CREATING VALUE ACROSS THE RESOURCES SECTOR

Raising finance in today’s market place

RICHARD CHASEManaging Director

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“At some point the quantitative easing will come to an end,

but until it does this bull market is sponsored by

governments and everyone should enjoy it.” Global financial model:

1.Find rainbow2.Borrow against expectation of finding crock of gold

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Global Mining Offers – Market Share by Proceeds

Global Mining Offers – Market Share by Number

New Issues on AIM

4China: Driving demand for natural resources

27%

28%

35%

35%

38%

58%

0% 10% 20% 30% 40% 50% 60% 70%

Nickel

Copper

Aluminium

Zinc

Energy Coal

Iron OreAutos & Shipbuilding

5%

Home Appliances1%

Metal Goods6%

Other6%

Machinery20%

Infrastructure14%

Construction48%

China’s Urban Residential Floor Space(Billions of Square Metres)

Source: CRU, Brook Hunt, IISI, PEL, China Customs, BHP Biliton estimates

Source: McKinsey & Co, BHP Billiton Estimates

Source: BHP Billiton Estimates

33

24

18

9

5

10

15

20

25

30

35

2000 2008 2015 2025

5Sharp Recovery in Natural Resources Sector

China’s Economic Recovery in 2009(% growth year-on-year to August 2009)

Industrial Production +12.3%

Fixed Asset Investment +33.3%

Construction Materials Sector +36.6%

Passenger Car Sales +90.0%

Exports (23.4%)

Rebound in Natural Resources

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40

60

80

100

120

140

160

Jan 08

Feb 08

Mar 08

Apr 08

May 08

Jun 08

Jul 08

Aug

 08

Sep 08

Oct 08

Nov

 08

Dec

 08

Jan 09

Feb 09

Mar 09

Apr 09

May 09

Jun 09

Jul 09

Aug

 09

Sep 09

FTSE All Share Mining Oil Copper Gold

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www.cartoonstock.com

7Equity Finance – Deeply discounted issues in H1 2009

Price (p) Discount Raised (£m) Current Price

RIO TINTO RIGHTS June 1400 50% 7,342 2664

XSTRATA RIGHTS March 210 40% 4,106 916

LONMIN RIGHTS May 900 40% 316 1681

GEM DIAMONDS PLACING April 100 33% 75 248

AQUARIUS PLATINUM PLACING March 180 10% 83 282

AQUARIUS PLATINUM RIGHTS April 115 36% 48 282

• UK financings in H1 were dominated by balance sheet repair • 25% of institutional cash flow was hoovered-up by the top 3 transactions

8Junior Company Equity Finance

Bank lending has become more conservative....and expensive

Equity financing can be completed more quickly....and with less rigour ( !? )

Carpe Diem: gold companies, in particular, feel an urgency

Quality projects are finding equity financing.

9Equity Finance – A Currency for Acquisitions

$86.5 million

Avocet Mining plc

Recommended all share offer for Wega Mining

April 2009

Joint Financial Adviser and Broker

$314.7 million

Sylvania Resources Limited

Recommended all share offer by Ruukki Group

Nominated Adviser

June 2009

£1.8 million

Dwyka Resources Limited

Recommended all share offer for Minerva

Resources

Financial Adviser, Nominated Adviser and BrokerJuly 2009

Shares are the obvious currency for juniors whose share prices have risen sharply in the last nine months.

10Equity Finance – Financing for Growth

• Financing to participate in rights offer by Extract Resources

• World class uranium asset in Namibia

• 100% Equity finance of mine development and start-up

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Pangea DiamondFields

• Critical stage of ramp-up to become cash flow positive

• Massively diluting 15 : 1 open offer

• Fully underwritten by management and key institutions

• Raised £8.7 million at 0.5p/share

• 33% discount

• Repaid loan obligation

• Exercised option to acquire 100% of operations

• Price has recovered to 2p/share

Equity Finance – Deeply Discounted Rights Issue

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African Copper (“ACU”)

• Natasa Mining agrees bridging loan and and equity financing

• ACU offers debt for equity swap to bond holders.

