MOY Producing gold - Millennium Minerals · MOY : Producing gold Visible mineralisation outside...

Millennium Minerals (MOY.ASX) 23 November 2015

MOY : Producing goldVisible mineralisation outside existing Resources

Expect good success in exploration drilling

See Page 23 for Disclaimer and Disclosures 23 November 2015

Recommendation ■ Following a write-down to its Reserves in March 2015, MOY now has 2 years of Reserves.

■ MOY has visible mineralisation outside of its Resources and many large intercepts of high grade and ore grade material. In our base case, Beer & Co allows $10m of drilling each year, for 2.0Mt at 1.5g/t to be added to mining inventory.

■ Our base case valuation of 14.5c/share assumes current AUD-USD rate and a gold price rising slowly to $1200/oz.

■ MOY is highly leveraged to better exploration results as well as the AUD gold price.

BUY, High Risk

Price

4.6c

Valuation

14.5c

Commodity

Gold

Snapshot Market Cap $10.0m

Cash on hand (31 Sept 2015) $5.05m

Net Debt ($19.5m)

Equity being raised $20m ‐ $21m

Shares on Issue 271.7m

Shares to be issued : 500m – 525m

52 Week High 7.9c

52 Week Low 2.3c

1 month / 6 month VWAP 5.0c / 5.0c

MOY : daily share price v. value traded

$ 0

$ 50,000

$ 100,000

$ 150,000

$ 200,000

$ 250,000

$ 300,000

$ 350,000

0c

5c

10c

15c

20c

25c

30c

35c

1 Oct. 2013 1 Jan. 2014 1 Apr. 2014 1 Jul. 2014 1 Oct. 2014 1 Jan. 2015 1 Apr. 2015 1 Jul. 2015 1 Oct. 2015

MOY value traded

Millenium Minerals

MOY began mining operations at Nullagine in September 2012. The operations were declared commercial in February 2013.

While the operations generated cash, the cash generated was, for 2014 and the first half of 2015, not enough to meet the required debt repayments.

The operations have been turned around, but there is further to go.

Success in converting known mineralisation into mining inventory is essential, and Beer & Co expects MOY to out‐perform.

Author : Pieter Bruinstroop [email protected]

Mining Operations at Nullagine are now (out‐)performing

MOY’s Nullagine mine has JORC Resources in 14 separate deposits across a tenement area of 264km2 in the West Pilbara region. First gold was poured in September 2012, but not enough net cash was generated to service and pay down the $50m in project finance taken on to develop the $83m project. This was due to

Unit costs being higher than expected; and

AUD gold prices being lower than expected.

This led to a write down in the carrying value of $76m.

With the change in CEO in December 2014, mill throughput has been ramped up to about 1.9Mt/yr and has processed oxide material grading around 1.7g/t to generate strong cashflows.

MOY forced to Raise Equity

MOY is now able to repay its bank debt, but will not be able to generate the cash required to pay back its subordinated debt, which is now about $15m, by its due date of July 2016.

With only 5Mt in Reserves at the start of 2015, MOY needs to drill known mineralisation to extend its mine life, which requires capital.

Drilling WILL be successful

MOY will invest $10m annually to increase its mining inventory. Beer & Co expects to add at least 2.0Mt each year, grading 1.5g/t, which is a discovery cost of over $120/oz, which is a high cost given there are significant areas of visible mineralisation.

Beer & Co risked valuation 14.5c/share

Given our expected exploration success, and a gold price of $1,200/oz, at an AUD‐USD rate of 0.700, Beer & Co generates a risked value of 14.5c/share.

Beer & Co conclusions

Drilling success is expected, and necessary. BUY, High Risk.

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/

Millennium Minerals (MOY.ASX)


Millennium Minerals

,

Nullagine Gold Mine

MOY operates a gold mine at Nullagine in the West Pilbara region of WA.

First gold was poured in September 2012.

Millennium Minerals operates a gold mine in the Pilbara region of WA, as shown in Figure 1.

MOY has a tenement area of 264km2, with some in Mining Licences and the rest in Exploration Leases.

MOY announced the results of its feasibility study in October 2009. The expected capital cost was $87m.

MOY then proceeded to finance the project, including $50m in project finance plus an $8m lease finance facility.

The operations were brought into production in September 2012 with first gold poured on 30 September, 2012.

Figure 1 : Nullagine Gold operations

Source : MOY presentation, November 2015

Figure 2 shows that MOY has progressively increased its gold production.

It shows that during 2014, the production was roughly in line with the projections in the October 2009 feasibility study.

During 2013 and 2014, gold produced was in line with that projected in the feasibility study

Figure 2 : Gold produced, and expected production

10,000 oz

12,500 oz

15,000 oz

17,500 oz

20,000 oz

22,500 oz

25,000 oz

27,500 oz

Dec. 12 Jun. 13 Dec. 13 Jun. 14 Dec. 14 Jun. 15 Dec. 15 Jun. 16 Dec. 16 Jun. 17 Dec. 17 Jun. 18 Dec. 18

Actual gold produced

Expected gold produced

Feasibility Study

Source : MOY quarterly reports, Beer & Co estimates

However, as shown in Figure 3, the costs of production were only a small premium to the gold price in the period to December 2014. Note that the All In costs in Figure 3 exclude the costs of servicing the debt, including the repayment of principal, taken on to finance the development of the project, which is about $300/oz.



However, not enough cash was generated to service and repay the $50m in project finance taken on to construct the project

Some of this shortfall was due to lower than expected AUD gold prices, but also due to higher costs

Figure 3 : Costs of production v. gold price, actual v expected

$A 800/oz

$A 900/oz

$A 1,000/oz

$A 1,100/oz

$A 1,200/oz

$A 1,300/oz

$A 1,400/oz

$A 1,500/oz

$A 1,600/oz

$A 1,700/oz

$A 1,800/oz

Dec. 12 Jun. 13 Dec. 13 Jun. 14 Dec. 14 Jun. 15 Dec. 15 Jun. 16 Dec. 16 Jun. 17 Dec. 17 Jun. 18 Dec. 18

A I S C ‐ actual A I S C ‐ expected

A I S C ‐ feasibility gold price ‐ actual

gold price ‐ expected gold price ‐ feasibility


Due to the shortfall in cash, MOY :

Took on 2 tranches, totalling $12m, in subordinated debt;

Sold a project nearby for $3.8m;

Wrote down the asset value by $76m, leaving only 2 years of reserves; and

Changed the CEO

Since the change in CEO, gold production has increased

MOY Response to (under‐)Performance

Looking at the period to December 2014, and bearing in mind the additional cost for debt servicing, shows that MOY came under significant financial distress. The first response, on 31 December 2013, was to defer some of the principal on the loans due to be paid to the senior debt providers. This was followed by

Taking on $7m in subordinated debt, from the major shareholder, IMC Resources on 19 March 2014;

Extending the term of the senior debt from September 2015 to June 2016;

The MD announcing his intention to resign on 27 August 2014 and a new CEO being appointed on 18 December 2014;

An extra $5m in subordinated debt announced on 23 December 2014;

Selling their interest in the Beatons Creek JV, for $3.8m, on 27 March 2015;

Announcing an asset impairment charge of $76m (compared with the original construction cost of $83m), together with a write‐down in Reserves to leave a mine life of just over 2 years, on 27 March 2015

Figure 2 shows that following the change in CEO, there was a significant increase in the amount of gold produced, while Figure 3 shows that this was accompanied by a significant fall in the cost of gold produced.

Figure 4 shows that the first action was to increase mill throughput.

Particularly due to an increase in the mill throughput rate

And higher yielding ore

Figure 4 : Ore treated,. Actual v projected

300 kt

325 kt

350 kt

375 kt

400 kt

425 kt

450 kt

475 kt

500 kt

Dec. 12 Jun. 13 Dec. 13 Jun. 14 Dec. 14 Jun. 15 Dec. 15 Jun. 16 Dec. 16 Jun. 17 Dec. 17

Actual Ore Treated

Expected Ore Treated

Nominal Mill capacity




While MOY is able to repay the senior debt, it needs to raise equity to repay the sub‐debt by the time it is due

MOY needs to drill to extend its mine life, as it has reserves only until about mid 2017.

As well as increased throughput, other actions included a much tighter review of costs and review of the mine plan to focus on total net benefit to MOY.

Refinancing

The subordinated debt that had been taken on so that commitments to the senior lenders could be met, as the sub‐debt :

Had a high interest rate, as expected from subordinated debt, including the issue of options with an exercise price linked to any future raising; and

Had a term to 30 days after the expiry of the senior debt.

