04)

Cash 9.7 0.03

Debt - -

Unpaid capital 2.4 0.01

TOTAL 139.7 0.42

Target Price 0.40

P/NAV 0.49x

$0.10

$0.20

$0.30

$0.40

$0.50

$0.60

-30% -20% -10% 0% 10% 20% 30%

Cha

ng

e in

Ta

rge

t P

rice

Spodumene Price (US$/t) Exchange Rate (A$:US$)

Tantalum Price (US$/lb) Discount Rate (@10%)


16 December 2015 20

10

CORPORATE & FINANCE

Capital structure

GMM’s capital structure is detailed in Figure 23 below. :

Figure 23: Capital structure


Cashflow & balance sheet

GMM had a cash balance of ~A$2.5m as at the end of SepQ’15, and currently has

no debt. The company raised A$5m through a placement and rights issue at

A$0.05/share in Sep’15, and recently announced the completion of a A$7.2m

placement at A$0.18/share. Following the placement, we estimate GMM will have

cash reserves of ~A$10m (includes proceeds of rights issue which settled in

Oct’15).

We estimate that following this raising, GMM has sufficient liquidity to fund initial

earn-in payments to GXY and the re-start of operations at Mt Cattlin, but note that

a further A$8m in capital is required throughout CY16 to complete process plant

upgrades to reach targeted production rates. We expect a majority of this can be

funded from existing cash and operating cashflow, with any additional

requirements satisfied by the exercise of management options (+A$2m) and

offtake related finance/product pre-payment (expected to be finalised in Jan’16)

totaling US$10m.

Major shareholders

GMM’s substantial shareholder (+5%) is Investmet, which holds ~14% of the fully

diluted capital of the company. Investmet is a company associated with the Executive

Chairman Michael Fotios.

Board of Directors

Michael Fotios, Executive Chairman

Mr Fotios is a geologist with 27 years’ experience in exploration and feasibility for

gold, base metals, tin, tantalum and nickel projects. He previously held roles with

Homestake Australia and Sons of Gwalia, with prior Directorships including Galaxy

Resources (2006-2008). Mr Fotios is also a Director of Northern Star Resources,

Horseshoe Metals, and Pegasus Metals.

Alan Still, Non-Executive Director

Mr. Still is a metallurgist with over 40 years’ experience in a variety of commodities,

including gold and rare earths. Mr Still is also a Director of Horseshoe Metals, Swan

Gold Mining and Pegasus Metals.

Michael Kitney, Non-Executive Director

Mr Kitney is a metallurgist with 40 years of international experience including roles in

mine operations, and project feasibility study management. Mr Kitney has experience

downstream lithium processing, and is currently COO of Kasbah Resources.

Price Expiry

Issued Shares m 269.18 $0.21

Options 1 m 14.25 $0.08 21/09/2017

Options 2 m 11.25 $0.12 21/09/2018

Total Options m 25.50 $0.10

Fully Diluted m 294.677

Market Cap (basic) A$m 55.181

Market Cap (Fully diluted) A$m 60.409


16 December 2015 21

11

Asset overview

MT CATTLIN SPODUMENE/TANTALUM PROJECT (GXY 100%, GMM EARNING 50%)

Location & access

Mt Cattlin is situated in the Phillips River mineral field, which surrounds the

township of Ravensthorpe, 450km south east of Perth, Western Australia. The

project area (including a number of exploration tenements) covers ~185km2, and

sits on granted mining leases. Access to the property is via sealed highways

and/or direct air routes from Perth to Ravensthorpe.

The project benefits from infrastructure in the immediate Ravensthorpe area,

including roads (potential trucking routes to the ports of Esperance or Bunbury),

as well as skilled labour. Water is currently supplied via bore fields, with base load

power requirements provided by diesel generators. We note that Mt Cattlin also

has real-time solar tracking panels and two wind turbines, providing back-up

power to the project. At capacity, the renewable energy systems provide ~15% of

the mine sites’ daily power requirements.

Figure 24: Project location Figure 25: Ravensthorpe project plan

Source: Google maps Source: Company reports

Project history

The tenements on which the project is located have been owned by numerous

companies since the 1960s, including Western Mining Corp, Pancontinental

Mining (1989-90), Greenstone Resources (1997-99), Sons of Gwalia (1999 and

2002-2006) and Haddington Resources (2000-02). GXY acquired the Mt Cattlin

mining lease from Sons of Gwalia in 2006. A project milestone summary is shown

in Figure 26 below.


16 December 2015 22

12

Figure 26: Mt Cattlin project milestone timeline


In Feb’15, GMM executed an agreement with GXY whereby GMM was granted the

right to recommence re-commence production and solely operate Mt Cattlin for

three years, with an option to purchase the asset for A$30m and a 3% NSR

royalty. Under the agreement, GXY was set to receive an annual lease fee of

A$2.5m and a 10% production royalty (on tantalum sales). Under the deal, GMM

had the right to all revenues from the sale of tantalum from Mt Cattlin, with

spodumene sales revenue shared equally.



A$25m (comprising expending A$7m of capex to re-start production and three


of production).

Geology & resources

The Mt Cattlin project is located within the Phillips River Mineral Field which forms

part of the regional Ravensthorpe Greenstone Belt. The central portion of this belt

hosts the Mt Cattlin deposit with host rocks comprising of intermediate to mafic

volcanoclastic rocks. This sequence comprises approximately 10-20% basalt, 50-

70% andesite and 20-30% dacite. Within this host rock, pegmatites dykes occur.

The pegmatites dykes display a diverse mineralogy with the deposit categorised

on structural and textural grounds as either i) Simple pegmatites, ii) Complex

pegmatites or iii) Albite-spodumene pegmatites. The pegmatites are zoned

vertically and can be quite variable laterally with a single layer of pegmatite

displaying all three lithologies at various locations.

Pegmatite mineralization defined to date covers an area of around 1.6 km east-

west and 1 km north-south. The main pegmatite mineralisation lies between 30 m

and 60 m below the surface, and outcrops in some locations as indicated in

Figure 27 below. However, deeper zones of lithium-mineralised pegmatites occur


16 December 2015 23

13

over 140m below the surface to the northwest of the main ore body. The ore is flat

lying in orientation with vein thickness approaching 20m in some locations.

Spodumene-bearing pegmatite is the predominant lithium ore mineral, and

several types of spodumene are recognised including light green and white

varieties. Tantalum occurs within manganese-rich locations and is considered to

occur in a ~1:4 ratio with lithium.

Figure 27: Mt Cattlin cross section


A revised Mineral Resource and Ore Reserves estimate for Mt Cattlin was

provided by project partner General Mining in August 2015 (Figures 28 & 29). This

was updated to meet JORC 2012 requirements and uses a 0.4% Li2O cut-off

grade assuming a 10% mining dilution and an additional 5% of revenue from

Tantalum sales.

We note that the deposit remains open at depth within the main pegmatite

(Dowling pit), suggesting the potential for further increases in the resource. GMM

are expected to commence resource extension drilling programs later in 2016.

