Metals & Mining - · PDF fileArgonaut Securities Research 1 Against the Grain Expectations...

A G A I N S T T H E G R A I N

Meta ls & Mining

J u n e 2 0 1 1

Argonaut Securities Research Against the Grain

Corporate Directory

Research: Ian Christie Director, Research Direct Line: +61 8 9224 6872 Email: [email protected] Troy Irvin Director, Research Direct Line: +61 8 9224 6871 Email: [email protected] Tim Serjeant Associate Director Direct Line: +61 8 9224 6806 Email: [email protected] Gianluca Paglia Analyst Direct Line: +61 8 9224 6824 Email: [email protected] Patrick Chang Analyst Direct Line: +61 8 9224 6835 Email: [email protected] Institutional Sales: Chris Wippl Head of Research & Sales Direct Line: +61 8 9224 6875 Email: [email protected] Paul Carter Executive Director Direct Line: +61 8 9224 6864 Email: [email protected]

John Santul Consultant, Sales & Research Direct Line: +61 8 9224 6859

Email: [email protected]

Damian Rooney Senior Institutional Dealer Direct Line: +61 8 9224 6862

Email: [email protected] Ben Willoughby Institutional Dealer Direct Line: +61 8 9224 6876 Email: [email protected] Bryan Johnson Institutional Dealer Direct Line: +61 8 9224 6834 Email: [email protected]

Corporate and Retail Sales: Kevin Johnson Executive Director Direct Line: +61 8 9224 6880 Email: [email protected] Glen Colgan Executive Director Direct Line: +61 8 9224 6874 Email: [email protected] James McGlew Director Direct Line: +61 8 9224 6866 Email: [email protected] Simon Lyons Director, Retail Stockbroking Direct Line: +61 8 9224 6881 Email: [email protected] Geoff Barnesby-Johnson Senior Dealer Direct Line +61 8 9224 6854 Email [email protected] Andrew Venn Senior Dealer Direct Line: +61 8 9224 6865 Email: [email protected] Melaney Brans Dealer Direct Line: +61 8 9224 6873 Email: [email protected] Cameron Fraser Dealer Direct Line: +61 8 9224 6851 Email: [email protected] Corporate Contacts: Charles Fear Executive Chairman Direct Line: +61 8 9224 6800 Email: [email protected] Edward G. Rigg CEO & Managing Director Direct Line: +61 8 9224 6804 Email: [email protected] Registered Office:

Level 30 Allendale Square 77 St Georges Terrace Perth WA 6000

Telephone: +61 8 9224 6888 Facsimile: +61 8 9224 6899 Website: www.argonautlimited.com


Contents

OVERVIEW

Introduction .................................................................................................. 1

Summary of Recommendations ....................................................................... 2

Earnings Summary ......................................................................................... 4

Metrics Summary ........................................................................................... 5

Commodity Price Assumptions ....................................................................... .6

STOCKS

Alacer Gold .................................................................................................. .7

BC Iron ....................................................................................................... 11

Independence Group .................................................................................... 15

Troy Resources ............................................................................................ 19

Venturex Resources ..................................................................................... 23

WPG Resources ........................................................................................... 27

GENERAL DISCLOSURE AND DISCLAIMER


NOTES:

Argonaut Securities Research 1 Against the Grain

Expectations tempered by perceived growth impediments

Although risk appetite has waned, corporates are willing to ‘build’ as well as ‘buy’ Argonaut too remains optimistic A soft USD and inflationary pressures bode well for gold Iron ore and most base metals are supported by tight supply USD well entrenched in its fundamental malaise Chinese inflation continues to pose the biggest risk to commodities Best picks offer robust cashflow underpinning tangible growth

13 June 2011

Reality bites Reality has bitten in the first half of 2011 with commodity prices sold off sharply in mid-April 2011. Expectations have been tempered by perceived impediments to global growth (Chinese tightening, rising oil prices, anaemic US economic data, cessation of QE2) and sovereign risk issues in Europe (debt) and North/West Africa (civil conflicts).

Closer to home, softer economic data coupled with the spectre of the Mineral Resource Rent Tax (MRRT) and Carbon Tax has contributed to short term lethargy.

Although risk appetite has waned, takeover activity in the resource space continues apace. Strong balance sheets, robust cash generation and fully-priced scrip saw M&A kick off in the December Q 2010. There is also a willingness to ‘build’ as well as ‘buy.’ Increasing comfort in the outlook for resources has seen companies willing to push the button on large capex and exploration programs, ignoring short term ‘noise’ in the marketplace. According to the ABS, mining sector capex in FY11 is $55b (53% higher than FY10).

Argonaut too remains optimistic on the commodity outlook over the medium term. Supply-side constraints across a number of metals markets will provide continued support, but our price forecasts by-and-large remain below consensus in the short term.

Our gold price outlook has been increased by an average of 13% over the next three years to US$1,350/oz, and the long term by 11% to US$1,000/oz. A soft USD and inflationary pressure in emerging economies bodes well for gold. Recent site visits confirm industry wide cost pressures / margin squeeze, adding further support to prices.

Our long term copper price has been increased by 11% to US$2.50 due to ongoing tightening on the supply side.

In the iron ore sector, persistent delays to slated expansion plans by the ‘majors’ and the ongoing rise in the capital intensity of new production were previously accounted for by significant upgrades to our forecasts in January.

With the USD well entrenched in its fundamental malaise we have increased our AUD/USD assumptions by 5% over the next three years to parity. The biggest risk to the AUD is a sharp change in risk appetite causing investors to seek safety in the USD’s deep liquidity.

Chinese inflation continues to pose the biggest risk to commodity prices. China has continued to increase borrowing costs and raise bank reserve ratio requirements to mop up excess liquidity and tame inflation, which rose 5.3% in April, surpassing the Government’s full-year target of 4% for a fourth month. Short-term commodities demand is also at risk from weakness in developed countries, and speculative distortions (ETFs).

Argonaut remains attracted to businesses with robust earnings and cashflow, underpinning tangible growth aspirations. In the metals and mining space, six of the best are:

Alacer Gold (AQG), Price Target $14.50

BC Iron (BCI), Valuation $3.70

Independence Group (IGO), Valuation $8.00

Troy Resources (TRY), Price Target $4.20

Venturex Resources (VXR), Valuation $0.26

WPG Resources (WPG), Valuation $1.40

Metals & Mining

Research

Analysts: Troy Irvin Tim Serjeant


Summary of Recommendations

Table 1: Stock Recommendations (Key picks highlighted - as at 13 June)

Market Share Price

Cap. Price Target

Base

Construction of the 3Mtpa Boseto Cu mine is underway and on track for commissioning in June H 2012An updated Zeta underground Resource is anticipated in Jun Q 2011, with the DFS in Sep Q 2011Fully funded with US$180m debt, execution risk has materialisedAcquisition of JML combines two high-margin metals businessesResults in arguably the premier development / exploration portfolio in the ASX mid-cap mining spaceGrowth credentials underpinned by a sophisticated $40m exploration effort Output (FY11 Zn 42kt and Cu 23kt) planned to jump to 70kt Zn in FY14 and 30kt Cu in FY15Operational and strategic review underway with new MD Geoff Day (ex Newcrest)Seveal moving parts with multiple mills fed by small (but high grade) mines with significant road haulage Tracking towards lowest production level since FY05 (YTD 31 Mar: 6.9kt Ni in conc, cash costs $7.66/lb) Ongoing nickel exploration results point to a brighter future, recent success at South Miitel and MarinersAnnounced a $30m high risk / high reward exploration and development JV deal with Niuminco Ltd in PNG 2010 was a commissioning / ramp-up year with production of 10.4kt Production data is moving in the right direction, specifically recoveries and plant throughputKeep an eye on grade over the next 12 months (2010 mined 0.55% v milled 0.51% v Reserve 0.60%)Beginning to leverage bal sheet - acq Carrapateena for US$250m and returned surplus cash to s'holdersNear-mine exploration provides biggest leverage for shareholders - >135,000m, >$70m budget in 2011Insulated from potential softening in metal prices given high margins and strong net cash positionRelatively low risk leverage to the nickel price with two geographically diverse production centresExecuted an agreement with AXM to purchase the Gidgee Gold Project for $15.5m Trading below valuation but difficult to identify price catalystsIntegration with GlobeStar provides diversification into copper and gold, and potentially lithium and nickelCerro de Maimon outperforming expectations of 9.5ktpa Cu, 15kozpa Au and 350kozpa Ag at US80c/lb CuContinued improvement at Broken Hill with Mar Q C1 cash costs US30c/lb Zn (40% below guidance)Emerging low cost Cu-Zn producer following Panorama acquistion for $26.2m from Toho ZincCentralised 1Mtpa hub at Whim Creek to deliver 27ktpa Cu Eq production over 9 years, starting 2013Will attract greater attention following an exodus of established copper names from the small cap spaceForecast to deliver the most nickel in FY11 at the highest grades and lowest costs in the peer groupReserve position apporaching 25ktpa for 10 years (15ktpa from Flying Fox / 10ktpa from Spotted Quoll)Preferred pure nickel exposureMaiden Nymagee Cu Resource imminent (historical prod 422kt @ 5.8% Cu), open at depth, N and SPrize is another CSA mine (~40ktpa, highest grade Cu in Aust, 5% at 1800mbs, strong vertical continuity) Rare to see such aggressive Cu exploration in Australia (3 rigs)

Precious

Forecast production of 600kozpa in 2013 rising to 800koz in 2015 years from 4 operationsShort term execution risk at Copler pales into insignificance compared to long term organic upsideShould attract a re-rating with few alternative golds in the widening gulf between NCM and sub $1.5b clubSet to become a West African gold producer in early 2013 at the Wa project in north west GhanaPotential metrics include US$125m capex , US$575/oz costs, 2.2g/t grade, >90% recovery, 80-100koz pa1.1Moz Resource expected to grow with a $15m / 5 rig / 250,000m drill budget (almost 80% extensional)In discussions with St Barbara (SBM) regarding a ~$350m merger proposal - stock is 'in play'Protracted ramp up at Edna May and market's lack of confidence has created the opportunity for SBMUnlikely other suitors could justify paying more and derive the synergies that SBM maybe able toEritrean gold developer (760koz @ 5.1g/t, US$122m capex, >100kozpa, US$338/oz costs, 10:1 strip)Next key step is completion of 30% sales agreement with ENAMCO (Eritrean Government)Koka-Konate corridor looms as a potential gold camp within trucking distance of the plantBanfora Inferred Resource 2.0Moz grading 2.1g/t, potential for >2.5Moz late 2011 Scoping Study commenced, results mid July, potential 180-200kozpa at cash costs of $650/ozWest African growth strategy expanded into Mauritania, added 2 Mining Engineers to BoardCommissioned the Randalls gold project, 90koz pa production from Phase 1, targeting growth to 140koz paMine life (~3 yrs on reserve) remains a key concern, exacerbated by 25% increase to plant throughputDemonstrating strong cash flow generation and resource to reserve conversion are key catalystsStruggling to rebound from a modest TBN Scoping Study (based on a premature Resource) True value driver remains exploration, 14000m summer drill program underway (Resource extensions)Potential prize is multi-Moz PGMs free from the issues plaguing South Africa's Bushveld ComplexDisappointing Resource upgrade to 827koz @ 1.8g/t (was 652koz @ 3.2g/t), market expecting >1MozDoesn't include Fekola with drill defined mineralisation >150m wide, open along strike and at depthRecent board changes positive, discounted share placement raised $4.7m (10.5m shares @ 45cps)

YTC Resources YTC 143

SPEC BUY

$9.05

$0.81

SPEC BUY

BUY

$0.58 $0.73

$14.50

SPEC BUY

PEM 337

98

1,059

OZ Minerals OZL 4,333 $13.38

AZM 151 $0.54

Western Areas

AQG

$0.58 HOLD

$2.39 BUY

HOLD

HOLD

$1.21

$1.97

$14.36

BUY

Kagara KZL 418

$1.76Panoramic PAN 363

$1.89

MCR

$1.85

$0.75$0.32

$0.26

SPEC BUY

SPEC BUY

$7.89

$0.42

PIRPapillon

Integra

Magma Metals

Perilya

Chalice Gold Mines

Catalpa

Gryphon Minerals

Alacer Gold

Venturex VXR

353IGR

GRY 471

Azumah

80

120

$5.58

MBN

$0.89178

$1.25Discovery Metals DML

Independence Group IGO 1,113 $8.00

Company Code

$1.41544

$5.89

$0.64

$0.59

$0.60

$0.09

$1.73

$1.57

$0.24

BUY

BUY

HOLD$0.59

Rec Comments

HOLD

$0.70

n/a

HOLD

SPEC BUY

SELL

SPEC BUY

Mirabela

63

927

CAH

Mincor

WSA

CHN

MMW

308

$0.46

n/a

2,507


Summary of Recommendations

Table 1: Stock Recommendations (Key picks highlighted - as at 13 June)