While MOY has generated enough cash to repay the senior debt, Beer & Co calculate that it would not be able to generate the roughly $15m, including accumulated interest, in total required to be re‐paid by July 2016.

Also, part of the cost cutting to survive was to cease exploration and with only 2 years of reserves, money is needed to develop the mining inventory.

This has led to the raising of $20m ‐ $21m in new equity.

Expected Exploration Success

Figure 4 shows that Beer & Co expects that MOY will process about 1.9Mt/yr of ore for many years.

MOY will invest $10m in drilling to increase its mining inventory

However, Figure 5 shows that MOY has Reserves that will last only until about July 2017.

MOY have stated that the company will invest $10m a year in drilling to increase mine life.

Figure 5 : Nullagine Reserves, Dec. 2014

Proved 3.68 Mt 1.5 g/t 174 koz

Probable 0.64 Mt 1.5 g/t 30 koz

Stockpiles 0.64 Mt 0.9 g/t 19 koz

TOTAL 4.97 Mt 1.40 g/t 223 koz

Source : MOY ASX announcement, 27 March 2015 plus 25 September 2015, Beer & Co.

As a base case, Beer & Co expects that MOY will add at least 2.0Mt to mining inventory, at a grade of about 1.5g/t, as shown by Figure 6.

Beer & Co’s analysis assumes that MOY is able to add 2.0Mt a year to its mining inventory at a grade that is around the Reserve grade, despite history showing higher grading ore.

Figure 6 : Actual grade of ore processed v. expected v. Reserves

1.00 g/t

1.20 g/t

1.40 g/t

1.60 g/t

1.80 g/t

2.00 g/t

Dec. 12 Jun. 13 Dec. 13 Jun. 14 Dec. 14 Jun. 15 Dec. 15 Jun. 16 Dec. 16 Jun. 17 Dec. 17 Jun. 18 Dec. 18 Jun. 19 Dec. 19

Actual gold grade

Expected gold grade

Reserve grade

Source : MOY ASX quarterly announcements, Reserve statements, Beer & Co estimates

Figure 6 shows that while MOY has focussed recent operations on higher grades, Beer & Co is not basing its analysis on a continuation of this trend.



Figure 6 shows that Beer & Co mine plan assumes that Reserves, on a deposit by deposit basis, are mined before new discoveries. However, we expect that MOY will be smarter than this.

Figure 7 shows that MOY has delineated Resources at 14 deposits and has a further 15 prospects for drilling, each of which has evidence of gold.

At Nullagine, MOY has delineated Resources at 14 separate deposits and has a further 15 prospects that have some evidence of mineralisation.

Mineralisation is found immediately north of the Middle Creek fault, and along splays of this fault

Figure 7 : Mineralised areas at Nullagine

Source : MOY ASX announcement, 23 November 2015

Historical drilling has already shown large intercepts at ore grades and higher

Figure 7 also shows that the gold is located to the immediate north of the Middle Creek fault and also along splays off this fault, to the north.

Figure 8 shows Infill potential at Otways, plus extension to the east, and extensions to both north and south of Shearers with historical results to the south of Shearers including :

5m at 7.51g/t;

20m at 2.09g/t; and

21m at 1.31g/t.

MOY has delineated extensions to existing operations

Figure 8 : Shearers – Otways deposits plus drilling




Recently announced results from drilling to the south of Shearers include :

11m at 4.16g/t, from 40m; and

7m at 3.83g/t, form 15m and

13m at 1.33g/t from surface.

Figure 9 shows that mineralisation extends beyond the ore reserve, with ore grade results in 2 lodes.

Known mineralisation extends beyond the bounds of the present reserves

Figure 9 : Extensions at Shearers


Outcomes

Figure 10 shows the actual outcomes from MOY’s operations, and Beer & Co’s projections.

Figure 10 : Actual and projected operational outcomes

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Waste moved 6,779 kt 8,778 kt 8,763 kt 8,550 kt 8,550 kt 8,550 kt 8,550 kt 8,550 kt 8,550 kt 8,550 kt 8,550 kt 8,550 kt 2,029 kt

waste : ore 4.2 : 1 5.5 : 1 4.8 : 1 4.5 : 1 4.5 : 1 4.5 : 1 4.5 : 1 4.5 : 1 4.5 : 1 4.5 : 1 4.5 : 1 4.5 : 1 4.5 : 1

Ore Mined 1,615 kt 1,583 kt 1,840 kt 1,900 kt 1,900 kt 1,900 kt 1,900 kt 1,900 kt 1,900 kt 1,900 kt 1,900 kt 1,900 kt 451 kt

Gold head grade 1.56 g/t 1.66 g/t 1.68 g/t 1.41 g/t 1.47 g/t 1.50 g/t 1.50 g/t 1.50 g/t 1.50 g/t 1.50 g/t 1.50 g/t 1.50 g/t 1.16 g/t

Recovery 88.2 % 87.1 % 90.9 % 92.0 % 92.0 % 92.0 % 92.0 % 92.0 % 92.0 % 92.0 % 92.0 % 92.0 % 92.0 %

Gold produced 63,247 oz 74,375 oz 88,631 oz 79,231 oz 82,534 oz 84,309 oz 84,309 oz 84,309 oz 84,309 oz 84,309 oz 84,309 oz 84,309 oz 37,473 oz

Source : Beer & Co estimates

Beer & Co projects continuing production of around 85koz a year, slightly below guidance for 2015

Figure 10 shows that Beer & Co’s projections effectively capitalise the turn‐around that has already taken place in the operational performance at Nullagine, with

Mill operations continuing at 1.9Mt/yr, even though the most recent quarter was at a higher rate, as shown in Figure 4;

Ore grade being slightly below the historical average, especially in the next 2 years; and

Recovery of gold in ore at 92%, despite MOY’s September quarterly stating that recoveries were at 93%.

Figure 11 shows Beer & Co’s base case commodity price assumptions and projected financial outcomes.



Figure 11 : Beer & Co’s base case projected financial outcomes, Nullagine Mining

AUD m 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

AUD/USD 0.968 0.903 0.747 0.700 0.700 0.700 0.700 0.700 0.700 0.700 0.700 0.700 0.700

Gold $ 1,411/oz $ 1,272/oz $ 1,149/oz $ 1,163/oz $ 1,200/oz $ 1,200/oz $ 1,200/oz $ 1,200/oz $ 1,200/oz $ 1,200/oz $ 1,200/oz $ 1,200/oz $ 1,200/oz

Revenue 92.4 106.9 136.9 131.7 141.5 144.5 144.5 144.5 144.5 144.5 144.5 144.5 64.2

Cash Costs (60.9) (70.8) (84.0) (79.0) (82.8) (76.4) (77.1) (77.9) (78.7) (79.5) (80.2) (82.5) (28.9)

Royalties (2.7) (3.1) (4.0) (5.9) (5.4) (4.2) (4.2) (4.2) (4.2) (4.2) (4.2) (4.2) (1.9)

Dep'cn & Amort'sn (22.0) (27.2) (22.5) (20.0) (22.5) (15.7) (13.8) (13.2) (13.0) (13.0) (12.9) (14.8) (4.5)

E B I T 6.8 5.8 26.4 26.8 30.8 48.3 49.4 49.2 48.6 47.9 47.2 43.0 29.0

Sus Cap Ex ‐ driling 0.0 0.0 0.0 (10.0) (10.0) (10.0) (10.0) (10.0) (10.0) (10.0) (10.0) (5.0) 0.0

Sus Cap Ex ‐ other (3.1) (3.0) (3.5) (3.6) (3.6) (3.6) (3.6) (3.6) (3.6) (3.6) (3.6) (3.6) (0.9)

Project Cashflow, p 25.8 30.0 45.4 33.1 39.6 50.4 49.6 48.8 48.0 47.3 46.5 49.2 32.6

Source : MOY reports, Beer & Co estimates

Figure 11 shows that Beer & Co projects that MOY invests $10m in drilling each year, for 8.5 years, with the final 12 months is unsuccessful, so the low grade stockpiles are processed.

MOY Valuation

Figure 12 shows the detail of Beer & Co’s base case valuation of MOY, which is 14.5c/share.