However, we don’t consider the project to be resource constrained with Reserves

sufficient to support a ~10 year project life, while further conversion of Inferred

resources could see an ultimate mining inventory supporting +15 years of

production at the proposed production rate of 800ktpa.

Figure 28: Mt Cattlin resources (2015) Figure 29: Mt Cattlin reserves (2015)

Source: Company reports Source: Company reports

Resources Mt Grade Mt Li2O Ta2O5 Ta2O5

(Li2O) (ppm) (Mlbs)

Mt Cattlin

Meas 2.54 1.20% 0.03 152.0 0.85

Indicated 9.53 1.06% 0.10 170.0 3.57

Inferred 4.34 1.07% 0.05 132.0 1.26

TOTAL 16.42 1.08% 0.18 157.0 5.68

Reserves Mt Grade Mt Li2O Ta2O5 Ta2O5

(Li2O) ppm (Mlbs)

Mt Cattlin

Proven 2.43 1.11% 0.03 152.0 0.81

Probable 7.54 1.02% 0.08 170.0 2.83

TOTAL 9.97 1.04% 0.10 149.0 3.28


16 December 2015 24

14

Production history

Mt Cattlin historically produced 114kt of spodumene concentrate (at a

concentrate grade of ~6% Li2O) from 2010 to mid’12 when the operation was

suspended. The spodumene product was shipped to China as feed for GXY’s

Jiangsu lithium carbonate plant.

The operation underperformed expectations, with spodumene product recoveries

(averaged 53% versus design recoveries of 70%) impacted by poor crushing

performance and mica removal. GXY did not report production costs during this

period, but lower spodumene prices and a higher AUD also impacted profitability

of the operation.

Figure 30: Historical Mt Cattlin plant performance Figure 31: Historical Mt Cattlin spodumene production


Project development

Mt Cattlin has been on care and maintenance since July 2013, and with only

limited operation, infrastructure remains in excellent condition. In Oct’15 GMM

reported the results of an independent review for a project re-start, based on an

800ktpa project producing 112ktpa of spodumene concentrate and ~500tpa of

tantalite concentrate over a mine life of 17 years (Figure 32 & 33).

Figure 32: Mt Cattlin scoping study outcomes Figure 33: Mt Cattlin scoping study financial inputs


0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

0

50

100

150

200

250

Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12

Reco

very

(x100)

/ L

i2O

Gra

de

(%

)

Ore

Mil

led

(kt)

Ore milled Li Recovery Grade (Li2O)

0

5000

10000

15000

20000

25000

30000

Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12

Sp

do

Co

nc (

kt)


16 December 2015 25

15

A re-start of operations will clearly benefit from the established plant and

infrastructure already on site, as well as open pit pre-strip being already 60%

complete (lending itself to a LOM strip ratio of 4:1). While the deposit may not

compare as favourably to some other spodumene projects in Australia in terms of

grade and tonnes, we consider the +A$100m in sunk capital to be a clear

advantage in terms of production lead times.

Furthermore, we consider the fact that historical spodumene product was

successfully used to produce a Li2CO3 product in GXY’s Jiangsu lithium carbonate

plant from 2012-2013, suggest a strong likelihood of acceptance among potential

convert plants, and presents as a de-risking factor for the project.

Figure 34: Mt Cattlin concentrator plant Figure 35: Mt Cattlin open pit

Source: Canaccord Genuity Source: Canaccord Genuity

Initial capex to re-commence production has been estimated at A$7.5m, with key

capital items including refurbishment of the current crushing circuit (~A$3m),

upgrade of fines circuit and installation of new equipment to ameliorate past poor

metallurgical aspects (A$4.5m). GMM have indicated that new and refurbished

equipment within the wet plant will be installed with sufficient redundancy to allow

for any potential expansion of production to ~200ktpa of spodumene concentrate.

Figure 36 overleaf summarises the existing process flowsheet design, previous

plant performance problems, and how GMM plan to resolve these to reach

targeted production rates.


16 December 2015 26

16

Figure 36: Mt Cattlin flowsheet description and proposed modifications

Source: Canaccord Genuity

Previous Limitations Proposed modifications

Cru

sh

ing

an

d S

cre

en

ing

* The plant previously consisted of a four stage

crushing circuit (3 dry and 1 wet stage) to

product a -6mm product from ROM ore at a

design rate of 1M tpa (420tpoh).

*The crushing plant is only operated on day shif t

with suff icent capacity provided in a f ine ore

(-18mm) bin.

*Previously f ine material (-25mm) was wet screened over

6.4mm aperture screens with oversize (-18mm +6mm) going to

quaternary crushers. This resulted in reduced throughput due to

wet feed agglomerat ing and impact ing on the ut ilisat ion of the

quaternary crushers circuit .

*A mobile crusher has been proposed to replace the

quaternary crusher. In addit ion to convert ing this to

a dry applicat ion, crush size can be controlled to target the

correct size for spodumene recovery via f lotat ion.

*The proposed changes along with refurbishment of the

current crushing circuit are expected to cost ~A$3m

*Crushing circuit to come online within 2-3 months of

operat ions commencing

Mic

a S

ep

ara

tio

n

* -6mm crushed ore is pulped and deslimed

at 75µm through a cyclone bank. The f ines are

transferred to the tailings thickener for disposal.

* The +75µm ore is fed over to a ref lux

(cross f low) classif ier to remove mica. Ref lux

classifers use simliar operat ion principles as other

gravity separat ion (up-current

classif ier, jigs etc).

*The dif ference in specif ic gravity of the lighter

mica (2.5 g/t) compared to

spodumene (3.15g/t) is exploited for ef fect ive

separat ion.

* Due to the similar physical propert ies (specif ic gravity, size

fract ion) that mica has with lithium bearing minerals inadequate

liberat ion inf luenced downstream heavy

media separat ion. M ica content within the lithium concentrate of

previous operat ions was ~20%, above the target grade of 5%.

This reduced contained Li2O to 5.2% to 5%.

* The overf low product from the ref lux classif ier was screened at

1.6mm to remove coarse mica f lakes. Control of the supension

water f lowrate and pressure is critcal to maintain effect ive

separat ion.

* The ref lux classif iers x2 are to be arranged to receive feed

from two discrete sizes -1.0+0.5mm

and -6.0+1.0mm. This is aimed at allowing the ref lux

classif iers to more select ively remove mica.

*The crit ical variable will be maintaining a product feed size

from the crushing circuit that enables effect ive separat ion of

mica.

Re

co

ve

ry f

rom

HM

S U

nd

ers

ize

* Prior to spodumene concentrate recovery by

Heavy M edia Separat ion (HM S), undersize (-

0.5mm) is treated through gravity separat ion

(spirals) to recovery tantalum and residual

spodumene.

* Tantalum concentrate at ~4.5% Ta2O5 is

recovered in the spiral sinks. This product is then

dewatered through a thickener and f ilter prior to

stockpiling for product shipment.

* Spiral f loats contain entrained spodumene which

was proposed to be recovered through f lotat ion.

