Vector Resources Limited

– Copyright © 2012 RM Research – www.rmresearch.com.au - Please read the disclaimer for terms.

Following the acquisition of Golden Iron Resources in February 2011, Vector has been making excellent progress at its flagship gold projects, Gwendolyn and Mt Dimer, in the Southern Cross Region of Western Australia.

In the last 11 months, of which the Company has only been actively drilling for the last six months, total JORC Resources at Gwendolyn and Mt Dimer have increased from 789,900 tonnes @ 4.7 g/t gold to 2.1 million tonnes @ 3.1 g/t gold for a total of 205,865 ounces. Importantly the total discovery cost of the additional ounces is under A$2.00.ounce against an industry comparison of A$10-15/ounce.

This recent resource upgrade however appears to be just the start of what could be a significant resource inventory which has the potential to sustain a standalone operation at Gwendolyn and possibly Mt Dimer. The quickest path to production appears to be the identification of oxide resources with recent results from 5,615 metres of RC drilling resulting in an increase of 78,300 JORC ounces and 103,000 unclassified ounces supporting our bullish views on Gwendolyn.

Both Gwendolyn and Mt Dimer have suffered from a lack of any systematic exploration of recent years. Mt Dimer in particular has been considered a narrow vein, high grade underground gold play with fairly poor continuity and modest project economics. The last two phases of RC drilling however have upgraded JORC Resources at the project including an additional 8,725 ounces at the Lightning Prospect.

In addition to the detailed drilling at Gwendolyn and Mt Dimer, the Company has also completed and processed the results from aeromagnetic surveys over the Mt Palmer, Clampton and Muriel’s’ Extension Projects.

At the 50:50 Earaheedy joint Venture with Cazaly Resources Limited (ASX: CAZ), a CID target in a remote part of Western Australia approximately 750 kilometres north-east of Perth, Anglo American have agreed (September 2011) to farm-in to a 890km2 area on the northern portion of the tenement. Anglo American will earn up to 75% of the project, make payments of up to A$51 million, drill 7,500 metres in the next 12 months and spend up to A$20 million within four years on exploration. In order to earn a 75% interest, Anglo American must complete a BFS. The JV still leaves CAZ and VEC with substantial acreage to explore in their own right in the southern portion of the tenement.

The Company is currently trading at an Enterprise Value of A$71.5 per JORC Resource ounce against a sector average (for comparable explorers/developers) of approximately A$107/JORC Resource ounce. RM Research however considers that total JORC Resources at Gwendolyn and Mt Dimer should increase to between 460,000 to 640,000 ounces within the next 3-6 months which would give us a share price target between 30 and 40 cents per share (fully diluted) assuming this relatively high-grade resource inventory would sustain a premium of say EV/oz gold of A$20-25/ounce over the sector average for its peers in the range of A$107/ounce.

Significantly, RM Research believes that the relatively high grades at both Gwendolyn and Mt Dimer have the potential to sustain C1+C2 operating costs under A$400/ounce against an average of approximately A$750/ounce for Western Australian open cut miners.

Our three month base case share price target is 30 cents on the back of the JORC resource inventory increasing to 460K ounces, however we believe this may surprise on the upside. Speculative Buy.

Capital Structure

Sector Materials

Share Price (A$) 0.092

Fully Paid Ordinary Shares (m) 205.6

Opt (ex 20c, exp 30/06/12) (m) 176.9

Opt (ex 25c, exp 31/01/15) (m) 88.4

Market Cap (undil) (A$m) 18.9

Share Price Year H-L (A$) 0.059-0.15

Cash & Liquid Sec (A$m) 4.3

Directors & Management

Damien O’Reilly Non-Exec Chairman

Glyn Povey Managing Director

Gary Castledine Non-Exec Director

Brian Williams Non-Exec Director

Robert Hyndes Non-Exec Director

Neville Basset Co Sec, N-Exec Director

Major Shareholders

CS Fourth Nominees P/L 3.7%

Slade Technologies P/L <Embrey S/F A/C> 3.1%

RP & SP Martin <R&S Martin S/F A/C> 2.6%

Kapiri Holdings P/L 2.5%

Pershing Aus Noms P/L <Ind Ocean A/C> 2.5%

Analyst

GT Le Page

+61 8 9488 0800

Share Price Performance

Vector Resources Limited Projecting JORC Resources to increase by over 200% short term...Gwendolyn shows potential for mineable oxide resource

4 April 2012

ASX Code: VEC Speculative Buy 3 month Price target 30 cents

– Copyright © 2012 RM Research - www.rmresearch.com.au

4 April 2012

INVESTMENT CASE

RESOURCE UPSIDE: RM Research believes that Gwendolyn in particular is set to increase the Vector JORC Resource inventory from 206,000 ounces to between 460,000 and 640, 000 ounces of gold within the next three to six months.

GOLD PRICE OUTLOOK REMAINS FIRM: Notwithstanding the uncertainty of short term volatility and liquidity related selling pressure and the associated move into the US dollar, RM Research believes the long term outlook for gold is positive, driven by its relative safe-haven status and longer term momentum of portfolio diversification away from the US currency.