Beer & Co’s risked, base case valuation is 14.5c/share

Figure 12: Beer & Co’s base case valuation of MOY

23‐Nov‐15

risk : 100% Product per share

Nullagine Reserves 100% $ 82m $ 82m 10.8 c 6.6 c

franking credits 60% $ 7m $ 4m 0.5 c 0.6 c

Nullagine Extension 80% $ 141m $ 113m 14.9 c 16.5 c


Exploration 90% ($ 46m) ($ 41m) (5.5c) (6.0c)

Hedge 100% ($ 8m) ($ 8m) (1.0c) (0.6c)

Corporate 100% ($ 30m) ($ 30m) (3.9c) (3.7c)

Cash / Debt 100% ($ 36m) ($ 36m) (4.7c) (1.3c)

Equity raisings 100% $ 19m $ 19m 2.5 c 0.3 c

TOTAL $ 163m $ 119m 15.7 c 14.6 c

Shares on issue 217.7m F P O shares 18.0m Options

525.0m issued 2015 16.0m Ops. Ex'd

discount rate = 12.0 % 31 December 2014


Figure 12 shows that while Beer & Co is confident of exploration success, we have still discounted the success for risk, while the investment has a lower risk weighting, despite our assumption that the last 12 months has zero success.

Sensitivity Analyses

Sensitivity analysis suggests that the current MOY share price factors in some exploration success and current commodity prices

Beer & Co’s base case valuation is a precise answer to a large number of assumptions, each of which is subject to a degree of error.

Figure 13 : Commodity prices

USD / oz $ 1,100/oz $ 1,200/oz $ 1,250/oz $ 1,300/oz

AUD‐USD = 0.700 $A 1,571/oz $A 1,714/oz $A 1,786/oz $A 1,857/oz

Reserves 3.0 c 4.2 c 4.4 c 4.7 c

Exploration 6.0 c 10.4 c 12.6 c 14.6 c

TOTAL 9.0 c 14.6 c 17.0 c 19.3 c




Beer & Co’s valuation is very sensitive to being able to add 2.0Mt/yr to the mining inventory

Figure 13 attempts to break the valuation up between existing Reserves and Beer & Co’s expected exploration success. It shows that the current share price :

Assumes some exploration success; and

Reflects current commodity prices.

The other key variables are the degree of exploration success. Figure 14 shows that a positive view on investment in MOY requires success in finding 2.0Mt/yr of mining inventory.

Grade is also important

Figure 14a : Exploration Success Figure 14b : Exploration Success

Gold price : $A 1,714/oz Years : 7.5 years

Tonnes by Grade 1.30 g/t 1.50 g/t 1.70 g/t

1.5 Mt/yr (1.0c) 0.4 c 2.2 c

2.0 Mt/yr 8.9 c 14.6 c 21.3 c

2.5 Mt/yr 10.2 c 16.7 c 24.3 c



1.5 Mt/yr (5.3c) (3.9c) (2.3c)

2.0 Mt/yr 3.8 c 9.0 c 15.2 c

2.5 Mt/yr 4.6 c 10.6 c 17.5 c

Source : Beer & Co estimates Source : Beer & Co estimates

MOY is raising equity at 4c/share.

Beer & Co’s risked valuation is 14.5c/share

Our valuation is sensitive to commodity prices, volume and grade of exploration success

We believe that we have been conservative in our base case for exploration success, which is $121/oz, which is a high cost

Beer & Co has a BUY, High Risk recommendation on MOY

Figure 14b shows that at current commodity prices, of $1100/oz gold and AUD‐USD rate of 0.700 , MOY gains significant benefit from either or both of higher grade and higher volume of exploration success.

Beer & Co’s analysis showed muted sensitivity to the number of years of expected exploration success.

Conclusions

MOY’s operations at Nullagine produced first gold in September 2012. From then until the most recent quarter, MOY failed to generate sufficient cash to service and repay the $58m in debt it had taken on to develop the $83m project.

This had been due to a range of operational issues.

For the September quarter, a strong cashflow was generated by running the operations well, with higher throughput, better recoveries, lower costs and focus on ore with a better net return.

MOY is raising equity to repay the subordinated debt it had taken on to service the senior debt, as the sub‐debt must be repaid quickly.

With this raising, MOY will be generating good cash.

Beer & Co’s base case valuation is based on :

The gold price rising slowly to $1200/oz, which is lower than the average of 2014, while the AUD‐USD rate stays level, when most expect it to fall;

An investment of $10m/yr in exploration for 8½ years, yielding 2.0Mt each year of material grading 1.5g/t, which is less than the grade or ore treated to date, for the first 7 ½ years before generating nothing in the final year.

The exploration cost is $121/oz, which is high, especially for an area that is as prospective as Nullagine.

Our valuation is quite sensitive to the volume of exploration success, but we feel that MOY is likely to be more successful than we have projected.

Our valuation shows that MOY is fair value at current commodity prices and our projected, very modest, exploration success.

Beer & Co initiates research on MOY with a BUY, High Risk, recommendation.



Millennium Minerals - History

October 2009 Feasibility Study

Figure 15 shows the tenement area held by MOY in late 2009.

Figure 15 : MOY tenements at Nullagine

Source : MOY ASX announcement, 17 October 2009

At that time, MOY reported a total of 1.1Moz of gold contained in 28.1Mt of Resources, as shown in Figure 16, over 6 different deposits.

Figure 16 : MOY Resources, October 2009, 28Mt for 1.1Moz gold

Deposit

Golden Eagle 11.43 Mt 1.26 g/t 465 koz 4.60 Mt 1.02 g/t 151 koz 4.04 Mt 1.00 g/t 130 koz 20.07 Mt 1.16 g/t 749 koz

Bartons 1.33 Mt 1.47 g/t 63 koz 0.85 Mt 1.48 g/t 41 koz 0.37 Mt 1.70 g/t 20 koz 2.55 Mt 1.52 g/t 125 koz

Shearers 0.59 Mt 1.09 g/t 21 koz 1.04 Mt 0.87 g/t 29 koz 0.40 Mt 0.90 g/t 12 koz 2.03 Mt 0.93 g/t 61 koz

All Nations 1.11 Mt 1.30 g/t 46 koz 0.19 Mt 1.04 g/t 6 koz 0.14 Mt 1.10 g/t 5 koz 1.44 Mt 1.25 g/t 58 koz

Little Wonder 0.44 Mt 1.13 g/t 16 koz 0.40 Mt 1.2 g/t 16 koz 0.85 Mt 1.17 g/t 31.8 koz

Golden Gate (ABCD Reef) 0.58 Mt 3.24 g/t 60 koz 0.11 Mt 2.6 g/t 9 koz 0.68 Mt 3.12 g/t 69 koz

Golden Gate Satellites 0.33 Mt 3.0 g/t 32 koz 0.13 Mt 3.4 g/t 14 koz 0.46 Mt 3.07 g/t 45 koz

TOTAL 14.46 Mt 1.28 g/t 595 koz 8.03 Mt 1.30 g/t 335 koz 5.59 Mt 1.14 g/t 206 koz 28.09 Mt 1.26 g/t 1,138 koz

Measured Resources Indicated Resources Inferred Resources TOTAL


As shown in Figure 17, MOY had reserves of 7.97Mt grading 1.8g/t for 463koz of contained gold.

Figure 17 : MOY tenements at Nullagine Deposit

Golden Eagle 5.15 Mt 1.6 g/t 272.5 koz 0.58 Mt 1.5 g/t 28.3 koz 5.73 Mt 1.6 g/t 300.7 koz

Bartons 0.66 Mt 1.8 g/t 39.2 koz 0.31 Mt 1.9 g/t 19.6 koz 0.98 Mt 1.9 g/t 58.8 koz

All Nations 0.31 Mt 1.8 g/t 18.6 koz 0.02 Mt 1.6 g/t 1.1 koz 0.33 Mt 1.8 g/t 19.7 koz

Shearers 0.17 Mt 1.7 g/t 9.3 koz 0.20 Mt 1.3 g/t 8.2 koz 0.37 Mt 1.5 g/t 17.5 koz

Golden Gate 0.31 Mt 3.7 g/t 37.6 koz 0.07 Mt 3.9 g/t 8.3 koz 0.38 Mt 3.8 g/t 45.9 koz

Golden Gate Area 0.19 Mt 3.4 g/t 20.6 koz 0.19 Mt 3.4 g/t 20.6 koz

TOTAL 6.61 Mt 1.77 g/t 377 koz 1.37 Mt 1.96 g/t 86 koz 7.98 Mt 1.81 g/t 463 koz

Proven Reserves Probable Reserves TOTAL




The initial plan was for

a 7 year mine life,

processing 1.25Mt/yr of ore for the first four years, and then 1.0Mt/yr, at

C1 cost of USD 594/oz from

AUD 17/t of ore mined, at a rate of 3.45t of waste per tonne of ore;

AUD 18/t of ore milled; and

AUD 3/t of ore for other costs

Expected capital cost was AUD 78m.

