argent minerals (ard) november kempfield drilling vms...

Argent Minerals (ARD) 8 November 2014

Kempfield : drilling VMS potential The sought after prize gives a great return……..

IF our mining inventory and cap.ex & op.ex are OK

See Page 8 for Disclaimer and Disclosures 8 November 2014

Recommendation ■ Beer & Co’s valuation of ARD is Speculative BUY as we base it on our speculation of the mining inventory that ARD will uncover from current drill programmes at Kempfield.

■ Beer & Co has used a mining inventory of 15Mt at 3.0% Zn, 1.0% Pb, 25g/t Ag and 0.25g/t Au. This is informed by an intercept of 18m at 9.8% Zn+Pb, 113g/t Ag and the geological model showing increasing base metal grades to the west.

■ Beer & Co expects that it will be mid 2015 before a revised Resource estimate is announced, but ARD should have good newsflow from drilling until then.

Speculative BUY

Price

2.9c

Valuation

14c

Snapshot Market Cap $4.5m

Cash on hand (30 Sept 2014) $0.6m

Shares on Issue 153.6m

52 Week High 5.9c

52 Week Low 2.0c

1 month / 6 month VWAP 3.0c / 2.9c

ARD : daily share price v. value traded

$ 0k

$ 10k

$ 20k

$ 30k

$ 40k

$ 50k

$ 60k

0.0c

2.0c

4.0c

6.0c

8.0c

10.0c

12.0c

1‐Oct‐12 1‐Jan‐13 1‐Apr‐13 1‐Jul‐13 1‐Oct‐13 1‐Jan‐14 1‐Apr‐14 1‐Jul‐14 1‐Oct‐14

ARD’s focus project is Kempfield, 50km from Bathurst in NSW, in the Lachlan Orogen. Its current Resource estimate, of 21.8Mt at 47g/t Ag includes 86koz gold, while the 15.8Mt of primary ore includes 97kt of contained lead and 200kt of contained zinc.

The base metals grades increase to the west and ARD’s current drill programme is targeting lenses to the west of the current resource, following geological, geo‐chemcial and geo‐physical indicators.

ARD has earned a 70% interest in Sunny Corner, which is about 100km from Kempfield, and has an Inferred Resource of 1.5 Mt @ 3.7% Zn, 2.1% Pb, 0.39% Cu, 24 g/t Ag and 0.17 g/t Au.

Author : Pieter Bruinstroop [email protected]

Kempfield VMS no longer a silver project, now base metals focus

Following a geological review, led by Prof. Ross Large of the Centre of Excellence in Ore Deposits, with Dr Vladimir David, ARD’s VMS expert, the Kempfield Volcanic Massive Sulphide deposit is now seen as a polymetallic mineral system with multiple lenses. Under the new interpretation, the early, silver focussed, discoveries are the outer reaches of the mineral system, with the prospect of additional mineralised lenses that are more base metal rich closer to the source.

ARD has already reported thick intercepts grading above 4% Zn + Pb, plus Ag plus Au. The current drill programme was designed after geo‐physical and geochemical work

Two Key Questions

1. 15Mt is a modest volume, especially given that the current resource is substantially based on 2 lenses, while there are 3 more being tested. The grades assumed are supported by recent drill results.

2. Our Cap.ex estimate is based on other 1.5Mt/yr plants, plus a site visit, while our op.ex takes into account the project location.

Beer & Co believes that the estimates we have used and the assumptions made will prove to be prudent.

Upside Potential

1. West Wyalong : 1.4km by 0.8km magnetic low, IP high, with strong Cu‐Au in sampling and shallow drilling; potential for a significant Cu‐Au porphyry;

2. Kempfield silver : 11Moz oxide plus 22Moz sulphide in the current Resource, can add to the value of the infrastructure for the base metals project;

3. Sunny Corner, 100km from Kempfield, has 1.5Mt at 3.7% Zn, 2.1% Pb, 0.4% Cu, 24g/t Ag and 0.3g/t Au.

Beer & Co conclusions

Our valuation of ARD is 14c/share. This is risk weighted, reflecting the degree of estimation made by Beer & Co.

There is significant upside potential to our valuation, from successful project delivery, drilling success at Kempfield, as well as ARD’s portfolio.

