NUS - Initiating Coverage (July 14, 2008)

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Equity Research July 14, 2008

NAUTILUS MINERALS INC. NUS-T (07/11/08): C$1.93OVERWEIGHTOpening Davy Jones' Locker; Initiating Coverage With An

Overweight Rating Initiating Coverage

Key Data FY 2007 2008 200952-Week Range: $1.87 - $4.84 EPS (US$)Market Cap (mn) $282 Q1 NM NM NEShares Out. (mn): 145.9 Q2 NM NE NEAvg. Daily Vol: 163,987 Q3 NM NE NEFiscal Year-End: 31-Dec Q4 NM NE NEDividend (Ind. Annual) $0.00 Year NM NE NEYield 0.00% P/E NM NM NM

Working Capital (US$ mn) $305 CFPS (US$) NM NE NELong-term debt (US$ mn) $0 P/CF NM NM NMNAVPS $4.50 Revenues (US$ mn) NM NE NEP/NAV: 0.4x EBITDA (US$ mn) NM NE NE3 Year Production Growth N/A EV/EBITDA NM NM NMPrice Target $4.50 Capex (US$ mn) NM $75E $150ETotal Potential Return 133% Free Cash Flow (US$ mn) NM ($101)E ($176)E

Note: Price is as of the close on the date indicated. All monetary figures are in the same currency as noted in market price. Any price target displayed in the data box above represents either a specific price target or the midpoint of a range. Exchange rate as of 07/11/08 C$1 : U.S.$0.99 Executive Summary

We are initiating coverage of Nautilus Minerals with an Overweight rating and a $4.50 12-month price target. Nautilus Minerals is the first company to commercially explore the seafloor for high grade copper-gold-zinc-silver Seafloor Massive Sulphide ("SMS") deposits. Nautilus has already defined a resource at its 100% Solwara 1 project and mine planning is underway. All contracts for the proposed mining system are now in place and we see few hurdles to the successful commencement of production in 2010. In addition, we believe that Nautilus has significant upside potential from its exploration activities.

We believe that as a first mover in the emerging seafloor mining industry, Nautilus has significant advantages over potential new entrants into the industry:

• Vast tenement licenses cover prime acreage within the western Pacific Ocean’s “Rim of Fire” where SMS discoveries have been extensively studied by academia.

• Tenement locations in shallower waters situated in favorable mining jurisdictions with established mining codes.

• Significant progress made by developing and refining its own undersea exploration methodology.

• Strong management team and technical alliances with some of the leaders in the deep sea construction and development industry.

• Key strategic shareholders including mining heavyweights such as Epion Holdings Ltd (22.4%), Teck Cominco Ltd (7.2%) and Anglo American PLC (5.7%).

METALS AND MINING Base Metals Matthew O'Keefe 416.815.3087 [email protected] Rahul Paul 416.815.3128 [email protected]

NAUTILUS MINERALS INC. (NUS-T) Initiating Coverage

July 14, 2008 Thomas Weisel Partners LLCPage 2 of 33 Matthew O'Keefe 416.815.3087

Company Description: Nautilus Minerals is the first mineral exploration and development company to commercially explore the seafloor for high grade copper-gold-zinc-silver Seafloor Massive Sulphide ("SMS") deposits; the modern day analogue to traditional land-based Volcanogenic Massive Sulphide (VMS) deposits which are a prime source of the world's base and precious metals. Mine planning is well underway for the world's first seafloor copper-gold mine at Nautilus' 100% owned Solwara 1 Project located in 1,500 meters of water in the territorial waters off Papua New Guinea (PNG). Nautilus has among its largest shareholders some of the world's leading international resource companies, Epion (22.4%), Teck Cominco (7.2%) and Anglo American (5.7%).

Despite the upside potential, Nautilus currently trades at 0.9x its cash holdings, which we believe significantly undervalues the company’s growth potential. We believe the disconnect exists largely because the viability of seafloor mining has yet to be proven. Over the next few years we expect to see the stock price appreciate as the Solwara 1 project moves closer to production, thus proving the viability of seafloor mining and Nautilus’ technology. We believe that the following upcoming milestones should help serve as potential catalysts for stock price appreciation:

• Results from the ongoing exploration program, that should help add to the existing resource at Solwara 1.

• ML application and EIS submission in Q3/2008.

• Decision on mining and environmental permits in Q1/2009.

• Integration of equipment into mining support vessel in Q1/2010.

• Commencement of operations at Solwara 1 in Q4/2010 .

Overall, we believe that Nautilus is on track to become the first successful seafloor mining company. Our 12-month $4.50 target is driven by the potential success at Solwara 1 and the company’s cash reserves. However, we believe that this should prove to be conservative given the upside potential from the company’s 365,000 km2 exploration acreage. Given the upside potential, we are initiating coverage on Nautilus Minerals with a $4.50 target and an Overweight rating. Investors should consider a position in Nautilus for exposure to what could potentially be the next big thing in mining.



INTRODUCTION

Nautilus Minerals is the first mineral exploration and development company to commercially explore the seafloor for high grade copper-gold-zinc-silver Seafloor Massive Sulphide ("SMS") deposits; the modern day analogue to traditional land-based Volcanogenic Massive Sulphide (VMS) deposits which are a prime source of the world's base and precious metals (Appendix A). The company is on track to tap this vast offshore mineral potential by adapting existing deep sea oil and gas technology. Mine planning is well underway for the world's first seafloor copper-gold mine at Nautilus’ 100% owned Solwara 1 Project located in 1,500 meters of water in the territorial waters off Papua New Guinea (PNG). Production is targeted for 2010. With a strong management and technical team, key technical alliances with leading engineering and offshore equipment suppliers and geologists in seabed minerals deposits, we see Nautilus as well-positioned for success in undersea mining.

Impressive Crew

Nautilus has assembled an excellent team led by CEO Stephen Rogers (previously the Chief Development Officer of Nautilus). Mr. Rogers has nearly 30 years of experience in the oil and gas industry, with particular extensive experience in deepwater project development. Over the last 15 years Mr. Rogers has led a number of capital intensive projects over $1 billion in value, which we believe makes him an ideal person to lead the development of the world’s first seafloor copper-gold mine. Mr. Rogers recently took over from David Heydon, the visionary who brought the company from concept and exploration to its current development stage. The company’s strong management and technical teams (Appendix B) are further augmented by the deep sea exploration team from Teck Cominco, which remains committed to jointly exploring Nautilus’ attractive tenement base.

First Mover Advantage

As the first company to commercially explore and potentially mine seafloor deposits, we believe that Nautilus has significant advantages over possible new entrants into the space. This comes primarily through its extensive and prospective tenement base that includes prime acreage within the western Pacific Ocean’s “Rim of Fire” where polymetallic SMS and hydrothermal sulphide system discoveries have been extensively studied by academia. At the end of 2007, Nautilus had amassed a vast area of 365,000 km2 of exploration tenements (Exhibit 1; Appendix C).



Exhibit 1. Location of Nautilus’ Tenements

Source: Company reports

In addition to having the proper geology, the bulk of this package is also located in the territorial waters of Papua New Guinea and Tonga which are favorable mining jurisdictions with established mining codes. Further, the majority of Nautilus’ exploration tenements are located in relatively shallow water (less than 2,500 m depth), which should provide for easier development and operation of its undersea mining system. Nautilus has also made significant progress by developing and refining its undersea exploration methodology. This puts Nautilus several years ahead of any would-be competitor and arguably further considering the ~10-yrs research work done on its undersea tenements. As a result, we believe that Nautilus has established a clear lead which should translate into significant value for shareholders as the company proves the viability of undersea mining.