Market Share Price

Cap. Price Target

Precious

Recurring industrial action continues to hamper the ramp-up at Smokey Hills PGM mineRooderand is a shallow opportunity that could leapfrog the development of KalplatsCurrently a high risk investment proposition, sole redeeming feature is rising PGM pricesAustralia’s highest grade gold mine at the Wattle Dam project, 25km south west of KambaldaResource / reserve estimation risk given atypical Goldfields deposit with large coarse free gold componentGold price leverage with Mount Magnet acquisition, robust balance sheet reducing downside riskRecent site visit confirms a potential +250koz pa Australian gold producer in the makingHard to fault - a proven management team and operating track record has garnered strong market supportGarden Well progressing (BFS and Reserve/Resource upgrades imminent) - elevated grades in first 2 yearsBuilding a strong operational track record - on track for FY11 production guidance of ~115kozFY12 brownfields exploration budget bolstered, Red October a potential 'game changer', pit access from OctKey to re-rating will be de-risking the production schedule and demonstrating tangible grade upsidePeople and high grades underpin the aggressive growth target of 300kozpa by FY14 Delivered a 17% increase in Resources to 3.0Mz @ 4.4g/t (was 2.5Moz @ 4.4g/t), further growth to 5MozCatalysts include open pit evaluations, further parallel structures at Daisy Milano and the Murchison studyFY11 group production guidance lowered to 255–270koz (was 250-270koz) Significant prize at Gwalia Deeps (1.8Moz @ 9g/t, >9 year life) must be weighed up v high operational riskApproached Catalpa (CAH) with a merger proposal via a Scheme of ArrangementCasposo drawing close to nameplate production, design throughput of 1,100tpd expected late June High Casposo grades (Year 1: 9g/t Au, 118g/t Ag) make TRY highest margin gold stock under coverageMine life extensions likely with exploration drilling underway

Bulks

331Mt open-pit, high quality coking coal resource, actively exploring (2011 10,000m), progressing studiesDemanding attention - SouthGobi Resources (19.9%) and Noble Group (8.6%) lurking on the registerPrize is a sizeable (~15Mtpa ROM), quality hard coking coal deposit in proximity to Asian export marketsRating at 6Mtpa, growth to ~15Mtpa through Utah Point de-risked by GIR acquisitionRising production profile, growing mine life and infrastructure access could appeal to corporates/end usersUnaligned and open register is unique amongst the bulk commodity players on ASXTerminated Scheme of Arrangement with Regent Pacific in AprilRamp up to 5Mtpa accelerated, targeting January 2012On the cusp of a significant step change - 6-fold increase in haulage rates over coming monthsDespite poor Mar Q, operationally in great shape, >$400m cash, platform to ~10Mtpa production in 2012Positive developments with major shareholder/customer re Board composition and offtakeStill a quality, lower risk exposure in the junior iron ore spaceKey project (Jack Hills) and infrastructure (Oakajee port & rail project) studies are imminentDoor open for third party investment in OPR - Ansteel, Sinosteel and Posco are major players in the regionFears of cost escalation and further delay to residual payment timing are key risksOn the improve - quality 'specs' increased to 66-68% Fe, 4-6% Si for remainder of 2011Key remains delivery of higher throughput - targeting 2.2Mt rate by Jun, 2.8Mtpa (namplate) by Apr 2012Light at the end of the tunnel, now time to deliverEmerging South Australian iron ore producer - funded to first production (targeting May 2012)Key short term catalysts - MARP and DA approval trigger start up for project and port site worksHas the winning formula - quality product, low capital intensity, infrastructure access, value

Uranium

Attractive features include location, low strip ratio and potential 5-7Mlb pa over >16 year mine life"Project improvement review" identified a potential US$4/lb operating cost reduction (to US$38/lb)Etango's large scale and modest grade make BMN one of the most highly leveraged uranium exposuresCGNPC proposal to acquire ~43% EXT shareholder Kalahari Minerals Plc withdrawnPremier undeveloped uranium asset globally not controlled by a major mining house or strategic/end userA question of ‘when’ and not ‘if' despite uncertainty regarding short term outlook for uraniumTracking towards lower end of FY11 guidance of 6.0-6.3Mlb (lowered from 7.0Mlb in the Dec Q) Significant debt (US$162m in bank loans, and two con bonds with a combined face value of US$625m)Argonaut’s price target now reflects strict NAV

$0.59

$1.23

$1.65

$3.67

$1.82

$3.59

264

$0.65Aspire Mining

PLA

Troy

2,957

290

295

512

323

AKM

MMX

Atlas Iron AGO

MGX

Murchison

Mount Gibson

BC Iron

TRY

Platinum Australia

RMSRamelius

Saracen

Silver Lake

SBM

RRL

SLR

SAR

1,873

$2.80BCI

$1.73

St Barbara

Regis

357

593

135

983

Company Code

$0.35

Extract EXT

BMN

PDNPaladin 2,108

1,922

WPG Resources

Bannerman

Northern Iron NFE

WPG

$0.30

BUY

$1.30

$4.20

SPEC BUY

BUY$4.20

Rec Comments

$1.66

$2.54$2.28

BUY

BUY

$0.92

HOLD

$2.64

BUY

HOLD

BUY

SPEC BUY

$2.20 BUY

$1.40 BUY

$1.25

$0.55

$2.10

BUY

HOLD

$3.70

BUY

$0.87

602 $1.79

$2.83

379

$0.51

187

70

$0.76

$2.71

$7.66 $9.00

HOLD$3.61

SPEC BUY


Earnings Summary Table 2: Earnings (as at 13 June)

Year Market Net Enterprise Share Price P /

End Cap. Debt Value Price Target 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E Val (x)

BaseDiscovery Metals DML 30-Jun 544 -137 407 $1.25 $1.41 $1.41 HOLD 0 51 239 -6 23 135 -10 5 77 -57 -115 114 0.9Independence Group IGO 30-Jun 1,113 -272 841 $5.58 $8.60 $8.00 BUY 239 264 343 132 148 189 71 82 109 -8 -117 -80 0.6Kagara KZL 30-Jun 418 11 430 $0.59 $0.58 $0.58 HOLD 249 357 352 68 116 56 23 57 15 14 77 30 1.0Mincor MCR 30-Jun 178 -96 81 $0.89 $1.21 $1.21 BUY 149 197 183 32 63 47 2 24 13 -26 31 11 0.7Mirabela MBN 30-Jun 927 218 1,145 $1.89 $1.97 $1.97 HOLD 269 387 422 73 136 159 -13 32 47 29 86 -227 1.0OZ Minerals OZL 31-Dec 4,333 -1,047 3,286 $13.38 $13.05 $14.36 HOLD 1,096 1,070 918 697 655 520 406 376 302 142 503 412 1.0Panoramic PAN 30-Jun 363 -93 270 $1.76 $2.39 $2.39 BUY 286 283 266 107 107 107 44 42 52 50 69 52 0.7Perilya PEM 31-Dec 337 -148 189 $0.64 $0.59 $0.59 HOLD 199 198 191 16 16 17 -13 -12 -5 0 0 0 1.1Western Areas WSA 30-Jun 1,059 141 1,200 $5.89 $7.89 $7.89 BUY 448 351 334 256 191 170 116 72 67 115 25 113 0.7

PreciousAlacer Gold AQG 31-Dec 2,507 96 2,603 $9.05 $7.25 $14.50 BUY 547 661 702 258 393 428 120 216 261 158 226 53 1.2Catalpa CAH 30-Jun 308 11 319 $1.73 $2.14 $1.85 HOLD 140 177 220 41 70 99 8 27 44 -12 27 65 0.8Integra IGR 30-Jun 353 -4 349 $0.42 $0.42 $0.46 SELL 40 123 136 19 57 59 14 33 35 -48 10 28 1.0Platinum Australia PLA 30-Jun 135 -13 122 $0.35 $0.64 $0.51 HOLD 45 90 206 -6 32 98 -19 7 53 -40 -23 81 0.5Ramelius RMS 30-Jun 357 -87 271 $1.23 $1.28 $1.66 BUY 146 167 243 99 80 110 53 47 65 58 42 96 1.0Regis RRL 30-Jun 983 2 985 $2.28 $1.95 $2.54 HOLD 96 151 344 46 77 180 27 47 112 -5 -33 170 1.2Saracen SAR 30-Jun 290 -32 259 $0.59 $0.83 $0.92 BUY 157 163 166 54 64 66 37 44 45 -1 35 41 0.7Silver Lake SLR 30-Jun 295 -28 268 $1.65 $2.36 $2.83 BUY 107 182 326 39 65 129 21 36 74 30 21 101 0.7St Barbara SBM 30-Jun 593 -84 509 $1.82 $2.40 $2.64 BUY 348 406 321 110 168 130 57 116 60 38 133 89 0.8Troy TRY 30-Jun 323 25 348 $3.67 $3.82 $4.20 BUY 95 178 162 31 109 95 9 57 58 2 66 69 1.0

BulksAtlas Iron AGO 30-Jun 2,957 -293 2,664 $3.59 $4.20 $4.20 BUY 549 721 903 232 428 659 135 282 439 160 119 66 0.9BC Iron BCI 30-Jun 264 0 264 $2.80 $3.70 $3.70 BUY 33 217 265 13 120 159 8 82 87 -29 73 103 0.8Mount Gibson MGX 30-Jun 1,873 -436 1,436 $1.73 $2.10 $2.10 BUY 804 1,159 1,283 478 658 991 287 385 477 208 426 535 0.8Murchison MMX 30-Jun 379 -31 348 $0.87 $3.56 $1.25 HOLD 0.2Northern Iron NFE 31-Dec 602 88 689 $1.79 $2.20 $2.20 BUY 260 354 369 123 240 253 68 150 159 44 145 138 0.8WPG Resources WPG 30-Jun 187 -81 106 $0.76 $1.40 $1.40 BUY 0 0 338 -9 -15 131 -9 -18 64 -28 -177 77 0.5

UraniumPaladin PDN 30-Jun 2,108 480 2,588 $2.71 $3.65 $3.61 HOLD 307 531 594 74 246 331 12 98 158 -116 163 136 0.7

Figures in A$m unless stated otherwise

Free CF NPATNPV

EBITDARevenueCode RecCompany


Metrics Summary Table 3: Metrics (as at 13 June)

Year Market Net Enterprise Share Price P /

End Cap. Debt Value Price Target 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E 2011E 2012E 2013E Val (x)

BaseDiscovery Metals DML 30-Jun 544 -137 407 $1.25 $1.41 $1.41 HOLD - 8.0 1.7 - 17.6 3.0 - 99.5 7.1 - - 4.8 0.9Independence Group IGO 30-Jun 1,113 -272 841 $5.58 $8.60 $8.00 BUY 3.5 3.2 2.5 6.4 5.7 4.5 15.8 13.6 10.2 - - - 0.6Kagara KZL 30-Jun 418 11 430 $0.59 $0.58 $0.58 HOLD 1.7 1.2 1.2 6.3 3.7 7.7 18.0 7.4 28.1 29.9 5.5 13.9 1.0Mincor MCR 30-Jun 178 -96 81 $0.89 $1.21 $1.21 BUY 0.5 0.4 0.4 2.6 1.3 1.7 94.0 7.3 13.4 - 5.7 16.1 0.7Mirabela MBN 30-Jun 927 218 1,145 $1.89 $1.97 $1.97 HOLD 4.3 3.0 2.7 15.8 8.4 7.2 - 28.7 19.7 32.0 10.8 - 1.0OZ Minerals OZL 31-Dec 4,333 -1,047 3,286 $13.38 $13.05 $14.36 HOLD 3.0 3.1 3.6 4.7 5.0 6.3 10.7 11.5 14.4 30.5 8.6 10.5 1.0Panoramic PAN 30-Jun 363 -93 270 $1.76 $2.39 $2.39 BUY 0.9 1.0 1.0 2.5 2.5 2.5 8.2 8.7 6.9 7.3 5.3 7.0 0.7Perilya PEM 31-Dec 337 -148 189 $0.64 $0.59 $0.59 HOLD 0.9 1.0 1.0 11.5 12.2 10.9 - - - - - - 1.1Western Areas WSA 30-Jun 1,059 141 1,200 $5.89 $7.89 $7.89 BUY 2.7 3.4 3.6 4.7 6.3 7.0 9.1 14.7 15.7 9.2 41.9 9.4 0.7