*The tailings stream from the spiral and f lotat ion

circuit are sent back to a tailings dam for

empoundment

* Tantalum recovery was negliable due to poor classif icat ion

within the spiral circuit . This was attributed to a poor control of

the feed size due to poor quarternary crusher performance.

*Contained Li2O within the tailing stream (~0.8%) suggested very

poor recovery and provides the operat ion with supplmentary

plant feed requiring no crushing. It is est imated that ~400kt of

tails at a grade of 0.8% L2O is avaiable for use to commision the

modif ied f ines circuit .

*A series of classif iers (jigs) and gravity shaking (Wilf ley)

tables will be installed to scalp out coarse tantalum

(specif ic gravity of 8.2g/cc vs Li2O of

2.013) prior to the spiral circuit . It is envisaged to

remove 35% of contained Tantalum from this stream.

* Addit ional scavanger stages will be added to the f lotat ion

to improved lithium recovery. This design has been based a

top size of 0.5mm for the HM S undersize feed.

* ~ $4m has been proposed in capital expenditure to

upgrade the f ines circuit .

Re

co

ve

ry f

rom

HM

S O

ve

rsiz

e

*The -6mm material f rom the underf low of

the ref lux classif ier has been seperated from the

majority of mica. It is then fed to the HM S pre-

screen.

*The HM S pre-screen separates out the feed into

0.5 to 3mm and 3 to 6mm size

fract ions.

*Ferrosilicon is recovered from product and waste

streams by screening ahdn magnet ic separat ion.

*Previous operat ions indicated that very coarse (+0.5mm)

Tantalum was affect ing the purity of the primary spodumene

concentrate.

*Overall spodumene recovery of <60% was previously achieved at

a concentrate grade of ~5.2% Li 2O against a design of 75%

*A series of classif iers (jigs) and gravity shaking (Wilf ley)

tables will be installed to scalp out coarse tantalum

(specif ic gravity of 8.2g/cc vs Li2O of

2.013) prior to the spiral circuit . It is envisaged to

remove ~35% of contained Tantalum from this stream.

*Is is proposed to install a second series of cyclones to

improve the purity of the spodumene concentrate product.

*$8m in capital expenditure has been forecast to improve

yields and opt imse the process. Equipment has been

selected with adequete redundancy to accomodate an

expansion in throughput of +200kt

of spodumene concentrate. This equipment has been based

off previous design work from leading Perth f irm M SP

Engineering and can be f it ted into the exisist ing plant

structure with lit t le modif icat ions.

Key Features


16 December 2015 27

17

Project timetable

GMM’s proposed project timetable is shown in Figure 37. It currently envisages

first concentrate production is due in MarQ’16, following completion of plant

upgrade works. Initial plant feed is expected to be sourced from reclaimed tailings

(400kt at ~1% Li2O) and 70kt of ROM ore currently on the ROM pad.

Upon the commencement of production it is proposed to initially feed reclaimed

tailings exclusively to the wet process plant in order to optimise the circuit, reduce

initial unit operating costs (no mining or crushing) and enable refurbishment of

the crushing circuit to be completed. Reclaimed tailings are then planned to be

blended with crushed ore feed as operations ramp up to steady state.

Figure 37: Mt Cattlin project timetable


Offtake, marketing & sales

GMM signed a Sales and Distribution Agreement with Mitsubishi Corporation in

Oct’15, which covers spodumene concentrate production from Mt Cattlin. The

agreement has a term of 4 years (plus an option for a 1 year extension based on

mutual agreement), and gives Mitsubishi the exclusive right to sell up to 100% of

production into China, South Korea, Taiwan and Vietnam.

Mitsubishi will act as principal buyer of the concentrate, and is obligated to use

reasonable endeavours to achieve the best price, Furthermore, Mitsubishi has

priority over spot buyers for Mt Cattlin concentrate, provided it at least matches

the prevailing market price. Quantity and pricing for the agreement is to be agreed

on a quarterly basis in line with market conditions.

The agreement also features two-way exclusivity in that Mitsubishi cannot

distribute spodumene concentrate from any other sources other than Mt Cattlin to

the named countries

We understand GMM is in discussions with a potential offtake partner for the

tantalum production from Mt Cattlin. We expect an update on this front in early

2016.


16 December 2015 28

18

Production

We have derived a project valuation for Mt Cattlin based on an NPV10%, based on

the following assumptions:

Mining inventory of 15Mt at 1.08% Li2O and 150ppm Ta2O5

Total capex of A$15m and annual sustaining capex of A$2.4m

800ktpa open pit mining with an average LOM strip ratio of ~4:1

Recoveries of 72% for spodumene and 65% for tantalite; spodumene

concentrate grades of 6% Li2O and tantalite concentrate grades of 4.5%

Ta2O5.

Based on the above assumptions, we estimate average annual spodumene

concentrate production of 108ktpa and tantalite concentrate production of

~1,800tpa. Our production estimates are shown in Figure 38 below.

Figure 38: CGe production & cost estimates


Key financial assumptions include:

Mining costs of A$4.50/t material moved

Processing & site G&A costs of A$20/t

Product trucking costs (trucking to port of Esperance) A$22/tonne

State royalty of 5% and Greenstone Resources production royalty of A$1.50/t

on tantalum ore

Marketing fees 5% and impurity penalties 5%

We estimate average LOM production costs of US$342/tonne of spodumene

concentrate, net of tantalite by-product credits of US$137/tonne (assumes

tantalite price of US$75/lb and AUDUSD:0.69 from 2020).

Project valuation

Our valuation is based on spodumene and tantalite pricing assumptions as

illustrated in Figure 39 below. Our conservative assumptions see an average

annual price increase of 4% for spodumene concentrate, and conservative

assumptions for tantalite at US$75/lb flat (versus current market prices of

~US$90/lb).

200

250

300

350

400

450

500

550

600

0.00

20.00

40.00

60.00

80.00

100.00

120.00

2016e 2018e 2020e 2022e 2024e 2026e 2028e 2030e 2032e

Pro

du

cti

on

co

sts

(U

S$/t

co

nc)

Sp

od

um

en

e c

on

c p

rod

'n (

kt)

Spodumene prod'n Cash costs (net of credits) Spod conc 6% Li2O price


16 December 2015 29

19

Figure 39: CG spodumene and tantalite pricing assumptions


Based on the above assumptions/estimates, we derive a base case, post-tax

NPV10% for Mt Cattlin of A$253m.

We highlight the optionality offered by the potential to expand plant capacity

and production. Noting that the project is not resource constrained (current

assumed mine life of 15 years), and with the likelihood of relatively low capital

costs to expand the plant, we see clear potential for enhanced value for the

operation should production be increased. We note that any expansion would

be reliant on sufficient market demand for spodumene concentrate, but

noting current and expected tightness in the spodumene market, an

expansion could be a distinct possibility in our view.

On this basis, we have also modelled an “expansion case” for Mt Cattlin,

whereby plant throughput is increased 60% to 1.6Mtpa, lifting production to

208ktpa of spodumene concentrate. In this scenario, we have assumed

expansion capex of A$45m (consisting of upgraded crushing circuit, additional

fines recovery capacity and TSF expansion costs), starting 1H’17. An

expanded project would lift our project valuation (NPV10%) 44% to A$364m.

