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EQUITY RESEARCH November 15 , 2016

GULF MANGANESE CORPORATION (GMC.ASX)

Speculative BUY – Nicholas Brownbill

GAME ON – NEW CORNERSTONE TERMSHEET SIGNED – KEY MILESTONE ACHIEVED - PROJECT WILL BE FULLY FUNDED TO CASH FLOW POSITIVE - UPGRADE IN PRICE TARGET TO $0.065

GMC TO BE INDONESIA’S FIRST FERRO- MANGANESE ALLOY DEVELOPER

Gulf Manganese Corporation Limited (Gulf) is an Australian registered

company (ACN 059 954 317) listed on the Australian Securities

Exchange (ASX: GMC) with its head office in Perth, Western Australia.

GAME ON- GMC FINALISES NEW TERMS- PROJECT SIGNIFIGANTLY DERISKED- KEY MILESTONE ACHIEVED

GAME CHANGING CATALYST with new cornerstone

investment term sheet signed for up to 20% equity in PT Gulf

Mangan Group for a total of US$20.0M based on:

- Initial investment of US$10.0M for 10% equity in Gulf’s

Indonesian based subsidiary PT Gulf Mangan Grup.

- 12 month option to purchase a further 10% interest in Gulf

for US$10.0M.

Pak Marthen based out of Timor, the base for Gulf’s smelting

hub. He has stated his interest in investment is to provide a

long term legacy to the people of Timor and the NTT and GMC

shares their vision for the future prosperity of the province

which will be generated by GMC business. Pak Marthen has

now been appointed President Commissioner of PT Gulf.

Following site approvals in early October, Gulf advised that

minor ammendements would be negotiated to the original

term sheet entered into with Pak Marthen August 5th 2016.

These ammendments have now been finalised allowing the

initial US$10m investment to be made within 21 days of

signing the agreement. Under the agreement, Pak Marthen

has 12 month option to invest a further US$10m for an

additional 10% in PT Gulf Mangan.

Triple C upgrade price target on GMC as a result of the sound project economics and key recent cornerstone commitement received with a Speculative Buy recommendation and and UPGRADE in 6 month Price Target to $0.065/share.

Share Data

Share Price $0.022 Valuation $120 million Price Target (6 Month) $0.065 Corporate Structure

Shares on Issue 1,304,260,106 Listed Options 505,361,419 Market Cap $35.7m

52 Week High $0.04 52 Week Low $0.002 Board

Hamish Bohannan Chief Executive Officer Craig Munro Non–Exec Chairman Andrew Wilson Non-Exec Director 6 Month Price Chart

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THE COMPANY The company is focussed on building a Smelting Hub to produce ferro manganese alloy. The facilities based in Kupang in West

Timor will take advantage of the low cost of ore, with labour and power being the majority of operating costs. Production will be

a premium quality 78%+ manganese alloy resulting from the unique qualities of the Indonesian high-grade, low impurity

manganese ore blended with imported ores to enhance iron content producing a low cost premium quality alloy.

Value adding is not only strongly encouraged by the Indonesian Government; it is not possible to export Indonesian ore without

upgrading. This will enrich the country's mineral endowment thereby enhancing the economy and creating employment.

All initiatives to value adding have full support from all levels of government and Gulf will benefit from the Government's

Financial Incentives Programme which effectively will result in a 10 year tax holiday.

THE INDUSTRY Manganese (Mn) is a brittle, hard grey metal that looks much like iron. Manganese is the twelfth most abundant element widely

distributed in the earth’s crust and the fourth most used metal in terms of tonnage, ranked after iron, aluminium and copper.

Manganese is mined as an oxide ore, converted to ferromanganese or silico-manganese in a blast or electric arc furnace, and

then mainly used as an essential ingredient in the steel production process.