Finance was arranged, including AUD 50m in project finance, that was due to be re‐paid by June 2015, plus AUD 8m in facilities finance.

Early Operations

Construction was completed on time and in line with the revised budget and first gold was poured in September 2012 and operations were declared commercial in February 2013.

As shown in Figure 18, production was roughly in line with the projected in the feasibility study.

Figure 18 : Actual v expected production.

10,000 oz

12,500 oz

15,000 oz

17,500 oz

20,000 oz

22,500 oz

Dec. 12 Jun. 13 Dec. 13 Jun. 14 Dec. 14

Actual gold produced Feasibility Study

Source : MOY Quarterly reports, 17 October 2009 ASX announcement, Beer & Co

However, as shown in Figure 19, while the realised gold price was higher than the expected gold price, the realised C1 costs were much higher than the expected C1 costs of USD 594/oz or AUD 711/oz (the AUD‐USD rate rose during 2009 from 0.65 in March to 0.88 by the end of September)

Figure 19 :Costs v Actual and Expected AUD gold price

$A 600/oz

$A 700/oz

$A 800/oz

$A 900/oz

$A 1,000/oz

$A 1,100/oz

$A 1,200/oz

$A 1,300/oz

$A 1,400/oz

$A 1,500/oz

$A 1,600/oz

$A 1,700/oz

Dec. 12 Mar. 13 Jun. 13 Sep. 13 Dec. 13 Mar. 14 Jun. 14 Sep. 14 Dec. 14

Realised, actual C1 cost Feasibility Study C1 cost

Realised gold price Feasibility Study gold price

Source : MOY Quarterly reports, 17 October 2009 ASX announcement, Beer & Co



A number of factors contributed to the higher than expected costs, including :

Higher costs in the sector generally as demand for resources boomed

A more significant impact than the cost was the fall in the average quality of the resources that were able to be secured, across all categories

Poorer recoveries as it was found that some material in the Golden Eagle pit, which was the dominant source of ore supply, was refractory and not able to be recovered in the CIL circuit;

Flooding in early 2014 which meant that supplies, especially diesel fuel, could not be trucked to site so low grade stocks, which did not require mining, were treated; and

Some delays in permitting in early 2014, which delayed the opening of new, higher grade, pits.

Not enough cash was being generated to adequately service and repay the senior debt, as evidenced by :

Taking on $7m in subordinated debt, from the major shareholder, IMC Resources on 19 March 2014;

Extending the term of the senior debt from September 2015 to June 2016;

The MD announcing his intention to resign on 27 August 2014 and a new CEO being appointed on 18 December 2014;

An extra $5m in subordinated debt announced on 23 December 2014;

MOY selling its interest in the Beatons Creek JV, for $3.8m, on 27 March 2015.

Write Down by $76m

On 27 March 2015, MOY announced that its reserves at Nullagine had been written down by nearly 60%, due to a combination of :

Mining depletion;

Issues with recoveries from refractory ores; and

A slightly lower AUD gold price, from AUD 1500/oz to AUD 1400/oz.

The impact of this revision is shown in Figure 20.

Figure 20 : Revision to Reserves

Change

Proved 6.95 Mt 1.6 g/t 374.6 koz 2.99 Mt 1.5 g/t 143.3 koz (61%)

Probable 1.28 Mt 1.9 g/t 78.4 koz 0.54 Mt 1.5 g/t 25.5 koz (67%)

Stockpiles 0.45 Mt 0.8 g/t 11.4 koz 0.64 Mt 0.9 g/t 19.0 koz 66 %

TOTAL 8.7 Mt 1.66 g/t 464 koz 4.16 Mt 1.40 g/t 188 koz (59%)

10 March 2014 27 March 2015

Source : MOY ASX announcement, 27 March 2015, Beer & Co

The reduction in gold reserves also caused a reduction in mine life, down to just over 2 years. This caused a write down of the asset value of $76m, and a diminution in the carrying value of tax loss asset of $12m.

This write down was despite the operations performing in line with the projections in the feasibility study for most parameters.

Arguably the operations did not under‐perform, but instead failed to respond to cost, price and corporate circumstances.



The Response

New CEO and Operations

On 27 August 2014, MOY announced that the MD would be resigning.

The new CEO formally began in the role on 18 December 2014 and changes in operational performance followed :

Figure 21 shows that the volume of milled increased;

Figure 22 shows that the average grade rose; while

Figure 23 shows that the recovery of gold in ore improved.

Figure 21 : Change in mill throughput

Source : MOY quarterly reports, Beer & Co

Figure 22 : Change in average grade of ore milled


Figure 23 : Change in recovery of gold in ore milled




As a result of improved tonnes, grade and recovery, gold output has risen, as shown in Figure 24.

Figure 24 : Change in gold produced


Figure 24 shows the end result of a lot of work, including :

Restructuring company and site management;

Reducing total personnel, and moving some positions from site to Perth, to eliminate the Fly‐In – Fly‐Out cost, so that only those who need to be on‐site incur the expense of being there;

Reducing costs by optimising and re‐negotiating contracts;

Improving understanding of geological complexities;

Optimising mining practices, including mine fleet efficiencies; and

Optimising process flow.

Finance

As well as selling their interest in the Beatons Creek JV, which is the highlighted area in Figure 15 to the immediate north of the Nullagine township, for $3.8m, MOY took on a total of $12m of subordinated debt so that commitments to the senior lenders could be met. This sub‐debt :

Had a high interest rate, as expected from subordinated debt, including the issue of options with an exercise price linked to any future raising; and

Had a term to 30 days after the expiry of the senior debt.

While MOY has generated enough cash to repay the senior debt, Beer & Co estimate that it would not be able to generate the $15m in total required to be re‐paid by July 2016.

Also, part of the cost cutting to survive was to cease exploration and with only 2 years of reserves, investment is required to develop the mining inventory.

This has led to the raising of $20m ‐ $21m in new equity.

This equity raising is only able to be undertaken as the operations have been turned around and are now generating sufficient cash to give investors confidence.

When this raising has been completed, MOY will be effectively debt free and able to properly develop its potential.



Expected Exploration Success

Resources and Reserves

Figure 25 shows MOY’s 246km2 of tenements near Nullagine, showing 14 deposits with defined resources and a further 15 prospects with known mineralisation.

It also indicates the distance that ore needs to be transported from it mine to the processing plant in the south‐west corner of the tenement area, adjacent to the Golden Eagle mine. The present maximum distance is nearly 50km, though most of this is on existing (council) roads and haul roads.

Figure 25 : MOY’s Nullagine tenements, over 246km2

Source : MOY ASX announcement, 25 September 2015

Figure 26 : Detail of MOY’s Mineral Resources Estimate for Nullagine

Deposit

Golden Eagle 10.56 Mt 0.9 g/t 310 koz 4.37 Mt 0.9 g/t 128 koz 4.29 Mt 0.9 g/t 126 koz 19.22 Mt 0.9 g/t 564 koz

Bartons 1.72 Mt 1.2 g/t 66 koz 1.44 Mt 1.2 g/t 56 koz 0.55 Mt 1.1 g/t 19 koz 3.71 Mt 1.2 g/t 141 koz

Shearers 0.59 Mt 1.3 g/t 25 koz 1.48 Mt 1.0 g/t 48 koz 0.26 Mt 1.0 g/t 8 koz 2.33 Mt 1.1 g/t 81 koz

Otways 1.15 Mt 0.8 g/t 29 koz 0.90 Mt 0.9 g/t 26 koz 0.69 Mt 0.9 g/t 20 koz 2.74 Mt 0.9 g/t 75 koz

All Nations 1.26 Mt 1.4 g/t 57 koz 0.55 Mt 1.1 g/t 19 koz 0.42 Mt 1.0 g/t 14 koz 2.23 Mt 1.3 g/t 90 koz

Little Wonder 0.47 Mt 1.4 g/t 21 koz 0.25 Mt 1.4 g/t 11 koz 0.22 Mt 1.7 g/t 12 koz 0.94 Mt 1.4 g/t 43.7 koz

Golden Gate 0.19 Mt 3.0 g/t 18 koz 0.14 Mt 2.9 g/t 13 koz 0.14 Mt 2.4 g/t 11 koz 0.47 Mt 2.8 g/t 42 koz

Falcon 0.00 Mt 0.0 g/t 0 koz 0.09 Mt 3.9 g/t 12 koz 0.04 Mt 4.4 g/t 6 koz 0.14 Mt 4.0 g/t 18 koz

Condor 0.15 Mt 2.6 g/t 12 koz 0.04 Mt 2.8 g/t 4 koz 0.03 Mt 3.7 g/t 4 koz 0.22 Mt 2.7 g/t 19 koz