35

45

55

65

75

85

95

350

400

450

500

550

600

2015 2016 2017 2018 2019 2020 2021 2022 2023

US

$/lb

US

$/t

onn

eSpodumene 6% Li2O (RHS) Tantalite (RHS)


16 December 2015 30

20

SAL DE VIDA LITHIUM BRINE PROJECT (GXY 100%)

Location & access

The Sal de Vida (SdV) project is located on the northern boundary of the

Catamarca Province and the southern boundary of Salta Province, in the Salar del

Hombre Muerto (Figure 40). The salar is situated ~1,300km NW of Buenos Aries

and 175km SW of Salta city, in the Argentinean Altiplano, and lies at an altitude of

~4,000m.

The project area covers ~420km2, and comprises a number of Mining Licences

(“Minas”) and Mining Claims (“Cateos”). The Minas and Cateos comprising the

project area cover the eastern sub-basin of the salar, proximal to FMC

Corporation’s (FMC:NYSE | Not rated) Fenix lithium brine operation on the

western part of the Salar (Figure 43), and Orocobre’s Tincalayu borate mining

operation to the north west..

Access to the property is via all-weather, sealed and unsealed roads,

approximately 390km from the City of Salta. Infrastructure in the region is

generally considered limited; however, any development is expected to benefit

from a gas pipeline extension running from the town of Pocitos to FMC’s Fenix

operation (24km from GXY’s SdV operations site).

Figure 40: Location map

Source: Google Maps


16 December 2015 31

21

Figure 41: Salar de Hombre Meurto & Sal de Vida project area


Ownership & history

GXY acquired a 100% ownership of SdV through its merger with Lithium One Inc in

2012. Prior to this, Lithium One had acquired the project through an initial

purchase and consolidation of a number of smaller claims throughout the eastern

part of the Salar in 2009 and 2010.

In 2010, Lithium One entered into an agreement with Korea Resources (KORES)

to acquire an initial 4% equity in the project, with an option to earn an additional

26% through the funding and delivery of a feasibility study to a cost of US$15m.

KORES subsequently brought GS Caltex and LG International in as partners in the

joint venture, with each able to earn a 10% interest, and Lithium One retaining

70%. KORES eventually let the option lapse in Jun’13, with GXY reverting to 100%

ownership in Sep’15 following the purchase of KORES’ 4% interest for US$2.5m.

Geology

The SdV project is a lithium-rich salar, situated in the eastern and northern sub

basins of the Hombre Muerto basin (Figure 42). The basin itself is similar to other

salar basins in Chile, Argentina, and Bolivia, with basin formation related to the

volcanogenic origins of the Andes mountain ranges. These mountain ranges act

as natural drainages, with lithium (along with other minerals such as boron,

potassium, magnesium) in the groundwater derived the alteration and weathering

of surrounding volcanic rocks. The mineral rich brines “collect” in these basins,

and subsequently undergo sedimentation. High evaporation rates and limited

precipitation then resulting in the concentration of the lithium and other minerals

within the brine.


16 December 2015 32

22

Figure 42: Project location relative to other basins in the Andean Altiplano


Resources/reserves

Brine deposits differ from hard rock mineral deposits due to fluid mobility – brine

is a fluid hosted in an aquifer and thus has the ability to move and mix with

adjacent fluids once extraction starts. An initial in situ resource estimate is based

on knowledge of the geometry of the aquifer, and the variation in drainable

porosity and brine grade within the aquifer. Based on this, flow rates and other

hydraulic properties of the aquifer material are considered as important as the

chemistry and mineral tenor. GXY’s resource methodology consisted of two key

components:

characterisation of the mineral grade dissolved in the brines, and

characterisation of the host aquifer drainable porosity that contains the

resources.

These key parameters were used to estimate the total amount of brine, and

therefore contained lithium and potassium that could be theoretically extracted

from the concession.

GXY last completed a resource estimate for SdV in 2012 (Figure 43). We highlight

that Sal de Vida features a number of favourable characteristics for the

development of a brine deposit including good lithium grades, low Mg:Li ratios

(benefits production costs), elevated Potassium grades (potential by-product

credits) and low sulphate levels (low impurities). The resource has been defined to

a depth of +200m based on drilling undertaken between 2010 and 2012.


16 December 2015 33

23

Figure 43: Sal de Vida resources (2012)

Source: Company reports & Canaccord Genuity estimates

As a pre-cursor to the completion of a Definitive Feasibility Study, GXY released a

maiden Reserve estimate for SdV in Apr’13. The Reserve estimation methodology

differs from that used to estimate the resource, instead focussing on the potential

for recovery of lithium and potassium via well field pumping in selected areas.

Brine pumping tests were completed in Oct’12, with wells drilled to a depth of

160m, and brine pumping rates of 16 L/sec. The tests revealed an average

assayed lithium grade of 760mg/L, with potassium grades of 8,800mg/L. The

Reserve was based on a numerical groundwater flow model projection, which

indicated that the proposed well fields would be able to support an average

annual brine extraction rate of 30,000m3/day (~350L/sec). Based on this, the

Reserve is sufficient to support a +40 year mine life, although we note that the

Resource of +7Mt of contained LCE lends scope for a significantly longer

operation.

Figure 44: Reserves (2013)

Source: Company reports & Canaccord Genuity estimates; NB: assumes 500mg/L Li cut off

Feasibility studies

GXY completed a Definitive Feasibility Study (DFS) for SdV in Apr’13. The study

was based on the 2013 Reserve estimate, and demonstrated the viability of a

+40 year, 25ktpa Li2CO3 and 95ktpa potash project based on the development of

evaporation ponds, a lithium carbonate plant and potash production plant. Key

outcomes of the DFS are shown in Figure 48.

The DFS estimated capital costs totaling US$369m (Figure 47), with direct costs

of US$275m. The DFS estimated operating costs of US$2,200/t net of potash by-

product credits (study based on a Li2CO3 price of US$6,395/t and potash price of

US$500/tonne).

Resources Vol (km3) Li (mg/l) K (mg/l) Li (t) LCE (Mt) K (t)

Sal de Vida

Meas 0.72 787 8,695 566,640 3.015 6,260,400

Indicated 0.26 768 8,534 199,680 1.062 2,218,840

Inferred 0.83 718 8,051 595,940 3.170 6,682,330

TOTAL 1.81 753 8,377 1,362,260 7.247 15,161,570

Concentration Contained

Reserves Vol (km3) Yield (%) Li (mg/l) K (mg/l) Li (kt) LCE (Mt) K (Mt)

Sal de Vida

Proven 0.07 66% 518 5,053 36.2 0.19 0.35

Probable 0.37 63% 483 5,020 178.9 0.95 1.86

TOTAL 0.44 215.1 1.14 2.21

Concentration Contained


16 December 2015 34

24

Figure 45: 2013 DFS capex breakdown Figure 46: 2013 DFS outcomes


Process flow design

The DFS contemplated the production of a refined Li2CO3, product based on the

“Silver Peak” process (Figure 47), comprising the following key processing stages:

Brine pumping: Well fields are located in two separate locations on the salar,

in the south west and east. Locations were selected based on brine quality,

extent of the aquifer and brine pumping rates. A total of 24 well field pumps

(120-130m depth) will then pump the brine to the pond system for initial

treatment.