PreciousAlacer Gold AQG 31-Dec 2,507 96 2,603 $9.05 $7.25 $14.50 BUY 4.8 3.9 3.7 10.1 6.6 6.1 20.9 11.6 9.6 15.9 11.1 47.1 1.2Catalpa CAH 30-Jun 308 11 319 $1.73 $2.14 $1.85 HOLD 2.3 1.8 1.4 7.9 4.5 3.2 39.4 11.5 6.9 - 11.6 4.7 0.8Integra IGR 30-Jun 353 -4 349 $0.42 $0.42 $0.46 SELL 8.8 2.8 2.6 18.4 6.2 5.9 25.5 10.8 10.0 - 34.8 12.8 1.0Platinum Australia PLA 30-Jun 135 -13 122 $0.35 $0.64 $0.51 HOLD 2.7 1.4 0.6 - 3.9 1.2 - 18.7 2.6 - - 1.7 0.5Ramelius RMS 30-Jun 357 -87 271 $1.23 $1.28 $1.66 BUY 1.9 1.6 1.1 2.7 3.4 2.5 6.8 7.5 5.5 6.2 8.5 3.7 1.0Regis RRL 30-Jun 983 2 985 $2.28 $1.95 $2.54 HOLD 10.2 6.5 2.9 21.5 12.8 5.5 36.5 20.9 8.8 - - 5.8 1.2Saracen SAR 30-Jun 290 -32 259 $0.59 $0.83 $0.92 BUY 1.7 1.6 1.6 4.8 4.0 3.9 7.8 6.6 6.4 - 8.2 7.1 0.7Silver Lake SLR 30-Jun 295 -28 268 $1.65 $2.36 $2.83 BUY 2.5 1.5 0.8 6.9 4.1 2.1 14.3 8.3 4.0 9.7 14.3 2.9 0.7St Barbara SBM 30-Jun 593 -84 509 $1.82 $2.40 $2.64 BUY 1.5 1.3 1.6 4.6 3.0 3.9 10.5 5.1 9.9 15.7 4.5 6.7 0.8Troy TRY 30-Jun 323 25 348 $3.67 $3.82 $4.20 BUY 3.7 2.0 2.1 11.3 3.2 3.7 36.1 5.7 5.6 131.6 4.9 4.7 1.0

BulksAtlas Iron AGO 30-Jun 2,957 -293 2,664 $3.59 $4.20 $4.20 BUY 4.9 3.7 3.0 11.5 6.2 4.0 21.9 10.5 6.7 18.4 24.8 44.5 0.9BC Iron BCI 30-Jun 264 0 264 $2.80 $3.70 $3.70 BUY 8.1 1.2 1.0 20.8 2.2 1.7 32.0 3.2 3.0 - 3.6 2.6 0.8Mount Gibson MGX 30-Jun 1,873 -436 1,436 $1.73 $2.10 $2.10 BUY 1.8 1.2 1.1 3.0 2.2 1.4 6.5 4.9 3.9 9.0 4.4 3.5 0.8Murchison MMX 30-Jun 379 -31 348 $0.87 $3.56 $1.25 HOLD - - - - - - - - - - - - 0.2Northern Iron NFE 31-Dec 602 88 689 $1.79 $2.20 $2.20 BUY 2.6 1.9 1.9 5.6 2.9 2.7 8.9 4.0 3.8 13.7 4.2 4.4 0.8WPG Resources WPG 30-Jun 187 -81 106 $0.76 $1.40 $1.40 BUY - - 0.3 - - 0.8 - - 2.9 - - 2.4 0.5

UraniumPaladin PDN 30-Jun 2,108 480 2,588 $2.71 $3.65 $3.61 HOLD 8.4 4.9 4.4 35.1 10.5 7.8 173.9 21.5 13.4 - 12.9 15.5 0.7

Figures in A$m unless stated otherwise

P/FCF (x)P/EEV/Revenue (x) EV/EBITDA (x)Company RecCode NPV


Commodity Price Assumptions

Table 4: Price Assumptions (as at 13 June)

Commodity Unit FY12E FY13E FY14E LT

Base Metals

Copper US$/lb 4.00 3.75 3.50 2.50

Nickel US$/lb 10.00 9.50 9.50 8.00

Zinc US$/lb 1.10 1.20 1.20 0.85

Precious Metals

Gold US$/oz 1,350 1,350 1,350 1,000

Platinum US$/oz 1,700 1,700 1,700 1,500

Bulks

Iron Ore Fines US$/t 135 130 115 65

Iron Ore Lump US$/t 155 150 132 75

Other

Uranium US$/lb 70 70 70 70

FX

AUD/USD $ 1.00 1.00 1.00 0.80

Pricing Assumptions

Source: Argonaut, June Year End


13 June 2011

Turkey with all the trimmings

Site visit:

Argonaut recently visited Alacer Gold’s (ASX:AQG, TSX:ASR) South Kalgoorlie operations in Western Australia.

Group Reserves are 5.9Moz, group Resources are 14.5Moz and 2011 production guidance is 400koz @ US$681/oz. Importantly, early production from the Çöpler oxide mine in Turkey is outperforming expectations (2011 guidance 128koz) with commercial production declared effective 1 April 2011.

Impact: Positive

The stock’s recent underperformance should be arrested with excellent near term news flow including:

Çöpler - Extensional drill results, completion of crushing / agglomeration circuits

Higginsville - Extensional drill results (Trident), first open pit production (Vine), portal and decline rehabilitation (Chalice)

South Kalgoorlie - Super-pit study / mill expansion

Frog's Leg - Reserve upgrade

Short term negatives include recent soft results at South Kalgoorlie (waste cutbacks) and Trident (low grades, low loader availability), and a high AUD.

View: Positive

With execution risk at the oxide mine diminishing, and the sulphide project advancing (Feasibility Study underway for completion in H2 2012), Çöpler is well positioned to underpin group production growth to 800koz pa by 2015.

AQG is inexpensive on relative valuation metrics (EV/Resource, EV/Reserve and EV/production) compared to a peer group of North American listed gold companies with market capitalisations ranging from ~US$850m-$10b.

Australian listed peers are harder to find with corporate activity almost wiping out the local mid cap landscape. AQG is the second largest gold stock on the ASX after Newcrest (NCM) and should attract a local re-rating with few alternatives in the widening gulf between the ~$29b NCM and a cluster of <$1.5b 100-200koz pa producers.

Recommendation: Buy

BUY recommendation and $14.50 target price maintained (2.0x NAV). The target is supported by an implied valuation of $12.10 based on average North American EV/oz metrics.

Alacer Gold BUY

Research


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Current Price:Target Price:

Ticker: AQGSector: Materials

Shares on Issue (m):Market Cap ($m): 2,507.2Net Cash ($m): -96.1Enterprise Value ($m): 2,603.3

52 wk High/Low: $10.53 $7.6112m Av Daily Vol (m):

Key Metrics11F 12F 13F

P/E (x) 20.9 11.6 9.6EV/EBITDA (x) 10.0 6.6 6.1

Financials:

Revenue (US$m) 554.5 660.9 701.9EBIT (US$m) 187.7 322.3 386.2NPAT (US$m) 121.7 215.8 260.6

Net Assets (US$m) 428.9 655.4 708.6

Op CF (US$m) 214.8 306.4 318.7

Per Share Data:

EPS (cps) 41.4 74.5 90.0DPS (cps) 0.0 0.0 0.0Div Yield 0.0% 0.0% 0.0%CFPS (cps) 73.2 105.8 110.1In A$ unless otherwise stated

Share Price Graph (reproduced)

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Site visit confirms growth prospects… …with Çöpler underpinning an expansion to 800koz pa Strong near term price catalysts… …include completion of crushing / agglomeration circuits at Çöpler… ...and extensional drill results at Trident

End of the rainbow

Argonaut recently visited Alacer Gold’s (ASX:AQG, TSX:ASR) South Kalgoorlie operations in Western Australia.

Figure 1: Site visit – South Kalgoorlie HBJ pit

Source: Argonaut

2011 group production guidance is 400koz @ US$681/oz. Importantly, early production from the Çöpler oxide mine in Turkey is outperforming expectations (2011 guidance 128koz) with commercial production declared effective 1 April 2011. Çöpler appears well positioned to underpin slated production growth of 600koz in 2013 rising to 800koz in 2015.

The stock’s recent underperformance should be arrested with excellent near term news flow including:

Çöpler - Extensional drill results, completion of crushing / agglomeration circuits

Higginsville - Extensional drill results (Trident), first open pit production (Vine), portal and decline rehabilitation (Chalice)

South Kalgoorlie - Super-pit study / mill expansion

Frog's Leg - Reserve upgrade

Figure 2: Trident extensions

Source: AQG


Compared to North American peers…

…AQG is inexpensive on EV/oz metrics

Australian listed peers are harder to find…

…with corporate activity almost wiping out the local mid cap landscape

With few local alternatives AQG should attract a re-rating

Inexpensive relative to North American mid-cap peers

Within a peer group of 14 North American listed gold companies (market caps of ~US$850m-$10b) AQG has the 7th largest Reserves, 7th largest Resources and 6th largest production rate.

Figure 3: North American gold peers – Market Capitalisation

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Despite offering excellent growth prospects, AQG is inexpensive on relative valuation metrics.

Table 1: Relative valuation metrics

Relative valuation AQG Peers Implied Val

Metric US$/oz US$/oz $ps

EV/Resource 170 223 12.00

EV/Reserve 418 587 12.47

EV/Production 6164 7545 11.82

Average 12.10 Source: Argonaut

An implied valuation of $12.10 can be derived from average EV/oz metrics.

Filling the Australian vacuum

Australian listed peers are harder to find with corporate activity almost wiping out the local mid cap landscape.

Figure 4: ASX-listed mid-tier golds all but eradicated

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AQG is the second largest gold stock on the ASX after Newcrest (NCM) and should attract a local re-rating with few alternatives in the widening gulf between the ~$29b NCM and a cluster of <$1.5b 100-200koz pa producers.


Alacer Gold Equities ResearchAnalyst: Troy Irvin

Recommendation BUY Sector MaterialsCurrent Price $9.05 Issued Capital (m) 277.0Target Price (2.0x NAV) $14.50 Market Cap (m)

4,622 Updated

Profit & Loss (US$m) 31 December 2011E 2012E 2013E Financial Summary 2011E 2012E 2013ESales Revenue 554.5 660.9 701.9 Reported EarningsOther Income 6.5 15.1 25.0 Net Profit (US$m) 121.7 215.8 260.6Operating Costs 280.2 263.2 282.6 EPS (A$cps) 41.4 74.5 90.0Exploration Written Off 7.5 7.7 3.9 PER (x) 20.9 11.6 9.6Corporate / Admin 12.0 12.3 12.5 Normalised EarningsEBITDA 261.3 392.9 427.9 Net Profit (US$m) 121.7 215.8 260.6Depn & Amort 73.5 70.6 41.6 EPS (A$cps) # 41.4 74.5 90.0EBIT 187.7 322.3 386.2 EPS Growth (%) 129.8 79.9 20.7Finance Costs 13.9 13.9 13.9 PER (x) 20.9 11.6 9.6Fair Value Loss on Derivatives 0.0 0.0 0.0 CashflowOperating Profit 173.8 308.3 372.3 Operating Cashflow (US$m) 214.8 306.4 318.7Tax expense 52.1 92.5 111.7 GCFPS (A$cps) 73.2 105.8 110.1Minorities 0.0 0.0 0.0 PCF (x) 12.4 8.6 8.2NPAT 121.7 215.8 260.6 DividendNormalised NPAT 121.7 215.8 260.6 Dividend (A$cps) 0.0 0.0 0.0

Yield (%) 0.0 0.0 0.0Franking % 100 100 100

Cash Flow (US$m) 2011E 2012E 2013EOperating Cashflow 214.8 306.4 318.7- Capex 62.2 49.3 249.9- Exploration & Evaluation 30.1 30.7 15.6- Asset purchases (+ asset sales) -37.6 0.0 0.0Free Cashflow 160.1 226.4 53.2 Financial Ratios 2011E 2012E 2013E- Dividends 0.0 0.0 0.0 Balance Sheet Ratios+ Equity raised 0.0 0.0 0.0 Total Debt / Equity (%) 46 30 28+ Debt drawdown (- repaid) -20.0 0.0 0.0 Interest Cover (x) 13.5 23.1 27.7- Other 0.0 0.0 0.0 Acid test ratio (x) 1.8 2.7 2.8Net Change in Cash 140.1 226.4 53.2Cash at End Period 1.6 182.5 409.0 462.2 Profitability Ratios

Net Profit Margin (%) 21.9 32.7 37.1Return on Assets (%) 37.1 60.9 51.0

Balance Sheet (US$m) 2011E 2012E 2013E Return on Equity (%) 28.4 32.9 36.8Total Assets 689.0 938.4 1219.5Total Debt 198.6 198.6 198.6Total Liabilities 260.1 283.0 510.9Shareholders Funds 428.9 655.4 708.6