Harrier 0.00 Mt 0.0 g/t 0 koz 0.10 Mt 1.7 g/t 6 koz 0.04 Mt 1.8 g/t 2 koz 0.14 Mt 1.8 g/t 8 koz

Crow 0.04 Mt 3.1 g/t 4 koz 0.04 Mt 2.6 g/t 3 koz 0.05 Mt 2.3 g/t 4 koz 0.12 Mt 2.7 g/t 10.5 koz

G_Reef 0.00 Mt 0.0 g/t 0 koz 0.02 Mt 4.0 g/t 3 koz 0.02 Mt 3.9 g/t 3 koz 0.04 Mt 4.0 g/t 5 koz

Au 81 0.35 Mt 1.6 g/t 18 koz 0.34 Mt 1.2 g/t 13 koz 0.90 Mt 0.9 g/t 26 koz 1.59 Mt 1.1 g/t 57 koz

Camel Ck 1.25 Mt 1.3 g/t 52 koz 0.73 Mt 1.2 g/t 28 koz 0.71 Mt 1.1 g/t 25 koz 2.68 Mt 1.2 g/t 105 koz

TOTAL 17.72 Mt 1.1 g/t 612 koz 10.49 Mt 1.1 g/t 369 koz 8.35 Mt 1.0 g/t 278 koz 36.57 Mt 1.1 g/t 1,259 koz

Measured Resources Indicated Resources Inferred Resources TOTAL


Figure 26 shows the detail of MOY’s Resource estimate. It modifies the detail in the 27 March 2015 announcement by the subsequent 25 September announcement that MOY had moved to 100% of the Camel Creek JV, the areas of which are shown in blue in Figure 25, in exchange for royalties, payable to the vendors, of

6.44% on the first 20,000 ounces of gold produced from these tenements; and

1.5% on the value of all other minerals produced from these tenements.

Figure 26 shows 1.26Moz in Resources.



Figure 27 shows the detail of MOY’s Reserves, as at 31 December 2014, adjusted for MOY’s 100% ownership of the Camel Creek JV.

This shows just about 28 months of high grade and about 4 further months using low grade stockpiles, from January 2015, or to 2017 Q3.

Figure 27 : Detail of MOY’s Ore Reserves Estimate for Nullagine Deposit

Golden Eagle 1.10 Mt 1.5 g/t 54 koz 0.02 Mt 1.4 g/t 1 koz 1.12 Mt 1.5 g/t 55.2 koz

Au 81 0.16 Mt 1.5 g/t 8 koz 0.04 Mt 1.0 g/t 1 koz 0.20 Mt 1.4 g/t 9.0 koz

Bartons 0.57 Mt 1.4 g/t 26 koz 0.15 Mt 1.4 g/t 7 koz 0.72 Mt 1.4 g/t 32.5 koz

All Nations 0.34 Mt 1.6 g/t 18 koz 0.03 Mt 1.4 g/t 1 koz 0.38 Mt 1.6 g/t 19.2 koz

Shearers 0.22 Mt 1.4 g/t 10 koz 0.12 Mt 1.2 g/t 5 koz 0.34 Mt 1.3 g/t 14.3 koz

Otways 0.21 Mt 1.1 g/t 7 koz 0.07 Mt 1.0 g/t 2 koz 0.27 Mt 1.0 g/t 9.2 koz

Little Wonder (MML) 0.09 Mt 1.7 g/t 5 koz 0.01 Mt 4.6 g/t 1 koz 0.10 Mt 2.0 g/t 6.3 koz

Golden Gate 0.01 Mt 4.2 g/t 2 koz 0.00 Mt 3.5 g/t 0 koz 0.01 Mt 4.1 g/t 1.8 koz

Condor 0.04 Mt 2.4 g/t 3 koz 0.01 Mt 2.9 g/t 1 koz 0.05 Mt 2.5 g/t 4.0 koz

Crow 0.00 Mt 1.1 g/t 0 koz 0.01 Mt 2.3 g/t 0 koz 0.01 Mt 2.2 g/t 0.4 koz

Falcon 0.00 Mt 0.0 g/t 0 koz 0.03 Mt 3.5 g/t 3 koz 0.03 Mt 3.5 g/t 3.0 koz

Harrier 0.00 Mt 0.0 g/t 0 koz 0.02 Mt 1.8 g/t 1 koz 0.02 Mt 1.8 g/t 1.1 koz

G_Reef 0.00 Mt 0.0 g/t 0 koz 0.00 Mt 3.2 g/t 0 koz 0.00 Mt 3.2 g/t 0.2 koz

Little Wonder (CCJV) 0.27 Mt 1.5 g/t 13 koz 0.00 Mt 1.4 g/t 0 koz 0.28 Mt 1.5 g/t 13.1 koz

Junction 0.14 Mt 2.0 g/t 9 koz 0.01 Mt 2.0 g/t 1 koz 0.15 Mt 2.0 g/t 9.4 koz

Roscoes Reward 0.53 Mt 1.2 g/t 21 koz 0.12 Mt 1.3 g/t 5 koz 0.65 Mt 1.2 g/t 25.8 koz

ROM stocks 0.64 Mt 0.9 g/t 19 koz 0.64 Mt 0.9 g/t 18.5 koz

TOTAL 4.32 Mt 1.39 g/t 193 koz 0.64 Mt 1.47 g/t 30 koz 4.97 Mt 1.40 g/t 223 koz

Proven Reserves Probable Reserves TOTAL


Drilling Results

Figure 25 also shows that the gold is located to the immediate north of the Middle Creek fault and also along splays off this fault, to the north.

Bartons pit is the pit currently being mined by MOY. Figure 27 shows that the Reserve grade for Bartons is 1.4g/t, while the quarterly reports shows the average grade of ore being processed for the September quarter was 1.94g/t.

Figure 28 : Bartons Pit drill results

Source : MOY Presentation, October 2015

This shows that the results from Bartons has been much better than expected.

Figure 28 shows the potential for extensions to the south and west and to the east. MOY had previously reported drill results, in May 20111 and October 2011, of

10m at 9.6g/t, 8m at 9.3g/t and 8m at 2.0g/t to the south and west; and

3m at 12.2g/t, 3m at 6.0g/t, 5m at 1.5g/t and 1m at 6.7g/t to the east.



MOY has recently conducted drilling in the region to the south of Shearers Pit, investigating the potential for extensions to the main lode.

Figure 29 : Extensions to Shearers Pit


As well as identifying extensions to the main lode, drilling identified a secondary lode, with results of

7m at 3.83g/t, 13m ar 1.55g/t and 13m at 1.33g/t for the main lode; and

11m at 4.16g/t, 20m at 2.1g/t and 8m at 2.2g/t from the secondary lode.

Figure 30 shows results from Anne de Vidia including 6m at 4.8g/t, 8m at 32g/t and 16m at 5.5g/t, even though this is not included in Resources.

Figure 30 : Anne de Vidia and Castlemaine


Figure 30 also shows Castlemaine which has historic shafts that have reported a total of 1,326oz of production and a single RC drill hole which returned 2m at 3.6g/t but was not followed up.

Expected Results

MOY is now committed to investing $10m into exploration within its tenement areas.

Beer & Co has assumed that MOY is able to delineate 2.0Mt of material to be included in its mining inventory.



Beer & Co assumes that the average grade is 1.5g/t, which is in line with the Reserve grade, despite evidence that the mining operations have consistently out‐performed the reserve grade.

This gives a cost of $A 121 for each ounce added to mining inventory, which is about 4x the average in Australia.

Beer & Co expects that the actual results will do better than we have assumed for this analysis.

Expected Outcomes

Operations

Due to the expected success in exploration, Beer & Co expects operations to continue beyond 2017 Q3.

In this analysis, Beer & Co assumes that MOY spends $10m a year on exploration, but delineating 2.0Mt of mining inventory grading 1.5g/t each year, except in the final year of the program which has zero success; in other words, keep going until no longer successful.

In this analysis, Beer & Co assumes that MOY is successful to 7½ years.