Beer & Co initiates research on ARD with a Speculative BUY recommendation.

This report was produced by Beer & Co Research, an independent research and advisory firm. It is intended for wholesale investors ONLY.

If you do not wish to receive our research, please email to [email protected] with “unsubscribe” If you wish to receive, free of charge, Beer & Co research, please register at http://beerandco.com.au/all‐research/

Argent Minerals (ARD)


ARD : Kempfield base metals, plus, plus,

,

ARD has three projects in the Lachlan Orogen

Kempfield base metals is the focus

Figure 1 shows that ARD has 3 projects :

100% of Kempfield, about 50km W‐SW of Bathurst in NSW, which is ARD’s focus project;

70% of Sunny Corner, which is about 100km from Kempfield; and

51% of West Wyalong

These are all in the back arc basin margins and in Ordovician volcanic arcs of the Lachlan Orogen, which contains a number of Palaeozoic Volcanic Massive Sulphide (VMS) deposits and world class copper‐gold and gold deposits

Figure 1 : ARD has 3 projects in the Lachlan Orogen

Source : ARD presentation, August 2014

ARD has a Resource of 22Mt at Kempfield

Kempfield : now a base metals project

ARD identified a potential silver project at Kempfield in 2008, and in June 2009 announced the results of a scoping study. Figure 2 shows the most recent Resource estimate is 6Mt of oxide and nearly 16Mt of sulphide ore.

containing 33Moz of silver

Figure 2 : Kempfield Resource estimate, JORC 2012 compliant

Silver Gold Lead Zinc

oxide & transitional 6.0 Mt 55 g/t 0.11 g/t

Sulphide 15.8 Mt 44 g/t 0.13 g/t 0.6 % 1.3 %

TOTAL 21.8 Mt 47 g/t 0.12 g/t 0.6 % 1.3 %

Source : ARD ASX announcement, 16 October 2014

In November 2012, when silver was $33/oz, ARD announced the results of a Stage 1 project, focussed on the oxide resources.



ARD is now focussed on developing a base metals project at Kempfield

As the silver price subsequently fell, ARD reviewed the project.

In September 2012, ARD advised that following a review of Kempfield, led by Prof. Ross Large of the Centre of Excellence for Ore Deposits (“CODES”), together with Dr Vladimir David, ARD’s resident VMS expert, it was hypothesised that the silver and barite were the “apron” of a VMS system, travelling the furtherest from the heat core, which was yet to be located.

ARD announced, on 16 October 2014, that a review of the geological information showed that the base metals content tend to increase to the west and with depth. This points to a higher depositional temperature to the west.

Figure 3 shows this pattern, along with expected further lenses following geo‐physical surveys.

ARD has, through geology, geo‐chemistry and geo‐physics, identified significant targets

ARD has had some significant intercepts of good base metals grades outside the current Resource envelope.

Figure 3 : Kempfield’s current geologic interpretation

Source : ARD ASX announcement, 8 September 2014

To test its potential value, Beer & Co has assumed a mining inventory of 15Mt

Only a small portion Lens 3 is included in the current Resource estimate that is shown in Figure 2.

From reviewing ARD’s reported drilling results in Lens 3, in their 10 March 2014 and 16 October 2014 announcements, Beer & Co has assumed the mining inventory shown in Figure 4 for our valuation.

Of 4% base metals with some silver and gold

Figure 4 : Beer & Co’s assumed mining inventory for Kempfield


Primary 15 Mt 25 g/t 0.25 g/t 1.0 % 3.0 % Source : Beer & Co estimates

Beer & Co assumes first product ion 2018

Other assumptions by Beer & Co

Beer & Co assumes that ARD’s current drill programme, and follow‐up drilling, will lead to a revised resource estimate by the middle of 2015.

From then, we expect a Preliminary Feasibility Study and then a Definitive Feasibility Study by December 2016, with financing and permitting by mid 2017, leading to first product in April 2018.



Beer & Co assumes $7m on feasibility assessment and $136m capital cost to develop a 1.5Mt/yr project

We calculate 39kt/yr of zinc in concentrate at a cash cost of 37c/lb, aided by 51c/lb in by‐product credit from lead, silver and gold

As shown in Figure 5, we allow $7m for feasibility studies and then $136m to bring the 1.5Mt/yr polymetallic project into operation.