Major Attention

Nautilus’ first mover advantage in the space has attracted investment from major mining companies including:

Epion Holdings Limited (22.4%) - Epion Holdings Ltd. ("Epion") holds 22.4% of Nautilus' issued shares, following a total investment of US$109 million in 2006 and 2007. Epion is a company controlled by Mr. Alisher Usmanov who is the founder of the Metalloinvest Group, Russia's largest iron ore producer.

Teck Cominco Limited (7.2%) - Teck Cominco Limited (“Teck”, TCK.B; not covered), a Vancouver-based diversified mining company, has invested a total of US$40mn in equity capital since 2006. Teck is also an exploration partner and has a commitment to spend US$12mn on an exploration program on Nautilus’ tenements in 2008.



Anglo American plc (5.7%) - Anglo American plc ("Anglo"), one of the world's largest mining and natural resource groups, invested US$25 million in 2006 and holds 5.7% of Nautilus. Nautilus and Anglo have signed a Heads of Agreement under which Anglo may assist Nautilus in its development of Solwara and other projects by seconding personnel with specialist skills to the project at Anglo's cost.

All three major shareholders have signed non-compete agreements in various jurisdictions in the South Pacific in seafloor mining for a period of five years from agreement date. In the event of a takeover bid for Nautilus and recommendation by the Board, these shareholders have agreed that they will accept the bid or make a higher counter offer. This ensures a premium bid for NUS shareholders in the event of a takeover.



SEAFLOOR MINING – AN EMERGING INDUSTRY

Mining companies are continually seeking to replenish depleting base and precious metal resources. This is becoming increasingly difficult and expensive as fewer new discoveries are made each year with the average grades of global resources, such as copper, falling. This makes land-based resources increasingly more expensive, a situation that has recently been exacerbated by escalations in capital and operating costs.

By contrast, the seafloor (which covers about 71% of the Earth’s surface) is known to have abundant mineral belts with high grades of copper, gold and zinc that have yet to be exploited. We believe that the current economic conditions (high commodity prices and development costs) and the technological advances in the oil and gas industry have reached the point where underwater mining is imminent. The situation is similar to the development of the off-shore oil & gas industry which grew quickly after the first well was started in 1947, such that by 1961 there were 415 active leases in the Gulf of Mexico producing 80mn barrels of oil (BOE) which, by 2001, had grown 18-fold to 7,365 active leases and 1,450mn BOE. We believe that the development of the seafloor mining industry will likely accelerate more quickly since the heavy equipment technology that allows for existing deep-sea oil & gas extraction equipment can be customized for mining seafloor deposits.

There are several advantages to the deep sea mining of SMS deposits compared to the land-based mining of VMS deposits as illustrated in Exhibit 2:



Exhibit 2. Land-Based Mining Versus Seafloor Mining

Land-based Mining Seafloor Mining

Mineral Deposits VMS grades are typically lower (<2.5% copper, <2 g/t gold) resulting in lower margins. Deposit needs to be considerably larger in order to be feasible.

SMS Grades are typically higher (Solwara 1 is 7% copper and 7 g/t gold) resulting in higher margins. Deposit can be relatively smaller and still feasible.

Opex Lower: Costs tend to be lower due to economies of scale, better infrastructure and typically cheaper power.

Higher: A heavy reliance on contractors, toll treatment and power from diesel fuel contributes to a higher unit cost.

Capex Higher: Mine construction typically requires significant investment in infrastructure and relatively larger fleets of equipment.

Lower: Smaller equipment, lower infrastructure requirements and a heavy reliance on contractors contributes to lower capital expenditures.

Waste Higher: Mining typically involves significant overburden stripping and waste removal to access ore bodies since most VMS deposits are found well below the ground surface.

Lower: Mining will require little or no stripping of overburden or waste removal since SMS deposits are typically located at the surface of the seafloor.

Infrastructure Fixed: Land-based mining infrastructure is mostly fixed and cannot be moved to another location at the end of mine life, resulting in significant sunk costs.

Mobile: Most of the equipment required for seafloor mining is mobile and can be moved to another location at the end of the mine's life. The exception is the concentrator which will, in the short term, be land-based.

Timeline Longer: Time to production and cash flow is longer, since exploration, permitting and construction consume more time.

Shorter: Time to production and cash flow is shorter, given that exploration, permitting and construction consume less time.

Technology Proven: Mining has relied on the same basic technology for over a century and is therefore proven and low risk.

Unproven: Seafloor mining has yet to be proven, although the technology and equipment that is to be adapted from other industries is well-proven.

Social Disturbance

Higher: Mine development can cause potentially significant levels of social disturbance. However they can also provide reasonable levels of employment opportunities.

Lower: Seafloor mining activities should result in minimal social disturbance as off-shore deposits tend to be located in secluded waters. However, direct employment opportunity is minimal.

Environmental Impact

Larger: The larger footprint and complicated interaction between air land and water results in stringent environmental permitting and reclamation costs at the end of the mine life. NGOs are active.

Smaller: The environmental permitting should be easier considering the smaller footprint and simpler deep sea eco-system. As such, development of a seafloor mine offers a greener solution to land-based mining and less of a concern to NGOs.

Source: Company reports and Thomas Weisel Partners LLC



The most obvious concern focuses on the environmental impact. Nautilus is keenly aware of the sensitivity around this issue and has committed significant dollars and resources to planning and completing a comprehensive Environmental Impact Statement (EIS). A strong regulatory framework and practices already exist for the dredging and offshore oil and gas industries but Nautilus is building on this and is focused on producing an EIS that will also satisfy specific concerns raised by the government of PNG as well as NGOs that monitor the project. The EIS will provide a baseline for the existing marine environment, the potential impact of mining activities and strategies to minimize those impacts. The lead consultant is Coffey Natural Systems, a specialist in environmental and social impact assessment that has been servicing the mining, oil and gas and infrastructure sectors for 29 years. To ensure an EIS of the highest quality, Nautilus has also involved other leading groups including Scripps Institute of Oceanography, Duke University, The University of Toronto, CSIRO and the University of Papua New Guinea.

Following its release sometime in 3Q08, the EIS will be publicly reviewed by independent scientists and be the subject of local community consultation. The EIS is the key to the mining permit and a critical path item. We are satisfied that Nautilus is taking all necessary steps to ensure it can minimize the environmental impact.



TECHNOLOGY TRANSFER FROM THE OIL AND GAS INDUSTRY

As the first company to attempt to mine the seafloor, Nautilus proposes to combine various technologies that have been successfully deployed in the exploration and development of deep sea oil & gas. The basic process involves disaggregating seafloor sulphide material and pumping it as slurry to surface where it is dewatered and shipped by barge to an on-shore treatment facility (Exhibit 3).

Exhibit 3. Summary Of The Proposed Process


Although Nautilus currently plans to conduct mining activities up to depths of 1,500 m, the offshore mining system is being developed to work at depths of up to 2,500m. This would provide Nautilus with the capacity to move into deeper waters, following the depletion of shallower reserves using existing technology and minimal incremental capital expenditures. The proposed offshore mining system is expected to be made of three main components:

1. The Seafloor Mining Tool (“SMT”): The first stage of the mining operation involves the remotely operated SMT (Exhibit 4), expected to measure 15m long x 13m wide x 8m high weighing approximately 190 tonnes. The SMT is capable of moving along the seafloor and will operate multiple cutting heads along with a suction device for recovery of ore material. It is expected to mine in 3 - 5m lifts and work 3-4 days at a time before having to be brought to the surface for maintenance. A second SMT will resume mining activities during the maintenance period allowing for near continuous mining. The SMT is expected on average to mine 100 m3/hour and have a peak production capacity of approximately 6,000 tonnes per day. In December 2007, a £33MM SMT contract was awarded to UK based Soil Machine Dynamics Ltd; a leading designer and manufacturer of complex marine excavation systems. This contract is for two machines and includes a comprehensive test program and



vessel integration, which is expected to be completed in Q1/2010. Although the SMT is developed in its current form for the first time, it is essentially a new combination of proven components. As a result, we believe that the technology risk to this component is relatively low.