Valuation Summary US$m A$/shHigginsville 390 1.41

Production Summary 2011E 2012E 2013E 2014E Frog's Leg 130 0.47Higginsville (koz) 170 190 190 193 South Kalgoorlie 165 0.60Frog's Leg (koz) 60 60 60 60 Çöpler - Oxide 575 2.08South Kalgoorlie (koz) 40 80 110 110 Çöpler - Sulphide 188 0.68Çöpler - Oxide (koz) 140 160 160 160 Other Resources 398 1.44Çöpler - Sulphide (koz) 0 0 0 91 Exploration 250 0.90Total 410 490 520 614 Forwards 0 0.00

Corporate -43 -0.16Gold Cash Cost (US$/oz) 650 522 529 514 Listed Investments 7 0.03Gold Price Realised (US$/oz) 1352 1350 1350 1346 Unpaid Capital 8 0.03

702 828 821 Tax Losses 29 0.11Exchange Rate (USD:AUD) 1.01 1.00 1.00 Cash at 31 March 108 0.39

Debt -199 -0.72

Attributable Reserves & Resources (Gold only)Reserves Mt g/t Moz Total @ 9% discount rate 2008 7.25Higginsville 6.0 4.2 0.8Frog's Leg 2.5 5.0 0.4South Kalgoorlie 2.0 1.6 0.1 Substantial Shareholders %Çöpler - Leach 63.0 1.1 2.2 Pala Investments 19.7%Çöpler - POx 33.1 2.25 2.4 M&G Investment Management 9.7%

Total 106.6 1.7 5.9Directors

Resources Mt g/t Moz Robert Reynolds Non-Executive ChairmanHigginsville 14.3 3.4 1.6 Ed Dowling President / Chief Executive OfficerFrog's Leg 2.3 6.3 0.5 Richard Graff Non-Executive DirectorSouth Kalgoorlie 68.7 2.0 4.5 Timothy Haddon Non-Executive DirectorÇöpler - Oxide 66.9 1.3 2.8 Jay Kellerman Non-Executive DirectorÇöpler - Sulphide 58.1 1.7 3.2 Rohan Williams Executive DirectorCevizlidere 445.0 0.1 1.6 Stephanie Unwin Non-Executive DirectorKarakartal 31.5 0.4 0.4 David Quinlivan Non-Executive Director

Jan Castro Non-Executive DirectorTotal 686.9 0.7 14.5

$2,507.213-June-2011

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13 June 2011

On the cusp

Regent Scheme terminated:

BC Iron (BCI) has fended off a $3.30 cash offer from 19.9% shareholder Regent Pacific Group (Regent).

In May, the Company terminated the Scheme Implementation Agreement (SIA) with Regent following the Independent Expert (KPMG) concluding the Scheme to be ‘not fair and not reasonable’ and therefore, is not in the best interest of BCI shareholders.

KPMG’s assessed valuation range for BCI (inclusive of a control premium) was $3.80 to $4.13.

Impact: Neutral

Now that the corporate actions have been put to bed, BCI can channel its energy towards executing the final stages of the Nullagine ramp up.

Current production guidance implies (100% basis):

1.7Mt from July – December 11 (i.e. 2.5Mt shipped by Dec 11)

4Mt in FY11

5Mt rate from March Q 2011 (this is ~6 months earlier than originally envisaged)

View: Positive

Operationally, BCI is on the cusp of a significant step change to production rates. The surface miners are performing above budget rates and teething issues with the crusher have been resolved. Transport (ore haulage) remains the only remaining bottleneck and is dependent on completion of the private haul road (imminent).

Ultimately, achieving the 5Mtpa target will require 1-2 additional surface miners, some modification to the crushing unit and transitioning to day and night shift, plus delivery of a further 5-6 trucks (the last expected in January 2012).

At the current spot fx rate, BCI’s current share price implies a life-of-mine (LOM) price received of US~$90/t – which is too cheap in our view.

Recommendation: Buy

BUY. Valuation $3.70

BC Iron BUY

Research

Analysts: Tim Serjeant Troy Irvin

Important Disclosures Argonaut acts as Corporate Adviser to BCI. Argonaut acted as Corporate Adviser to BCI in relation to the proposed Scheme of Arrangement with Regent Pacific Group and received fees commensurate with these services. Argonaut acted as Manager to the placement of 8.0m shares to raise $18.4m (November 2010).

Current Price:Valuation: $3.70

Ticker: BCISector: Materials

Shares on Issue (m):Market Cap (A$m): 264.3Net Cash (A$m): 0.1Enterprise Value (A$m): 264.1


Key Metrics10A 11F 12F

P/E (x) -190.7 32.0 3.2EV/EBITDA (x) -113.8 20.8 2.2

Financials:

Revenue ($m) 0.5 32.7 217.5EBITDA ($m) -2.3 12.7 120.4NPAT ($m) -1.4 8.2 82.4

Net Assets ($m) 39.0 67.7 144.6

Op CF ($m) -0.9 13.8 79.0

Per Share Data:

EPS (cps) -1.5 8.7 87.4DPS (cps) 0.0 0.0 0.0Div Yield 0.0 0.0 0.0CFPS (cps) -3.2 14.6 83.7

Share Price Graph

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BCI terminated the Scheme with Regent in May…

… after the Independent Expert opined the transaction to be ‘not fair and not reasonable’

Re-cap

Scheme of Arrangement with Regent terminated

Termination of SIA

The Board of BC Iron (BCI) has withdrawn its recommendation in respect to the proposed Scheme of Arrangement (Scheme) with Regent Pacific Group (Regent). Regent was proposing to acquire BCI for cash consideration of $3.30 per share.

The Independent Expert (KPMG) concluded that the Scheme to be ‘not fair and not reasonable’ and therefore, is not in the best interest of BCI shareholders. Subsequently, the BCI Board has withdrew its recommmendation and terminated the Scheme Implementation Agreement (SIA).

Blow by blow

It is worth re-capping on the course of events since the Regent deal was announced:

1. 21 Jan – Recommended $3.30 cash offer from Regent announced

2. 25 Jan – FIRB approval received

3. 31 Jan – First Nullagine JV ore on TPI rail

4. 13 Feb – “Article” published on website

5. 24 Feb – First ore shipped

6. 4 Mar – Settles arbitration with Tennant Metals Pty Ltd

7. 15 Mar – Regent Board withdraws recommendation and seek to terminate in the SIA

8. 16 Mar – Consolidated Minerals confirms no decision made in relation to Regent offer

9. 21 Mar – BCI applies to the Takeovers Panel

10. 6 Apr – Takeovers Panel declares ‘unacceptable circumstances’

11. 15 Apr – Regent re-instates financing, Scheme ‘back on foot’

12. 10 May – Consolidated Minerals increases shareholding to 22.1%

13. 11 May – BCI withdraws recommendation following Expert report, terminates SIA

Figure 1: Course of Events – BCI- Regent deal

Source: Argonaut unless stated otherwise

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Current production guidance Surface miners performing above design rate Achieving targets is largely dependent on transport logistics Absolute and relative value

Operational update

Production targets

During the course of the Scheme, the JV has made changes to the proposed production/shipping schedule.

After above-average rainfall and flooding in the Pilbara during February, the shipping target to 30 June 2011 was reduced by 20% to 0.8Mt (Note our forecast is below this at 0.5Mt).

Current guidance is (100% basis):

1.7Mt from July – December 11 (i.e. 2.5Mt shipped by Dec 11)

4Mt in FY11

~5Mtpa from March Q 2011 (this is ~6 months earlier than originally envisaged)

Mining and crushing

Argonaut attended the Mine Opening Ceremony on site in mid April. The two Wirtgen TL2400 surface miners were in operation, currently operating on a single shift basis. The surface miners are rating >650tph (above design), with lower than expected tooth wear.

‘Teething’ problems with crushing and screening circuit apear to have been resolved. Crushing and screening circuit is now fully commissioned and operating at ~6,500t per shift (12 hrs), which equates to ~2.4Mtpa.

Ultimately, achieving the 5Mtpa target will require 1-2 additional surface miners, some modifications to the crushing unit and transitioning from day only to day/night shift.

Ore haulage

Achieving these targets is largely dependent on transport logistics:

Completion of Haul Road

BCI is targeting completion of the private haul road (imminent), which will then be bitumised in July. This will facilitate a direct route (55km) from site to the Christmas Creek (CC) Ore Process Facility (OPF), running 360t Powertrans, as opposed to 75t trucks, 120km on public roads. This will ultimately result in ore haulage rates going from ~3kt/day currently to 12kt/day, a four-fold increase.

Delivery of 360t Powertrans trucks

2 Powertrans units (provided by haulage contractor Mitchells West) are on site. Each truck can do ~650ktpa (i.e to reach the 5Mtpa target will require 8 units). A further 3 units are scheduled to arrive by August 2011, and the last (8th) unit by January 2012.

Value

Across a number of metrics, BCI offers both absolute and relative value.

Table 1: Iron ore producers – peer comparison (FY13 estimates)

Peer comparison (based on FY13 estimates)

Stock Code EV* EV/Revenue EV/EBITDA PE $/t Prodn P/NPV

Atlas Iron AGO 2,618 2.9 4.0 6.6 335.6 0.84

Mount Gibson Iron MGX 1,447 1.1 1.5 3.9 147.6 0.83

Northern Iron^ NFE 706 1.9 2.8 3.9 245.3 0.84

BC Iron BCI 279 1.1 1.8 3.2 109.6 0.80

WPG Resources* WPG 292 0.9 2.2 3.1 88.5 0.57

* EV is adjusted to include capital i.e = EV + capex^31 Dec


BC Iron Equities ResearchAnalyst: Tim Serjeant

Recommendation BUY Sector MaterialsCurrent Price $2.80 Issued Capital (m) 94.4Valuation $3.70 Market Cap (m) $264.3All Ords (XAO) 4,622 Updated

Profit & Loss (A$m) 30 June 2010A 2011E 2012E 2013E Financial Summary 2010A 2011E 2012E 2013ERevenue 0.5 32.7 217.5 265.4 Reported EarningsOther Income 1.0 1.4 2.5 6.2 Net Profit ($m) -1.4 8.2 82.4 87.2Profit/(Loss) on Hedging 0.0 0.0 0.0 0.0 EPS (A$) -0.01 0.09 0.87 0.93Operating Costs 0.0 17.5 95.1 108.2 PER (x) -190.7 32.0 3.2 3.0Exploration Exp 0.0 1.0 1.5 1.5 Normalised EarningsCorporate/Admin/Other 3.8 2.9 2.9 3.0 Net Profit ($m) -1.4 8.2 82.4 87.2EBITDA -2.3 12.7 120.4 158.8 EPS (A$) -0.01 0.09 0.87 0.93Depn & Amort 0.1 0.9 2.6 3.4 EPS Growth (%) - - - 7.0EBIT -2.4 11.8 117.8 155.4 PER (x) -190.7 32.0 3.2 3.0MRRT 0.0 0.0 0.0 29.4 CashflowNet Interest Paid 0.0 0.0 0.0 0.0 Operating Cashflow ($m) -0.9 13.8 79.0 107.5Operating Profit -2.4 11.8 117.8 126.0 GCFPS ($) -0.03 0.15 0.84 1.14Tax expense -1.0 3.5 35.3 37.8 PCF (x) -88.6 19.2 3.3 2.5Minorities 0.0 0.0 0.0 1.0 DividendNPAT -1.4 8.2 82.4 87.2 Dividend ($) 0.00 0.00 0.00 0.00Normalised NPAT -1.4 8.2 82.4 87.2 Yield (%) 0% 0% 0% 0%

Franking % 0% 0% 0% 0%

Cash Flow (A$m) 2010A 2011E 2012E 2013EOperating Cashflow -0.9 13.8 79.0 107.5 Financial Ratios 2010A 2011E 2012E 2013E- Capex (+asset sales) -13.0 -24.3 -4.3 -3.0 Balance Sheet Ratios -Exploration Expenditure -0.5 -1.2 -1.5 -1.5 Total Debt/Equity (%) 36% 41% 16% 7% -Other 1.3 -17.3 0.0 0.0 Interest Coverage (x) - - - -Free Cashflow -13.0 -29.0 73.2 102.9 Profitability Ratios- Dividends 0.0 0.0 0.0 0.0 Net Profit Margin (%) -287% 25% 38% 33%+ Equity raised 12.6 0.0 0.0 0.0 Return on Assets (%) -57% -22% 10% -16%+ Debt drawdown (- repaid) 15.6 12.2 -5.0 -5.0 Return on Equity (%) -4% 12% 57% 35%Net Change in Cash 16.7 4.7 68.2 97.9Cash at End Period 28.7 33.4 101.6 199.5Net Cash (Debt) 14.7 5.6 78.8 181.8