Figure 6 shows Beer & Co’s projected production from Kempfield.

Figure 7 shows the detail of our operating cost estimates. Kempfield is 50km from Bathurst, and so is well placed in terms of infrastructure, labour supply and general costs.

Figure 8 shows Beer & Co’s estimated product costs, of 37c/lb of zinc.

Figure 5 : Estimated Cap.ex

Feasibility Studies $ 7m

Project Capital

Processing Plant $ 65m

Mine development $ 15m

mobile plant $ 5m

Roads, water, power $ 5m

Tailings $ 5m

Offices, etc $ 5m

E P C M $ 10m

Contingency $ 11m

Initial working capital $ 15m

TOTAL $ 136m

Source : Beer & Co estimates

Figure 6 : Beer & Co’s estimated production at Kempfield

2016‐17 2017‐18 2018‐19 2019‐20 2020‐21 2021‐22 2022‐23 2023‐24 2024‐25 2025‐26 2026‐27 2027‐28

Waste Moved 0 kt 797 kt 3,979 kt 4,725 kt 5,325 kt 5,925 kt 6,525 kt 7,125 kt 7,725 kt 8,325 kt 8,887 kt 7,425 kt

Open Cut Ore 0 kt 319 kt 1,444 kt 1,500 kt 1,500 kt 1,500 kt 1,500 kt 1,500 kt 1,500 kt 1,500 kt 1,500 kt 1,238 kt

zinc 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % 3.0 %

lead 1.0 % 1.0 % 1.0 % 1.0 % 1.0 % 1.0 % 1.0 % 1.0 % 1.0 % 1.0 % 1.0 % 1.0 %

gold 0.25g/t 0.25g/t 0.25g/t 0.25g/t 0.25g/t 0.25g/t 0.25g/t 0.25g/t 0.25g/t 0.25g/t 0.25g/t 0.25g/t

silver 25g/t 25g/t 25g/t 25g/t 25g/t 25g/t 25g/t 25g/t 25g/t 25g/t 25g/t 25g/t

Recovery ‐ zinc 70 % 72 % 79 % 87 % 88 % 88 % 88 % 88 % 88 % 88 % 88 % 88 %

Zn in conc 0 t 6,915 t 34,345 t 39,296 t 39,600 t 39,600 t 39,600 t 39,600 t 39,600 t 39,600 t 39,600 t 32,670 t

Recovery ‐ lead 68 % 69 % 77 % 85 % 85 % 85 % 85 % 85 % 85 % 85 % 85 % 85 %

Pb in conc 0 t 2,228 t 11,102 t 12,675 t 12,750 t 12,750 t 12,750 t 12,750 t 12,750 t 12,750 t 12,750 t 10,519 t

Recovery ‐ silver 60 % 62 % 67 % 74 % 75 % 75 % 75 % 75 % 75 % 75 % 75 % 75 %

Ag in Conc 0 koz 158 koz 779 koz 892 koz 904 koz 904 koz 904 koz 904 koz 904 koz 904 koz 904 koz 746 koz

Recovery ‐ gold 48 % 50 % 55 % 60 % 60 % 60 % 60 % 60 % 60 % 60 % 60 % 60 %

Au in Pb conc 0 oz 1,269 oz 6,397 oz 7,235 oz 7,235 oz 7,235 oz 7,235 oz 7,235 oz 7,235 oz 7,235 oz 7,235 oz 5,969 oz


Figure 7 : Beer & Co’s estimated operating costs for Kempfield

2017‐18 2018‐19 2019‐20 2020‐21 2021‐22 2022‐23 2023‐24 2024‐25 2025‐26 2026‐27 2027‐28

WASTE $ 1.7m $ 7.6m $ 9.3m $ 10.3m $ 11.3m $ 12.4m $ 14.0m $ 15.3m $ 16.5m $ 17.5m $ 14.7m

AUD /t material 2.1 1.9 2.0 1.9 1.9 1.9 2.0 2.0 2.0 2.0 2.0

AUD /t ore 5.2 5.2 6.2 6.9 7.5 8.3 9.3 10.2 11.0 11.6 11.8

ORE MINING $ 0.8m $ 3.5m $ 3.9m $ 4.1m $ 4.3m $ 4.5m $ 4.8m $ 5.0m $ 5.2m $ 5.4m $ 4.6m