Exhibit 4. The Seafloor Mining Tool


2. The Riser and Lifting System (“RALS”): The RALS will be used to pump the sulphide ore disaggregated by the SMT to a barge on the surface, and will include subsea pumps, the riser pipe, riser handling system and associated deck equipment. The riser unit is expected to weigh approximately 750 tonnes and can easily be extended to work in deeper waters. In April 2008 the RALS contract was awarded to Technip USA Inc; an integrated engineering, technology and construction services provider and one of the global leaders in deepwater riser technology. The US$116mn contract provides engineering, procurement and construction management (EPCM) services for the RALS. Under the contract, the majority of the equipment is to be provided on a fixed price basis which provides Nautilus with a certain level of protection from cost escalation. The RALS system is comprised of off-the-shelf components, as a result of which we consider technology risk to be minimal.

3. The Mining Support Vessel (“MSV”): The MSV will support mining operations, and is expected to be fully integrated with the SMT and the RALS. On June 20, 2008 Nautilus announced that it had entered into a binding agreement with North Sea Shipping Holding AS, to provide the MSV on a five year charter basis with options to buy the ship thereafter or to extend for another 5 years. The 160m vessel (Exhibit 5) will be fitted with specialized equipment such as a 400 tonne heave compensated crane capable of working at 2,500m water depth. The build of the hull is already in an advanced stage and the ship is expected to be completed in June 2010. The MSV contract is valued at US$125mn over the initial five year period.



Exhibit 5. The Mining Support Vessel




SOLWARA 1 - THE FIRST SEAFLOOR MINERAL RESOURCE

Australia’s Commonwealth Scientific and Industrial Research Organization (CSIRO) first identified the Solwara Field in 1991. Extensive research campaigns were undertaken on the Solwara fields between 1993 and 1997 and in March 2005, Nautilus undertook exploration at Solwara 1 using side scan sonar and dredge sampling. To define a NI 43-1011 compliant resource, Nautilus had to develop an underwater, remotely operated drill. It was successful and on December 20, 2007, Nautilus announced the world’s first SMS resource at Solwara 1, with an Indicated Mineral Resource of 0.87 million tonnes @ 6.8% Cu, 4.8 g/t Au, 23 g/t Ag, 0.4% Zn and an Inferred Mineral Resource of 1.3 million tonnes @ 7.5% Cu, 7.2 g/t Au, 37 g/t Ag, 0.8% Zn. A cut-off of 4.0% Cu was used (Exhibit 6). Metallurgical investigations of the high grade deposit concluded that a marketable copper concentrate with grades of better than 28% copper can be produced by standard flotation techniques with copper recoveries of more than 85%.

Exhibit 6. Mineral Resource Estimate For Solwara 1 at 4% Cu Cut-Off

Class Domain Tonnes (kt) Cu (%) Au (g/t) Ag (g/t) Zn (%)

Indicated Massive sulphide 870 6.8% 4.8 23 0.4%

Chimney 80 11.0% 17 170 6.0%

Lithified Sediment 2 4.5% 5.2 36 0.6%

Massive sulphide 1200 7.3% 6.5 28 0.4%

Inferred total 1282 7.5% 7.2 37 0.8%

Inferred

Sources: Company reports

The resource is open to the west and at a depth where 38% of holes drilled in 2007 finished in mineralization so additional resource may be added at depth (Exhibit 7).

1 National Instrument 43-101 (NI 43-101) is a rule developed by the Canadian Securities Administrators (CSA) that govern how issuers disclose scientific and technical information about their mineral projects to the public. It requires that all disclosure be based on advice by a "qualified person" and in some circumstances that the person be independent of the issuer and the property.



Exhibit 7. Solwara 1 Resource


The grades outlined in this first resource demonstrate a much higher grade than that of average land-based VMS deposits. At 7% copper and 7 g/t gold, the deposit has a value of about US$827/tonne at today’s metal prices and US$520/tonne applying our long-term values of $1.60 for copper, $1000/oz for gold.

Exploration Upside – A Lot More Solwara’s In The Sea

Since 2005, Nautilus has made a number of discoveries on its growing tenement package (Exhibit 8). The Solwara 1 Project and Solwara 2-8 Prospects are on 100% owned Nautilus tenements. As such these tenements are not covered by the exploration joint venture with Teck Cominco providing NUS shareholders with the full upside from a successful mining operation. New discoveries are numbering about four per year which we expect to continue. The company continues to refine its exploration techniques with more sophisticated remote sensing techniques and a proven ROV Drill that allows for resource definition.



Exhibit 8: Exploration Results

Prospect Samples Au g/t Cu % Zn % Ag g/t Year

Solwara 1 45 13.7 10.8 3.7 224 2005

Solwara 2 37 6.2 1.3 22.8 226 2006

Solwara 3 26 15.4 1.3 22.4 488 2006

Solwara 4 28 13.5 11.3 22.4 263 2006

Solwara 5 13 17.37 6.72 7.78 273 2007

Solwara 6 4 18.1 14.24 18.66 217 2007

Solwara 7 7 17.15 5.87 24.08 404 2007

Solwara 8 12 16.9 6.1 32.5 328 2007 Source: Company reports

The goal of Nautilus’ 2008 exploration program is to increase the resource inventory through continued work near Papua New Guinea and to expand the project pipeline by focusing on its tenements in Tonga where a number of known high-grade mineralized systems are known. . The combination of a large tenement package and improved exploration techniques should ensure a healthy project pipeline and no shortage of ore once mining begins in 2010.

Teck Cominco – Joining the Fleet

Teck Cominco has committed to spending $12mn in 2008 with focus over Nautilus' exploration tenements in the territorial waters of PNG and Tonga. At the completion of this program Teck Cominco will have the right to elect to enter into joint ventures with Nautilus in up to six countries, earning between 40% and 50% (depending on the country) by the expenditure of US$25 million in that specific country area. Teck appears fully committed to the concept and has assembled an offshore mineral exploration team of its own consisting of 12 professionals in Brisbane dedicated to Nautilus, signaling Teck’s commitment to advancing the partnership. The combined Nautilus and Teck exploration programs should result in total exploration spending of US$30mn in 2008, which we believe is key to adding to Nautilus’ existing resource. Overall, we view the involvement of a major exploration partner such as Teck Cominco as a positive for Nautilus, as it increases capital available for exploration purposes while Nautilus continues to focus on the successful permitting and development of the Solwara 1 Project. It also increases our confidence in the upside potential of Nautilus’ tenements in PNG and Tonga.



VALUING NAUTILUS - THE FIRST OCEAN FLOOR MINING COMPANY

We calculate the net asset value for Nautilus Minerals at $677mn or $4.50 per share (Exhibit 9).