Figure 31 : Operational Outcomes

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Waste moved 6,779 kt 8,778 kt 8,763 kt 8,550 kt 8,550 kt 8,550 kt 8,550 kt 8,550 kt 8,550 kt 8,550 kt 8,550 kt 8,550 kt 2,029 kt

waste : ore 4.2 : 1 5.5 : 1 4.8 : 1 4.5 : 1 4.5 : 1 4.5 : 1 4.5 : 1 4.5 : 1 4.5 : 1 4.5 : 1 4.5 : 1 4.5 : 1 4.5 : 1

Ore Mined 1,615 kt 1,583 kt 1,840 kt 1,900 kt 1,900 kt 1,900 kt 1,900 kt 1,900 kt 1,900 kt 1,900 kt 1,900 kt 1,900 kt 451 kt

Gold head grade 1.56 g/t 1.66 g/t 1.68 g/t 1.41 g/t 1.47 g/t 1.50 g/t 1.50 g/t 1.50 g/t 1.50 g/t 1.50 g/t 1.50 g/t 1.50 g/t 1.16 g/t

Recovery 88.2 % 87.1 % 90.9 % 92.0 % 92.0 % 92.0 % 92.0 % 92.0 % 92.0 % 92.0 % 92.0 % 92.0 % 92.0 %

Gold produced 63,247 oz 74,375 oz 88,631 oz 79,231 oz 82,534 oz 84,309 oz 84,309 oz 84,309 oz 84,309 oz 84,309 oz 84,309 oz 84,309 oz 37,473 oz

Source : MOY quarterly announcements, Beer & Co estimates

Figure 31 shows that Beer & Co’s operational projections are not as good as recent operational experience, suggesting potential upside.

Figure 32 : Details of operating costs

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Waste Removal $A 18.7m $A 23.2m $A 24.1m $A 23.5m $A 23.5m $A 23.5m $A 23.5m $A 23.5m $A 23.5m $A 23.5m $A 23.5m $A 23.5m $A 5.6m

AUD /t ore $A 11.6/t $A 14.7/t $A 13.1/t $A 12.3/t $A 12.3/t $A 12.3/t $A 12.3/t $A 12.3/t $A 12.3/t $A 12.3/t $A 12.3/t $A 12.3/t $A 12.3/t

AUD /t material $A 2.8/t $A 2.6/t $A 2.7/t $A 2.7/t $A 2.7/t $A 2.7/t $A 2.7/t $A 2.7/t $A 2.7/t $A 2.7/t $A 2.7/t $A 2.7/t $A 2.7/t

Ore extraction $A 4.0m $A 4.1m $A 4.8m $A 4.9m $A 4.9m $A 4.9m $A 4.9m $A 4.9m $A 4.9m $A 4.9m $A 4.9m $A 4.9m $A 1.2m


Ore Transport $A 0.0m $A 3.0m $A 10.4m $A 5.0m $A 8.8m $A 2.3m $A 3.1m $A 3.9m $A 4.6m $A 5.4m $A 6.2m $A 8.5m $A 1.8m


Mining Overhead $A 4.8m $A 4.8m $A 4.9m $A 5.0m $A 5.0m $A 5.0m $A 5.0m $A 5.0m $A 5.0m $A 5.0m $A 5.0m $A 5.0m $A 1.2m


Processing $A 26.8m $A 29.0m $A 32.5m $A 33.3m $A 33.3m $A 33.3m $A 33.3m $A 33.3m $A 33.3m $A 33.3m $A 33.3m $A 33.3m $A 16.8m


Site Admin $A 3.9m $A 4.2m $A 4.4m $A 4.3m $A 4.4m $A 4.4m $A 4.4m $A 4.4m $A 4.4m $A 4.4m $A 4.4m $A 4.4m $A 1.6m


TOTAL C1 $A 58.3m $A 68.2m $A 81.1m $A 76.0m $A 79.8m $A 73.4m $A 74.1m $A 74.9m $A 75.7m $A 76.5m $A 77.2m $A 79.5m $A 28.2m

AUD/t of ore $A 37.7/t $A 44.7/t $A 45.7/t $A 41.6/t $A 43.6/t $A 40.2/t $A 40.6/t $A 41.0/t $A 41.4/t $A 41.8/t $A 42.2/t $A 43.4/t $A 64.2/t

$A 963/oz $A 952/oz $A 948/oz $A 997/oz $A 1,003/oz $A 906/oz $A 915/oz $A 924/oz $A 933/oz $A 942/oz $A 952/oz $A 979/oz $A 772/oz

Source : MOY quarterly announcements, Beer & Co estimates



Figure 32 complements Figure 31 by showing the detail of Beer & Co’s estimated C1 costs by cost component.

Figure 33 shows the detail, in AUD/oz terms, of our projections for All In Sustaining Costs.

Figure 33 : Detail of Beer & Co’s projected cash costs for Nullagine operations AUD / oz LoM 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Waste Removal 280 312 271 296 284 278 278 278 278 278 278 278 149

Ore extraction 93 90 87 100 96 94 94 94 94 94 94 94 50

Ore Transport 61 40 118 64 106 28 37 46 55 64 73 101 47

Mining Overhead 60 64 56 63 60 59 59 59 59 59 59 59 33

Processing 400 389 366 420 403 395 395 395 395 395 395 395 449

Site Admin 53 56 50 55 53 52 52 52 52 52 52 52 44

Royalties 52 42 45 75 66 50 50 50 50 50 50 50 50

Corporate Costs 64 71 56 63 61 59 59 59 59 59 59 59 133

Sus. Capital 125 40 39 172 165 161 161 161 161 161 161 102 23

TOTAL 1,188 1,105 1,088 1,307 1,295 1,176 1,185 1,195 1,204 1,213 1,222 1,190 978


Financial Outcomes

Figure 34 shows the gold prices and the AUD‐USD rate since January 2005.

It shows that our AUD‐USD projection is the current rate, while there are many who project a lower rate. Also, our projection is only a little lower than the average since

the AUD was first floated in 1983 (0.764).

Figure 34 : Historical and projected gold prices and AUD‐USD rate

0.600

0.650

0.700

0.750

0.800

0.850

0.900

0.950

1.000

1.050

1.100

$ 400/oz

$ 650/oz

$ 900/oz

$ 1,150/oz

$ 1,400/oz

$ 1,650/oz

$ 1,900/oz

4 Jan. 2005 4 Jan. 2007 4 Jan. 2009 4 Jan. 2011 4 Jan. 2013 4 Jan. 2015 4 Jan. 2017 4 Jan. 2019 4 Jan. 2021 4 Jan. 2023

Gold price, in USD Projected gold price

AUD‐USD rate projecjed AUD‐USD

Source : IRESS, Beer & Co estimates

Our projection is for the gold price to recover from the current level, but only to the average for 2014.

Figure 35 : Projected financial outcomes for MOY’s Nullagine operations

AUD m 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

AUD/USD 0.968 0.903 0.747 0.700 0.700 0.700 0.700 0.700 0.700 0.700 0.700 0.700

Gold $ 1,411/oz $ 1,272/oz $ 1,149/oz $ 1,163/oz $ 1,200/oz $ 1,200/oz $ 1,200/oz $ 1,200/oz $ 1,200/oz $ 1,200/oz $ 1,200/oz $ 1,200/oz

Revenue 92.4 106.9 136.9 131.7 141.5 144.5 144.5 144.5 144.5 144.5 144.5 144.5

Cash Costs (60.9) (70.8) (84.0) (79.0) (82.8) (76.4) (77.1) (77.9) (78.7) (79.5) (80.2) (82.5)

Royalties (2.7) (3.1) (4.0) (5.9) (5.4) (4.2) (4.2) (4.2) (4.2) (4.2) (4.2) (4.2)

Dep'cn & Amort'sn (22.0) (27.2) (22.5) (20.0) (22.5) (15.7) (13.8) (13.2) (13.0) (13.0) (12.9) (14.8)

E B I T 6.8 5.8 26.4 26.8 30.8 48.3 49.4 49.2 48.6 47.9 47.2 43.0

Sus Cap Ex ‐ driling 0.0 0.0 0.0 (10.0) (10.0) (10.0) (10.0) (10.0) (10.0) (10.0) (10.0) (5.0)

Sus Cap Ex ‐ other (3.1) (3.0) (3.5) (3.6) (3.6) (3.6) (3.6) (3.6) (3.6) (3.6) (3.6) (3.6)

Project Cashflow, pre‐tax 25.8 30.0 45.4 33.1 39.6 50.4 49.6 48.8 48.0 47.3 46.5 49.2

Source : MOY reports, Beer & Co estimates



Figure 35 shows the detail of Beer & Co’s financial projections, based on the commodity prices shown in Figure 33 and the costs in Figure 32.

It shows that Beer & Co projects that MOY spends $10m each year on drilling to maintain its mining inventory, and also generates significant cash flow.

Valuation of MOY

Figure 35 shows Beer & Co’s financial projections for the Nullagine operations.

Figure 36 shows the financial outcomes for MOY as a corporate entity.