AUD /t ore 2.4 2.4 2.6 2.7 2.9 3.0 3.2 3.3 3.5 3.6 3.7

MINE PLANNING $ 0.7m $ 1.7m $ 1.7m $ 1.7m $ 1.7m $ 1.7m $ 1.7m $ 1.7m $ 1.7m $ 1.7m $ 1.5m

AUD /t ore 2.1 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2

PROCESSING $ 4.8m $ 20.9m $ 21.6m $ 21.6m $ 21.6m $ 21.6m $ 21.6m $ 21.6m $ 21.6m $ 21.6m $ 18.0m

AUD /t ore 14.9 14.5 14.4 14.4 14.4 14.4 14.4 14.4 14.4 14.4 14.5

SITE ADMIN $ 1.1m $ 3.6m $ 3.6m $ 3.6m $ 3.6m $ 3.6m $ 3.6m $ 3.6m $ 3.6m $ 3.6m $ 3.2m

AUD /t ore 3.5 2.5 2.4 2.4 2.4 2.4 2.4 2.4 2.4 2.4 2.6

SALES $ 1.3m $ 6.0m $ 6.5m $ 6.5m $ 6.5m $ 6.5m $ 6.5m $ 6.5m $ 6.5m $ 6.5m $ 5.4m


Figure 8 : Detail of estimated product cost

US c/lb of Zinc e Of Mine 2017‐18 2018‐19 2019‐20 2020‐21 2021‐22 2022‐23 2023‐24 2024‐25 2025‐26 2026‐27 2027‐28

Waste 13 c/lb 9 9 9 10 11 12 14 15 16 17 17

Mining 5 c/lb 4 4 4 4 4 4 5 5 5 5 5

Mine overhead 2 c/lb 4 2 2 2 2 2 2 2 2 2 2

Processing 21 c/lb 27 23 21 21 21 21 21 21 21 21 21

Site Admin 4 c/lb 6 4 3 3 3 3 3 3 3 3 4

Transport 6 c/lb 7 7 6 6 6 6 6 6 6 6 6

TC/RC 33 c/lb 36 34 33 33 33 33 33 33 33 33 33

net by‐product credit (51c/lb) (50) (50) (51) (51) (51) (51) (51) (51) (51) (51) (51)

Royalties 5 c/lb 5 5 5 5 5 5 5 5 5 5 5

Sustaining Capital 2 c/lb 0 2 2 2 2 2 2 2 2 2 0

TOTAL 37 c/lb 49 c/lb 40 c/lb 35 c/lb 35 c/lb 37 c/lb 38 c/lb 40 c/lb 41 c/lb 42 c/lb 43 c/lb 42 c/lb




In valuing Kempfield, Beer & Co has assumed Treatment Charges of $200/t of conc for both lead and zinc, with 85% of zinc payable and 95% of lead payable.

Figure 8 shows

The greatest single cost is the treatment charges, which we have assumed to be $200/t of concentrate, though we expect it should be less, plus metal deductions (eg 85% of zinc payable);

Net by‐product credits make a big contribution to the low cash costs; as shown in Figure 9, the by‐product credits, for lead, silver and gold, together represent over a third of the project revenue.

Figure 9 : Net Revenue split


Valuation of Kempfield base metals project

Figure 10 shows the cashflows expected to be generated by the Kempfield project, given the production and costs outlined in Figures 6, 7 & 8. Figure 10 also shows the commodity price assumptions used.

Treatment charges for both zinc and lead are assumed to be $200/t, with 85% of zinc in conc and 95% of lead in conc payable, with escalation.