Exhibit 9: NAV Summary

Project Interest Value Value/Share ValuationSolwara + Exploration - 100% (US$) 100% $354.6 $2.37 DCF NAV at 12%

Subtotal - Operations $354.6 $2.37Working Capital (pro-forma)2 (US$) $288.2 $1.93Long-term debt (US$) $0.0 $0.00Net Working Capital (Debt) (US$) $288.2 $1.93Net Asset Value (US$) $642.8 $4.29Exchange Rate (C$/US$) $0.95 $0.95Net Asset Value (C$) $676.6 $4.50Pro-forma Shares (mn) 175.5 175.5Target mulitple 1.0xPrice Target (C$) $4.50

Source: Thomas Weisel Partners LLC estimates

The bulk of this value is driven by our base-case conceptual model of an ongoing SMS mining operation starting at Solwara-1 resource (Exhibit 10). Our key assumptions are outlined in Exhibit 10. Although at present, Solwara 1 provides enough resource for less than 2 years production, we have applied a 10-year mine life on the expectation that a) Solwara 1 will increase in size with depth, and b) ongoing exploration will be successful in bringing additional SMS deposits into the mine plan. Based on our conceptual mine model (at capacity), Nautilus should have annual production of approximately 240mn lbs of copper and 317,000 ounces of gold annually contributing about equal parts to operating cash flow of approximately $200mn per year. We recognize that there will be grade variability from deposit to deposit but note that, based on our model, an ore value of $200/tonne is required to breakeven. This is equivalent to about 2.4% copper, 10% zinc or 7 g/t gold which are well below values over the 8 targets sampled to date.



Exhibit 10: Conceptual Model For Solwara Mining Operation

Potential resource (mn Tonnes) 14.0

Copper grade (% ) 7.0Gold Grade (g/t) 6.0Capex ($mn) 250.0First Production 2010EMine Life (years) 10Annual Production (at capacity)Throughput (tonnes per day) 5,000Copper Production (mn lbs) 239Gold Production (ounces) 316,840Onsite costs (US$/tonne mined) $125Offsite costs (US$/tonne mined) $75NPV (US$ mn) @ 5% discount rate 734.0 @ 8% discount rate 540.4 @ 10% discount rate 438.9 @ 12% discount rate 354.6

CONCEPTUAL MODEL SUMMARY


The main uncertainties remain the timeline to production (the most likely source of delay being permitting) and the operating costs that should be clear once the Mining Services contract is awarded. We have assumed a very slow ramp up of five years to full production rate of 5,000 tpd (the company anticipates less than one year). We have also inflated our operating cost estimates by 50% over the company’s 2006 estimates to reflect increased fuel and labor costs that are an industry-wide issue. The valuation is most sensitive to metal prices and grade (Exhibit 11) and least sensitive to capital costs.

To account for higher-than-normal risk associated with applying a new mining method, we have applied a 12% discount rate. When valuing base metal companies at the development stage, we typically apply a discount rate of 8%-10% and for gold companies, 5%-8%.



Exhibit 11: Sensitivity Analysis

NAV Sensitivity to Grades, Opex, Capex & Throughput

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

-50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50%

% Change in Input

Naut

ilus N

AV (@

12%

disc

ount

rate

)

Copper Grade Gold Grade Opex Mill Throughput Capex Copper price LT Gold price LT


The company maintains a strong balance sheet with no debt and US$308mn in cash which is enough to move the project to production and continue its exploration programs. While most of this cash is earmarked for development of the project, it does remove the bulk of financing risk for the Solwara project.

Potential Upside To Valuation

Several scenarios point to significant potential upside to our valuation:

1. Our DCF valuation for the Solwara 1 project is based on 12% discount rate in order to account for an unproven mining method. However, successful implementation of the technology would drop our discount rate to 8%-10%, in line with what we typically use for base metal companies. A 10% discount rate would result in a NAV of $5.10 a share, while an 8% discount rate would result in a NAV of $5.80 per share.

2. Our valuation is based on a no growth scenario, under the assumption that all mining is done using one ship and the equipment currently under contract. However, following success at Solwara, Nautilus could add additional ships and equipment to the operations, thus growing annual production. This would represent potential upside from our NAV.

3. Our current valuation is based on mining just the Solwara area, a very small portion of Nautilus’s vast tenement base. Nautilus has had good exploration results so far and as outlined previously, it is likely that mineable deposits will be located in other locations around the world. As such, mining operations could continue well beyond our 10 year base case scenario, extending almost to perpetuity. We estimate that under this assumption, Nautilus could be worth almost $8.00 per share.



Major Potential Catalysts

Subject to timely permitting, production at Solwara 1 is planned in Q4/2010. The timeline of key events as follows:

2Q/2008 All Major contracts in place

3Q/2008 EIS and ML Submission

1Q/2009 Decision on mining and environmental permits.

1Q/2010 Commence integration of equipment into mining support vessel.

4Q/2010 Solwara 1 Mining Commences (subject to timely permitting).



RISKS

Permitting: Nautilus’s construction plans for a seafloor mine and related land-based facilities depend on the company’s ability to secure a number of mining and environmental permits. As with most mining operations, there is no guarantee that the company will be able to obtain the necessary permits and there is limited visibility into the permitting timelines. Failure to secure the necessary permits or a prolonged permitting delay could adversely impact the company’s share price.

Unproven Mining Method: While many of the technologies and processes have been used successfully in other industries, the process being proposed has yet to be proven in the context of deep sea mining. Should the process not work as planned, additional time and capital could be required.

Capital and Operating Costs: Given the lack of comparable industry information or feasibility study, capital and operating costs cannot be estimated with certainty. As such actual operations could be higher than our estimates.

Metal Prices: As a gold and base metal producer, Nautilus will be heavily leveraged to the price of these metals. The company has not sold forward or hedged its production so there is no guarantee regarding future metal prices. A decline in metal prices below our estimates would negatively impact the share price. We note that the high grades of the deposits at Solwara 1 point to a robust operation and the company may choose to lower this risk by hedging.

Foreign Exchange: Nautilus’ future operations are expected to be based in Papua New Guinea and Tonga, thus making the company vulnerable to foreign exchange fluctuations since gold and base metal prices are typically settled in US dollars, while a portion of capital and operating cost will be incurred in the local currency. In the absence of currency hedges, this exposure could adversely impact project valuations and share price performance if the US dollar were to depreciate significantly against local currencies.

Share Dilution: As of March 31, 2008, Nautilus had approximately US$308mn in cash available, which should allow the company to fund a significant portion of its exploration, feasibility and development activities. However, it is possible that Nautilus may require significant additional debt or equity funding given the scale of its projects. The issuance of equity may cause the ownership of existing shareholders to dilute.



CONCLUSION

Nautilus Minerals appears well-positioned to sail into history as the first to commercially mine the seafloor for base and precious metals. The company has made significant progress in the last three years in refining its exploration techniques, defining a high grade resource, developing the technology and establishing partnerships for commercial. Engineering and construction has begun and we believe the company should be able to prove the viability of seafloor mining by 2010. Its rapidly expanding strategic tenement position provides an excellent advantage over would-be competitors and should allow its shareholders to fully benefit from mining success. We are initiating coverage of Nautilus with an Overweight rating and $4.50 12-month price target. Investors should consider a position in Nautilus for exposure to what could potentially be the next big thing in mining.



APPENDIX A: SEAFLOOR MASSIVE SULPHIDES

Seafloor massive sulfide (SMS) accumulations are interpreted to be the modern day equivalent of ancient Volcanic Massive Sulfide (VMS) deposits, such as the famous Kidd Creek mine in Timmins, Ontario Canada. Both deposit types form along tectonic plate boundaries (Refer Exhibit 13) where hydrothermal convection cells deep within the Earth’s concentrate metal rich fluids which rise upwards through volcanic and sedimentary units to the seafloor.

Exhibit 13. Plate Boundaries

Source: Halback

When the hydrothermal fluids reach the seafloor and mix with cold seawater, the metals contained in the fluids precipitate as sulfides on or within the seafloor. The accumulation of sulfides around these active hydrothermal vents results in the gradual development of sulfide-rich chimneys that are a key element in Seafloor Massive Sulfide (SMS) deposits (See Exhibit 14).



Exhibit 14. Schematic diagram development of SMS deposits

Note: Red arrows illustrate the flow of hydrothermal fluids. Source: Nautilus Minerals (Modified from Lyndon 1983)

VMS deposits form in the same way but, over a long period of time, are subject to further tectonic deformation eventually forming part of the continental crust as traditional VMS deposits.