Valuation Summary A$m $/shNullagine JV (BCI - 50%) 345 3.66

Balance Sheet (A$m) 2010A 2011E 2012E 2013E Bungaroo Creek 5 0.05Total Assets 54.8 96.3 168.4 270.4 Investments 0 0.00Total Debt 14.0 27.8 22.8 17.8 Unpaid Capital 13 0.14Total Liabilities 15.8 28.7 23.8 19.0 Corporate -14 -0.15Shareholders Funds 39.0 67.7 144.6 251.4 Cash (estimate) 25 0.26

Debt -25 -0.26

Production & Cash Costs 2010A 2011E 2012E 2013ESales Total @ 11% Discount Rate 349 3.70Nullagine (Mt) - BCI share - 0.25 1.75 2.20

Cash Costs - inc royalties (A$/t) - - 56.0 49.2

DirectorsName Position

Reserves & Resources Tony Kiernan ChairmanMike Young Managing DirectorGlenn Baldwin Non-Executive Director

Reserves Mt % Fe %CaFe %P Terry Ransted Non-Executive DirectorProven Steven Chadwick Non-Executive DirectorProbable 35.6 56.9 - 0.020Total 35.6 56.9 - 0.020

Resources Mt % Fe %CaFe %P Substantial Shareholders %Measured 2.2 54.5 62.1 0.018 Palmary 24%Indicated 68.8 54.0 61.8 0.017 Regent Pacific 19%Inferred 30.6 54.4 61.8 0.016Total 101.6 54.1 61.8 0.017

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13 June 2011

Top shelf

Site visit:

Argonaut recently visited Independence Group’s (IGO) two high grade / high margin base metals mines in Western Australia:

Long (Nickel) – Current cash costs US$4.00/lb, +5 year mine life

Jaguar / Bentley (Zinc and copper) – Current cash costs -US$0.50/lb Zn, +10 year mine life

First stoping ore from the Moran discovery (Long mine) is imminent. First development ore from Bentley was announced last week with first stope ore expected early 2012.

Impact: Positive

IGO offers multiple “top shelf” assets:

Moran (100%) – Kambalda’s best Ni ore body today –32.7kt @ 4.4% Reserve, up to 12m wide, relatively uninterrupted, grade upside, open to the north and south

Tropicana JV (30%) – Australia’s leading undeveloped gold project - 340kozpa at $590/oz from late 2013, demonstrable upside to the 10 year mine life in the immediate mine area

Jaguar belt (100%) - Australia’s leading VMS exploration opportunity – Underexplored with ~6Mt in 3 known deposits compared to average camp size of 9

Duketon JV (earning 70%) - Australia’s leading greenfields nickel opportunity - Best intercept of 3.3m @ 9.1% Ni, 1.1% Cu, 0.2% Co and 7.1g/t PGEs (true width)

Other projects (all 100% owned) include Stockman (high grade copper and zinc production from 2014), Karlawinda (220koz Inferred gold Resource), Birrindudu (potential to host tin, initial drilling planned) and the De Beers database (292,000 surface geochemical samples). A ~$40m p.a. group exploration budget is anticipated.

View: Positive

Within a peer group of 12 ASX listed base metals producers (market caps of $180m-$4.3b) the stock is the cheapest on a price / valuation basis.

IGO’s adjusted EV/EBITDA is 2.5x for FY12 / FY13 (after subtracting $503m for 30% of Tropicana). This multiple is third lowest in the peer group, despite IGO offering lower risk (multiple mines, diversified commodity exposure) and long and growing mine lives.

Recommendation: Buy

BUY IGO for exposure to the preeminent diversified Australian mid-cap mining company. $8.00 valuation.

Independence BUY

Research


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Current Price:Valuation:

Ticker: IGOSector: Materials

Shares on Issue (m):Market Cap ($m): 1,113.2Net Cash ($m): 235.0Enterprise Value ($m): 878.2



P/E (x) 38.7 21.0 14.8EV/EBITDA (x) 17.0 8.2 6.3

Financials:

Revenue ($m) 116.7 213.8 250.7EBIT ($m) 40.4 75.9 108.0NPAT ($m) 28.7 53.0 75.2

Net Assets ($m) 214.8 872.8 896.9

Op CF ($m) 58.9 91.0 121.4

Per Share Data:

EPS (cps) 25.0 25.2 35.8DPS (cps) 5.0 7.0 7.0Div Yield 0.9% 1.3% 1.3%CFPS (cps) 47.4 43.4 57.9

Share Price Graph

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Moran shapes as Kambalda’s best nickel ore body today…

…with Reserve growth likely

Tropicana slated to deliver 340kozpa at $590/oz…

…with demonstrable upside to the current 10 year mine life Exploration upside at Jaguar is significant… …given size and a track record of success despite modest budgets

Moran - Kambalda’s leading nickel ore body

With Mincor’s (MCR) Otter Juan mine struggling at a depth of >1,800m, Argonaut considers Moran the best Ni ore body in Kambalda today – 32.7kt Ni Reserve, up to 12m wide, relatively uninterrupted, grade upside (conservative Reserve 4.4%), open to the north and south.

With much of the development work completed (including ventilation), "payday" from first stoping at Moran is imminent. IGO is on track for FY11 production guidance 8,800-9,200t @ $4.40-4.60/lb (Argonaut 8,900t @ $4.21/lb). Moran will underpin at least the next 3 years output at the Long mine.

Additional ore defined north of Moran included new true width intercepts outside current Resources and Reserves of 5.0m @ 12.2% Ni, 3.0m @ 11.4% Ni and 3.0m @ 10.7% Ni.

Tropicana - Australia’s leading undeveloped gold project

The Tropicana JV (30% IGO / 70% AngloGold Ashanti) comprises ~16,000km² of prospective tenure covering a strike length of 396km. Based on a November 2010 BFS the approved 5.8Mtpa open pit mine features $725-775m capex, $710-730/oz cash costs, 2.0g/t head grade, 5.5:1 strip ratio, 90.4% recovery, and average 330-350koz pa output. Output for the first three years is slated to be 470–490kozpa at cash costs of $580-600/oz.

With Boston Shaker or Havana Deeps excluded from the BFS, there is demonstrable upside to the 3.8Moz Mining Inventory in the immediate mine area. A PFS is underway at the Havana Deeps underground, and an open pit Feasibility Study is expecetd for Boston Shaker in the Septemebr Q 2011. The JV also has more than 30 exploration targets within trucking distance of the planned plant.

Figure 1: Tropicana JV – Intercepts outside Reserves

Source: IGO

Jaguar - Australia’s leading VMS exploration opportunity

The exploration upside at the Jaguar VMS belt is significant given its size (consolidated >50km strike under one ownership) and track record of success despite modest budgets.

The Jaguar belt currently contains ~6Mt in three known deposits (Teutonic Bore, Jaguar and Bentley). Better explored Canadian belts yield an average camp size of 9, and usually include a small proportion of very large deposits (the majority of deposits are small, with ~80% of known deposits in the range 0.1-10 Mt). For example, the Noranda district is 40km long with 110Mt of polymetallic massive sulphides in 25 known deposits.

Site testing of IGO’s high powered TEM transmitter Mark III is planned.


Given the scarcity of high grade massive nickel… …ongoing drilling at Duketon deserves close attention IGO is the cheapest base metals stock on P/NAV…

…and third cheapest on an adjusted EV/EBITDA basis… …despite offering lower risk and long and growing mine lives

Duketon - Australia’s leading greenfields nickel opportunity

Given the global scarcity of high grade massive nickel sulphides the ongoing drill campaign at the Duketon JV with South Boulder Mines (STB) (IGO earning 70%) deserves close attention.

The high-grade Rosie Prospect, defined over 950m strike (open) and 600m down dip extent (open), has a best intercept of 3.3m @ 9.1% Ni, 1.1% Cu, 0.2% Co and 7.1g/t PGEs (true width). IGO plans to have sufficient drilling to estimate a Resource by the end of the June Q.

Figure 2: Duketon JV – Rosie longitudinal projection

Source: IGO

Cheap compared to base metals peers

Within a peer group of 12 ASX listed base metals producers (market caps of $180m-$4.3b) IGO is the cheapest on a price / valuation basis.

Figure 3: Base metal peers – P/NAV

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After stripping out Argonaut’s $503m valuation for 30% of Tropicana gold, IGO has an adjusted EV of $383m. IGO is the third cheapest on an EV/EBITDA basis despite offering lower risk (multiple mines, diversified commodity exposure) and long and growing mine lives.

Figure 4: Base metal peers – EV/EBITDA

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Including 30% of Tropicana gold production from FY14 puts IGO on a fully funded EV/EBITDA of 3.9x (at spot gold and fx, assuming IGO’s share of capex is $225m).


Independence Group Equities ResearchAnalyst: Troy Irvin

Recommendation BUY Sector MaterialsCurrent Price $5.58 Issued Capital (m) 199.5Valuation $8.00 Market Cap (m)All Ords (XAO) ?Field? Updated

Profit & Loss ($m) 30 June 2010A 2011E 2012E 2013E Financial Summary 2010A 2011E 2012E 2013ESales Revenue 116.7 213.8 250.7 294.2 Reported EarningsOther Income 0.0 10.7 11.8 4.6 Net Profit ($m) 28.7 53.0 75.2 94.1Operating Costs 51.6 99.0 101.4 112.9 EPS (cents) 23.1 25.2 35.8 44.8Exploration Exp / Written Off 7.3 10.2 12.2 12.4 PER (x) 38.7 21.0 14.8 11.8Corporate/Admin 6.0 8.0 10.1 10.3 Normalised EarningsEBITDA 51.8 107.3 138.8 163.1 Net Profit ($m) 28.7 53.0 75.2 94.1D & A 11.4 31.3 30.9 28.2 EPS (cents) 30.7 88.9 25.0 25.2 35.8 44.8EBIT 40.4 75.9 108.0 135.0 EPS Growth (%) 41.4 1.0 41.9 25.1Interest Paid 0.0 0.3 0.6 0.6 PER (x) 38.7 21.0 14.8 11.8Abnormals / Impairments 0.0 0.0 0.0 0.0 CashflowOperating Profit 40.4 75.7 107.4 134.4 Operating Cashflow ($m) 58.9 91.0 121.4 153.7Tax expense 11.7 22.7 32.2 40.3 GCFPS (cents) 47.4 43.4 57.9 73.2Minorities 0.0 0.0 0.0 0.0 PCF (x) 11.8 12.9 9.6 7.6NPAT 28.7 53.0 75.2 94.1 DividendNormalised NPAT 28.7 53.0 75.2 94.1 Dividend (cents) 5.0 7.0 7.0 7.0

Yield (%) 0.9 1.3 1.3 1.3Franking % 100% 100% 100% 100%

Cash Flow ($m) 2010A 2011E 2012E 2013E Financial Ratios 2010A 2011E 2012E 2013EOperating Cashflow 58.9 91.0 121.4 153.7 Balance Sheet Ratios- Capex 18.1 59.0 115.8 360.5 Total Debt / Equity (%) 0.0 0.8 0.7 0.7- Exploration & Evaluation 23.9 34.0 40.5 41.3 Interest Cover (x) 0 262 186 232- Asset purchases (+ asset sales) (5.0) 0.0 0.0 0.0 Acid test ratio (x) 5.1 3.6 6.5 0.4Free Cashflow 21.9 (2.0) (34.9) (248.2)- Dividends 5.7 13.5 16.0 16.0 Profitability Ratios+ Equity Raised 0.5 164.4 0.0 0.0 Net Profit Margin (%) 24.6 24.8 30.0 32.0+ Debt Drawdown (Repaid) 0.0 0.0 0.0 0.0 Return on Assets (%) 31.2 10.4 11.4 11.6- Other 0.0 0.0 0.0 0.0 Return on Equity (%) 13.4 6.1 8.4 10.3Net Change in Cash 16.7 148.9 (50.8) (264.1)Cash at End Period 144.0 292.9 242.0 (22.1)

Valuation Summary A$m A$/shBalance Sheet ($m) 2010A 2011E 2012E 2013E Long 239 1.20Total Assets 273.5 1023.5 1190.6 1136.6 Tropicana JV (7% Discount Rate) 503 2.52Total Debt 0.0 6.7 6.7 6.7 Jaguar / Bentley 223 1.12Total Liabilities 58.8 150.7 293.7 219.7 Stockman 95 0.48Shareholders Funds 214.8 872.8 896.9 916.9 Duketon JV 80 0.40

Teutonic Bore 23 0.11Forward Sales -3 -0.01

Production Summary 2010A 2011E 2012E 2013E Corporate -17 -0.08Nickel Production (kt) 8.6 8.9 9.0 9.0 Exploration 200 1.00

Unpaid Capital 4 0.02Nickel Cash Cost (US$/lb) 3.93 4.21 4.23 4.31 Investments 4 0.02Ni Price Realised (US$/lb) 8.54 10.05 10.01 9.62 Tax Losses 8 0.04

Cash Estimate 242 1.21Zinc Production (kt) 26.8 15.5 25.6 38.1 Debt -7 -0.03Copper Production (kt) 9.0 9.0 11.5 14.7Silver Production (Moz) 0.6 0.6 0.8 1.0 Total @ 11% discount rate 1595 8.00

Zinc Cash Cost (US$/lb) 0.05 -0.56 -0.59 -0.26Zn Price Realised (US$/lb) 0.93 0.99 1.06 1.20

DirectorsOscar Aamodt Non-Executive ChairmanChris Bonwick Managing Director

Reserves & Resources Gary Comb Executive Director - OperationsKelly Ross Executive Director

Nickel Mt % Ni Ni (kt) Rod Marston Non-Executive DirectorReserves 1.3 4.1 53.4 John Christie Non-Executive DirectorResources 1.7 5.4 91.5 Peter Bilbe Non-Executive Director

Copper / Zinc / Silver Mt % Cu % Zn g/t Ag Cu (kt)Reserves 3.2 1.8 7.9 100 576Resources 17.9 2.1 5.4 60 3759 Substantial Shareholders %

JF Capital Partners 10.2%Gold Mt g/t Au Au (Moz)Reserves 14.4 2.2 1.0Resources 28.9 1.9 1.7

$1,113.210-June-2011

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13 June 2011

Ready to rip

Update:

Troy Resources (TRY) is drawing close to nameplate production at the Casposo gold and silver mine in San Juan province, Argentina. April gold production was 4,414oz @ cash costs of US$232/oz (net of silver credits) (v March 2,465oz @ US$477/oz).