Figure 10 : Beer & Co projected outcomes for Kempfield project AUD m 2015‐16 2016‐17 2017‐18 2018‐19 2019‐20 2020‐21 2021‐22 2022‐23 2023‐24 2024‐25 2025‐26

AUD/USD 0.863 0.850 0.850 0.850 0.850 0.850 0.850 0.850 0.850 0.850 0.850

Zinc USD /t 3,775 4,275 3,275 2,350 2,300 2,300 2,300 2,300 2,300 2,300 2,300

Lead USD /t 2,475 2,400 2,225 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200

Silver USD /oz 23.3 23.3 23.3 23.3 23.3 23.3 23.3 23.3 23.3 23.3 23.3

Gold USD /oz 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400

Zinc produced 0.0 kt 0.0 kt 6.9 kt 34.3 kt 39.3 kt 39.6 kt 39.6 kt 39.6 kt 39.6 kt 39.6 kt 39.6 kt

Lead produced 0.0 kt 0.0 kt 2.2 kt 11.1 kt 12.7 kt 12.8 kt 12.8 kt 12.8 kt 12.8 kt 12.8 kt 12.8 kt

Gold produced 0 oz 0 oz 1,269 oz 6,397 oz 7,235 oz 7,235 oz 7,235 oz 7,235 oz 7,235 oz 7,235 oz 7,235 oz

Silver produced 0 koz 0 koz 158 koz 779 koz 892 koz 904 koz 904 koz 904 koz 904 koz 904 koz 904 koz

Zinc Revenue 0.0 0.0 23.0 94.6 106.3 107.2 107.2 107.2 107.2 107.2 107.2

Zn TC / RC 0.0 0.0 (6.5) (30.7) (33.3) (33.6) (33.6) (33.6) (33.6) (33.6) (33.6)

Lead Revenue 0.0 0.0 5.8 28.7 32.8 33.0 33.0 33.0 33.0 33.0 33.0

Pb TC / RC 0.0 0.0 (2.3) (11.3) (12.5) (12.5) (12.5) (12.5) (12.5) (12.5) (12.5)

By‐products, net 0.0 0.0 5.5 27.4 31.3 31.6 31.6 31.6 31.6 31.6 31.6

Cash Costs 0.0 0.0 (10.2) (43.2) (46.5) (47.8) (49.0) (50.3) (52.1) (53.7) (55.1)

Royalties 0.0 0.0 (1.0) (4.1) (4.7) (4.8) (4.8) (4.8) (4.8) (4.8) (4.8)

Dep'cn & Amort'sn 0.0 0.0 (3.1) (14.3) (17.1) (17.2) (17.2) (17.2) (16.6) (16.6) (16.6)

E B I T 0.0 0.0 11.2 47.0 56.3 56.0 54.7 53.4 52.2 50.7 49.3

Interest Expense 0.0 0.0 (3.8) (5.9) (4.9) (3.7) (2.5) (1.1) 0.0 0.0 0.0

Tax Expense 0.0 0.0 (3.4) (14.1) (16.9) (16.8) (16.4) (16.0) (15.7) (15.2) (14.8)

N P A T 0.0 0.0 4.0 27.0 34.5 35.4 35.8 36.2 36.5 35.5 34.5

Feasibility, etc (5.2) (1.4) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Project Cap.Ex 0.0 (68.0) (68.0) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Sus. Cap. Ex 0.0 0.0 0.0 (2.2) (2.3) (2.3) (2.3) (2.3) (2.3) (2.3) (2.3)

Net Cashflow (5.2) (69.4) (60.9) 39.2 49.4 50.4 50.7 51.2 50.9 49.8 48.8


Beer & Co’s valuation for Kempfield is $A107m

Figure 11 shows the NPV, using a 10% discount rate, of the after‐tax cashflows shown in Figure 10. At the time of this report, the value is $A 107m.

Figure 11 : Valuation of Kempfield base metals project

AUD m 30‐Jun‐13 30‐Jun‐14 30‐Jun‐15 30‐Jun‐16 30‐Jun‐17 30‐Jun‐18

NPV at 10% 93 102 115 129 211 294




Beer & Co assume that ARD sells a 40% stake in the Kempfield project to an industry partner, such as a trader or off‐taker.

Valuation of ARD

ARD need to raise equity capital to complete feasibility studies and equity plus debt to bring Kempfield into operation. Beer & Co assumes that ARD raises $9m in equity over the next 2 years and then sells a 40% stake in the project to an off‐taker or other industry partner for a value that is related to NPV.

ARD then need to rise a small amount of further equity to bring Kempfield into operation.

Figure 12, which shows Beer & Co’s risked valuation of ARD is 14c/share, shows the extent of our risk weighting, the impact of projected equity raisings, and the fact that we have attributed only nominal value to ARD’s other assets.