Exploration Tools

Nautilus has continued to refine its exploration techniques and grow its project pipeline since it first sampled Solwara 1 in 2005. The main tools include:

• Remotely Operated Vehicle (ROV): These pilot-less submersibles serve as a platform for the exploration tools.

• Sidescan Sonar: This system allows for detailed bathymetric (seafloor) maps.

• Deep Ocean Electromagnetic (EM) Surveying: This saltwater EM-system can help discern the presence of copper over other minerals allowing the groups to prioritize targets quicker and with considerably lower expense.

• Physical Sampling: Surface samples are collected by ROV through dredging, grab sampling and scout drilling for mineralogical and assay analysis.

• Core drilling: The purpose-built ROV Drill can drill about 20 meters into the deposits and return drill core to the surface for assay. It was successfully deployed on Solwara 1 where it completed 111 holes which were key for the determination of a NI 43-101 resource at Solwara 1.



APPENDIX B: BOARD OF DIRECTORS

A. Geoffrey Loudon (Chairman and Non-Executive Director)

Mr. Loudon, a London-based mining professional, has several years of international experience covering resource exploration development, production and finance in Australasia, Asia, the Americas and Europe. Mr. Loudon was the founder and chairman of Niugini Mining. He is currently a founding director of Lihir Gold Limited and is chairman of L&M Petroleum Limited. Mr. Loudon is also a fellow of the Australasian Institute of Mining and Metallurgy.

David Heydon (Non-Executive Director) (Formerly President & Chief Executive Officer of Nautilus)

Mr. Heydon, an applied geologist, has been President and CEO of the Nautilus Group since 2003. He is a foundation fellow of the Australian Institute of Company Directors, a director of the International Marine Minerals Society, a co-sponsor of the Underwater Mining Institute, a member of the International Society of Offshore and Polar Engineers and a member of the Australasian Institute of Mining and Metallurgy. Mr. Heydon is also a member of the Engineering Committee on Oceanic Resources (ECOR) Specialist Panel on deepwater mining. Mr. Heydon was succeeded by Mr. Stephen Rogers (former Chief Development Officer), as President and CEO, effective June 4, 2008.

David De Witt (Non-Executive Director)

Mr. De Witt, a lawyer, is a founder and the chairman of Pathway Capital Ltd, a private venture capital firm. Mr. De Witt has spent 15 years as a practicing lawyer and has held positions on the boards of mining companies such as Arequipa Resources Ltd, Bear Creek Mining Corp and Peru Copper Ltd.

Russell Debney (Non-Executive Director)

Mr. Debney, a lawyer, was chairman of the Board of Directors of Nautilus Minerals Niugini Limited and Nautilus Minerals Oceania Limited prior to the acquisition of those companies by Nautilus. He has extensive experience in the management, financing and structuring of resource projects, particularly in the offshore environment and has held positions on the boards of a number of companies in the mining and resources industry.

A. Farhad Moshiri (Non-Executive Director)

Mr. Moshiri, a Chartered Certified Accountant, is Chief Executive of London-listed Europe Steel Plc. He has extensive experience with a number of Russian and UK-based steel and mining companies and his directorships include Epion Holdings Limited, Ural Steel, ZAO Metalloinvest, and Gallagher Holdings Limited.

John O'Reilly (Non-Executive Director)

Mr. O'Reilly has over 40 years experience in the international mining industry including 19 years with Rio Tinto Plc and previously was Chief Executive Officer of Lihir Gold Ltd.



APPENDIX C: MANAGEMENT TEAM

Stephen Rogers, President & Chief Executive Officer (Formerly Chief Development Officer of Nautilus)

Mr. Rogers joined Nautilus from Clough Limited (one of Australia's largest multi-disciplinary engineering firms) where he was CEO for oil and gas. He has 30 years of experience in project and corporate management and has extensive deepwater offshore project development experience. Over the last 15 years Mr. Rogers has worked at steering committee and project director level on capital intensive projects with values in excess of US$1 billion. Mr. Rogers succeeded Mr. David Heydon as President and CEO, effective June 04, 2008.

Anthony O'Sullivan, Chief Operating Officer

Mr. O'Sullivan joined Nautilus as Vice-President - Corporate Development and later became Chief Operating Officer. Mr. O'Sullivan has 18 years of international experience in the mining industry, 15 of which were with BHP Billiton where he held several senior positions.

Shontel Norgate, Chief Financial Officer

Ms. Norgate previously was the financial controller of Macarthur Coal Ltd. She has several years of experience in the resources industry and is a qualified Chartered Accountant.

Michael Johnston, Vice-President - Corporate Development

Formerly general manager for Exploration with Placer Dome, Mr. Johnston has 20 years' experience in the mining industry, primarily within the Asia-Pacific region. He also has a strong understanding of all aspects of deep sea mining, through his management of Placer Dome's involvement in the Solwara Projects.

Scott Trebilcock, Vice-President - Business Development

Mr. Trebilcock is a professional engineer with over 12 years of experience in the metallurgical, mining and materials industries and has worked with companies such as Hatch Associates, Noranda Inc and DuPont Canada. Prior to joining Nautilus, he worked with PRTM, consulting to Fortune 100 chemicals, materials and energy firms.

Mel Togolo, PNG Country Manager

Mr. Togolo has 25 years' experience working in senior roles in industry and government, both internationally and in Papua New Guinea, and is the vice-president of the Business Council of Papua New Guinea.

Paul Tamoepeau, Tonga Country Manager

Mr. Tamoepeau has over 16 years experience working in the public and private sector in Tonga. Mr. Tamoepeau is Vice President of the Tonga Chamber of Commerce & Industry.



APPENDIX D: DETAILS OF NAUTILUS’ EXPLORATION TENEMENTS

At the end of 2007, Nautilus had approximately 154,000 km2 of granted tenements, and approximately 210,000 km2 of applications for tenements in the territorial waters and Exclusive Economic Zones (EEZ) of Papua New Guinea, Tonga, Solomon Islands, Fiji and New Zealand, for a total area of 365,000 km2. Teck Cominco Limited (Teck) has the option to participate and fund exploration on a number of Nautilus tenements in PNG, Fiji, and Tonga. As part of the agreement, Teck is currently conducting an exploration program on Nautilus's tenements.

Papua New Guinea (PNG) Tenements - As of March 31, 2008 Nautilus had been granted 19 exploration licenses and has a further 71 tenements in applications, in the Bismarck and Solomon Seas, encompassing approximately 205,000 km2 in area. Teck Cominco has the option to explore the majority of this tenement base excluding the Solwara 1 to 8 projects (a 17,000 km2 tenement package in PNG) and applications in Tonga and Fiji applied for before October 20, 2006 which remains 100% owned by Nautilus.

Tonga Tenements - As of March 31, 2008, Nautilus had been granted 16 offshore exploration licenses covering 78,977 km2, being an area containing most known prospects and the exploration licenses cover a strike of over 900 km of highly prospective geology known to contain SMS occurrences. Nine of the 16 granted titles in Tonga licenses are 100% owned by Nautilus, and the other seven Tongan licenses subject to exploration by Teck under the JV agreement.

Solomon Island Tenements - As of November 31, 2008 Nautilus had been granted 14 tenements covering 10,641 km2 in the Exclusive Economic Zone (EEZ) of the Solomon Islands, with 100% of these licenses owned by Nautilus.

Fiji Tenements - As of March 31, 2008 Nautilus has applied for 9 tenements covering 18,341 km2 in the EEZ of Fiji.

New Zealand Tenements - As of March 31, 2008 Nautilus has applied for 1 tenement covering 48,200 km2 in New Zealand's EEZ.