Pre-treatment stage: Nearly all magnesium is removed from the brines

through the addition of lime in the pre-treatment stage. The low magnesium

content of the SdV brines makes removal at an early stage of the process

possible, thus benefitting production costs.

Evaporation stage: the clarified brine is pumped to a series of evaporation

ponds, where initial ponds utilise natural evaporation to concentrate the brine

and remove the excess halite (common salt). Subsequent ponds further

concentrate the brine, resulting in the crystallisation of potassium, gypsum

and borate which are then harvested for the production of potash. Excess

calcium and sulphate are removed throughout the system.

Recovery stage: The concentrated brine is pumped to the processing plant at

a rate of 33m3/sec with a minimum Li content of 2% w/w. Processing involves

the removal of boron through solvent extraction, with remaining boron,

magnesium and calcium removed through ionic exchange. Residual impurities

(calcium and magnesium) are further removed through the addition of soda

ash, and passed through a filtration system to remove the precipitated solids.

Heat treatment and further soda ash treatment precipitates out the Li2CO3

and is extracted via centrifuges before purification.

Purification: Purification (targeted purity levels of 99.5% Li) is achieved via

through digestion of the Li2CO3 and addition of CO2, with the resultant liquor

passed through a further ionic exchange step to remove the entrained

impurities. Steam treatment then precipitates out a purified Li2CO3 product

which is then micronized (5 micron) and bagged for transport.


16 December 2015 35

25

Figure 47: SdV process flow diagram


The DFS also contemplated the production of a saleable potash product (95ktpa)

through the harvesting of potassium chloride (KCl) from the initial evaporation

ponds. The potash plant uses comminution, flotation and centrifugation to

produce a purified potash product suitable for fertilizer production.

Project development, timetable & funding

GXY commenced a development optimisation assessment of the project in 2013

with a view to reducing the upfront capital costs. The assessment is centered on

the staged development of the asset, utilising a modular project design allowing a

subsequent expansion. The current concept could see development split into two

stages with parameters potentially comprising:

Phase 1: 6-10ktpa Li2CO3, Capex US$100-200m (versus original US$369m)

Phase 2: expansion to 25ktpa Li2CO3

Further options being considered include:

Partial development of the evaporation ponds

Phase I development only seeing the first stages of the plant being built and

producing a lower purity, intermediate product (i.e. deferral of purification

circuit) – we note that the benefit of higher purity production and the margin

it affords is likely to outweigh the benefit of any upfront capital savings. As

such, we consider this option unlikely.

Deferral of Potash production

We note there is currently no defined development timetable for SdV, with

development of the project reliant on finalising a lower capex development and


16 December 2015 36

26

funding plan for the project. However, based on the DFS construction timetable

(+18months), it is possible that production could commence in 2018.

In our view, GXY’s 100% ownership of SdV affords it some flexibility as to how any

development may be funded. Noting that even if a lower capex staged

development is pursued (capex ~US$100-120m), it would still require a

significant equity contribution against GXY’s current equity value. As such, funding

considerations could include selling down an equity interest in the project to a

strategic JV partner (e.g. Orocobre and Toyota Tsusho at Olaroz), as well as

increased debt funding.

Project valuation

In our view, GXY’s SdV project holds significant option and strategic value, which is

likely to become more evident from 2016 given expectations for continued

tightness in the lithium market and the higher quality nature (Li grades, low

impurities) of the project. However, given the current uncertainty around the

design, capex, development path and funding for the project, we have derived a

range of valuations for SdV. These include:

1. DCF based on a staged development

2. Market based valuation

1. DCF valuation

Our DCF valuation for SdV is based on the following assumptions:

Staged project development comprising 10ktpa Li2CO3 Stage 1, and

subsequent expansion to 25ktpa Li2CO3

40 year mine life based on the 2013 Reserve estimate of 1.14 Mt of LCE

Stage 1 capex of US$120m (plus additional working capital), with project

construction commencing in late 2016, and first Li2CO3 production in late

2018

Stage 2 capex of US$185m to take production to 25ktpa; construction

commences in mid-2020 with Stage 2 production commencing in mid-2022

Our assumed project development includes no potash recovery circuit,

reducing upfront capital (US$26m in the DFS for the potash circuit) but

increasing production costs by virtue of the removal of by-product credits. We

estimate Stage 1 production costs of US$3,915/t LCE and expanded Stage 2

total costs of US$3,418/t LCE.

Conservative Li2CO3 prices of US$7,100/t from 2020.

Figure 48: CG modelled production and costs 2019e-2033e


0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

0.0

5.0

10.0

15.0

20.0

25.0

30.0

2016e 2017e 2018e 2019e 2020e 2021e 2022e 2023e 2024e 2025e 2026e 2027e 2028e 2029e 2030e 2031e 2032e 2033e

US

$/t

on

ne L

i2C

O3

Lit

hiu

m c

arb

on

ate

(ktp

a)

Lithium prod'n Total cash costs (RHS) Lithium carbonate price (RHS)

Steady state production (25ktpa)


16 December 2015 37

27

Our production and cost estimates are illustrated in Figure 48, and based the

above assumptions we derive a post-tax NPV10% (100%) for SdV of US$98m

(A$137m).

2. Market based valuation

We have derived an average market based valuation for SdV based on

“comparable” (i.e. lithium brine deposits) asset transactions in Figure 49.

Figure 49: Comparable transactions valuation summary


Based on the average value of “comparable” transactions, we estimate a market-

based value for SdV of US$92m (A$128m).

Year Asset Acqurier Interest Value (US$m) Implied Project Seller

Value (US$m)

2008 Salar de Rincon Sentient Group 100% 22.0 22.0 Admiralty Res*

2012 Salar de Olaroz Toyota Tsusho 25% 55.0 220.0 Orocobre

2015 Sal de Vida Galaxy Resources 4% 2.5 62.5 KORES

2015 Cauchari-Olaroz Western Lithium 100% 63.0 63.0 Lithium Americas**

Average 91.9


16 December 2015 38

28

JAMES BAY LITHIUM PROJECT (GXY 100%; GMM EARNING 50%)

Location & Access

The James Bay lithium pegmatite project is located in north-west Quebec, Canada.

The project is readily accessible by sealed roads and is 381km from the town of

Mattagami which provides access to mining infrastructure and a skilled workforce.

The nearest airstrip to the James Bay project is ~15kms away.

The project is exposed to seasonal extremes common in Canada. Winter (October

to April) temperatures range from -45 to 5 degrees generally associated with

significant snow cover, whereas summer months are typically characterized by

temperatures between 15 to 35 degrees. While not prohibitive to commercial

development, we expect the majority of the feasibility work to be completed in the

summer months.