Beer & Co assumes that the project is 50% debt funded

We estimate that ARD needs to raise equity for feasibility studies and to get Kempfield into production

Figure 12 : Beer & Co valuation is 14c/share 7‐Nov‐14

risk : 100% Product per share

Kempfield base metals 40 % $ 53m $ 21m 4.7 c 5.0 c

franking credits 24 % $ 23m $ 6m 1.2 c 1.3 c

Kempfield oxides nom $ 2m $ 2m 0.4 c 0.5 c

Sunny Corner nom $ 2m $ 2m 0.4 c 0.5 c

West Wyalong nom $ 1m $ 1m 0.1 c 0.1 c

Corporate 100 % ($11m) ($11m) (2.4c) (2.5c)

Exploration 100 % $ 0m $ 0m 0.0 c 0.0 c

Asset Sales 100 % $ 30m $ 30m 6.5 c 6.8 c

Cash 100 % $ 1m $ 1m 0.2 c 0.2 c

Cash to be raised 100 % $ 10m $ 10m 2.2 c 2.1 c

TOTAL $ 101m $ 50m 13.4 c 13.9 c

Shares on issue 153.6m FPO shares 59.6m options

111.1m issued 2015 0.0m ex'd

115.7m issued 2016‐17

70.7m Issued 2018‐19

discount rate = 12.0 % 30‐Jun‐14


Beer & Co’s risked base case valuation is 145c/share.

There is significant upside potential to our valuation.

We rate ARD as a Speculative BUY,

as our valuation is based on our estimates of mining inventory, capital costs and operating costs.

Conclusions

Beer & Co’s risked valuation of ARD is 14c/share. This is a multiple of the current share price.

Our recommendation is Speculative Buy, as our valuation is based on Beer & Co’s estimates of mining inventory, capital costs and operating costs.

Beer & Co feels comfortable with the estimates we have used. Beer & Co believes there is significant potential upside to our valuation from :

Successful execution of the Kempfield base metals project, leading to progressive de‐risking;

Exploitation of the silver in the current Resource estimate at Kempfield, which is likely to be economic as a project utilising the infrastructure developed for the base metals project;

Potential to develop Sunny Corner, which is 100km from Kempfield, and has an Inferred resource of 1.5Mt at 3.7% Zn, 2.1% Pb, 0.4% Cu, 24g/t Ag and 0.3g/t Au;

West Wyalong, which has a 1.4km by 0.8km magnetic low, IP high, with strong Cu‐Au in sampling and shallow drilling; potential for a significant Cu‐Au porphyry, while the tenement area has many historic mines.

In Beer & Co’s view, ARD is a BUY on the basis of the potential Kempfield base metals project. It has significant further, very real, upside potential.

We initiate research with a Speculative BUY recommendation.



Beer & Co ResearchArgent Minerals (ARD.ASX)

Year ended June 2013‐14 2014‐15 2015‐16 2016‐17 2017‐18 2018‐19 2019‐20 Year ended June 2015‐16 2016‐17 2017‐18 2018‐19 2019‐20 2020‐21

Section 1 - P&L Commodity price assumptions

Sales revenue $A m 0 0 0 0 15 65 75 AUD/USD 0.863 0.850 0.850 0.850 0.850 0.850

Interest revenue $A m 0 0 0 0 0 0 1 Zinc USD/t 3,775 4,275 3,275 2,350 2,300 2,300

Other revenue $A m 0 0 0 0 0 0 0 Lead USD/t 2,475 2,400 2,225 2,200 2,200 2,200

Total Revenue $A m 0 0 0 0 15 65 75 Silver USD/oz 23.3 23.3 23.3 23.3 23.3 23.3

Cost of Goods Sold $A m 0 0 0 0 (6) (26) (28) Mine Production, 100% basis

Royalties $A m 0 0 0 0 (1) (2) (3) Mine production 0 0 319 1,444 1,500 1,500

Exploration Expense $A m (1) 0 0 0 0 0 0 Zinc grade 3.0 % 3.0 % 3.0 % 3.0 % 3.0 % 3.0 %

Corporate Costs $A m (1) (1) (1) (2) (2) (2) (2) zinc recovery 70 % 70 % 72 % 79 % 87 % 88 %