2 diamond drill rigs continue to deliver high grade intercepts at Casposo. A new hole in the Inca Vein (5.9m @ 15.8g/t Au and 2610g/t Ag from 308m) has added 100m strike to the Kamila SE Zone. Recent Julietta Main Zone South Vein drilling yielded 18.8m @ 4.7g/t Au and 32g/t Ag from 60m.

Last week TRY declared a 4c fully franked dividend.

Impact: Positive

Although the Casposo ramp-up has been slower than anticipated there is light at the end of the tunnel. Plant throughput continues to improve, averaging 360t per day (tpd) in March, 550tpd in April and 600tpd in May (peak 910t). A four-day plant shut is planned in June to modify identified bottlenecks, following which design throughput of 1,100tpd is expected.

The new Kamila SE Extension drill results are located outside the existing Reserve and could offset a scheduled drop in grade in years 3-4 of the mine plan. An additional rig will focus on infill drilling of the Inca Vein from late June, with the aim of bringing the strike extension into Resource status later this year.

View: Positive

It appears TRY has turned the corner at both South American operations with Casposo moving towards namplate and Andorinhas delivering sustained improvement e.g. 34.4koz production at cash costs of US$537/oz for the first 3 Q’s of FY11 already exceeds the FY10 result of 31.6koz at US$660/oz.

There are at least 18 South American low sulphidation epithermal style gold–silver deposits with endowments of >0.5Moz. The average size is ~2.0Moz. Despite being underexplored with multiple extensional and brownfields targets the market is awarding TRY minimal value for exploration upside at the 0.7Moz Casposo project.

Recommendation: Buy

Once Casposo achieves nameplate output, the unhedged TRY will emerge as the highest margin gold stock under Argonaut coverage. Argonaut’s FY12 group forecast is 132koz at cash costs of US$234/oz (net of silver credits).

BUY recommendation and $4.20 target price (1.1x NAV) maintained.

Troy Resources BUY

Research


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Current Price:Valuation:

Ticker: TRYSector: Materials

Shares on Issue (m): 88.0Market Cap ($m): 322.8Net Cash ($m): -24.9Enterprise Value ($m): 347.7



P/E (x) -47.3 36.1 5.7EV/EBITDA (x) 42.9 11.4 3.2

Financials:

Revenue ($m) 75.2 94.6 177.6EBIT ($m) -6.8 9.2 82.9NPAT ($m) -6.8 8.9 56.9

Net Assets ($m) 129.2 124.6 184.2

Op CF ($m) -7.8 25.6 97.2

Per Share Data:

EPS (cps) -7.4 9.7 61.5DPS (cps) 2.0 4.0 6.0Div Yield 0.5% 1.1% 1.6%CFPS (cps) -8.5 27.6 105.0

Share Price Graph

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$3.67$4.20


Drawing close to nameplate production at Casposo… …with design throughput of 1,100tpd expected in June

Casposo features elevated gold grades…

…coincident with low cost open pit mining in the early stages of the mine life

Silver is important…

…particularly in the outer years, with the Ag:Au ratio increasing with depth

Drawing close

Troy Resources (TRY) is drawing close to nameplate production at the Casposo mine in Argentina. April gold production was 4,414oz @ cash costs of US$232/oz (net of silver credits) (v March 2,465oz @ US$477/oz).

Plant throughput continues to improve, averaging 360tpd in March, 550tpd in April and 600tpd in May (peak 910t in a single day). A four-day plant shut is planned in June to modify identified bottlenecks, following which design throughput of 1,100tpd is expected.

High grade, low cost production profile

It is instructive to revisit the production profile presented in the June 2010 NI 43-101 Technical Report:

Table 1: Production profile

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6

Ore milled ktpa 300 400 400 400 400 133

Gold grade g/t Au 9.1 7.5 3.6 2.9 4.1 5.0

Silver grade g/t Ag 118 122 104 181 260 348

Gold recovery % 93.7 93.7 93.7 93.7 93.7 93.7

Silver recovery % 80.6 80.6 80.6 80.6 80.6 80.6

Gold production koz 82 90 44 35 50 20

Silver production koz 919 1,269 1,073 1,872 2,699 1,204

Source: TRY, Argonaut

Once Casposo hits its straps it features elevated gold grades coincident with low cost open pit mining in the early stages of the mine life e.g. 9.1g/t Au and 118g/t Ag in Year 1.

The open pit plan comprises the mining of two separate orebodies ~1km apart - Kamila (Aztec, Inca and B veins) and Mercado. The Kamila open-pit will consist of a large pit (Kamila Main pit) and a small satellite pit located 100 m to the SE (Kamila SE pit).

Figure 1: Casposo - 2010 Mining Reserve

Source: TRY

Underground mining (deeper Kamila) starts mid way through Year 4. An uphole retreat stoping method was selected as the primary mining method, with some areas of the mine being more conducive to cut and fill mining methods.

Silver is important, particularly in the outer years, with the Ag:Au ratio increasing with depth.


Once Casposo consistently hits nameplate…

…TRY will emerge as the highest margin gold stock under Argonaut coverage

The Company declared a 4c fully franked dividend

A new hole in the Inca Vein… …has added 100m strike to the Kamila SE Zone

Promising brownfields targets include Castaño Nuevo, Cerro Norte and Casposo Norte

Highest margin gold stock

Once Casposo achieves nameplate output TRY will emerge as the highest margin gold stock under Argonaut coverage.

Figure 2: ASX listed gold miners - Cash operating margins (US$/oz)

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Dividend declared

Argonaut’s modelling indicates the lowest cash position has passed (cash and bullion on hand at 31 March was $8.6m).

Last week TRY declared a 4c fully franked dividend.

Drilling success will add mine life

Underexplored South American low sulphidation epithermal style gold–silver deposits such as Casposo have a good track record of yielding additional ounces with further exploration effort. For example, a new hole in the Inca Vein (5.9m @ 15.8g/t Au and 2610g/t Ag from 308m) has added 100m strike to the Kamila SE Zone. An additional (third) rig will focus on infill drilling of the Inca Vein from late June, with the aim of bringing the strike extension into Resource status later this year.

Figure 3: Kamila SE Zone - Inca Vein Longitudinal Section

Source: TRY

Outside of “gaps” in the Kamila - Mercado long section and Julietta (5km from Kamila), promising brownfields targets include Castaño Nuevo, Cerro Norte, Casposo Norte etc.


Troy Resources Equities ResearchAnalyst: Troy Irvin

Recommendation BUY Sector MaterialsCurrent Price $3.67 Issued Capital (m) 88.0Target Price (1.1x NPV) $4.20 Market Cap (m) $322.8All Ords (XAO) 4,622 Updated

Profit & Loss ($m) 30 June 2010A 2011E 2012E 2013E Financial Summary 2010A 2011E 2012E 2013ESales Revenue 75.2 94.6 177.6 162.5 Reported EarningsOther Income 6.2 1.5 1.1 3.4 Net Profit ($m) (6.8) 8.9 56.9 58.1Operating Costs 58.1 51.5 54.4 55.4 EPS (cents) (7.4) 9.7 61.5 62.8Exploration Expense 7.0 6.0 7.1 7.2 PER (x) (47.3) 36.1 5.7 5.6Corporate/Admin 8.2 8.0 8.1 8.3 Normalised EarningsEBITDA 8.1 30.6 109.0 95.0 Net Profit ($m) (6.8) 8.9 56.9 58.1Depn & Amort 14.9 21.4 26.2 12.0 EPS (cents) (7.4) 9.7 61.5 62.8EBIT -6.8 9.2 82.9 82.9 EPS Growth (%) (198.1) (229.9) 536.7 2.2Interest Paid 0.0 2.5 1.6 -0.1 PER (x) (47.3) 36.1 5.7 5.6Sale of interest in Volta 0.0 4.2 0.0 0.0 CashflowOperating Profit -6.9 11.0 81.3 83.1 Operating Cashflow ($m) (7.8) 25.6 97.2 82.2Tax expense -0.1 2.0 24.4 24.9 GCFPS (cents) (8.5) 27.6 105.0 88.8Minorities 0.1 0.0 0.0 0.0 PCF (x) (43.3) 13.3 3.5 4.1NPAT -6.8 8.9 56.9 58.1 DividendNormalised NPAT -6.8 8.9 56.9 58.1 Dividend (cents) 2.0 4.0 6.0 6.0

Yield (%) 0.5 1.1 1.6 1.6Franking % 100 100 100 100

Cash Flow ($m) 2010A 2011E 2012E 2013EOperating Cashflow -7.8 25.6 97.2 82.2- Capex 37.7 19.6 24.3 6.2- Exploration & Evaluation 7.0 6.0 7.1 7.2- Asset purchases (+ asset sales) -6.1 -2.5 0.0 0.0 Financial Ratios 2010A 2011E 2012E 2013EFree Cashflow -46.4 2.5 65.7 68.8 Balance Sheet Ratios- Dividends 3.0 1.7 6.2 5.3 Total Debt / Equity (%) 1.0 24.1 5.4 -2.0+ Equity raised 26.0 0.0 0.0 0.0 Interest Cover (x) -231.1 3.7 52.4 -734.1+ Debt drawdown (- repaid) 2.1 0.0 -20.0 -15.0 Acid test ratio (x) 1.8 1.0 1.6 2.7- Other 0.0 0.0 1.0 2.0Net Change in Cash -21.2 0.7 38.6 46.5 Profitability RatiosCash at End Period 16.4 17.1 55.7 102.2 Net Profit Margin (%) -9.1 9.4 32.0 35.8

Return on Assets (%) -5.1 6.5 44.9 43.8Return on Equity (%) -5.3 7.2 0.0 0.0

Balance Sheet ($m) 2010A 2011E 2012E 2013ETotal Assets 150.8 159.2 240.1 291.8Total Debt 1.3 30.0 10.0 -5.0Total Liabilities 21.6 34.6 56.0 44.1Shareholders Funds 129.2 124.6 184.2 247.7 Valuation Summary A$m A$/sh

Casposo 215 2.45Andorinhas 53 0.61Iron Ore 10 0.11

Production Summary (Gold only) 2010A 2011E 2012E 2013E Sandstone 10 0.11Casposo (koz) 0 20 90 80 Exploration 80 0.91Andorinhas (koz) 32 45 41 41 2011E Investments 1 0.01Sandstone (koz) 30 5 0 0 20 Corporate -10 -0.12

5 Unpaid Capital 2 0.02Total Gold 61 70 132 120 45 Cash at 31 March 5 0.06Brazil Iron Ore (kt) 0 0 0 0 2011E Debt -30 -0.34Gold Cash Cost (US$/oz) 855 469 234 293 70Gold Price Realised (US$/oz) 1077 1344 1350 1350 5

469Total @ 10% discount rate 336 3.82

1344

469Reserves & Resources 555 DirectorsGold Reserves Mt g/t Au (koz) David Dix Non-Executive ChairmanAndorinhas 1.2 6.5 256 1344 Paul Benson Managing DirectorSandstone 0.7 1.7 37 Gordon Chambers Non-Executive DirectorCasposo* 2.0 7.7 528 John Jones Non-Executive DirectorTotal 3.92 6.5 821 Robin Parish Non-Executive Director

Fred Grimwade Non-Executive DirectorGold Resources Mt g/t Au (koz) Ken Nilsson Executive DirectorAndorinhas 2.3 5.1 369Sandstone 15.5 1.5 748Casposo* 2.6 9.1 772Total 20.4 2.9 1889*Aueq

Substantial Shareholders %EV / Reserve ($/oz) $430 Warrigal Pty Ltd 12.5%EV / Resource ($/oz) $187

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13 June 2011

Spilling the beans

Update:

Venturex Resources (VXR) is an emerging Australian Cu-Zn producer.