Figure 50: James Bay location map

Source: Google Maps

Project History

The James Bay deposit was first discovered in 1966 and drill tested by the

Canadian government in 1977, where three diamond holes confirmed the

presence of spodumene mineralisation. Little modern exploration was completed

until Lithium One began drilling in 2008. During a two year drilling campaign

which followed targets based on extensive surface mapping, the presence of wide

pegmatite intersections with several hundred metres of lateral extent and a strike

length of >1km was confirmed. Drilling returned consistent grades throughout the

deposit of 1.2-1.8% Li20 which culminated in release of a maiden resource of

22.2Mt at 1.3% Li2O in November 2010.

Shortly after release of the James Bay maiden resource, GXY signed an agreement

with Lithium One to earn up to 70% in the project through C$3m cash payment

and completion of DFS. In March 2012, GXY and Lithium One ended up merging

and GXY currently has 100% ownership of the project.

GXY currently own 100% of the James Bay project. However, in June 2015, the

company executed an agreement that will allow GMM to earn a 50% stake by


16 December 2015 39

29

spending US$5m over a 3 year period. Part of the agreement will require GMM to

contribute 50% of the expenditure in the first 2 years which it expects to fund from

cashflow from the Mt Cattlin operation.

Figure 51: James Bay project milestone summary


Geology & resources

James Bay is situated on the north-eastern part of the Superior geological

province, within the Eastmain greenstone belt. Lithium mineralisation is

concentrated in swarms of pegmatite dykes.

The individual pegmatite dykes vary in width from 60-100m. Generally

outcropping from surface, the pegmatite dykes form a discontinuous “corridor”

with a traced strike length of 4km and width of 300m. Surface mapping has

identified 15 different pegmatite swarms within the deposit, each consisting of up

to seven dykes.

Pegmatites form by the crystallisation of post-magmatic fluids enriched in light

elements such as lithium, boron and beryllium inside the crust. Geological

investigations on the James Bay dykes have indicated that almost all are

spodumene bearing. The mineral spodumene (LiAlSi2O6), in its pure form

contains 8.02% Li2O. Spodumene crystals at James Bay are relatively coarse,

usually more than 5cm in length although some have been recorded at >80cm.


16 December 2015 40

30

Figure 52: James Bay – base line cross section


Figure 53: Pegmatite outcrop at James Bay


In November 2010, Lithium One announced a maiden resource estimate for

James Bay comprising 22.2 Mt at 1.28% Li2O. The resource was estimated using

a 0.75% Li2O cut off.

Figure 54: James Bay resources (2010)



16 December 2015 41

31

Project development & timetable

GXY has indicated that a DFS will commence in 2016 on the James Bay project.

Given the weather constraints of the Canadian winter, we don’t expect to see field

work meaningfully start before May next year.

At this stage, key deliverables and timing for completion of the DFS are yet to be

outlined. We expect to see follow up drilling to convert Inferred resources into

Measured and Indicated categories, ongoing metallurgical testwork (samples of

James Bay pegmatite are planned to be shipped to Mt Cattlin for processing and

assessment), pit optimizations and advancement of necessary permits to be the

key areas of ongoing work.

While early stage, that geometry of the current resource looks amenable to open

pit mining and we expect the coarse grained pegmatite mineralisation to respond

well to similar processing as Mt Cattlin. Ultimately, given the relative similarity in

orebodies, we expect Mt Cattlin to serve as a blueprint for the development of

James Bay.

Pending the outcomes of a DFS, we expect the scale of the operation to

potentially be similar to that of Mt Cattlin, with the exception of the tantalum

production. The target market would likely be North America which is widely

expected to have a growing appetite for lithium. Given the current earn-in timeline

with GMM, we don’t expect to see a funding and development decision for the

project before late 2018. In terms of priority for GXY, we see James Bay as the

third rank priority, behind Sal de Vida and Mt Cattlin.


16 December 2015 42

32

Appendix I – Investment risks

The key investment risks for GXY and GMM include:

Funding risk

As a pre-production company with no material income, both GXY and GMM are reliant

on equity and debt markets to fund feasibility studies and development of their

various projects. We can make no assurances that accessing these markets will be

done without further dilution to shareholders.

Exploration risks

Exploration is subject to a number of risks and can require a high rate of capital

expenditure. Risks can also be associated with conversion of inferred resources and

lack of accuracy in the interpretation of geochemical, geophysical, drilling and other

data. No assurances can be given that exploration will delineate further minable

reserves.

Operating risks

Once in production, the company will be subject to risks such as plant/equipment

breakdowns, metallurgical (meeting design recoveries within a complex flowsheet),

materials handling and other technical issues. An increase in operating costs could

reduce the profitability and free cash generation from the operating assets

considerably and negatively impact valuation. Further, the actual characteristics of an

ore deposit may differ significantly from initial interpretations which can also

materially impact forecast production from original expectations.

Commodity price and currency fluctuations

As with any mining company, GXY and GMM are directly exposed to commodity price

and currency fluctuations. Commodity price fluctuations are driven by many

macroeconomic forces including inflationary pressures, interest rates and supply and

demand factors. These factors could reduce the profitability, costing and prospective

outlook for the business.


16 December 2015 43

Appendix: Important DisclosuresAnalyst CertificationEach authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) therecommendations and opinions expressed in this research accurately reflect the authoring analyst’s personal, independent andobjective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoringanalyst’s coverage universe and (ii) no part of the authoring analyst’s compensation was, is, or will be, directly or indirectly, related to thespecific recommendations or views expressed by the authoring analyst in the research.Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associated persons ofCanaccord Genuity Inc. and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communicationswith a subject company, public appearances and trading securities held by a research analyst account.Target Price / Valuation Methodology:General Mining Corporation Limited - GMMTo reach our A$0.40/sh target price, we value GMM on a net asset valuation basis, comprising a 50% interest in our base case MtCattlin NPV10%, 50% of our nominal valuation for James Bay, net of corporate and other adjustments.Galaxy Resources Limited - GXYTo reach our A$0.16/sh target price, We value GXY on a NAV basis comprising 50% of our base case NPV10% for Mt Cattlin, our blendedDCF/market based value for Sal de Vida, and exploration, net of corporate and other adjustments.Orocobre Limited - OREOur target price is derived from a NAV comprising NPV10% for operating assets, interco loan receivables, net of corporate and otheradjustments.Risks to achieving Target Price / Valuation:General Mining Corporation Limited - GMMThe key investment risks for GMM include:Funding riskAs a pre-production company with no material income, GMM is reliant on equity and debt markets to fund feasibility studies anddevelopment of various projects. We can make no assurances that accessing these markets will be done without further dilution toshareholders.

Exploration risksExploration is subject to a number of risks and can require a high rate of capital expenditure. Risks can also be associated withconversion of inferred resources and lack of accuracy in the interpretation of geochemical, geophysical, drilling and other data. Noassurances can be given that exploration will delineate further minable reserves.