APPENDIX E. CONCEPTUAL MODEL SUMMARY 2008E 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E

Metal PricesCopper ($/lb) $3.25 $3.00 $2.35 $2.00 $1.60 $1.60 $1.60 $1.60 $1.60 $1.60 $1.60 $1.60Gold ($/oz) $938 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000Zinc ($/lb) $1.15 $1.10 $1.00 $0.90 $0.80 $0.80 $0.80 $0.80 $0.80 $0.80 $0.80 $0.80

ReservesBeginning Resource (mn tonne) 2.2 2.2 2.2 4.0 5.1 5.7 6.1 6.4 6.5 6.7 4.9 3.1Reserves processed 0.0 0.0 (0.2) (0.9) (1.4) (1.6) (1.7) (1.8) (1.8) (1.8) (1.8) (1.8)Reserves added 0.0 0.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 0.0 0.0 0.0End of year reserves (mn tonnes) 2.2 2.2 4.0 5.1 5.7 6.1 6.4 6.5 6.7 4.9 3.1 1.2

Mining & Processing Tonnes of Ore Processed (daily) 0 0 500 2,500 3,750 4,500 4,750 5,000 5,000 5,000 5,000 5,000Copper Head Grade (% ) 0.00% 0.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00% 7.00%Copper Recovery (% ) 0% 0% 85% 85% 85% 85% 85% 85% 85% 85% 85% 85%Annual Copper production (MM lbs) 0.0 0.0 23.9 119.7 179.5 215.5 227.4 239.4 239.4 239.4 239.4 239.4Copper Revenue (US$MM) $0.0 $0.0 $56.3 $239.4 $287.3 $344.7 $363.9 $383.0 $383.0 $383.0 $383.0 $383.0Gold Head Grade (g/t) 0.00 0.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00Gold Recovery (%) 0% 0% 90% 90% 90% 90% 90% 90% 90% 90% 90% 90%Gold Produced (troy ounces) 0 0 31,684 158,420 237,630 285,156 300,998 316,840 316,840 316,840 316,840 316,840Gold revenue (US$MM) $0.0 $0.0 $31.7 $158.4 $237.6 $285.2 $301.0 $316.8 $316.8 $316.8 $316.8 $316.8

Operating CostsOnsite costs (US$/tonne mined) $0 $0 $125 $125 $125 $125 $125 $125 $125 $125 $125 $125Offsite Costs (US$/tonne mined) $0 $0 $80 $77 $75 $75 $75 $75 $75 $75 $75 $75

Captial Costs (US$MM)Capital Expenditures $75.0 $150.0 $25.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0Sustaining Capital $0.0 $0.0 $7.0 $7.0 $7.0 $7.0 $7.0 $7.0 $7.0 $7.0 $7.0 $7.0Total Capex $75.0 $150.0 $32.0 $7.0 $7.0 $7.0 $7.0 $7.0 $7.0 $7.0 $7.0 $7.0

US$MM 2008E 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E

MINE INCOME STATEMENT

Revenue $0.0 $0.0 $70.0 $349.9 $524.9 $629.9 $664.9 $699.9 $699.9 $699.9 $699.9 $699.9On-site costs (Mine operating costs) $0.0 $0.0 $22.8 $114.1 $171.1 $205.3 $216.7 $228.1 $228.1 $228.1 $228.1 $228.1Off-site costs $0.0 $0.0 $14.6 $70.7 $102.4 $122.9 $129.8 $136.6 $136.6 $136.6 $136.6 $136.6Mine Operating Income $0.0 $0.0 $32.6 $165.2 $251.4 $301.6 $318.4 $335.2 $335.2 $335.2 $335.2 $335.2

Royalties $0.0 $0.0 $0.7 $3.7 $5.7 $6.8 $7.2 $7.5 $7.5 $7.5 $7.5 $7.5SG&A $6.0 $6.0 $6.0 $6.0 $6.0 $6.0 $6.0 $6.0 $6.0 $6.0 $6.0 $6.0Total Operating Income ($6.0) ($6.0) $25.9 $155.5 $239.7 $288.8 $305.2 $321.6 $321.6 $321.6 $321.6 $321.6

Exploration $20.0 $20.0 $33.0 $33.0 $33.0 $33.0 $33.0 $33.0 $33.0 $33.0 $33.0 $33.0EBITDA ($26.0) ($26.0) ($7.1) $122.5 $206.7 $255.8 $272.2 $288.6 $288.6 $288.6 $288.6 $288.6

Depreciation $0.0 $0.0 $32.0 $32.0 $32.0 $32.0 $32.0 $32.0 $32.0 $32.0 $32.0 $32.0Earnings Before Tax (EBT) ($26.0) ($26.0) ($39.1) $90.5 $174.7 $223.8 $240.2 $256.6 $256.6 $256.6 $256.6 $256.6

Effective Tax rate (%) 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35% 35%Current taxes $0.0 $0.0 $0.0 $31.7 $61.1 $78.3 $84.1 $89.8 $89.8 $89.8 $89.8 $89.8Net income ($26.0) ($26.0) ($39.1) $58.8 $113.6 $145.5 $156.1 $166.8 $166.8 $166.8 $166.8 $166.8

Add: Depreciation $0.0 $0.0 $32.0 $32.0 $32.0 $32.0 $32.0 $32.0 $32.0 $32.0 $32.0 $32.0Deduct: Capex $75.0 $150.0 $32.0 $7.0 $7.0 $7.0 $7.0 $7.0 $7.0 $7.0 $7.0 $7.0Mine cash flow (US$MM) ($101.0) ($176.0) ($39.1) $83.8 $138.6 $170.5 $181.1 $191.8 $191.8 $191.8 $191.8 $191.8Cash Flow from Operations ($26.0) ($26.0) ($7.1) $90.8 $145.6 $177.5 $188.1 $198.8 $198.8 $198.8 $198.8 $198.8

Source: Company reports, Thomas Weisel Partners LLC estimates



APPENDIX F: OPTIONS AND WARRANT SCHEDULE

(As of March 31, 2008)

SharesWeighted average

remaining contractual life (years)

Weighted average exerciseable price

(C$)Implied Expiry Date Shares Weighted average

exercise price (C$)

587,667 0.2 $1.40 June 12, 2008 587,667 $1.403,409,964 1.0 $2.22 March 31, 2009 2,369,964 $2.222,445,000 2.5 $3.20 September 29, 2010 1,168,500 $3.202,283,639 2.3 $4.69 July 18, 2010 517,160 $4.754,530,000 4.5 $5.33 September 28, 2012 100,000 $5.12425,000 2.2 $6.38 June 12, 2010 85,000 $6.38

13,681,270 2.6 $3.93 4,828,291 $2.76

SharesWeighted average

remaining contractual life (years)

Weighted average exerciseable price

(C$)Expiry Date Shares Weighted average

exercise price (C$)

48,611 0.1 $1.50 May 4, 2008 48,611 $1.50750,000 0.2 $5.26 June 1, 2008 750,000 $5.26185,000 0.7 $3.47 December 7, 2008 185,000 $3.47549,395 0.8 $4.53 February 2, 2009 549,395 $4.53549,910 0.8 $4.22 February 2, 2009 549,910 $4.22

10,540,874 0.9 $5.66 February 21, 2009 10,540,874 $5.663,257,907 1.7 $3.80 November 28, 2009 3,257,907 $3.80

15,881,697 1.0 $5.13 15,881,697 $5.13

Exerciseable optionsTotal options outstanding

Optio

ns O

utst

andi

ngW

arra

nts O

utst

andi

ng

Total warrants outstanding Exerciseable warrants

Sources: Company reports and Thomas Weisel Partners LLC



APPENDIX G: TECHNICAL ALLIANCES AND PARTNERSHIPS

Company Name Nature of Alliance Company Description

North Sea Shipping Holding AS

Contract to build and operate specialized Mining Support Vessel (MSV) for Solwara 1

North Sea Shipping is a leading Norwegian ship owner and operator in the offshore oil and gas industry.