Figure 36 : Beer & Co’s projected financial outcomes for MOY AUD m 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Total Revenue 116 137 132 142 145 146 146 146 147 147 147 67

Cost of Goods Sold (88) (84) (79) (83) (76) (77) (78) (79) (79) (80) (83) (29)

Royalties (4) (4) (6) (5) (4) (4) (4) (4) (4) (4) (4) (2)

Corporate Costs (5) (5) (5) (5) (5) (5) (5) (5) (5) (5) (5) (5)

Exploration Expense 0 0 0 0 0 0 0 0 0 0 0 0

Dep'cn & Amort'sn (27) (22) (20) (22) (16) (14) (13) (13) (13) (13) (15) (4)

Interest Expense (5) (3) (0) 0 0 0 0 0 0 0 0 0

Tax Expense (12) (4) (5) (8) (13) (14) (14) (14) (13) (13) (12) (8)

NPAT (118) 10 12 18 31 32 32 32 31 31 28 19

Shares on Issue 218 m 349 m 743 m 754 m 759 m 759 m 759 m 759 m 759 m 759 m 759 m 759 m

Earnings per Share (2.1c) 2.8 c 1.6 c 2.4 c 4.1 c 4.2 c 4.2 c 4.2 c 4.1 c 4.1 c 3.8 c 2.5 c

Operating Cashflow 5 25 40 47 60 47 47 47 47 46 45 25

Investing Cashflow (3) (3) (14) (14) (14) (14) (14) (14) (14) (14) (9) (1)

Source : MOY 2014 Annual Report, 2015 Half Year report, Beer & Co estimates

Figure 36 shows the impact of the present equity raising. It also shows that we project earnings of 1.6c/share for 2016, which is P/E of 3.0x, and that earnings rise over time, partly due to our assumed rise in the gold price.

Figure 37 shows the detail of Beer & Co’ risked base case valuation of MOY, which is 14.5c/share (rounded to the nearest half cent, which is how trades are done).

Figure 37 : Beer & Co’s base case valuation of MOY

23‐Nov‐15


Nullagine Reserves 100% $ 82m $ 82m 10.8 c 6.6 c


Nullagine Extensions 80% $ 141m $ 113m 14.9 c 16.5 c



Hedge 100% ($ 8m) ($ 8m) (1.0c) (0.6c)

Corporate 100% ($ 30m) ($ 30m) (3.9c) (3.7c)

Cash / Debt 100% ($ 36m) ($ 36m) (4.7c) (1.3c)

Equity raisings 100% $ 19m $ 19m 2.5 c 0.3 c

TOTAL $ 163m $ 119m 15.7 c 14.6 c

Shares on issue 217.7m F P O shares 18.0m Options


discount rate = 12.0 % 31 December 2014




Figure 37 shows that while Beer & Co is confident of exploration success, we have still discounted the success for risk, while the investment has a lower risk weighting, despite our assumption that the last 12 months has zero success.

Sensitivity Analyses

Beer & Co’s base case valuation is a precise answer to a large number of assumptions, each of which is subject to a degree of error.

Figure 38 attempts to break the valuation up between existing Reserves and Beer & Co’s expected exploration success. It shows that the current share price :

Assumes some exploration success; and

Reflects current commodity prices.

Figure 38 : Commodity prices

USD / oz $ 1,100/oz $ 1,200/oz $ 1,250/oz $ 1,300/oz

AUD‐USD = 0.700 $A 1,571/oz $A 1,714/oz $A 1,786/oz $A 1,857/oz

Reserves 3.0 c 4.2 c 4.4 c 4.7 c

Exploration 6.0 c 10.4 c 12.6 c 14.6 c

TOTAL 9.0 c 14.6 c 17.0 c 19.3 c Source : Beer & Co estimates

The other key variables are the degree of exploration success. Figure 39 shows that a positive view on investment in MOY requires success in finding 2.0Mt/yr of mining inventory.

Figure 39a : Exploration Success Figure 39b : Exploration Success



1.5 Mt/yr (1.0c) 0.4 c 2.2 c

2.0 Mt/yr 8.9 c 14.6 c 21.3 c

2.5 Mt/yr 10.2 c 16.7 c 24.3 c



1.5 Mt/yr (5.3c) (3.9c) (2.3c)

2.0 Mt/yr 3.8 c 9.0 c 15.2 c

2.5 Mt/yr 4.6 c 10.6 c 17.5 c

Source : Beer & Co estimates Source : Beer & Co estimates

Figure 39b shows that at current commodity prices, of $1100/oz gold and AUD‐USD rate of 0.700 , MOY gains significant benefit from either or both of higher grade and higher volume of exploration success.

Beer & Co’s analysis showed muted sensitivity to number of years of expected exploration success.

Conclusions

MOY’s operations at Nullagine produced first gold in September 2012. From then until the most recent quarter, MOY failed to generate sufficient cash to service and repay the $58m in debt it had taken on to develop the $83m project.

This had been due to a range of operational issues which drove costs higher and may be seen as outside the control of the management.

However, management failed to respond to these changed conditions and instead focused on the operational projections in the feasibility study.

For the September quarter, a strong cashflow was generated by running the operations well, with higher throughput, better recoveries, lower costs and focus on ore with a better net return.



MOY is raising equity to repay the subordinated debt it had taken on to service the senior debt, as the sub‐debt must be repaid quickly.

With this raising, MOY will be generating good cash.

Beer & Co’s base case valuation is based on :

The gold price rising slowly to $1250/oz, which is lower than the average of 2014, while the AUD‐USD rate stays level, when most expect it to fall;

An investment of $10m/yr in exploration for 8½ years, yielding 2.0Mt each year of material grading 1.5g/t, which is less than the grade or ore treated to date, for the first 7 ½ years before generating nothing in the final year.

The exploration cost is $121/oz, which is high, especially for an area that is as prospective as Nullagine.

Our valuation is quite sensitive to the volume of exploration success, but we feel that MOY is likely to be more successful than we have projected.

Our valuation shows that MOY is fair value at current commodity prices and our projected, very modest, exploration success.

Beer & Co initiates research on MOY with a BUY, High Risk, recommendation.



Beer & Co ResearchMillenium Minerals (MOY.ASX)

Year ended December 2014 2015 2016 2017 2018 2019 2020 2021 Commodity price assumptions

Section 1 - P&L 2015 2016 2017 2018 2019 2020

Sales revenue $A m 107 137 132 141 145 145 145 145 AUD‐USD 0.747 0.700 0.700 0.700 0.700 0.700

Interest revenue $A m 0 0 0 0 1 1 1 2 Gold US$ / oz 1,149 1,163 1,200 1,200 1,200 1,200

Other revenue $A m 9 0 0 0 0 0 0 0 AUD / oz 1,537 1,661 1,714 1,714 1,714 1,714

Total Revenue $A m 116 137 132 142 145 146 146 146

Mine Production

Cost of Goods Sold $A m (88) (84) (79) (83) (76) (77) (78) (79) Nullagine

Royalties (4) (4) (6) (5) (4) (4) (4) (4) Ore processed '000t 1,841 1,900 1,900 1,900 1,900 1,900

Corporate Costs $A m (5) (5) (5) (5) (5) (5) (5) (5) Gold grade 1.68 g/t 1.41 g/t 1.47 g/t 1.50 g/t 1.50 g/t 1.50 g/t

Exploration Expense $A m 0 0 0 0 0 0 0 0 Gold produced (ounces) 88,631 79,231 82,534 84,309 84,309 84,309

Other Operating Expenses $A m (17) (5) (5) 0 0 0 0 0

Total Operating Expenses $A m (114) (98) (95) (93) (86) (86) (87) (88) Resources

Deposit Gold

EBITDA $A m 2 39 37 48 60 59 59 58 Golden Eagle 10.6 Mt 0.9 g/t 4.4 Mt 0.9 g/t 4.3 Mt 0.9 g/t 564 koz

Dep'cn & Amort'sn $A m (27) (22) (20) (22) (16) (14) (13) (13) Bartons 1.7 Mt 1.2 g/t 1.4 Mt 1.2 g/t 0.6 Mt 1.1 g/t 141 koz

EBIT $A m (25) 17 17 26 44 45 46 45 Shearers 0.6 Mt 1.3 g/t 1.5 Mt 1.0 g/t 0.3 Mt 1.0 g/t 81 koz

Interest Expense $A m 0 0 0 (1) (1) (1) (1) (1) Otways 1.2 Mt 0.8 g/t 0.9 Mt 0.9 g/t 0.7 Mt 0.9 g/t 75 koz

Other $A m (1) 0 0 0 0 0 0 0 All Nations 1.3 Mt 1.4 g/t 0.6 Mt 1.1 g/t 0.4 Mt 1.0 g/t 90 koz