Manganese ore is processed in a variety of ways, eventually being used as the hardening agent in alloy steels. Manganese adds a

host of properties to modern steels that cannot be created by any other additive, therfore Its importance in the carbon steel

industry cannot be understated. The demand and uniqueness of the properties of manganese makes the processing of rare high

grade deposits a valuable pursuit; a strategy that Gulf Manganese plans to execute in 2016/17 and for the future.

Chart 1: Mn ore production by region, 2012 Chart 2: Major producers of Mn alloy, 2011

Chart 3: Major producers of Mn ore and alloy, 2012 Chart 4: End use of Manganese by industry

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BOARD OF DIRECTORS

MANGANESE: THE WONDER ELEMENT For many people, Manganese is a little-known element yet

it is the fourth most used metal in terms of tonnage, ranked

behind iron, aluminium and copper.

Manganese has numerous applications which benefit our

daily lives, whether it be through steel foundations,

portable batteries, or even aluminium beverage cans. In

each case, manganese plays a vital role in improving the

properties of the alloys and compounds involved in each

specific application.

Manganese has played a key role in the development of

various steelmaking processes and its continuing

importance is indicated by the fact that about 90% of all

manganese consumed annually goes into steel as an

alloying element.

No satisfactory substitute for manganese in steel has been

identified which combines its relatively low price with

outstanding technical benefits. After steel, the second most

important market for manganese (in dioxide form) is for

portable dry cell batteries.

Other uses include manganese sulphates as an agricultural

fertilizer, in water purification, health vitamins, gasoline

additives and colouring glass. Looking forward, recent

advances in electric vehicles and in the storage of solar

energy has resulted in an increased use of Lithium-Ion

Batteries. It is important to note that there is more

manganese in some lithium-ion batteries than lithium

itself. https://en.wikipedia.org/wiki/Lithium-ion_battery

There is real potential for battery usage to soar with

growing climate change pressure combining with

technology capability to store electrical energy. Currently

some 98% of manganese production goes into steel with

less than 3% into batteries.

SUPPLY AND DEMAND The demand for manganese is primarily driven by the

steel industry which consumes the majority of the

Manganese ore produced. Demand for steel is ever

increasing due to increased rate of infrastructure

growth in developing nations such as China and India.

The manganese market is highly concentrated with

limited global suppliers providing a natural pricing

floor for manganese. Rising global crude steel

production is driving up demand for manganese ore,

especially reserves of high grade ore.

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China’s reported manganese reserves are limited and expected to last for less than 15 years at current production rates.

Demand for imported manganese ore in China has more than doubled in the last decade and now accounts for 62% of ore

supplied into China. The demand for Manganese is projected to soar 40% in the next 10 years through China’s increasing

urbanisation and continued industrialisation.

MANGANESE PRICING Mid-term pricing prospects for medium to high

grade manganese ores should remain very

favourable, being mainly the result of:

Increased consumption of steel in

developing world.

Market for steel products to increase.

Higher grade ores attract a premium price

due to its “Value-in-use” during the steel

making progresses.

LOCATION Kupang is the capital of the East Nusa Tenggara province and the capital of West Timor. After a recent site visit, Triple C

identified a number of key advantages in operating in the region.

Gulf’s proposed smelter site is located approximately 12 km South West of Kupang. The site of approximately 50Ha is accessed

by a sealed road and has coastal frontage suitable for the construction of a barge loading facility. The site is only 8 km South

West from the main port of Tenau and approximately 4 km from the State owned main, PLN Power Station.

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THE PROJECT Project Fly Through:

http://www.gulfmanganese.com/images/Video/Project_Fly_Through_Web.mp4

It has long been recognised that there are many high grade, 48%+ manganese outcrops in the islands of Indonesia and

specifically in and around Timor including the island of Flores. Indonesian “Value Adding” laws introduced in 2009 prevent the

export of minerals unless the mineral has been “upgraded” in Indonesia.