NEAR TERM PRODUCTION POTENTIAL: RM Research believes that a JORC Reserve of approximately 200,000 ounces @ +5g/t gold at Gwendolyn should be sufficient to sustain a 150,000-200,000 tpa carbon-in pulp plant on site. Subject to permitting and delays for long lead time items, we consider there is potential to bring Gwendolyn on line by 2Q 2013.

ATTRACTIVE FINANCIAL METRICS: the high grades and potentially low strip ratios at Gwendolyn have the potential to deliver C1 +C2 cash costs of under A$400/tonne against a sector average of approximately A$750/ounce Au for open cut Western Australian gold mines. This assumption is based on a 150-200Ktpa carbon-in-pulp circuit starting on oxide material. We believe Mt Dimer also has potential for smaller and more discrete open pit ore bodies with the possibly higher strip ratios offset by much higher grades(+5/g Au).

EXPERIENCED MANAGEMENT: The board of Vector has considerable experience in open cut and underground gold mining including Managing Director Glyn Povey who has considerable experience as a Mine Manager and Mining Engineer on many Australian open cut and underground operations. Chairman Damian O’Reilly has held senior roles with Downer EDI, MacMahon Contractors, Henry Walker Eltin and CSR in addition to being involved in the establishment of more than 100 mines in Australia.

COMPANY BACKGROUND

Vector raised A$12.0 million at 20 cents per share and listed on the Australian Securities Exchange (“ASX”) in 2007 on the back of its flagship Nabberu Iron Ore Project in Western Australia.

In February 2010, the Company entered into the 50/50 Earaheedy Iron Ore Joint-Venture with Cazaly Resources Limited (ASX: CAZ) situated in central Western Australia and covering 2,700km2.

In November 2010, the Company acquired 100% of the share capital of Golden Iron Resources Limited (“Golden Iron”) via a 1 for 2 share swap. Golden Iron’s gold portfolio in the Southern Cross region of Western Australia included Mt Dimer and Gwendolyn with JORC Compliant Resources of 798,900t @ 4.7 g/t for 118,930 oz Au. In May 2011 the Company finalised the acquisition of 100% of Muriel’s Extension, a portfolio of tenements prospective for gold near Leonora, Western Australia.

RM Research believe that total JORC Resources for Vector Resources could exceed 460,000 ounces of gold within the next 3-‐6 months

Gwendolyn and Mt Dimer have the potential to develop into relatively low cost open cut operations

FIGURE 1: Vector Resources Limited Western Australian exploration portfolio (source: Vector Resources Limited website, March 2012).

– Copyright © 2012 RM Research – www.rmresearch.com.au

4 April 2012

EXPLORATION OVERVIEW

Southern Cross Exploration Projects Background

The Company acquired 100% of Golden Iron Resources Ltd ("Golden Iron") in February 2011, an unlisted public company whose primary assets included the Gwendolyn and Mt Dimer Projects in Southern Cross, Western Australia, containing JORC Resources of 798,900t @ 4.7 g/t for 118,800 oz gold. Vector now controls six mining, six exploration and seven prospecting licences in Southern Cross covering 41,376 hectares.

Gwendolyn

Location and Access

The Gwendolyn Project (E77/1580 and P77/3976) covers in excess of 487 hectares and contains numerous old workings. The project is situated approximately 370 kilometres east of Perth and 200 kilometres north of Southern Cross.

Geology and Mineralisation

The local geology is dominated by greenstones comprising mafic rocks, cherts, BIF’s and minor ultramafic, clastic sedimentary rocks and felsics. Gold mineralisation is associated with arsenic along north easterly trending west dipping shears. Gold occurs as minor elluvial enrichment, as shear hosted bodies and stratabound within BIF’s and mafic lithologies.

Historical Mining

Past production at the site includes documented recovered gold grades of 15.7g/t from mining the BIF horizons at the nearby Evanston and Blue Peter, Kitchie’s and Goldies workings. Historical mining at Gwendolyn consisted of a shallow oxide pit to a depth of approximately 28 metres.

FIGURE 2: Vector Resources Limited Australian Exploration Portfolio diagram (source: Vector Resources Limited website, March 2012).

Golden Iron was acquired in early 2011

Gold grades of 15g/t were returned from historical mining near Gwendolyn


4 April 2012

Recent Exploration

A total of 54 RC holes were completed over two phases of RC drilling at the project for a total of 5,615 metres.

The majority of the intersections were situated outside of the known JORC Resources indicating the potential for extension along strike to the north and south. Some recent intercepts from the late 2011 program included:

• 3 metres @ 57.91 g/t

• 2 metres @ 8.93 g/t

• 4 metres @ 19.9 g/t,

• 7 metres @ 22.88 g/t

• 10 metres @ 4.13 g/t

• 6 metres @ 7.54 g/t,

• 2 metres at @11.95 g/t.