Operating risksOnce in production, the company will be subject to risks such as plant/equipment breakdowns, metallurgical (meeting design recoverieswithin a complex flowsheet), materials handling and other technical issues. An increase in operating costs could reduce the profitabilityand free cash generation from the operating assets considerably and negatively impact valuation. Further, the actual characteristicsof an ore deposit may differ significantly from initial interpretations which can also materially impact forecast production from originalexpectations.


As with any mining company, GMM is directly exposed to commodity price and currency fluctuations. Commodity price fluctuations aredriven by many macroeconomic forces including inflationary pressures, interest rates and supply and demand factors. These factorscould reduce the profitability, costing and prospective outlook for the business.Galaxy Resources Limited - GXYThe key investment risks for GXY include:Funding riskAs a pre-production company with no material income, GXY is reliant on equity and debt markets to fund feasibility studies anddevelopment of various projects. We can make no assurances that accessing these markets will be done without further dilution toshareholders.

Exploration risks


16 December 2015 44

Exploration is subject to a number of risks and can require a high rate of capital expenditure. Risks can also be associated withconversion of inferred resources and lack of accuracy in the interpretation of geochemical, geophysical, drilling and other data. Noassurances can be given that exploration will delineate further minable reserves.

Operating risksOnce in production, the company will be subject to risks such as plant/equipment breakdowns, metallurgical (meeting design recoverieswithin a complex flowsheet), materials handling and other technical issues. An increase in operating costs could reduce the profitabilityand free cash generation from the operating assets considerably and negatively impact valuation. Further, the actual characteristicsof an ore deposit may differ significantly from initial interpretations which can also materially impact forecast production from originalexpectations.


As with any mining company, GXY is directly exposed to commodity price and currency fluctuations. Commodity price fluctuations aredriven by many macroeconomic forces including inflationary pressures, interest rates and supply and demand factors. These factorscould reduce the profitability, costing and prospective outlook for the business.Orocobre Limited - OREThe key investment risks for ORE include: Geological risk -- the actual characteristics of an ore deposit may differ significantly frominitial interpretations and expectations. We note however the resource is extremely large relative to the forecast extraction rates andmine life, somewhat mitigating geological risk. Technical risk -- the construction and operation of brine based lithium carbonate projectsalthough proven is still in its relative infancy and therefore construction and operating risks are inherently elevated. Mitigating this riskis a pilot plant has been operating on site for in excess of 18 months, producing battery grade lithium carbonate. Financing risk -- theability of ORE to fund its portion of the development of the Olaroz project should also be considered a key investment risk. Equity andcredit markets may not be conducive to securing the required funds to complete construction of the project although we consider withthe Capital expenditure and operating risk -- the risk that capital and or operating costs exceed budget and/or exhaust available fundingbefore project completion, and reduce the profitability and free cash generation of the project. Commodity price and exchange rate risk:As with all mining and mineral exploration companies, commodity price and exchange rate risk should also be considered. In particularlithium and lithium carbonate are not exchange-traded commodities and are relatively small markets. Small and illiquid markets can bemore susceptible to wild fluctuations in prices.

Distribution of Ratings:Global Stock Ratings (as of 12/16/15)Rating Coverage Universe IB Clients

# % %Buy 583 62.55% 31.22%Hold 265 28.43% 13.21%Sell 29 3.11% 3.45%Speculative Buy 55 5.90% 60.00%

932* 100.0%*Total includes stocks that are Under ReviewCanaccord Genuity Ratings SystemBUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months.

HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months.

SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months.

NOT RATED: Canaccord Genuity does not provide research coverage of the relevant issuer.“Risk-adjusted return” refers to the expected return in relation to the amount of risk associated with the designated investment or therelevant issuer.Risk QualifierSPECULATIVE: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental criteria. Investments in thestock may result in material loss.

Canaccord Genuity Company-Specific Disclosures (as of date of this publication)General Mining Corporation Limited and Orocobre Limited currently are, or in the past 12 months were, a client of Canaccord Genuityor its affiliated companies. During this period, Canaccord Genuity or its affiliated companies provided investment banking services toGeneral Mining Corporation Limited and Orocobre Limited.


16 December 2015 45

In the past 12 months, Canaccord Genuity or its affiliated companies have received compensation for Corporate Finance/InvestmentBanking services from General Mining Corporation Limited and Orocobre Limited .In the past 12 months, Canaccord Genuity or any of its affiliated companies have been lead manager, co-lead manager or co-manager ofa public offering of securities of General Mining Corporation Limited and Orocobre Limited or any publicly disclosed offer of securities ofGeneral Mining Corporation Limited and Orocobre Limited or in any related derivatives.Canaccord Genuity or one or more of its affiliated companies intend to seek or expect to receive compensation for Corporate Finance/Investment Banking services from Galaxy Resources Limited, General Mining Corporation Limited and Orocobre Limited in the next sixmonths.The primary analyst, a member of primary analyst's household, or any individual directly involved in the preparation of this research, hasa long position in the shares or derivatives, or has any other financial interest in Orocobre Limited, the value of which increases as thevalue of the underlying equity increases.

An analyst has visited the material operations of Galaxy Resources Limited, General Mining Corporation Limited and Orocobre Limited.No payment was received for the related travel costs.Canaccord Genuity (Australia) Limited was the Lead Manager and Bookrunner to the Placement to raise A$32.3m in June'15

Jan 2013 Apr 2013 Jul 2013 Oct 2013 Jan 2014 Apr 2014 Jul 2014 Oct 2014 Jan 2015 Apr 2015 Jul 2015 Oct 2015

0.30

0.25

0.20

0.15

0.10

0.05

0.00

Galaxy Resources Limited Rating History as of 12/14/2015

Closing Price Target Price

Buy (B); Speculative Buy (SB); Sell (S); Hold (H); Suspended (SU); Under Review (UR); Restricted (RE); Not Rated (NR)