Total Operating Expenses $A m (2) (1) (1) (2) (9) (30) (33) Lead grade 1.0 % 1.0 % 1.0 % 1.0 % 1.0 % 1.0 %

lead recovery 68 % 68 % 69 % 77 % 85 % 85 %

EBITDA $A m (2) (1) (1) (1) 7 35 43 Silver grade 25g/t 25g/t 25g/t 25g/t 25g/t 25g/t

Dep'cn & Amort'sn $A m 0 0 0 0 (2) (9) (10) silver recovery 60 % 60 % 62 % 67 % 74 % 75 %

EBIT $A m (2) (1) (1) (1) 5 26 32

Interest Expense $A m 0 0 0 0 (2) (4) (3) Attributable production (ARD share)

Other $A m Zinc '000t 0.0 0.0 4.1 20.6 23.6 23.8

Pre‐Tax Profit $A m (2) (1) (1) (1) 2 23 29 Lead '000t 0.0 0.0 1.3 6.7 7.6 7.7

Tax Expense $A m 2 0 0 0 (1) (7) (9) Silver '000 oz 0.0 0.0 94.6 467.4 535.4 542.6

NPAT $A m (0) (1) (1) (1) 2 16 21

Resources

Section 2 - Key Data Silver Gold Lead Zinc 0

Ordinary shares ‐ year end m 153.6 264.6 380.4 451.0 451.0 451.0 451.0 oxide & transitional 6.0 Mt 55 g/t 0.11 g/t 0.0 %

Fully diluted shares on issue m 153.6 264.6 380.4 451.0 451.0 451.0 451.0 Sulphide 15.8 Mt 44 g/t 0.13 g/t 0.6 % 1.3 % 0.0 %

Weighted # shares m 152.7 236.9 345.6 433.4 451.0 451.0 451.0 Total Resources 21.8 Mt 47 g/t 0.12 g/t 0.6 % 1.3 % 0.0 %

Earnings per Share (0.1c) (0.2c) (0.2c) 8.0 c 0.4 c 3.6 c 4.6 c

Dividends Per Share 0.0 c 0.0 c 0.0 c 0.0 c 0.0 c 0.0 c 0.0 c Assumed mining inventory


Section 3 - Balance Sheet Primary 15 Mt 25 g/t 0.3 g/t 1.0 % 3.0 %

Cash $A m 1 0 2 5 6 18 33

Receivables $A m 0 0 0 0 8 17 19 Asset based Valuation

Other $A m 0 0 0 0 0 0 0

CURRENT ASSETS $A m 1 0 2 5 14 36 52 07‐Nov‐14

risking 100% Product per share

Receivables $A m 0 0 0 0 0 0 0 Kempfield base metals 40 % $ 53m $ 21m 4.7 c 5.0 c

P , P & E $A m 1 1 1 41 84 92 101 franking credits 24 % $ 23m $ 6m 1.2 c 1.3 c

Mining Properties / Exploration $A m 0 2 5 7 7 7 7 Kempfield oxides nom $ 2m $ 2m 0.4 c 0.5 c

Other $A m 0 0 0 0 0 0 0 Sunny Corner nom $ 2m $ 2m 0.4 c 0.5 c

NON‐CURRENT ASSETS $A m 1 3 6 48 91 99 108 West Wyalong nom $ 1m $ 1m 0.1 c 0.1 c

TOTAL ASSETS $A m 1 3 7 53 104 135 160 Corporate 100 % ($11m) ($11m) (2.4c) (2.5c)