The Company is progressing a BFS (due October 2011) for development of a centralised ~1Mtpa processing hub, combining open pit material from Whim Creek with high grade underground feed transported from the recently acquired Sulphur Springs deposit.

The ~1Mtpa hub scenario (base case) could yield average production of 27ktpa Cu Eq over 9 years, commencing in early FY14.

Impact: Positive

Our modelling is based on a 1Mtpa production scenario; however there appears to be organic upside to this.

Current optimisation studies indicate the potential for increased production rates from both (Whim Creek open pits and Sulphur Springs underground) mining centres.

Pending Reserve/Resource upgrades from Mons Cupri North West and expected inclusion of ~1.5Mt in copper (stringer) mineralisation in the footwall at Sulphur Springs could underpin a potential 30% increase in plant throughput, delivering up to ~35ktpa Cu Eq production.

View: Positive

VXR is likely to attract greater attention following an exodus of established copper names from the small cap space. Despite being relatively advanced, the stock remains largely a market secret.

VXR exhibits similar characteristics to Jabiru Metals (since acquired by Independence Group) with regards to its production profile, and large VMS strike horizon. Large by-product credits (predominantly Silver) should have a significant impact on reported cash costs.

Recommendation: Spec Buy

BUY. Valuation - $0.26ps.

Venturex SPECULATIVE BUY

Research

Important Disclosures Argonaut acts as Corporate Advisor to VXR. Argonaut acted as Corporate Advisor to VXR on the acquisition of the Panorama Cu-Zn Project, and as the Sole Lead Manager and Underwriter (Entitlements Issue only) to the Placement and Entitlement Issue in February 2011. Argonaut has previously acted for VXR and has earned fees commensurate with those services. Argonaut holds or controls 53,774,282 VXR shares and 10,526,316 VXR options exercisable at $0.095. Mr. Michael Mulroney is also a director of an Argonaut group company and is a non-executive director of VXR.

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Ticker: VXRSector: Materials

Shares on Issue (m):Market Cap ($m): 97.9Net Cash ($m): 12.7Enterprise Value (A$m): 85.2


Board and Management

Tony Kiernan ChairmanTim Sugden Managing DirectorAnthony Reilly Executive DirectorAllan Trench Non-Executive DirectorMichael Mulroney Non-Executive Director

Substantial shareholders:

Regent Pacific 23.6%Straits Resources 9.4%

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VXR purchased the Panorama Project for $26.2m in February The acquisition expands the resource base to ~0.6Mt contained Cu Eq

Creating a meaningful base metals producer

Background

Venturex Resources (VXR) acquired the Panorama Cu-Zn Project from CBH Resources Ltd (a wholly owned subsidiary of Toho Zinc Co Ltd) for $26.2m in February 2011. Panorama is located 162km by road SE of Port Hedland. The project includes the Sulphur Springs copper-zinc VMS orebody, with a resource of 19.3Mt @ 3.2% Zn, 1.2% Cu, and 16g/t Ag.

A number of feasibility studies have been completed during the history of Panorama (Sulphur Springs was discovered in 1984). In 2008 CBH Resources (CBH) planned to extract the ore via open-pit mining, however this was placed on hold due to the overall cost structure of the project, decreasing metal prices and less favourable market conditions. Toho acquired the asset as part of the takover for CBH, which was completed in September 2010. A new plan to extract the high grade central zone (2.2% Cu, 6.2% Zn) of the ore body using underground methods has since been developed as the preferred option, and this approach will be adopted by VXR.

Figure 1: Project Location

Source: VXR

The combined Resource base is 27Mt @ 2.2% Cu Eq (~590kt Cu Eq).

Table 1: Combined Reserve and Resource Base

Combined Reserve & Resource PositionReserves Mt Cu % Zn % Pb % Ag g/t Au g/t Cu Eq %Pilbara VMS 4.5 1.4% 2.8% 0.9% 33.9 0.3 2.8%Panorama 3.9 2.2% 6.2% 0.0% 25.3 0.0 4.1%TOTAL 8.4 1.8% 4.4% 0.5% 29.9 0.1 3.4%

Resources Mt Cu % Zn % Pb % Ag g/t Au g/t Cu EqPilbara VMS 7.6 1.2% 2.2% 0.7% 26.1 0.2 2.2%Panorama 19.3 1.2% 3.2% 0.2% 16.1 0.0 2.2%

TOTAL 26.9 1.2% 2.9% 0.3% 18.9 0.1 2.2%

Source: Argonaut (unless stated otherwise)

The addition of Panorama provides significant economies of scale, allowing VXR to leverage off established infrastructure at Whim Creek and transform the Company into a meaningful Cu-Zn producer.


The ‘base case’ is production of ~27ktpa Cu Eq over 9 years commencing in FY14

VXR compares favourably amongst the copper developer peer group

Conceptual production profile

The creation a centralised 1Mpta processing hub at Whim Creek could deliver annual production of 38kt Zn and 16kt Cu over 9 years, underpinned by an equal blend of open pit ore (Mons Cupri) and underground feed from Sulphur Springs (transported via road haulage) over the first six years. A BFS is underway, scheduled for completion in October 2010.

Table 2 illustrates the enhanced economics via the combination of the two projects as opposed to development on a ‘standalone’ basis.

Table 2: Conceptual Prouction Plan

Combined v Standalone basisVXR* CBH / Toho Combined - Base Case

Project Pilbara VMS Panorama VXR + PanoramaMining Inventory Mt 4.5 3.9 8.3Grade % Cu Eq ^ 2.8% 3.9% 3.4%Throughput ktpa 600 600 1,000Metal in Conc - Zinc ktpa 14 34 38 - Copper ktpa 8 12 16 - Lead ktpa 4 - 3Cu Eqv 13 20 27Mine Life yrs 9 7 9First Production yr FY13 - FY14Capex 96 163 140-150

Source: Argonaut, VXR

Current optimisation studies indicate the potential for increased production rates from both (Whim Creek open pits and Sulphur Springs underground) mining centres.

Pending Reserve/Resource upgrades from Mons Cupri North West and expected inclusion of ~1.5Mt in copper (stringer) mineralisation in the footwall at Sulphur Springs could underpin a potential 30% increase in plant throughput, delivering up to ~35ktpa Cu Eq production.

Peer Comparison

Among the emerging 20 – 40ktpa copper production peer group, VXR’s cash costs (US$/lb Cu) compare favourably, given the value of precious metal by-product credits associated with the concentrates.

Figure 2: ASX listed Copper developers

RXM

JML

CGG

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VXRSRQ

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Note: Bubble Size - Fully Funded Enterprise Value (FFEV) = EV + Capex


Key assumptions

Argonaut values VXR at $283m or $0.26 per share

Valuation

Argonaut’s commodity and exchange rate pricing assumptions are presented in Table 3.

Table 3: Commodity and FX Assumptions

Pricing AssumptionsFY12F FY13F FY14F LT

Copper US$/lb 4.00 3.75 3.50 2.50Zinc US$/lb 1.10 1.20 1.20 0.85Silver US$/oz 20 20 20 20Gold US$/oz 1,350 1,350 1,350 1,000AUD A$:US$ 1.00 1.00 1.00 0.80

We derive a valuation of $283m or $0.26 per share.

Table 4: Summary Valuation

Summary ValuationVenturex Resources $m $/shPilbara VMS + Panorama 237 0.22CMG Gold (Brazil) 20 0.02Exploration 10 0.01Investments 0 0.00Tax Losses 15 0.01Unpaid Capital 0 0.00Corporate -12 -0.01Cash 13 0.01Debt 0 0.00

Total @ 11% Discount Rate 283 0.26

Key financial outputs over the first five years of production are presented in Table 5.

Table 5: Financial Summary

Financial SummaryFY12 FY13 FY14 FY15 FY16 FY17 FY18

Revenue $m 0 0 211 201 203 211 218Opex $m 6 6 118 122 124 126 136EBITDA $m -10 -11 89 74 75 80 78NPAT $m -7 -7 52 41 41 45 43Net Op CF $m -8 -8 72 57 57 63 60Capex $m 7 143 14 7 7 7 7FCF $m -20 -156 53 45 45 51 48


13 June 2011

Turning up the Knob

Initiation:

Argonaut is initiating coverage on WPG Resources (WPG).

WPG is an emerging South Australian direct shipping (DSO) iron ore producer. Its flagship project is the 19Mt Peculiar Knob (PK) deposit, located ~90km SE of Coober Pedy.

The Company is fully funded to first production, targeting 3.3Mtpa commencing in May 2012 over an initial 6 year mine life. Total capex is $175m, with operating costs ~$75/t.

Impact: Positive

With a number of catalysts on the horizon, we see strong re-rate potential for WPG in the near term.

Three outstanding approvals (South Australian Government approval for the Mining and Rehabilitation Program – MARP, Development Application (DA) for Port Pirie and Commonwealth approval under the Environmetal Protection and Biodiversity Conservation Act) are due by July 2011, which will trigger commencement of work at both mine and port, as well as draw down of the US$120m debt funding package.

The recent endorsement by the Commonwealth to re-zone the Woomera Prohibited Area (WPA) is also very significant for WPG. Subject to Defence approval, this unlocks a potential 4-6 year mine life extension (13Mt in Reserves, 18Mt in Resources) on the DSO and paves the way for the Hawks Nest JV with Wuhan Iron and Steel Co (WISCO, China’s 3rd largest steel producer) to proceed.

View: Positive

Argonaut believes WPG has got the key ingredients required for a successful bulk commodity business. Peculiar Knob is one of (if not) the highest grade (~63% Fe), undeveloped iron ore deposits in Australia. The Company has developed an integrated infrastructure solution from mine to port, involving rail and road haulage to Port Pirie, where it will have capacity to export up to ~7Mtpa. As a low capital intensity producer (~$43/t), it has the ability to capitalise on bouyant pricing imminently. WPG compares favourably against other iron ore peers - it represents value across a range of metrics.

Near term risks relate specifically to receipt and timing of approvals. Other risks include iron ore and fx prices, 3rd quartile cash costs (given large haulage component), access to labour and the proposed Mineral Resource Rent Tax (MRRT).

Recommendation: Buy

Initiating with BUY recommendation. Valuation $1.40.

WPG Resources BUY

Research



Ticker: WPGSector: Materials

Shares on Issue (m):Market Cap (A$m): 187.1Net Cash (A$m): 81.0Enterprise Value (A$m): 106.1


Key Metrics11F 12F 13F

P/E (x) n/a n/a 2.9EV/EBITDA (x) n/a n/a 0.8

Financials:

Revenue ($m) 0.0 0.0 338.4EBITDA ($m) -8.9 -15.2 130.5NPAT ($m) -8.9 -18.4 63.8

Net Assets ($m) 112.9 143.7 232.9

Op CF ($m) -0.8 -0.3 83.5

Per Share Data:

EPS (cps) -4.7 -7.4 25.7DPS (cps) 0.0 0.0 0.0Div Yield 0.0 0.0 0.0CFPS (cps) -0.5 -0.1 33.7

Share Price Graph

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Argonaut Securities Research 28 WPG Resources

A proven formula

High quality product Logistics solution

The proven formula

The key ingredients for what Argonaut considers the basis of a successful bulk commodity stock are:

Quality product

Infrastructure solution

Low capital intensity

Value

Quality product

We have benchmarked Peculiar Knob against a host of other Australian DSO deposits with regards to contaminants (SiO2 + Al2O3) and grade (Fe) as well as commonly accepted products in the market place. Peculiar Knob, with its high Fe grade and elevated silica (Si02) is most comparable to MGX’s Koolan Island deposit.