Pre‐Tax Profit $A m (26) 17 17 25 43 44 45 44 Little Wonder 0.5 Mt 1.4 g/t 0.3 Mt 1.4 g/t 0.2 Mt 1.7 g/t 44 koz

Tax Expense $A m 0 0 0 (1) (3) (5) (5) (7) Golden Gate 0.2 Mt 3.0 g/t 0.1 Mt 2.9 g/t 0.1 Mt 2.4 g/t 42 koz

NPAT $A m (26) 17 17 24 39 39 40 37 Falcon 0.0 Mt 0.0 g/t 0.1 Mt 3.9 g/t 0.0 Mt 4.4 g/t 18 koz

Condor 0.2 Mt 2.6 g/t 0.0 Mt 2.8 g/t 0.0 Mt 3.7 g/t 19 koz

Section 2 - Key Data Harrier 0.0 Mt 0.0 g/t 0.1 Mt 1.7 g/t 0.0 Mt 1.8 g/t 8 koz

Ordinary shares ‐ year end m 217.7 742.7 742.7 758.7 758.7 758.7 758.7 758.7 Crow 0.0 Mt 3.1 g/t 0.0 Mt 2.6 g/t 0.0 Mt 2.3 g/t 11 koz

Fully diluted shares on issue m 217.7 742.7 742.7 758.7 758.7 758.7 758.7 758.7 G_Reef 0.0 Mt 0.0 g/t 0.0 Mt 4.0 g/t 0.0 Mt 3.9 g/t 5 koz

Weighted # shares m 217.7 348.9 742.7 754.2 758.7 758.7 758.7 758.7 Au 81 0.4 Mt 1.6 g/t 0.3 Mt 1.2 g/t 0.9 Mt 0.9 g/t 57 koz

Earnings per Share (2.1c) 2.8 c 1.6 c 2.4 c 4.1 c 4.2 c 4.2 c 4.2 c Camel Ck 1.2 Mt 1.3 g/t 0.7 Mt 1.2 g/t 0.7 Mt 1.1 g/t 105 koz

Dividends Per Share 0.0 c 0.0 c 0.0 c 0.0 c 0.0 c 0.0 c 0.0 c 0.0 c TOTAL 17.7 Mt 1.1 g/t 10.5 Mt 1.1 g/t 8.4 Mt 1.0 g/t 1,259 koz

Section 3 - Balance Sheet Reserves (includes 100% of Camel Ck JV)

Cash $A m 2 5 6 31 67 89 110 131 Proved 3.7 Mt 1.5 g/t 174 koz

Receivables $A m 2 9 11 12 11 11 11 11 Probable 0.6 Mt 1.5 g/t 30 koz

Inventory $A m 17 13 14 12 13 13 13 13 Stockpiles 0.6 Mt 0.9 g/t 19 koz

Other $A m 2 2 2 2 2 2 2 2 TOTAL 5.0 Mt 1.4 g/t 223 koz

CURRENT ASSETS $A m 23 30 33 58 92 115 136 157

Costs, AUD / oz

Receivables $A m 0 0 0 0 0 0 0 0 LoM 2015 2016 2017 2018 2019 2020

P , P & E $A m 43 28 16 7 5 4 4 4 C 1 cash costs 947 948 997 1,003 906 915 924

Mining Properties / Exploration $A m 8 4 10 10 10 10 11 11 All‐In 1,188 1,088 1,307 1,295 1,176 1,185 1,195

Other $A m 0 0 0 0 0 0 0 0

NON‐CURRENT ASSETS $A m 51 32 26 17 15 15 15 16 Asset based Valuation

TOTAL ASSETS $A m 74 62 59 75 107 129 151 173 23‐Nov‐15


Payables $A m 16 7 7 6 6 6 6 6 Nullagine Reserves 100% $ 82m $ 82m 10.8 c 6.6 c

Debt $A m 20 12 0 0 0 0 0 0 franking credits 60% $ 7m $ 4m 0.5 c 0.6 c

Other $A m 1 0 0 0 0 0 0 0 Nullagine Extensions 80% $ 141m $ 113m 14.9 c 16.5 c

CURRENT LIABILITIES $A m 36 18 7 6 6 6 6 6 franking credits 48% $ 33m $ 16m 2.1 c 2.3 c


Long Term Debt $A m 17 0 0 0 0 0 0 0 Hedge 100% ($ 8m) ($ 8m) (1.0c) (0.6c)

Other $A m 2 2 2 2 2 2 2 2 Corporate 100% ($ 30m) ($ 30m) (3.9c) (3.7c)

Provisions $A m 6 6 6 6 6 6 6 6 Cash / Debt 100% ($ 36m) ($ 36m) (4.7c) (1.3c)

NON‐CURRENT LIABILITIES $A m 26 8 8 8 8 8 8 8 Equity raisings 100% $ 19m $ 19m 2.5 c 0.3 c

TOTAL LIABILTIES $A m 62 27 16 14 14 15 15 15 TOTAL $ 163m $ 119m 15.7 c 14.6 c

NET ASSETS $A m 12 35 43 61 93 115 137 158 Shares on issue 217.7m F P O shares 18.0m Options


Accumulated Profit (Loss) $A m (135) (125) (113) (95) (64) (33) (1) 31

Reserves $A m 3 (4) (8) (9) (8) (17) (27) (37) Financial Ratios

Contributed Equity $A m 144 165 165 165 165 165 165 165 2014 2015 2016 2017 2018 2019

Total Equity $A m 12 35 43 61 93 115 137 158 Revenue $A m 116 137 132 142 145 146

EBITDA $A m 2 39 37 48 60 59

Section 4 - Cashflow EBIT $A m (25) 17 17 26 44 45

Net Cashflow from operations $A m 19 44 42 48 60 59 59 58 NPAT (reported $A m (26) 17 17 24 39 39

Hedging $A m (5) 0 0 0 0 0 0 0 Adjusted EPS (cps) (2.1c) 2.8 c 1.6 c 2.4 c 4.1 c 4.2 c

Interest Paid $A m (5) (3) (0) 0 1 1 1 2 EPS Growth (%) (45%) 54 % 68 % 4 %

Taxes Paid $A m 0 0 0 0 (1) (14) (14) (14) DPS (c) 0.0 c 0.0 c 0.0 c 0.0 c 0.0 c 0.0 c

Change in Working Capital $A m (4) (16) (1) (2) 1 0 0 0 Dividend Yield (%) 0 % 0 % 0 % 0 % 0 % 0 %

Other $A m PE adj. (x) x (1.8) 1.8 3.2 2.1 1.2 1.2

OPERATING CASHFLOW $A m 5 25 40 47 60 47 47 47 EV / EBITDA (x) x 19.4 1.1 0.8 0.1 (0.5) (0.9)

EV / EBIT (x) x (1.7) 2.6 1.8 0.2 (0.7) (1.1)

Exploration Expenditures $A m 0 0 (10) (10) (10) (10) (10) (10) Gearing (%) 50 % 19 % 0 % 0 % 0 % 0 %

Maintenace Capex $A m (3) (3) (4) (4) (4) (4) (4) (4) Return on Assets (34%) 27 % 29 % 35 % 41 % 35 %

Expansion Capex $A m 0 0 0 0 0 0 0 0 Return on Equity (211%) 48 % 39 % 40 % 42 % 34 %

PPE Acquisitions (Total Capex)$A m (3) (3) (14) (14) (14) (14) (14) (14) EBITDA Margin (%) 2 % 29 % 28 % 34 % 41 % 41 %

PPE Divestments $A m 0 0 0 0 0 0 0 0 Interest Cover ( x n/a n/a n/a n/a n/a n/a

INVESTING CASHFLOW $A m (3) (3) (14) (14) (14) (14) (14) (14)

Change in Equity $A m 0 21 0 1 0 0 0 0 Major shareholders

Dividends Paid $A m 0 0 0 0 0 0 0 0 IMC Resource Holdings

Change in Debt $A m (2) (25) (12) 0 0 0 0 0 existing 75.4m 34.6 % 91.4m 39.1 %

FINANCING CASHFLOW $A m (2) (5) (12) 1 0 0 0 0 new 181.7m 34.6 % 181.7m 34.6 %

Total 257.1m 34.6 % 273.1m 36.0 %

Free Cashflow $A m 2 22 27 33 47 33 33 33

Net Cashflow $A m 0 17 15 34 47 33 33 33

fully diluted

discount rate = 12 % 31 December 2014

Year ended December

Measured Indicated Inferred

November 2015

Year ended December



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