This program was successful in delivering a 235% increase in JORC resources to 1.45Mt @ 2.4 g/t gold for 111,600 ounces (317,700 tonnes @ 3.3g/t for 33.300 ounces of gold), mostly in oxide material to a depth of approximately 89 metres. A lower cut-off of 0.20 g/t and a top cut of 32g/t Au were used. Further drilling will be required to convert mineralisation into resources below the zone of oxidation (Figure 4).

A large body of mineralisation has not yet been classified as JORC resources due to inadequate drill testing with RM Research considering the Exploration Target of 592,000 t at 2.4 g/t and 1,100,000 t at 2.9 g/t for between 46,000 - 103,000 ounces will comfortably be exceeded within the next 3-6 months (Figure 5).

FIGURE 3: Vector Resources Limited Gold tail from panning of RC drillholes (source: Vector Resources Limited ASX Announcement, 25 August 2011)

Drilling in late 2011 delivered a 235% increase in JORC Resources at Gwendolyn

FIGURE 4: Vector Resources Limited Gwendolyn East Prospect. Final domain model looking east north-east (source: Vector Resources Limited ASX Announcement, 19 December 2011).

RM Research believes the Exploration Target of 100Koz of gold will be comfortably exceeded in the next 3-‐6 months


4 April 2012

RM Research believes that the next round of results at Gwendolyn are likely to surprise on the upside with mineralisation both at depth, along strike and adjacent to known mineralisation and JORC Resources remaining open. While the near term focus is on the delineation of oxide gold resources for an early start to production in 2013, there remains significant sulphide potential at depth as well.

Mt Dimer

Location and Access

Mt Dimer (Figure 6) is situated approximately 120 kilometres north-east of Southern Cross and is accessed by an all-weather gravel haul and service road.

FIGURE 5: Vector Resources Limited Exploration Portfolio (source: Vector Resources Limited website, March 2012).

Gwendolyn remains open at depth, along strike and adjacent to known mineralisation and JORC Resources

FIGURE 6: Vector Resources Limited Mt Dimer Project, location and geology (source: Vector Resources Limited, website. March 2012).


4 April 2012


Mt Dimer covers over 2,029 hectares within the Archaean Diemals-Marda Greenstone Belt (Figure 6). With gold mineralisation associated with quartz veins orientated in discreet steeply plunging shoots. A JORC Compliant Resource of 377,200t at 5.8g/t for 70,320oz gold was outlined by previous explorers.

Historical Mining

Open pit and underground mining took place from 1990 to 1997 with total production of 639,790 tonnes @ 6.5g/t gold for 133,000 ounces of gold and 183,000 ounces of silver.

Recent Exploration

A detailed Soil Auger program (Figure 7) was undertaken by Vector during 2Q/3Q 2011 over five mining tenements at a density of between 100 metres x 40 metres and 200 metres x 200 metres, resulting in the collection of 3,487 samples. This geochemical program targeted calcrete horizons which tend to act as a “soak” for metals. 22 new gold targets, coincident with known structures, were outlined including five geochemical targets that effectively extend mineralisation from known workings including extensions to previous workings along strike.

A 147 RC drill hole, 14,770 metre program in 3Q 2011 tested potential extensions to historical workings together with newly identified geochemical anomalies. Numerous high grade intercepts were returned at Lightning, Anomaly 2, Silver Wing and Golden Slipper confirming mineralisation both at depth and along strike from known workings. Better results included;

• 6 metres @ 24.81g/t from 62 metres downhole

• 4 metres @ 21.71 g/t from 50 metres downhole




FIGURE 7: Vector Resources Limited Geochemical gold anomalies on M77/427 and M77/428 at the Mt Dimer Project (source: Vector Resources Limited, ASX Announcement, 30th August 2011).

Lightning, Anomaly 2 and Golden Slipper returned encouraging intercepts


4 April 2012

Lightning Prospect

Fourteen drill holes over late 2011 were successful in upgrading the Lightening JORC resources (Figure 9, 10) by 4,850 ounces to 13,575 ounces with mineralisation remaining open along strike and at depth. The prospect was discovered in the process of sterilising an area for the Golden Slipper waste dump.

The resource was calculated by SRK Consulting using a low cut-off grade of 0.20 g/t gold and 30 g/t gold for a top cut.

Gold mineralisation found to be associated with steeply plunging quartz veins with better intercepts including 7 metres @ 13.1 g/t and 10 metres @ 14.4 g/t gold.

FIGURE 8: Vector Resources Limited Aerial view of Mt Dimer old workings and anomalies (source: Vector Resources Limited ASX Announcement, 26 September 2011).

FIGURE 9: Vector Resources Limited Lightening Deposit, aerial view (source: Vector Resources Limited ASX Announcement, 21st December 2011).

FIGURE 10: Vector Resources Limited Lightening Deposit, geostatistical domains (source: Vector Resources Limited ASX Announcement, 21st December 2011).

Lightening Prospect


4 April 2012

Anomaly 2

Anomaly 2 (Figure 8) is situated east of Lightning and comprises two small laterite pits that were mined in the 1990’s. Gold mineralisation is associated with quartz veins within a sheared mafic unit. Drilling over 2011 returning significant intercepts including 4 metres downhole @ 21.71 g/t gold.