Soil Machine Dynamics (SMD)

Contract to build the Subsea Mining Tools for Solwara 1.

SMD is one of the world's leading subsea engineering companies and specializes in the design and manufacture of remotely operated vehicle ("ROV") systems.

Technip SA (TEC-PAR, €51.02, Not Covered)

EPCM Contract for Solwara 1's riser and lifting system.

Technip is an integrated group providing engineering, technologies and construction services to the oil/gas and petrochemical industry worldwide. Technip ranks among the 5 major players in full-service engineering and construction services in the field of hydrocarbons and petrochemicals.

Canyon Offshore Inc. - part of Helix Energy Solutions Group Inc. (HLX-N,$38.39, Not Covered)

Contracts for provision of marine services and ROV drilling equipment to support the Nautilus exploration program.

Canyon provides ROV systems and skilled offshore teams for critical-path deepwater construction and specialty marine contracting projects.

Ocean Floor Geophysics Inc

Partnered with Nautilus and Teck Cominco to develop and deploy the new deep-ocean electromagnetic technology used in the deep-sea exploration program.

Ocean Floor Geophysics (a partnership between Frontier Geosciences Inc, PK Geophysics Inc and Cellula Robotics Ltd.) offers comprehensive geophysical consulting and survey services to industries such as mineral exploration and civil engineering.

Perry Slingsby Systems

Perry designed and built the 20m ROV drills used in the 2007 drilling program on Solwara 1.

Perry Slingsby is a leading global manufacturer of deep ocean remote operated vehicles (ROV) for the oil/gas and telecommunications industries.

Coffey Natural Systems – division of Coffey International Ltd (COF-AU, A$1.98, Not Covered)

Lead consultant on the EIS for Nautilus’ 100% owned Solwara 1 project.

Coffey Natural Systems is a specialist environmental and social impact assessment consultancy servicing the mining, oil and gas and infrastructure sectors for 29 years.

Source: Company Reports, FactSet and Thomas Weisel Partners LLC



APPENDIX H: NAUTILUS MINERALS - HISTORICAL STOCK PRICE PERFORMANCE ALONG WITH A TIMELINE OF KEY EVENTS

7/06 10/06 1/07 4/07 7/07 10/07 1/08 4/08 7/08

2

3

4

5

6

7

8

Barrick converts JV to

9.6% stake ($2.08)

Teck Cominco

exercises 3 MM warrants

(US$5.00)

NUS Graduates to the TSX from the Venture exchange

NUS Releases

43-101 Resource at Solwara 1

Heads of Agreement

with Belgium based Jan de

Hul to build deep sea

mining vessel

Reverse takeover of Orka; NUS

starts trading on TSX-V ($2.00)

Anglo American invests

US$25 MM ($3.37)

Teck Cominco

invests $35.4MM ($3.76)

US$175 MM financing in AIM & North

America ($4.30)

ABCP Crisis

Epion invests$39.1 MM ($3.60)

Lapse of mining

services agreement

with dredgingcontractor, Jan de Nul

Vessel contract

signed with North Sea Shipping Holding

Cash value - $2.13 per

share

©FactSet Research Systems

Nautilus Minerals Inc. (NUS-CA)10-May-2006 to 11-Jul-2008 (Daily) High:7.39 Low: 1.84 Last: 1.93

Source: FactSet and Thomas Weisel Partners LLC



ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST.

ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES: The Research Analyst(s) principally responsible for the analysis of any security or issuer included in this report certifies that the views expressed accurately reflect the personal views of the Research Analyst(s) about the subject securities or issuers and certifies that no part of his or her compensation was or is or will be, directly or indirectly, related to the specific recommendations or views expressed by the Research Analyst(s) in this report. Our European Conflicts Management Policy is available on our website at http://www.tweisel.com

Notes: Price chart updated as of 7/11/2008. All price targets displayed in the chart above represent either a specific price target or the midpoint of a range. Prior to November 16, 2006, Thomas Weisel Partners LLC used a three-tier rating system with different rating names and definitions: Outperform, Peer Perform and Underperform. Source: First Call, FactSet and Thomas Weisel Partners LLC Nautilus Minerals Inc.: Our 12-month price target of $4.50 is in line with our NAV estimate. There are always risks that the price target for any security will not be realized. In addition to general market and macroeconomic risks, investors in Nautilus Minerals may be subject to a number of risks including: (1) potential failure of an unproven mining method, (2) potential inability to obtain the necessary permits, (3) unforeseen escalation in capital and operating costs, (4) potential decline in metal prices, (5) potential weakening of the US dollar, (6) potential dilution from future issuance of debt or equity.



The following table outlines the Thomas Weisel Partners LLC stock rating system, along with the relevant definitions, effective November 16, 2006.

PCT. OF PCT. FOR SECURITIES WHICH IB

STOCK RATED IN SERVICES HAVE RATING STOCK RATINGS DEFINITIONS EACH CATEGORY BEEN PROVIDED

Overweight (O)

When an analyst rates a stock Overweight, he/she is advising our clients to carry a position in the stock that is in excess of its weighting relative to the stocks either in that analyst's coverage or an index identified by the analyst that includes, but is not limited to, stocks covered by that analyst.

54.7% 31.6%

Total Buy 54.7% 31.6%

Market Weight (M)

When an analyst rates a stock Market Weight, he/she is advising our clients to carry a position in the stock that is in line with its weighting relative to the stocks either in that analyst's coverage or an index identified by the analyst that includes, but is not limited to, stocks covered by that analyst.

42.1% 10.1%

Total Hold 42.1% 10.1%

Underweight (U)

When an analyst rates a stock Underweight, he/she is advising our clients to carry a position in the stock that is below its weighting relative to the stocks either in that analyst's coverage or an index identified by the analyst that includes, but is not limited to, stocks covered by that analyst.

3.3% 0.0%

Total Sell 3.3% 0.0%

Suspended Rating (S) The stock rating has been suspended.

Not Rated (NR) The stock is not rated, but it is covered by a Thomas Weisel Partners LLC analyst.

Not Covered (NC) The stock is not covered by a Thomas Weisel Partners LLC analyst.

Notes: The percentage of investment banking services is calculated as of 3/31/2008. The percentage of securities rated in each category is calculated as of 7/14/2008. The new rating system is effective 11/16/2006. An analyst's coverage universe is defined as all of the stocks within the analyst's industry that reasonably are part of his/her potential coverage, not necessarily the stocks specifically covered. "Buy", "Hold" and "Sell" are not ratings categories defined by Thomas Weisel Partners LLC and should not be interpreted as investment opinions. We show these categories for illustrative purposes in accordance with NASD and NYSE regulations. The above table includes Thomas Weisel International stocks. Source: FactSet and Thomas Weisel Partners LLC

The following grid outlines the Thomas Weisel Partners LLC industry rating system, along with the relevant definitions, effective November 16, 2006.

INDUSTRY RATINGS INDUSTRY RATINGS DEFINITIONS

Favorable When an analyst assigns a Favorable rating to an industry that means he/she believes that, generally, the industry's fundamentals or stock prospects are improving.

Neutral When an analyst assigns a Neutral rating to an industry that means he/she believes that, generally, the industry's fundamentals or stock prospects are stable.

Unfavorable When an analyst assigns an Unfavorable rating to an industry that means he/she believes that, generally, the industry's fundamentals or stock prospects are deteriorating.