Figure 2: Australian DSO deposits – Fe v contaminants

Buzzard

Peculiar Knob

55

57

59

61

63

65

4 6 8 10 12 14Si + Al (%)

Fe (

%)

Table 3: WPG product spec v typical DSO products

Product specificationProduct Fe Si Al P LOIRobe CID 56.3 6.0 2.9 0.04 9.1Yandi CID 59.2 5.3 1.1 0.04 8.7Pilbara Blend BID 62.2 4.3 2.1 0.08 4.1Cliffs BID 62.1 4.0 2.0 0.08 4.3FMG "Rocket" Fines 59.0 4.0 2.3 0.09 8.3WPG Fines 63.2 8.3 0.03 0.01 0.4

WPG compares very favourably versus peers.

Infrastructure

Logisitics is the key to any bulk commodity business:

Rail/Road

WPG will build a 96km haul road to the Wirrida siding, where it has access to rail ore 635km to port.

Port

WPG is building an iron ore receival, storage and load out facility at Port Pirie, capable of handling up to 7Mtpa. Less than half of this capacity will be required initially.


Low capital intensity… With the ability to capitalise on buoyant pricing in the near term

Re-rate potential as production draws near

Low capital intensity

Capital intensity ($/t) is a measure of the capital required per tonne of annualised production.

High capital intensive projects are typically ‘greenfields’ developments, where significant infrastructure (rail, port) is required to get the tonnes to market.

Argonaut has had a preference for low capital intensity producers, such as Atlas Iron (AGO), Mount Gibson Iron (MGX), Mineral Resources (MIN) and BC Iron (BCI). WPG fits into this category too, with a capital insensity of ~$43/t (see Figure 3).

Figure 3: Capital intensity of selected iron ore projects

Source: Ferraus (FRS)

Whilst these projects tend to have shorter mine lives and higher operating costs, this is oftened outweighed by the quality of tonnes and the ability to capitalise on bouyant prices now.

Value

We have lined up WPG against the iron ore producers under our coverage based on FY13 numbers (WPG’s first full year of production and earnings). Even after accounting for the $175m capex to be spent, the stock is the cheapest across almost all metrics. We expect as PK comes into production, WPG will trade closer to producing peers on earnings multiples and a P/NPV basis.

Table 4: Iron ore comps

Peer comparison

Stock Code EV* EV/Revenue EV/EBITDA PE $/t Prodn P/NPV

Atlas Iron AGO 2,618 2.9 4.0 6.6 335.6 0.84

Mount Gibson Iron MGX 1,447 1.1 1.5 3.9 147.6 0.83

Northern Iron^ NFE 706 1.9 2.8 3.9 245.3 0.84

BC Iron BCI 279 1.1 1.8 3.2 109.6 0.80

WPG Resources* WPG 292 0.9 2.2 3.1 88.5 0.57

* EV is adjusted to include capital i.e = EV + capex

^31 Dec


WPG Resources Equities Research

Analyst: Tim Serjeant

Recommendation BUY Sector MaterialsCurrent Price $0.76 Issued Capital (m) 247.8Valuation $1.40 Market Cap (m) $187.1All Ords (XAO) 4,622 Updated

Profit & Loss (A$m) 30 June 2011E 2012E 2013E 2014E Financial Summary 2011E 2012E 2013E 2014ERevenue 0.0 0.0 338.4 390.7 Reported EarningsOther Income 3.1 2.9 0.8 5.5 Net Profit ($m) -8.9 -18.4 63.8 71.3Profit/(Loss) on Hedging 0.0 0.0 0.0 0.0 EPS (A$) -0.05 -0.07 0.26 0.29Operating Costs 10.0 10.0 200.3 204.4 PER (x) -16.0 -10.2 2.9 2.6Exploration Exp 0.5 2.0 2.1 2.1 Normalised EarningsCorporate/Admin/Other 1.5 6.1 6.2 6.3 Net Profit ($m) -8.9 -18.4 63.8 71.3EBITDA -8.9 -15.2 130.5 183.4 EPS (A$) -0.05 -0.07 0.26 0.29Depn & Amort 0.0 0.0 33.8 34.5 EPS Growth (%) - - -446.5 11.8EBIT -8.9 -15.2 96.7 148.9 PER (x) -16.0 -10.2 2.9 2.6MRRT 0.0 0.0 0.0 42.8 CashflowNet Interest Paid 0.0 3.2 5.6 5.6 Operating Cashflow ($m) -0.8 -0.3 83.5 117.2Operating Profit -8.9 -18.4 91.1 100.5 GCFPS ($) -0.01 0.00 0.34 0.47Tax expense 0.0 0.0 27.3 29.1 PCF (x) -150.7 -602.5 2.2 1.6Minorities 0.0 0.0 0.0 0.0 DividendNPAT -8.9 -18.4 63.8 71.3 Dividend ($) 0.00 0.00 0.00 0.00Normalised NPAT -8.9 -18.4 63.8 71.3 Yield (%) 0% 0% 0% 0%

Franking % 0% 0% 0% 0%

Cash Flow (A$m) 2011E 2012E 2013E 2014EOperating Cashflow -0.8 -0.3 83.5 117.2 Financial Ratios 2011E 2012E 2013E 2014E- Capex (+asset sales) -15.0 -175.0 -4.0 -4.0 Balance Sheet Ratios -Exploration Expenditure -10.1 -2.0 -2.1 -2.1 Total Debt/Equity (%) 0% 84% 41% 20% -Other -2.3 0.0 0.0 0.0 Interest Coverage (x) - - - -Free Cashflow -28.3 -177.3 77.4 111.1 Profitability Ratios- Dividends 0.0 0.0 0.0 0.0 Net Profit Margin (%) - - 19% 18%+ Equity raised 0.0 0.0 0.0 0.0 Return on Assets (%) -62% -9% 10% 0%+ Debt drawdown (- repaid) 0.0 120.0 -25.0 -25.0 Return on Equity (%) -8% -13% 27% 20%Net Change in Cash 51.9 -57.3 52.4 86.1Cash at End Period 66.9 9.6 62.0 148.0Net Cash (Debt) 66.9 -110.4 -33.0 78.0

Valuation Summary A$m $/shPeculiar Knob 227 0.92

Balance Sheet (A$m) 2011E 2012E 2013E 2014E Buzzard, Tui DSO 35 0.14Total Assets 122.8 275.1 340.9 441.2 Hawks Nest- WISCO 25 0.10Total Debt 0.0 120.0 95.0 70.0 Other exploration 0 0.00Total Liabilities 9.9 131.4 108.1 85.0 Unpaid Capital 1 0.00Shareholders Funds 112.9 143.7 232.9 356.1 Corporate -23 -0.09

Cash (31 March) 81 0.33

Production & Cash Costs 2011E 2012E 2013E 2014ESales Total @ 11% Discount Rate 346 1.40Peculiar Knob (Mt) 0.00 0.00 2.6 3.3

Cash Costs - inc royalties (A$/t) 0.0 0.0 76.9 79.7 Directors

Bob Duffin Executive ChairmanReserves & Resources Gary Jones Executive Director

Heath Roberts Executive DirectorDSO Reserves Mt % Fe Bob Richardson Non-Executive DirectorTotal 29.5 62.0 Len Dean Non-Executive Director

Lim See Yong Non-Executive DirectorDSO Resources Mt % Fe Dennis Mutton Non-Executive DirectorTotal 37.6 62.8

Magnetite Resources Mt % FeTotal 569.0 35.5 Substantial Shareholders %

Acorn Capital 7.7%Hematite BIFs Mt % Fe Bob Duffin 5.9%Total 102.5 37.4

13-June-2011

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Contact Details

Research: Ian Christie Director Research +61 8 9224 6872 Troy Irvin Director Research +61 8 9224 6871 Tim Serjeant Associate Director Research +61 8 9224 6806 Gianluca Paglia Analyst +61 8 9224 6824 Patrick Chang Analyst +61 8 9224 6835

Institutional Sales: Paul Carter Executive Director +61 8 9224 6864 Chris Wippl Executive Director Head of Research & Sales +61 8 9224 6875 John Santul Consultant, Sales & Research +61 8 9224 6859 Damian Rooney Senior Institutional Dealer +61 8 9224 6862 Ben Willoughby Institutional Dealer +61 8 9224 6876 Bryan Johnson Institutional Dealer +61 8 9224 6834

Corporate and Retail Sales: Kevin Johnson Executive Director +61 8 9224 6880 Glen Colgan Executive Director +61 8 9224 6874 Simon Lyons Director, Retail Stockbroking +61 8 9224 6881 James McGlew Director, Corporate Stockbroking +61 8 9224 6866 Geoff Barnesby-Johnson Senior Dealer +61 8 9224 6854 Andrew Venn Senior Dealer +61 8 9224 6865 Melaney Brans Dealer +61 8 9224 6873 Cam Fraser Dealer +61 8 9224 6851

Important Disclosures

Argonaut acts as corporate advisor to AKM and receives fees commensurate with these services. Argonaut acted as advisor to and arranger of the placement to SouthGobi Resources, and as manager and broker to the issue of 50m shares at $0.09 per share to raise $4.5m in June 2010. Argonaut owns/and or controls 1m AKM shares and 6m options exercisable at $0.15 on or before 31 December 2012.

Argonaut acts as Corporate Adviser to BCI. Argonaut acted as Corporate Adviser to BCI in relation to the proposed Scheme of Arrangement with Regent Pacific Group and received fees commensurate with these services. Argonaut acted as Manager to the placement of 8.0m shares to raise $18.4m (November 2010).

Argonaut acted as Lead Manager to the placement of 30m BMN shares at $0.50 to raise $15m in December 2010 and received fees commensurate with this service.

Argonaut Securities Pty Ltd acted as broker to the CHN rights issue in September 2010 and has received fees commensurate with these services.

Argonaut acts as corporate adviser for MBN and co-managed the US$165m Global offer in September 2010.

Argonaut acted as Co-Manager to the placement of MMW shares to raise $20m and has received fees commensurate with these services.

Argonaut acted as Corporate Advisor to OZL in relation to OZL acquiring a 19% stake in Sandfire Resources NL in July 2010. Argonaut received fees commensurate with this service.

Argonaut acted as joint lead manager to the PIR Capital Raising in December 2010 and received fees commensurate with this service. Argonaut holds 1,550,000 PIR shares and 2,011,268 PIR options ex $0.20 on or before 31 Dec 2012.

Argonaut acts as Corporate Advisor to VXR. Argonaut acted as Corporate Advisor to VXR on the acquisition of the Panorama Cu-Zn Project, and as the Sole Lead Manager and Underwriter (Entitlements Issue only) to the Placement and Entitlement Issue in February 2011. Argonaut has previously acted for VXR and has earned fees commensurate with those services. Argonaut holds or controls 54,315,106 VXR shares and 10,526,316 VXR options exercisable at $.095. Mr. Michael Mulroney is also a director of an Argonaut group company and is a non-executive director of VXR.

The analyst(s) own MMW, PDN and VXR shares.

General Disclosure and Disclaimer

This research has been prepared by Argonaut Securities Pty Limited (ABN 72 108 330 650) (“ASPL”) for the use of the clients of ASPL and its related bodies corporate (the “Argonaut Group”) and must not be copied, either in whole or in part, or distributed to any other person. If you are not the intended recipient you must not use or disclose the information in this report in any way. ASPL is a holder of an Australian Financial Services Licence No. 274099 and is a Market Participant of the Australian Stock Exchange Limited.

Nothing in this report should be construed as personal financial product advice for the purposes of Section 766B of the Corporations Act. This report does not consider any of your objectives, financial situation or needs. The report may contain general financial product advice and you should therefore consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision.

This research is based on information obtained from sources believed to be reliable and ASPL has made every effort to ensure the information in this report is accurate, but we do not make any representation or warranty that it is accurate, reliable, complete or up to date. The Argonaut Group accepts no obligation to correct or update the information or the opinions in it. Opinions expressed are subject to change without notice and accurately reflect the analyst(s)’ personal views at the time of writing. No member of the Argonaut Group or its respective employees, agents or consultants accepts any liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this research and/or further communication in relation to this research.

Nothing in this research shall be construed as a solicitation to buy or sell any financial product, or to engage in or refrain from engaging in any transaction. The Argonaut Group and/or its associates, including ASPL, officers or employees may have interests in the financial products or a relationship with the issuer of the financial products referred to in this report by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, director or adviser. Further, they may buy or sell those securities as principal or agent, and as such may effect transactions which are not consistent with the recommendations (if any) in this research. The Argonaut Group and/or its associates, including ASPL, may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case.

There are risks involved in securities trading. The price of securities can and does fluctuate, and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment.

The analyst(s) principally responsible for the preparation of this research may receive compensation based on ASPL’s overall revenues.

© 2011. All rights reserved. No part of this document may be reproduced or distributed in any manner without the written permission of Argonaut Securities Pty Limited. Argonaut Securities Pty Limited specifically prohibits the re-distribution of this document, via the internet or otherwise, and accepts no liability whatsoever for the actions of third parties in this respect.

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