Golden Slipper

RC drilling over 2011 along strike from the Golden Slipper Prospect (Figure 8) resulted in 9 out of 14 RC holes intersecting significant gold mineralisation including;

• D049; 6 metres @ 15.7 g/t

• D062; 4 metres @ 11.83 g/t

• D054; 3 metres @ 12.7 g/t

• D050; 3 metres @ 7.45 g/t, and

• D052; 2 metres @ 7.8 g/t.

This round of drilling targeted areas LO1, LO2 and LO3 (Figure 11) as well as Frodo and Karli West Pits to the north and south.

Again mineralisation appears to be open along strike and at depth.

FIGURE 3: Vector Resources Limited Aerial view of important Mt Dimer old workings and anomalies (source: Vector Resources Limited ASX Announcement, 26 September 2012).

The Frere Formation remains the primary target at the Earaheedy joint venture...

Recent exploration by Zinc Company Australia has highlighted the potential for manganese in the region

FIGURE 11: Vector Resources Limited Golden Slipper Prospect showing 2011 drill holes (source: Vector Resources Limited ASX Announcement, 31 December 2012).

Mineralisation appears to be open along strike and at depth


4 April 2012

Iron Ore Projects

Earaheedy JV Location and Access

Vector has a 50:50 joint venture with CAZ which includes eight exploration licences, one prospecting license, three prospecting applications and 14 exploration applications at the Earaheedy joint venture (Figure 12). The project is very remote and situated approximately 750 kilometres north-east of Perth covering an area in excess of 2,700km2.


The Frere Formation is the primary focus for iron ore exploration within the basin and contains granular and supergene-enriched iron-formations intercalated with shale, siltstone, chert, and jasper beds. Iron formations appear to increase in thickness and volume towards the north west of the basin.

These CID style deposits formed in meandering river channels. As bedded iron deposits were eroded by weathering, iron particles were concentrated in river channels. These particles were rimmed with goethite deposited by iron-enriched ground water around 15-30 million years ago which fused the particles together. CID deposits occur as low flat-topped mesas as well as being concealed under cover. Their chief characteristic is their pisolitic 'texture': rounded hematitic 'pea-stones', 0.1mm to 5mm in diameter, rimmed and cemented by a goethitic matrix. The ore is brown-yellow in colour. They typically contain minor amounts of clay in discrete lenses.

Previous Exploration

BHP-Billiton Limited (ASX: BHP) and AMAX Exploration (Australia) Inc (“Amax”) commenced exploration in the area in the 1970’s and outlined areas of haematite enrichment. Grades up to 66% Fe were encountered but little work was undertaken until the Geological Survey of Western Australia and other companies such as Enterprise Metals Limited (ASX: ENT), commenced exploration activity. The discovery of manganese mineralisation by Zinc Company Australia Limited in the area also highlighted the exploration potential.

FIGURE 12: Vector Resources Limited Earaheedy joint venture (source: Vector Resources Limited, website 2012).

Previous explorers included BHP and AMAX...

...recent exploration has highlighted the manganese potential of the area


4 April 2012

Recent Exploration

The most promising results from last years’ drilling program came from the Cecil Rhodes Prospect. Significant results (all with low contaminants) included;

• 34 metres @ 54.4% Fe (including 22m @ 58.1% Fe),

• 22 metres @ 57.8% Fe and 26m @ 55.1% Fe.

Anglo American Joint Venture

On 26 September 2011, CAZ and VEC announced that ANGLO AMERICAN Corporation (“Anglo”) had agreed to farm into an 890 km2 area of the Earaheedy Joint Venture. The joint venture partners will retain the southern portion of the Earaheedy Project which is considered prospective for manganese mineralisation. Key terms are summarised as follows:

• Anglo will drill up to 7,500 metres of RC/Diamond as part of their due diligence within the next 12 months after which Anglo may earn an initial 51% interest via payment of an initial A$1 million in cash and by spending A$20 million within 4 years.

• Anglo may go up to 75% by completing a Bankable Feasibility Study (BFS) and paying a further A$5 million to the joint venture partners.

• A further A$45 million would become payable on the completion of a positive BFS. The VEC/CAZ may then elect to contribute to project expenditure or dilute to a royalty of 1.25% FOB.

RESOURCES AND RESERVES

There has been very little exploration at both Gwendolyn and Mt Dimer over recent years until this current round of exploration by the Company over 2011-2012. There has been a long held perception at Mt Dimer, in particular, that mineralisation is confined to narrow vein shoots extractable by underground mining methods only. However recent drilling at the Lightning Prospect at Mt Dimer, for example, has shown that there is extensive high grade (+5g/t Au) near surface material that we believe could be mineable by discrete and relatively constrained open pits. Similarly at Gwendolyn, we believe there is potential for extensive near surface, open pittable mineralisation (+2gt Au) with mineralisation open along strike, down dip and possibly adjacent to previous drilling. Recent RC results from Gwendolyn East support this view.