0.25

0.20

0.15

0.10

0.05

0.00

General Mining Corporation Limited Rating History as of 12/14/2015




16 December 2015 46


4.504.003.503.002.502.001.501.00

Orocobre Limited Rating History as of 12/14/2015



B:AUD2.5405/02/13

B:AUD2.7008/14/13

B:AUD3.4111/10/13

B:AUD3.2411/13/13

B:AUD3.3502/17/14

B:AUD3.4004/14/14

B:AUD3.6205/01/14

B:AUD3.7507/02/14

B:AUD3.7707/31/14

B:AUD3.9109/30/14

B:AUD4.2010/26/14

B:AUD4.2012/28/14

B:AUD3.7003/18/15

B:AUD3.5506/23/15

B:AUD3.4007/01/15

B:AUD3.1010/21/15

Online DisclosuresUp-to-date disclosures may be obtained at the following website (provided as a hyperlink if this report is being read electronically)http://disclosures.canaccordgenuity.com/EN/Pages/default.aspx; or by sending a request to Canaccord Genuity Corp. Research, Attn:Disclosures, P.O. Box 10337 Pacific Centre, 2200-609 Granville Street, Vancouver, BC, Canada V7Y 1H2; or by sending a requestby email to [email protected]. The reader may also obtain a copy of Canaccord Genuity’s policies and proceduresregarding the dissemination of research by following the steps outlined above.General Disclosures“Canaccord Genuity” is the business name used by certain wholly owned subsidiaries of Canaccord Genuity Group Inc., includingCanaccord Genuity Inc., Canaccord Genuity Limited, Canaccord Genuity Corp., and Canaccord Genuity (Australia) Limited, an affiliatedcompany that is 50%-owned by Canaccord Genuity Group Inc.The authoring analysts who are responsible for the preparation of this research are employed by Canaccord Genuity Corp. a Canadianbroker-dealer with principal offices located in Vancouver, Calgary, Toronto, Montreal, or Canaccord Genuity Inc., a US broker-dealerwith principal offices located in New York, Boston, San Francisco and Houston, or Canaccord Genuity Limited., a UK broker-dealer withprincipal offices located in London (UK) and Dublin (Ireland), or Canaccord Genuity (Australia) Limited, an Australian broker-dealer withprincipal offices located in Sydney and Melbourne.The authoring analysts who are responsible for the preparation of this research have received (or will receive) compensation based upon(among other factors) the Corporate Finance/Investment Banking revenues and general profits of Canaccord Genuity. However, suchauthoring analysts have not received, and will not receive, compensation that is directly based upon or linked to one or more specificCorporate Finance/Investment Banking activities, or to recommendations contained in the research.Canaccord Genuity and its affiliated companies may have a Corporate Finance/Investment Banking or other relationship with the issuerthat is the subject of this research and may trade in any of the designated investments mentioned herein either for their own accountor the accounts of their customers, in good faith or in the normal course of market making. Accordingly, Canaccord Genuity or theiraffiliated companies, principals or employees (other than the authoring analyst(s) who prepared this research) may at any time havea long or short position in any such designated investments, related designated investments or in options, futures or other derivativeinstruments based thereon.Some regulators require that a firm must establish, implement and make available a policy for managing conflicts of interest arising asa result of publication or distribution of research. This research has been prepared in accordance with Canaccord Genuity’s policy onmanaging conflicts of interest, and information barriers or firewalls have been used where appropriate. Canaccord Genuity’s policy isavailable upon request.The information contained in this research has been compiled by Canaccord Genuity from sources believed to be reliable, but (with theexception of the information about Canaccord Genuity) no representation or warranty, express or implied, is made by Canaccord Genuity,its affiliated companies or any other person as to its fairness, accuracy, completeness or correctness. Canaccord Genuity has notindependently verified the facts, assumptions, and estimates contained herein. All estimates, opinions and other information containedin this research constitute Canaccord Genuity’s judgement as of the date of this research, are subject to change without notice and areprovided in good faith but without legal responsibility or liability.Canaccord Genuity’s salespeople, traders, and other professionals may provide oral or written market commentary or trading strategiesto our clients and our proprietary trading desk that reflect opinions that are contrary to the opinions expressed in this research.


16 December 2015 47

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Canaccord Genuity’s affiliates, principal trading desk, and investing businesses may make investment decisions that are inconsistentwith the recommendations or views expressed in this research.This research is provided for information purposes only and does not constitute an offer or solicitation to buy or sell any designatedinvestments discussed herein in any jurisdiction where such offer or solicitation would be prohibited. As a result, the designatedinvestments discussed in this research may not be eligible for sale in some jurisdictions. This research is not, and under nocircumstances should be construed as, a solicitation to act as a securities broker or dealer in any jurisdiction by any person or companythat is not legally permitted to carry on the business of a securities broker or dealer in that jurisdiction. This material is prepared forgeneral circulation to clients and does not have regard to the investment objectives, financial situation or particular needs of anyparticular person. Investors should obtain advice based on their own individual circumstances before making an investment decision.To the fullest extent permitted by law, none of Canaccord Genuity, its affiliated companies or any other person accepts any liabilitywhatsoever for any direct or consequential loss arising from or relating to any use of the information contained in this research.For Canadian Residents:This research has been approved by Canaccord Genuity Corp., which accepts sole responsibility for this research and its disseminationin Canada. Canaccord Genuity Corp. is registered and regulated by the Investment Industry Regulatory Organization of Canada (IIROC)and is a Member of the Canadian Investor Protection Fund. Canadian clients wishing to effect transactions in any designated investmentdiscussed should do so through a qualified salesperson of Canaccord Genuity Corp. in their particular province or territory.For United States Residents:Canaccord Genuity Inc., a US registered broker-dealer, accepts responsibility for this research and its dissemination in the United States.This research is intended for distribution in the United States only to certain US institutional investors. US clients wishing to effecttransactions in any designated investment discussed should do so through a qualified salesperson of Canaccord Genuity Inc. Analystsemployed outside the US, as specifically indicated elsewhere in this report, are not registered as research analysts with FINRA. Theseanalysts may not be associated persons of Canaccord Genuity Inc. and therefore may not be subject to the NASD Rule 2711 and NYSERule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analystaccount.For United Kingdom and European Residents:This research is distributed in the United Kingdom and elsewhere Europe, as third party research by Canaccord Genuity Limited,which is authorized and regulated by the Financial Conduct Authority. This research is for distribution only to persons who are EligibleCounterparties or Professional Clients only and is exempt from the general restrictions in section 21 of the Financial Services andMarkets Act 2000 on the communication of invitations or inducements to engage in investment activity on the grounds that it is beingdistributed in the United Kingdom only to persons of a kind described in Article 19(5) (Investment Professionals) and 49(2) (High NetWorth companies, unincorporated associations etc) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005(as amended). It is not intended to be distributed or passed on, directly or indirectly, to any other class of persons. 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If you are in anydoubt, you should consult your financial adviser.CGWI is licensed and regulated by the Guernsey Financial Services Commission, the Jersey Financial Services Commission and the Isleof Man Financial Supervision Commission. CGWI is registered in Guernsey and is a wholly owned subsidiary of Canaccord Genuity GroupInc.For Australian Residents:This research is distributed in Australia by Canaccord Genuity (Australia) Limited ABN 19 075 071 466 holder of AFS Licence No234666. To the extent that this research contains any advice, this is limited to general advice only. Recipients should take into accounttheir own personal circumstances before making an investment decision. Clients wishing to effect any transactions in any financialproducts discussed in the research should do so through a qualified representative of Canaccord Genuity (Australia) Limited. CanaccordGenuity Wealth Management is a division of Canaccord Genuity (Australia) Limited.For Singapore Residents:This research is distributed pursuant to 32C of the Financial Advisers under an arrangement between each of the Canaccord Genuityentities that publish research and Canaccord Genuity Singapore Pte. Ltd who is an exempt financial adviser under section 23(1)(d) ofthe Financial Advisers Act. This research is only intended for persons who fall within the definition of accredited investor, expert investoror institutional investor as defined under section 4A of the Securities and Futures Act. It is not intended to be distributed or passed on,directly or indirectly, to any other class of persons. Recipients of this report can contact Canaccord Genuity Singapore Pte. Ltd. (ContactTel: +65 6854 6150) in respect of any matters arising from, or in connection with, the research.


16 December 2015 48

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