Overview of Analyzing Mining Companies

March 14, 2012

Chris Callahan | Mining Portfolio Manager

This presentation is for informational purposes only, and is not an offer to buy or sell or a solicitation to buy or sell any securities, investment products or other financial product or service, an official confirmation of any transaction, or an official statement of Limestone Capital Investment Club. Any views or opinions presented are solely those of the author and do not necessarily represent those of Limestone Capital.

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Table of Contents

o Mining Resource Classificationo Primary Steps to Productiono Key Factors for Resource Valuationo Valuation Methods

Mineral Resource Classification

• Technical Report outlining process for evaluating resource, report on reserves made by third party• Obtainable through SEDAR.com

• Created after the Bre-X incident in 1997 • Company used a core to estimate reserves using gold that management inputted themselves, turns out

there was no gold at all• States

• Measured, Indicated, Inferred, Proven, Probable• Important Metrics:

• Cut-off grade: Lowest grams per ton of the commodity beyond which it is not economical to extract the commodity from the asset in question

• Equivalent grams/ton: Junior mining companies may use this metric to deceive investors. Ratios are just as important as the cut-off grade for a complete analysis

National Instrument 43-101

NI 43-101 Production Key Factors

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Steps to Production

1. NI 43-101

2. Pre Feasibility Study

3. Feasibility Study

4. Bankable Feasibility Study

5. Timeline to Production

6. Production

Steps to Production

NI 43-101 Production Key Factors

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Management

Key Factors for AnalysisProperty

• “Who are the key players involved with the company?”

• Research management biographies• Sedi.ca• Research previous position successes• Company with bad reserves with good

management can be a good buy• Euromax, tripled in value just because

they hired Steve Sharp.

• Between 95% and 99% of mining properties do not go into production

• Due to costs and economic variables to produce at profit

• Minimum of 50 Million to build a mine• Search for Big Deposits (Big Upside)

Recent Financings• Match up companies

objectives to its current finances

• Look through press releases to see past financing rounds

• Match up expenditures/CAPEX with financings

Political Factors/Risk• Can make or break a

promising junior stock.• Majority of Gold Deposits

are found in third world countries

• Nationalization Threats • Royalties/Taxes

Valuation Metrics• Precedent Comparable

Transactions• Resource Comparable

Ratios: (EV/Total Resource)• DCF (Not Applicable for

early stage projects)

NI 43-101 Production Key Factors

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