Whilst there are small silicon manganese smelters in Indonesia, there is currently not any significant facility for the “near-term”

production of high grade ferro-manganese alloy. Gulf has identified the opportunity to build a ferromanganese smelting hub in

Timor near the town of Kupang. This will involve the purchase of Indonesian manganese ores at the smelter gate, processing of

the ores in the smelter to a ferromanganese alloy and the sale of ferromanganese alloys to the world’s markets. The high grade

of the Indonesian ores and the opportunity to source other inputs locally including limestone, coal and iron ore more than offset

the current ferromanganese alloy prices which continue to be at a low point in the cycle. An upturn in the market and potential

for the disruptive technology benefits from a surge in Lithium battery usage make establishing the hub now an exciting

opportunity. Gulf has secured land and has a number of manganese ore supply agreements in place to underpin the proposal.

Gulf under new management operates prudently on behalf of shareholders in order to generate early cash flow and increase

shareholder value.

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GULF’S MARKETING NETWORK High carbon ferromanganese Alloy (Mn 70-82%) is used in manufacturing normal, low/medium carbon and high-carbon steel.

On average 9.71kg of manganese alloy is used in making one tonne of steel. Manganese alloy used per tonne of steel tends to

vary across region with Europe accounting for as low as 8.51kg per tonne of steel and China for more than 10.5kg per tonne. The

+/- 1% manganese in basic steel does vary slightly from country, but the real variation is that the percentage increases to up 13%

in speciality steels with the highest being used in super-tough military grade applications. It is only rebar and construction steel

that is 1%, construction and engineering steels can be 2-3%.

Gulf’s ferromanganese alloy business in Indonesia is ideally located to take advantage of its proximity to the major consumer

markets in Asia.

THE PROJECT PROCESS Gulf is planning to develop a ferromanganese smelting and sales business to produce carbon ferromanganese alloys in West

Timor, Indonesia. The business will comprise of the following components all based in Indonesia.

1. Ore purchasing

2. Ore Transport to Processing Plan

3. Ore processing

4. Alloy smelting

5. Sales & marketing

6. Final product Ferromanganese Alloy

The annual ferromanganese alloy production is set at 155,000 tonnes per annum, generating on today’s prices, some US$

170,500,000. The Smelter feed will comprise local Indonesian manganese ores (48%+ Mn). Production will be commencing

initially with a single smelter to generate early cash flow and establish an ore supply. Once the process has been proven up, Gulf

has plans to stage the build out of the operation with the overall aim of 8 furnaces in a smelting facility built just out of Kupang.

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THE PROJECT PROCESS – Flow Chart Diagram

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THE PROJECT PROCESS – Flow Chart Diagram (CONT)

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GLOBAL MANGANESE IMPORTS & EXPORTS

SWOT ANALYSIS: STRENGTHS, WEAKNESSES, OPPORTUNITIES & THREATS – BUSINESS MODEL STRENGTHS WEAKNESSES

INTERNAL

- Database of geological knowledge - People on the ground with local knowledge - Multi-level government support - Complies with licences and approvals - High grade manganese ore available which was

being exported prior to Government ore export ban.

- Close to port - Proximity to most Asian Mn markets - Proximity to Indonesian Coal mines for smelter

consumables.

- Limited Indonesian proven mineral resource base - Project funding to be secured - Limited metallurgical work

OPPORTUNITIES THREATS

EXTERNAL

- No competitor in Processing or Smelting in Timor - Local small scale Mn Supplier can mine and sell

Mn ores once a processing route is established - High unemployment in Timor will provide a ready

source of labour - Scalability – the operation can be developed in a

staged manner - Ore supply potential in neighbouring islands - Mn price is semi-cyclical in nature and is at low

levels currently

- First smelter to market will gain a strong hold on ore supply

- Time to develop a smelter in compliance with Indonesian upstream processing requirements

- Other companies entering the smelting business - Potential loss of export of other permits if

milestone not achieved.