• Natasa buys US$21m secured loan note at 60% face value and calls the loan

• ZCI subscribes for shares at 1p for gross proceeds of £6.76m, giving it 82% interest

• Natasa is repaid in full and releases security over the assets

• ZCI and African Copper agree a re-financing of inter-company loans :

• US$8.4m convertible loan note at 1p for 4 years, with a coupon of 12%

• US$22.7m of ordinary 4 year loan notes with a coupon of 14%

Equity Finance – Rescue Finance

13Equity Finance – Choose your broker (and your audience)

AIM FTSE Small Cap FTSE 100

% Market Share by Value

(Thomson Reuters data)

14Debt

Debt has re-appeared

It is starting to occur further up the development cycle

The two primary drivers are:

security means debt holders are first in line if the project is derailed

debt comes with interest payments which diminish the risk incrementally

The current economic landscape supports debt: a debt investor's exposure is limited to a finite time horizon

A potentially inflationary environment makes debt more attractive.

15Alternative loan options

Instrument Comments

Equity Swap • legally binding subscription for shares • subscription reference price at a premium to the prevailing price• monthly “swap” of equity for cash• cash receipt adjusted according to prevailing price in relation to the agreed reference price

Convertible loan note • unsecured• typically 10 -12% coupon• can limit future corporate flexibility

Gold Participating Bond* • up to 20% of annual mine production• loan effectively converts to a securitised gold loan• repaid quarterly as ETF • pays a coupon

Gold Exchangeable Bond ** • gold secured loan• exchangeable into physical metal at holder’s option• callable by the issuer at trigger price• can be utilised for any exchange traded commodity

* marketed by Canaccord Adams** marketed by Ambrian

16Private Equity

Historically avoided cyclical businesses

At the peak they specifically avoid miners because valuations are too high to provide the returns they seek

And booming investor demand meant smaller companies could obtain capital through share placings

Through high interest rates, private equity financing can provide a solution to the troubles facing companies at the pre-production / feasibility stage

The expectation is that over a 3 – 5 year timeframe the return will be 2 – 5 times the investment

The latest development is the tie-up between banking and trading groups with commodity expertise and Sovereign Wealth Funds (SWF’s) to buy assets

17Private equity and investment companies

Polo Resources

Aim listed group focused on investing in uranium and coal assets

Capitalised at £120 million

Investments include Extract Resources, West Australian Metals, Impact Minerals, Uranex

Endeavour Financial

Classical merchant bank

Capitalised at US$174 million with cash of US$122m and investments of US$71m

Recently acquired up to 54% of Etruscan Resources through a US$43m finance and restructuring plan

18Private equity and investment companies

Och Ziff

“Alternative asset” management firm

US$21.7 billion of assets under management

African Global Capital created in January 2008, biased towards natural resources

Noble

Started in 1987, it has moved upstream to secure commodity off take for trading

CIC invested US$850m

Distressed asset acquisitions incldue:Gloucester Coal (US$430m)US fuel terminal & storage assets (US$65m)

19Sovereign Wealth Funds

An Example

China Investment Corporation

US$200 billion seed with the goal of improving returns on foreign exchange reserves

17% of Teck Corporation

14.5% of Noble Group ( for US$850m at a 8% discount to market)

US$1.9bn in PT Bumi

Approved investment partners increase access to global raw materials (eg: Glencore)Source: SWF Institute

10 = Overweight / 0 = Underweight

SWF’s have focussed on Resources Companies

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But the last word on why the equity and debt markets are booming must go to Alex.......

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CORPORATE FINANCE & EQUITIES COMMODITIES

AMBRIAN PARTNERS LIMITED _______________________________________Nominated AdviserCorporate FinanceCorporate BrokerEquity New IssuesMarket MakingEquity Sales & TradingResearch

_______________________________________Authorised and Regulated by the FSA

Member of the London Stock Exchange

AMBRIAN COMMODITIES LIMITED_______________________________________Broker-Dealer of LME Futures & Options- Aluminium- Copper- Nickel- Lead- Tin- Zinc

Bullion Dealer_______________________________________

Authorised and Regulated by the FSA

Member of the London Metal Exchange

AMBRIAN METALS LIMITED_______________________________________Physical metals traderFocus on:- Copper (wire-rod/cathode)- Aluminium- Lead

_______________________________________London and Shanghai

Agents in Calcutta, New York, Santiago, Seoul and Tokyo

  #1

AIM AdvisersBasic Materials

Nomad & Broker

Ambrian Partners

April 2009

#1

Extel Smal l CapsMetals & Mining

Broker

Ambrian Partners

2009

Richard.chase@ambrian.com +44 (0)207 634 4700