Exploration 100 % $ 0m $ 0m 0.0 c 0.0 c

Payables $A m 0 0 0 0 2 3 3 Asset Sales 100 % $ 30m $ 30m 6.5 c 6.8 c

Debt $A m 0 0 0 0 7 7 8 Cash 100 % $ 1m $ 1m 0.2 c 0.2 c

Other $A m 0 0 0 0 0 0 0 Cash to be raised 100 % $ 10m $ 10m 2.2 c 2.1 c

CURRENT LIABILITIES $A m 0 0 0 0 7 7 8 TOTAL $ 110m $ 61m 13.4 c 13.9 c

Shares on issue 153.6m FPO shares 59.6m options

Long Term Debt $A m 0 0 0 0 35 28 20 111.1m issued 2015 0.0m ex'd

Deferred Tax Liability $A m 0 0 0 0 0 0 0 115.7m sued 2016‐17

Other $A m 0 0 0 0 0 0 0 70.7m ssued 2018‐19

Provisions $A m 0 0 0 0 0 0 0 Estimated Cash Costs, US c/lb

NON‐CURRENT LIABILITIES $A m 0 0 0 0 35 28 20 LoM 2017‐18 2018‐19 2019‐20 2020‐21 2021‐22

TOTAL LIABILTIES $A m 0 0 0 0 42 35 28 Waste 13 9 9 9 10 11

NET ASSETS $A m 1 3 7 53 62 99 132 Mining 5 4 4 4 4 4

Mine overhead 2 4 2 2 2 2

Accumulated Profit (Loss) $A m (21) (21) (22) 14 16 32 53 Processing 21 27 23 21 21 21

Reserves $A m 1 0 (0) 4 10 30 42 Site Admin 4 6 4 3 3 3

Contributed Equity $A m 21 24 29 34 34 34 34 Transport 6 7 7 6 6 6

Total Equity $A m 1 3 7 53 61 96 129 TC/RC 33 36 34 33 33 33

net by‐product credit (51) (50) (50) (51) (51) (51)

Section 4 - Cashflow Royalties 5 5 5 5 5 5

Net Cashflow from operations $A m (1) (1) (1) (2) 7 35 42 Sustaining Capital 2 0 2 2 2 2

Net Interest Paid $A m 0 0 0 0 (2) (3) (2) TOTAL 37 c/lb 49 c/lb 37 c/lb 32 c/lb 33 c/lb 34 c/lb

Taxes Paid $A m 0 0 0 0 (3) (3) (6)

Change in Working Capital $A m 0 0 0 0 (6) (8) (1) Financial Ratios

OPERATING CASHFLOW $A m (1) (1) (1) (1) (5) 21 33 Year ended June 2014‐15 2015‐16 2016‐17 2017‐18 2018‐19 2019‐20

Revenue $A m 0 0 0 15 65 75

Exploration Expenditures $A m (1) (2) (3) (1) 0 0 0 EBITDA $A m (1) (1) (1) 7 35 43

Maintenace Capex $A m 0 0 0 0 0 (1) (1) EBIT $A m (1) (1) (1) 5 26 32

Expansion Capex $A m 0 0 0 (41) (41) 0 0 Adjusted EPS (cps) (0.2c) (0.2c) 8.0 c 0.4 c 3.6 c 4.6 c

PPE Acquisitions (Total Capex) $A m (1) (2) (3) (42) (41) (1) (1) EPS Growth (%) 13 % 4,269 % (95%) 833 % 28 %

PPE Divestments $A m 0 0 0 41 0 0 0 DPS (c) 0.0 c 0.0 c 0.0 c 0.0 c 0.0 c 0.0 c

INVESTING CASHFLOW $A m (1) (2) (3) (1) (41) (1) (1) Dividend Yield (%) 0 % 0 % 0 % 0 % 0 % 0 %

PE adj. (x) x (13) (15) 0.4 8 0.8 0.6

Change in Equity $A m 0 3 5 5 0 0 0 EV / EBITDA (x) x (4) (8) (9) 1.2 1.4 0.7

Dividends Paid $A m 0 0 0 0 0 0 0 EV / EBIT (x) x (4) (8) (9) 1.7 1.9 0.9

Change in Debt $A m 0 0 0 0 42 (7) (7) Gearing (%) 0 % 0 % 0 % 40 % 26 % 17 %

FINANCING CASHFLOW $A m 0.4 3 5 5 42 (7) (7) Return on Assets (66%) (8%) (2%) 5 % 20 % 20 %

Return on Equity (69%) (6%) (1%) 3 % 17 % 16 %

Free Cashflow $A m (2) (3) (4) (2) (46) 20 31 EBITDA Margin (%) n/a n/a n/a n/a 43 % 54 %

Net Cashflow $A m (2) (0) 1 3 (4) 13 24 Interest Cover (x) x n/a n/a n/a n/a 2.1 7.4

30‐Jun‐14discount rate = 12.0 %

November 2014



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