RM Research is projecting that total Measured, Inferred and Indicated JORC Resources will increase by 1-1.5 million tonnes @ +5g/t Au at Mt Dimer for a total of between 250,000 and 350,000 ounces within the next 12-18 months. At Gwendolyn, RM Research is projecting that total Measured, Inferred and Indicated JORC Resources will increase by 1-2.0 million tonnes @ +2g/t Au for a total of approximately 160,000 - 240,000 ounces within the next 3 months. The above projections would represent therefore a total increase in JORC Resources of between 267,000 (227% increase) and 442,000 (312% increase) over and above the current 2.08 million tonnes @ 3.07 g/t for 205,865 ounces Au.

Anglo will drill approximately 7,500 metres over the next 12 months at the Earaheedy joint venture...

TABLE 1: Vector Resources Limited Resources and Reserves (source: Vector Resources Limited website, March 2012).

RM Research is projecting JORC Resources at Mt Dimer to grow to 250,000-‐350,000 ounces @ +5g/t Au within the next 12 -‐18months...

...and 160,000 to 240,000 ounces Au @ + 2g/t Au at Gwendolyn in the next 3-‐6 months

Current Company Global JORC Resource March 2012

JORC Category Measured Resource Indicated Resources Inferred Resource Total Resource

Project Tonnes g/t Total

Tonnes g/t Total

Tonnes g/t Total

Tonnes g/t Total

Au Oz Au Au Oz Au Au Oz Au Au Oz Au

Mt Dimer * 88,800 4.6 10,400 429,570 5 68,555 518,370 4.738 78,955

CATEGORY MEASURED INDICATED INFERRED TOTAL

PROJECT Tonnes g/t Au Oz Tonnes

g/t Au Oz Tonnes

g/t Au Oz Tonnes

g/t Au Oz

Mt Dimer

88,800 4.6

10,400

429,570 5.0

68,555

528,370 4.7

78,955

Gwendolyn

1,214,000 2.71

106,000

1,214,000 2.71

106,000

Wendolyn T

238,000 0.7

5,600

238,000 0.7

5,600

Great Bingin

54,700 7.4

12,960

54,700 7.4

12,960

Athenia

49,300 1.5

2,350

49,300 1.5

2,350

TOTALS

88,800 4.6

10,400

238,000 0.7

5,600

1,747,570

3.38

189,865

2,074,370

3.09

205,865


4 April 2012

GOLD MARKET OUTLOOK Gold prices (Figure 13) has recently been edging higher after dropping nearly 1 percent in late February, as a slightly weaker dollar came to the aid of buyers, while sluggish physical demand and an improving U.S. economic outlook capped gains.

Recent U.S. housing data added to a series of numbers pointing to a steady recovery, and the reduced likelihood of further quantitative easing which helped buoy gold earlier this year. At the time of writing gold is trading at US$1,653, up US$234 YOY and down US$70 over the last 30 days (Figure 13).

Some investors have taken money out of gold after a recent equities rally, and turned to chase higher-yielding assets with indications of a stabilizing global economy taking the shine off safe-haven assets such as gold and government bonds.

There has also been some recent liquidation of gold by funds after the hopes for QE3 (third round of quantitative easing) were dashed.

The recent firming US economy could see gold move lower in the near term, compounded by a stronger dollar and lack of support from the physical market.

Investors are closely watching the U.S. debt market, an indicator of appetite for the safe-haven asset. Interestingly Indonesia has recently been a big buyer of gold. High oil prices have helped underpin gold sentiment. But oil tumbled in the previous session after comments from Saudi Arabia on its willingness to meet any supply gap.

SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, said its holdings had slipped 0.23 percent to 1,290.247 metric tonnes (1,422.3 tons) by March 20, the first drop after staying unchanged for four straight sessions.

Notwithstanding the uncertainty of short term volatility and liquidity related selling pressure and the associated move into the US dollar, RM Research believes the long term price outlook for gold is positive, driven by its relative safe-haven status and longer term momentum of portfolio diversification away from the US currency. However, if the recent decline in gold prices is any indication of the next leg down of the GFC, it could be a couple years before recent gold price highs are surpassed. During 2008, by comparison, the gold price fell US$288/oz from US$1000/oz (Mar ’08) to a low of US$712/oz (Nov ’08) and did not return to US$1000/oz till September 2009, a period of 18 months. Gold subsequently rallied a massive ~US$1200/oz to US$1900/oz.

The recent bull market in gold has been fuelled by the fear associated primarily with massive deficit-driven stimulus spending in the US, and the eurozone sovereign debt crisis and associated risk to global financial stability.

Recent gold price falls have been due to the stronger dollar and lack of support in the physical market

FIGURE 13: 1 Year Gold price chart (source: www. kitco.com).

We believe the longer term outlook remains strong however it may take some time before recent gold price highs are surpassed


4 April 2012

OTHER PROJECTS SOUTHERN CROSS PROJECTS: (VEC 100%, Southern Cross Region, Western Australia) Gold.

• The Great Bingin Project (M77/1255) covers 169 hectares on the southern portion of a peninsula into Lake Deborah West, 70km northwest of Southern Cross. Mining in the 1900’s reached a depth of 78 metres with current JORC Inferred Resources standing at 54,700t @ 7.4g/t for 12,960oz Au. The Great Bingin workings are situated in an area of tightly folded metamorphosed interbedded, basic schists, lavas and jaspilites. The Company has submitted an RC drill program for approval that is designed to test mineralisation along strike to the east and west and at depth.