Source: Thomas Weisel Partners LLC



The following grid outlines the Thomas Weisel Partners LLC stock rating system, along with the relevant definitions, in effect from April 4, 2003, to November 16, 2006.

COMPANY RATING RATINGS DEFINITION

Outperform (O) The stock is expected to outperform the median performance of the Analyst's coverage universe over the next six to 12 months.

Peer Perform (P) The stock is expected to perform in line with the median performance of the Analyst's coverage universe over the next six to 12 months.

Underperform (U) The stock is expected to underperform the median performance of the Analyst's coverage universe over the next six to 12 months.

Suspended Rating (S) The stock rating has been suspended. Not Rated (NR) The stock is not rated, but it is covered by a Thomas Weisel Partners LLC analyst.

Not Covered (NC) The stock is not covered by a Thomas Weisel Partners LLC analyst.

SECTOR RATING SECTOR RATING DEFINITION Overweight (OW) The Analyst's coverage universe is expected to outperform the S&P 500 over the next six to 12 months.

Market Weight (MW) The Analyst's coverage universe is expected to perform in line with the S&P 500 over the next six to 12 months.

Underweight (UW) The Analyst's coverage universe is expected to underperform the S&P 500 over the next six to 12 months.

Source: Thomas Weisel Partners LLC

This report contains statements of fact relating to economic conditions generally and to parties other than Thomas Weisel Partners. Although these statements of fact have been obtained from and are based on sources that Thomas Weisel Partners believes to be reliable, we do not guarantee their accuracy and any such information might be incomplete or condensed. All opinions and estimates included in this report constitute Thomas Weisel Partners LLC's judgment as of the date of this report and are subject to change without notice. This report is for information purposes only. It is not intended as an offer or a solicitation with respect to the purchase or sale of a security, and it should not be interpreted as such. This report does not take into account the investment objective, financial situation or particular needs of any particular investor. Investors should obtain individual financial advice based on their own particular circumstances before making an investment decision based on the recommendations in this report.

Thomas Weisel Partners International Limited, which is authorized and regulated by the Financial Services Authority, has approved this document for the purposes of the financial promotion regime under Section 21 of the Financial Services and Markets Act of 2000 for communication only to eligible counterparties and professional clients. It is not intended for communication to retail customers and it may not and is not intended to be passed on, directly or indirectly, to retail customers. The investments and/or services detailed in this document are available only to eligible counterparties and professional clients, and only they should rely upon this document. Retail clients should not rely on the contents of this document in any way. © Thomas Weisel Partners LLC, 2008. All rights reserved. Any unauthorized use, duplication or disclosure is prohibited by law and will result in prosecution.

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E Q U I T Y R E S E A R C H D I R E C T O R Y

R. Keith Gay • Head of Research • [email protected] • 415.364.2582

John Grandy • Associate Head of Research • [email protected] • 416.815.3067 Cons umer

Gaming & Lodging and Interactive Market Services Jake Fuller [email protected] 212.271.3821

Timothy Forrester 212.271.3843

Lifestyles/Sports Retailers Jim Duffy [email protected] 415.364.5974

Christian Buss 415.364.2519 Sam Bitetti 617.488.4630

Retailing: Hardlines Matt Nemer [email protected] 415.364.5901

Trisha Dill, CFA 415.364.2619

Retailing: Softlines Liz Dunn [email protected] 212.271.3806

Bill Strauss 212.271.3425 Christina Colone 212.271.3582

Ene rg y

Alternative Energy Jeff Osborne [email protected] 212.271.3577

Dilip Warrier 415.364.2983 Scott Reynolds 212.271.3429

Energy Equipment and Services Dana Benner, CFA [email protected] 403.268.9168

Lara King, CFA 403.268.9150 Chris LeGrow 403.268.9169

International Oil & Gas David Dudlyke [email protected] +44 207.877.4410

Quinn Sievewright +44 207.877.4412 Thomas Martin +44 207.877.4411

Oil & Gas Exploration and Production Kurt Molnar [email protected] 403.268.9156 Michael Scialla [email protected] 720.479.2435

Daniel Guffey 720.479.2437

Alistair Toward, CFA [email protected] 403.268.9153

Juan Jarrah 403.268.9164

Fina nc ia l Se rv ic es

Diversified Financials Horst Hueniken, CFA [email protected] 416.815.1633

Ari Black 416.815.3103

Real Estate Investment Trusts Dean Wilkinson, CFA [email protected] 416.815.3124

Rahul Paul 416.815.3128

Hea l t hca re

Biotechnology Ian Somaiya [email protected] 212.271.3761

Michael Ulz 212.271.3423 Sasha Blaug, PhD 212.271.3818

Stephen Willey [email protected] 212.271.3620

Healthcare Information Technology and Pharmaceutical Services Steven P. Halper [email protected] 212.271.3807

Alan Fishman 212.271.3679 Topher Orr 212.271.3659

Life Science and Diagnostics Peter Lawson, PhD [email protected] 212.271.3859

Eric Criscuolo 212.271.3592

Medical Devices Raj Denhoy [email protected] 212.271.3698

Jared Holz 212.271.3644 Philip E. Legendy [email protected] 212.271.3762

Pharmaceuticals: Specialty Donald B. Ellis, PharmD [email protected] 415.364.7038

Aaron Mishel 415.364.2622 Yumi Odama 415.364.5965

I n te rne t , Me d ia a nd Te le c om

Broadcasting and Entertainment Ben Mogil [email protected] 416.815.3078

Benjamin Shapiro 416.815.3106

Internet Services Christa Quarles, CFA [email protected] 415.364.7154

Cyrus Modanlou 415.364.2976 Jennifer Wang, CFA 415.364.2590

Media & Entertainment Lloyd Walmsley [email protected] 415.364.2584

Telecom Services James D. Breen, Jr., CFA [email protected] 617.488.4107

Louie DiPalma 617.488.4167 Shane J. Larkin 617.488.4108

Meta ls a nd Min ing

Gold & Precious Metals Heather Douglas, CFA [email protected] 416.815.3108

Josh Wolfson 416.815.3080 Andrew Mikitchook, P. Eng., CFA [email protected] 416.815.1622

Nana Sangmuah 416.815.3113

Meta ls a nd Min ing, c ont inue d

Base Metals Matthew O’Keefe [email protected] 416.815.3087

Rahul Paul 416.815.3128

Te c hno log y

Applied Technologies Ajit Pai [email protected] 212.271.3695

Sven Eenmaa 212.271.3838 Andy Yeung, CFA 415.364.2589

Computer Systems and Storage Doug Reid, CFA [email protected] 212.271.3841

Nehal Chokshi 212.271.3653

Electronic Supply Chain Matt Sheerin [email protected] 212.271.3753

Alberto Mann 212.271.3635 Aaron Berman 212.271.3427

Information & Financial Technology Services David Grossman [email protected] 415.364.2541

Nicole Conway 415.364.5934 Melissa Moran, CFA 415.364.2586

Semiconductors: Analog & Mixed Signal Tore Svanberg [email protected] 650.688.5261

Evan Wang 650.688.5263 Brian Williamson 415.364.2550

Semiconductors: Multimedia & Specialty Heidi T. Poon, CFA [email protected] 415.364.2505

Semiconductors: Processors & Components Kevin Cassidy [email protected] 650.688.5264

Software: Applications Blair Abernethy, CFA [email protected] 416.815.3050

Doug Taylor 416.815.3127

Software: Applications & Communications Tom Roderick [email protected] 415.364.5952

Gur Talpaz 415.364.2608 Chris Koh 415.364.2655

Software: Infrastructure Tim Klasell [email protected] 415.364.2949

Dormain Geyer 415.364.2807 Marc Griffin 415.364.6951

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NUS - Initiating Coverage (July 14, 2008)

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