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THE ROAD AHEAD: PROPOSED WORK PROGRAM The Gulf Manganese team is solely focused on prudently managing the development of the Kupang Smelter Hub Project. The

schedule below requires an equity component and/or project finance through offtake agreement or joint venture, as well as the

final permitting from the office of the Kupang Bupati.

First Quarter 2016 (Completed)

Engage in community workshops with the office of

the Bupati

Negotiate the purchase terms for the South

African Smelters

Continue negotiations for subsequent power plan

Identify and qualify 2-3 further ore suppliers in the

Kupang area

Roadshow and continue to broadcast the project

Second Quarter 2016 (Completed)

Raise AUD$1.8M for project establishment

Commence ore purchases

Third Quarter 2016 (Current)

Finalise purchase of smelter and arrange for the

Smelters to be shipped to West Timor

Cornerstone commitment for 20% equity in PT

Gulf Mangan Group (or Gulf) for a total of

US$20.0M

Establish power contracts

Commence Construction

Commence operator training program

Fourth Quarter 2016

Secure offtake contract for up to 70% of

production

Monitor ore supply chain and market conditions

and adjust module program to suit.

Continue evaluation of Indonesian ore sources

Develop partnerships arrangements/JV with

Indonesian suppliers

First Quarter 2017

Commission first furnace

Market sample of first product largely into Asia.

Establish Community programs

Second Quarter 2017

First cash positive quarter

PROGRESSIVE EXPANSION

First unit refurbished from South Africa, recently

decommissioned

Provides rapid path to production, and positive

cash flow

Following units built as supply chain of Indonesian

ore established

Even in current depressed market, substantial

production margin

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CORNERSTONE ENGAGED As a recent key catalyst for the company, Gulf Manganese Corporation (GMC) has received commitment up to 20% equity in PT Gulf Mangan Grup (or Gulf) for a total of US$20.0M based on the following:

i) An initial investment of US$10.0M for 10% of the ordinary shares in Gulf. ii) A 12 month option to purchase a further 10% ordinary shares in Gulf for US$10.0M.

The Cornerstone investor Pak Marthen is based out of Timor, the intended base for Gulf’s smelting hub. The Cornerstone has stated that their interest in investment is primarily to provide a long term legacy to the people of Timor and the NTT and GMC shares their vision for the future prosperity of the province which will be generated by GMC business. Following the signing of this agreement, Pak Marthen has been appointed as President Commissioner of PT Gulf. Gulf is now focused on the execution of a number of key milestones, including the commencement of preparatory site works at Kupang, formailities with the local authorities and the shipping of the two ferromanganese smelting furnaces from Pretoria.

KUPANG LOCATION MAP

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WHY TO BUY High Quality Board and Management have

experience in both Manganese and Indonesia

Sound project economics (80% industry average

operating cost)

Indonesian ore is some of highest commercial

grade in the global market

Producing premium manganese alloy (78%+ Mn)

Established port and infrastructure

Government full support, fiscal incentives, tax

holidays

Global sales network

Modest staged capital requirement, early cash

flow

EARNINGS The Timor Smelter Study highlights the benefit of having access to high quality manganese ore, access to existing port and

infrastructure as well as lower than average industry costs. The fully integrated manganese business benefits from established

port and infrastructure. Adding further interest, the full Indonesian Government support and a 10 year tax holiday is a significant

pointer as to the importance of the smelter and its upside potential.

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VALUATION

Triple C has upgraded the research on Gulf Manganese as a result of the announcement today (15th November 2016) by the

company in relation to the Cornerstone investment by Pak Marthen.

In the last two months, Gulf has achived 2 key milestones which signifigantly de-risk the project.

1) 03/10/22016: Approval by The Provincial Government for the development of the Kupang Smelting Hub

2) 15/11/2016: Cornerstone commitment from Pak Marthen of up to US$20m for 20% of PT Gulf Mangan in two stages

Triple C has applied a very conservative base case valuation for GMC without applying any additional upside. The price target on

the valuation is based on the Cornerstone’s investment and the Smelting Projects’ current Valuation.