• The Athenia Project (P77/3434 and P77/3637, under application to convert to a mining lease) covers 135 hectares and is situated 8 kilometres north-west of Southern Cross. Small scale mining took place in the 1900’s with mineralisation associated with the western limb of the Hopes Hill Anticline. The area comprises predominantly ultramafics, amphibolites, graphic and politic metasediments. The tenement areas consist of argillaceous shale unit, a mafics unit and an ultramafic unit with mineralisation occurring near the sediment-mafic contact. Mineralisation is present from the surface and exploration drill programs are planned to define the extent of this mineralisation.

• Mt Palmer is situated approximately 32 kilometres east of Southern Cross and covers 17,116 hectares. Production prior to the 1940’s was 315,203t @ 15.6g/t for 158,000oz Au. Mineralisation is hosted with a greenstone sequence interpreted to be on the eastern limb of an anticline on a north-west–south-east axis. Aeromagnetic surveys in 2011 (25 metre spacing for 2,501 line kilometres) are now being reviewed.

• The Mt Holland Project comprises three tenements situated approximately 130 kilometres south south-east of Southern Cross covering 538 hectares. The tenements occupy a portion of the north-south trending Forrestania Greenstone Belt with quartz vein hosted gold mineralisation enveloped within mafic-ultramafic and BIF units. Little exploration has been undertaken previously and the Company is planning a geochemical program in the medium term.

LEONORA PROJECTS: (VEC 100%, Southern Cross Region, Western Australia) Gold.

• Muriel’s Extension (M37/661, P37/7580-7587) is located 43 kilometres north-east of Leonora (central Western Australia) and consists of one mining lease (M37/661) and eight adjoining prospecting licenses (P37/7580-7587) covering 1,772 hectares. The project is situated near the intersection of the Sandstone-Mt Weld Lineament and the Celia Lineament, a major focus for gold deposits in the region with approximately 35 million ounces of historical gold resources within an 80 kilometre radius. Results of a recent aeromagnetic survey are also being reviewed.

CORPORATE Vector is currently undertaking (subject to shareholder approval at a General Meeting on/before 25 May 2012) an entitlement issue of new options for existing listed option holders to subscribe for new options on a one for two basis pursuant to a Prospectus. The VECO series expires on 30 June 2012 and the Company is proposing that this new option series will be listed shortly after expiry of the VECO series.

A 1 for 2 option entitlement issue to existing listed optionholders

A 1 for 2 option entitlement issue to existing listed optionholders


4 April 2012

ESTIMATE OF VALUE AND PEER COMPARISON Our enterprise value per ounce of gold calculations (Table 2, Figure 14) shows a broad variation in the valuation of JORC Resources due to: • Quality of Resources-Higher grade resources (+2-3 g/t gold) will trade at premiums to

lower grade gold resources. A lack of continuity or complex orebodies may result in potentially higher OPEX +/- CAPEX.

• Resource Growth-Those resources that are anticipated to grow strongly in the short to medium term will attract a premium.

• Other Factors-Lower processing recoveries, poor infrastructure and the lack of treatment options can affect the value of gold resources. Potentially high cost operations (high CAPEX +/- OPEX) can also have a negative effect on valuations.

Code Company tons grade oz (m) Locality EV per Oz

RAU Republic Gold Ltd 36.82 1.4 1.657 Bolivia, QLD $3.19

GDO Gold One 191.2 3.53 21.693 S Africa $11.49

CVR Central Asia Resources 20.5 1.0 0.665 Kazakhstan $36.18

SBL Signature Metals 23.4 1.9 1.429 Africa $36.50

AZM Azumah Resources 34.3 1.5 1.654 Ghana $39.55

DMG Dragon Mountain 54.5 1.91 3.346 SA $40.17

MUM Mt Magnet Mines 13.5 1.10 0.477 WA $40.47

NAV Navigator Resources 11.6 1.8 0.670 WA $41.20

MOY Millennium Min Ltd 34.4 1.13 1.250 WA $45.62

EXG Excelsior Gold 13.8 1.62 0.717 WA $62.49

CHN Chalice Gold Mines 5 5.3 0.852 Africa $62.74

AMX Ampella Mining 61.8 1.6 3.179 Burkina Faso $68.00

VEC Vector Resources 2.1 3.07 0.206 WA $71.50

WGR Westgold Resources 5.3 6.1 1.039 WA $74.12

CRC Cortona Resources 1.6 6.3 0.324 NSW $88.60

GOR Gold Road Resources 20 1.69 1.087 WA $93.68

ALK Alkane Resources Ltd 72 1.37 3.171 NSW $101.20

CDT Castle Minerals Ltd 5.4 1.50 0.260 Ghana $102.71

BCN Beacon Minerals 0.36 6 0.070 WA $114.24

SGZ Scotia Minerals 0.31 10.8 0.108 UK $128.95

CHZ Chesser Resources 14.5 0.6 0.280 Turkey $289.24

GRY Gryphon Minerals Ltd 29 2.1 1.958 Burkina Faso $455.29

GMR Golden Rim Resources 3.8 1.5 0.183 Burkina/Mali $456.53

Quality of gold resources, growth outlook and infrastructure issues have an effect on the value of gold resources

TABLE 2: Enterprise Value per ounce of JORC gold resources for selected ASX listed explorers/developers (source: RM Research, internal modelling, March 2012).

