Technical ReportsTechnical ReportsWho needs them?

FINEX ‘10 Exploration meets the City

An early minerAn early minerFinex '10 October 2010 2

The first technical report?The first technical report?Finex '10 October 2010

UGH !

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Roman gold mineRoman gold mine

Las Medullas, Leon, Spain

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Hydraulic miningHydraulic miningFinex '10 October 2010 5

Roman gold mineRoman gold mine

Las Medullas, Leon, Spain

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•Major alluvial gold mine

•Over 1km across

•500 million m3 extracted

•Grade 3 g/t

•60,000 workers (slaves)

•200,000 oz p.a.

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Mediaeval mining-Agricola 1555Mediaeval mining-Agricola 1555Finex '10 October 2010 7

The Industrial RevolutionThe Industrial RevolutionFinex '10 October 2010 8

Britain 17Britain 17thth and 18 and 18thth century centuryFinex '10 October 2010

•Britain leads the world in mineral production

•Iron ore•Coal•Copper•Tin

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The Stock Exchange, LondonThe Stock Exchange, London

Started in a coffee house in 1698

South Sea Bubble had grown and burst within 25 years

Adopted formal name in 1773

Formal membership introduced in 1801

First Rule Book introduced in 1812

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London-global mining financeLondon-global mining financeFinex '10 October 2010 11

London-global mining financeLondon-global mining finance

London capital backed:◦Californian gold rush 1849

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London-global mining financeLondon-global mining finance

London capital backed:◦Klondike gold rush 1897

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London-global mining financeLondon-global mining finance

London capital backed:

◦Californian gold rush 1849◦Klondike gold rush 1897◦Australian gold rushes

◦Victoria 1850’s◦Kalgoorlie 1890’s

◦Kolar Gold Fields, India 1870’s◦Witwatersrand, S.Africa gold 1880’s

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Gold Fields of South Africa LtdGold Fields of South Africa Ltd

Prospectus issued 1887

£250,000 raised for 230,000 shares

Promotors took only 200 founder shares

But retained 3/15 (20%) of any profits

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Where was the CPR?Where was the CPR?

The Company is formed for the purpose of acquiring and dealing with certain auriferous and other mineral properties, interests and rights in South Africa, and also for carrying on general exploration with a view to making further investments of a similar nature

£25,000 spent on purchases and options but “opportunities exceed capacity of private capital”

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London-global mining financeLondon-global mining finance

London capital backed:

◦Californian gold rush 1849◦Klondike gold rush 1897◦Australian gold rushes

◦Victoria 1850’s◦Kalgoorlie 1890’s

◦Kolar Gold Fields, India 1870’s◦Witwatersrand, S.Africa gold 1880’s◦Malaysian tin from 1870’s◦Nigerian tin mines from 1900’s◦Zambian Copper Belt discovered 1928

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Chapter 19Chapter 19

Special LSE Rules for mining companiesExempt from 3 year trading recordListing particulars must contain a

Competent Person’s ReportRequired to demonstrate proven reserves

for at least 2 years operationAggregate value of proven and probable

reserves must exceed 50% of the expected market capitalisation

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Reign of the Mining Finance Reign of the Mining Finance HouseHouse

Consolidated Gold FieldsAnglo AmericanUnion CorporationGeneral Mining Selection Trust

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Canada and AustraliaCanada and Australia

Local mining industriesNeed for local capitalListing of exploration companies allowedBoom and bust in various commoditiesAttracted unwary international investorsLittle regulation of trading or reportingPoseidon nickel boomLed to tighter regulation in Australia

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London’s responseLondon’s response

Still unable to list exploration companiesMajor changes in 1995OFEX market set upLSE established AIM European market of choice for resourcesUnique regulatory modelRelatively light & flexibleRegulated by Nominated Advisers

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Requirements for mining listing Requirements for mining listing on AIMon AIM

Suitability for listing No minimum free floatWorking capitalIndependent Competent Persons ReportOngoing reporting obligations

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Technical reports vitalTechnical reports vital

Competent Persons ReportExploration updatesResource estimates

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Standards varyStandards vary

Convergence in Australia, Canada, South Africa

US regulators much more restrictive

Russia-an acquired taste

China-not yet

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The Russian systemThe Russian systemFinex '10 October 2010 25

Russian reservesRussian reserves

VMS depositC1 +C2 “reserves”24.0Mt5.87% Zn (1.41Mt Zn)0.67% Pb (161,000t Pb)106 g/t Au (81.8M oz Ag)0.3 g/t Au (232,000 oz Au)

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Western reservesWestern reserves

9.7Mt8.94% Zn (865,000t Zn)3.58% Pb (346,000t Pb)161 g/t Ag (50.5M oz Ag)0.37 g/t Au (115,000 oz Au)

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Chinese systemChinese systemFinex '10 October 2010 28

Australian resourcesAustralian resources

Volcanic hosted sulphide depositMeasured, indicated and inferred resource

(90% inferred)Total resources 6.897Mt 4.4% Zn (303,000t Zn)3.5% Pb (241,000t Pb)34g/t Ag (7.5M oz)

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Recalculation to Chinese standardRecalculation to Chinese standard

Total mineral resources 25.253Mt3.08% Zn (778,000t)3.02% Pb (763,000t)51g/t Ag (41.4M oz)4.6% S (1.16Mt)

Of which the “controlled intrinsic resource” is 4.5Mt (2.41% Zn, 3.57% Pb, 64g/t Ag) and the “inferred intrinsic resource is 20.7Mt (3.23% Zn, 3.57% Pb, 48g/t Ag)

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An Australian lessonAn Australian lesson

An alluvial tin projectPeriods of historic productionMassive historic database of drillingCPR by reputable consultantMeasured and indicated resourcesUpgrade to reserve statusPlant constructionOutcome?

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Impact of Bre-XImpact of Bre-XFinex '10 October 2010 32

What to look out forWhat to look out for

Management experience

◦Is the in house “qualified person” qualified?

Track record

◦Do the directors know what they are doing?◦Have they done it before

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What to look out forWhat to look out for

Beware of silence after a run of news

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What to look out forWhat to look out for

Independent oversight

◦Ensure the consultant really is competent

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What to look out forWhat to look out for

Are the samples selective?

Is the cut off grade stated?

Are they true widths?

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What to look out forWhat to look out for

Beware of gross, in the ground values

Metal equivalent◦Base metal equivalent better than precious◦In Australia includes an adjustment for recovery◦In Canada it does not

Is reserve/resource terminology sloppy

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ConclusionsConclusionsFinex '10 October 2010 38

ConclusionsConclusions

Investors today are given more information than ever before

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ConclusionsConclusions

Investors today are given more information than ever before

It takes knowledge, experience and effort to make the most of it

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ConclusionsConclusions

Agricola put his finger on it-

“Those who take an interest in … mining … should read studiously and consult expert mining people”

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LastlyLastlyFinex '10 October 2010 42

Ask yourself-does it look too good to be true?

Always bear in mindAlways bear in mind

Mark Twain’s immortal words

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The definition of a mine is a hole in the ground that belongs to a liar!

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