Key Assumptions:

- Gulf Manganese Corporation initially owned 100% of their Indonesian Subsidiary PT Gulf Mangan. - Pak Marthen is investing US$10m for 10% of PT Gulf Mangan with a 12 month option to invest further US$10m for additional 10%, which implies PT Gulf Mangan is valued at US $100m. - Upon full cornerstone commitment being received, Gulf Manganese Corporation (GMC) would own 80% of PT Gulf Mangan, which implies GMC has US$80m of the project. - Assume $1 AUD = $0.75 USD (Based on todays exchange rate). - This values Gulf Manganese Corporations’ 80% share of the PT Gulf Mangan at AUD $106.67 million. - At a corporate level, Gulf Manganese has 1,304,260,106 Fully Ordinary Paid Shares on issue, 505,361,419 Listed Options AND 56,275,917 Unlisted Options. - Fully diluted- 1,865,897,442 / AUD $106.67 million implies a share value of $0.057 - Add back the initial USD$10,000,000.00 investment in cash (AUD $13,333,333) @ exchange rate of $0.75 - On a fully diluted basis, this implies a share price valuation of $0.065 a share.

Triple C maintain a SPECULATIVE BUY recommendation with an upgrade to 6-month price target of A$0.065/share.

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DISCLAIMER This Research report, accurately expresses the personal view of the Author. This report was prepared by Triple C Consulting Pty Ltd ABN: 45 141

412 106, Australian Financial Services Licence No. 346282.

This Research Report was not commissioned by the Company, the Company did however provide assistance in verifying the factual content of

the report. No inducements have been offered or accepted by the company for the publication of this report. Triple C Consulting initiated this

research of its own initiative based on its own due diligence of the company and its opinion that it represents value to existing and potential

shareholders.

Disclosure

Triple C Consulting Pty Ltd, including the authors of this report, its directors and employees advise that they have an interest in and earn

brokerage and other benefits or advantages, either directly or indirectly from client transactions in securities the subject of this report.

Interest in Securities

66,900,00 listed options and 22,800,000 shares.

Fees

Triple C Consulting received a fee of 6% for the recent rights issue. Triple C is engaged by the company to provide corporate services and is paid

$5,000 per month as a retainer.

Warning

In accordance with Section 949A of the Corporations Act 2001 Triple C Consulting advise this report contains general financial advice only. In

preparing this document Triple C Consulting did not take into account the investment objectives, financial situation and particular needs

(‘financial circumstances’) of any particular person. Accordingly, before acting on any advice contained in this document, you should assess

whether the advice is appropriate in light of your own financial circumstances or contact your Triple C Consulting adviser.

Disclaimer

Triple C Consulting believe that the advice herein is accurate however no warranty of accuracy or reliability is given in relation to any advice or

information contained in this publication and no responsibility for any loss or damage whatsoever arising in any way for any representation, act

or omission, whether express or implied (including responsibility to any persons by reason of negligence), is accepted by Triple C Consulting or

any officer, agent or employee of Triple C Consulting.

No part of this report may be reproduced or distributed in any manner without permission of Triple C Consulting Pty Ltd.

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Prepared by

Nicholas Brownbill Director

08 9228 5999 | 0417 914 659

nic@tripleccc.com.au

Triple C Consulting Pty Ltd 5 Lindsay Street, Perth WA 6000

08 9228 5999 | www.tripleccc.com.au

Peter Sheppeard – Managing Director/Corporate – peter@tripleccc.com.au

Justin Warburton – Institutional Sales – justin@tripleccc.com.au

Michael Rimbas – Investment Adviser– michael@tripleccc.com.au

Natalie Ruck – Office Manager/Administration – natalie@tripleccc.com.au