FIGURE 14 Enterprise Value per ounce of JORC gold resources for selected ASX listed explorers/developers (source: RM Research, internal modelling, March 2012).


4 April 2012

A brief look at our universe of companies (Table, 2, Figure 14) reveals healthy premiums for the West African gold explorers such as Gryphon Minerals Limited (ASX: GRY) with a substantial and growing resource inventory and Golden Rim Resources Limited (ASX: GMR) with excellent drill results pointing to a near term maiden JORC resource. Potentially more challenging ore bodies such as Nullagine (Millennium Minerals Limited, ASX: MOY) however are trading at EV/oz values of under A$50 per ounce. Vector is currently trading at an EV/Ounce of gold of approximately A$71.5. Our base case scenario for Vector is for a resource of just over 460Koz of gold which would give a current Enterprise Value in the order of A$32 per ounce of gold. Given the relatively high grades at Mt. Gwendolyn and Mt Dimer however, we anticipate that the Company would trade at a significant premium to the average for the sector (EV/ounce of gold of A$107). Taking a conservative approach, a three to six month price target of 30 cents is realistic assuming a A$120-A$125/ounce Enterprise Value for our base case scenario.

Figure 15 shows our potential share price outcomes (fully diluted) of 30 cents and 40 cents per Share for the Company over the next 3 months based on 460Koz (Case 1) and 640Koz (Case 2) of JORC Resources of gold respectively. This valuation places no value on the Earaheedy Iron Ore joint venture with Cazaly/Anglo.

Our three month share price target is 30 cents per share...

...and places no value n the Earaheedy JV at this stage

FIGURE 15: Potential share price outcomes using RM Research base case and upper case JORC Resource scenarios (source: RM Research, internal modelling, March 2012).


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RISK ANALYSIS Exploration Risk: Exploration at the Company’s various mineral projects may fail to identify any mineralisation of value. Furthermore, follow-up RC and Diamond drilling at Mt Dimer and Gwendolyn may fail to outline potentially economic gold mineralisation. Furthermore the high-grade-narrow vein nature of the Mt Dimer mineralisation may prove difficult to drill and establish adequate continuity.

Traditional Owners: Relations with traditional owners at the Company’s various exploration projects may deteriorate which may make future access to the tenements problematic.

Financial Position: The Company has limited cash reserves (around A$3.0 million) which will necessitate an equity raising within the next twelve months.

Infrastructure Risks: The isolation of some of the exploration tenements (in particular the Earaheedy JV) and associated lack of infrastructure are likely to result in a higher threshold for any mineral deposit. Furthermore mineral resources at Mt Dimer and Gwendolyn, for example, may not be sufficient to justify stand alone operations and may require treatment at third party facilities.

Commodity Risks: The Company is primarily exposed to gold and iron ore. Gold has come off recent highs and may come under pressure as investors move back into US$ as economic conditions improve. The demand/supply scenario (see Iron Ore Market) remains strong with supply likely to be constrained by infrastructure bottlenecks in the medium term. The ramp up of iron ore development in West Africa poses a medium-long term risk to the competitiveness of Western Australian iron ore projects.

Market Risks: Further declines in equity markets may continue to put pressure on junior resource companies as investors switch out of “risk” into perceived safe haven investments such as cash, gold and counter cyclical equities. Our medium term view is that the risk premium has been eroded for many junior resource companies and we see near term upside.

Currency Risks: A strengthening Australian dollar (as funds flow back into riskier currencies) may make the price of gold and iron ore in local (Australian) currency terms less attractive. This could have negative influences on Australian gold and iron ore explorers/developers however it is more relevant to producing companies.

There is a risk that gold deposits at Mt Dimer and Gwendolyn may be too small to support a stand-‐alone operation

Further declines in equity markets could see a move out of riskier asset classes such as junior resource companies


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DIRECTORS AND MANAGEMENT Damien O’Reilly, B.A.(Hons), M.Sc., FAusIMM, CICD, FIQ NON-EXECUTIVE CHAIRMAN

Mr O’Reilly has more than 20 years experience within the resources sector and has held positions with two of Australia’s leading industry bodies, the Minerals Council of Australia (MCA) where he was a director, and the Chamber of Minerals and Energy Western Australia (CMEWA) where he was an Executive Council member for the past 4 years. Mr O’Reilly has held senior roles with Downer EDI, MacMahon Contractors, Henry Walker Eltin and CSR and has been involved in the establishment of more than 100 mines in Australia across the minerals spectrum. He worked for 13 years in China and Hong Kong and has been involved in projects in North Africa, the United States and Canada. Mr O’Reilly holds a BA Hons (University of Adelaide) an MSc in Mineral Economics (WA School Mines) and has completed the GSM/AIM/Harvard Joint Executive Development Program. He is a Fellow of the Australasian Institute of Mining and Metallurgy, a Graduate of the Australian Institute of Company Directors, and a Fellow of the Institute of Quarrying.

Glyn Povey, B.Min.Eng. MANAGING DIRECTOR

Mr Povey is a well qualified senior executive with significant domestic and international experience which includes contractor management and leading green and brown fields mine developments. He has been Hong Kong MTRC Senior Project Manager, the Director of Operations in the Pacific region for a mineral exploration company, the Project Manager for a PNG mining company and the Mine Manager for a number of underground and open cut mines. Prior to joining Vector, Glyn was the VP of Operations for Crossland Resources Limited, a joint-venture between Murchison Metals Limited and Mitsubishi Development, and the owner of the Jack Hills Iron Ore Project in Midwest (Western Australia).

Gary Castledine, NON-EXECUTIVE DIRECTOR

Mr Castledine has over 14 years experience in stockbroking and capital markets. He is a founding director and the head of corporate with Indian Ocean Capital in Perth, Western Australia, a specialist boutique securities dealer and corporate advisory firm. His wealth of experience has enable him to gather an extensive suite of clients in a corporate advisory role which has seen him involved in many capital raisings and IPO’s across a spectrum of industries. He is currently a Practitioner Member of the Stockbrokers Association of Australia (SAA). As a Director of Vector, and with extensive contacts throughout Australasia, UK and the USA capital markets.

Neville Basset, FCA COMPANY SECRETARY/NON-EXECUTIVE DIRECTOR

Mr Bassett is a Chartered Accountant operating his own corporate consulting business, specialising in the area of corporate, financial and management advisory services. He consults a number of publicly listed companies and private company groups in ad diversity of industry sectors such as stockbroking, property and resources. He is a Director or Company Secretary of a number of public and private companies. Neville has been involved with numerous public company listings and capital raisings. His involvement in the corporate arena has also taken in mergers and acquisitions, and includes significant knowledge and exposure to the Australian financial markets. Mr Bassett has a wealth of experience in matters pertaining to the Corporations Act, ASX listing requirements, corporate taxation and finance.

Robert Hyndes, B.Comm. (Cut) EXECUTIVE DIRECTOR

Mr Hyndes has a proven track record in leading and managing emerging and growth stage projects, with global experience in Australia, UK, Asia and the US across a range of industries including resources, technology and professional services. He has extensive public market experience including debt and equity capital raising, project acquisition and divestments. Robert graduated from Curtin University of Technology in Western Australia with a Bachelor of Commerce with a double major in Economics and Marketing. Mr Hyndes is currently a Director of Astro Resources NL, Mamba Minerals Limited and AIM-listed Charles St Capital.

Damien has over 20 years experience in the resources sector

Glyn’s experience covers engineering and contract management

Gary has over 14 years experience in capital markets

Neville has acted as a director/company secretary for numerous Public Companies

Robert has extensive public company experience


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Brian Williams, NON-EXECUTIVE DIRECTOR

Mr Williams is a highly experienced mining engineer, infrastructure executive and director, with substantial domestic and international (Asia, Europe and Africa) open pit and underground mine development and management experience.

Mr Williams’ experience also includes project managing some of the largest underground and open cut gold mines in Western Australia. Mr Williams has held senior management roles at operational and corporate levels within the resources industry in both private and publicly listed companies.

CONCLUSION RM Research considers the Company is due for a fairly rapid re-rating should our base case scenario in the order of 400,000 ounces of gold prove correct. The lack of any systematic exploration over the last 20-30 years at both Mt Dimer and Gwendolyn has diminished investor interest (part of the reason the Golden Iron float didn’t proceed) however recent phases of exploration by the Company are likely to bring both projects firmly back in the investor spotlight. The potential upside beyond our Case 1 (460Koz Au) and Case 2 (640 Koz Au) is completely unknown at this stage.

While the Earaheedy joint venture with Cazaly Resources and Anglo is certainly impressive and there is increasing exploration interest in CID and detrital iron deposits (see Enterprise Metals) the significant infrastructure hurdles (possibly 500-600 kilometres of rail) could stretch time lines out significantly.

Our key risks near term remain the ability for the Mt Dimer ore body to “hang” together as a series of potentially smaller pits, given the typically narrow shoot geometry. Our short term target of 30 cents per share (fully diluted) remains conservative. Speculative Buy.

Brian has a strong background in mining engineering

Our 3 month share price target for Vector of 30 cents per share remains conservative


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Email / Website [email protected] www.RMresearch.com.au

RM Research Recommendation Categories Care has been taken to define the level of risk to return associated with a particular company. Our recommendation ranking system is as follows:

Buy Companies with ‘Buy’ recommendations have been cash flow positive for some time and have a moderate to low risk profile. We expect these to outperform the broader market.

Speculative Buy We forecast strong earnings growth or value creation that may achieve a return well above that of the broader market. These companies also carry a higher than normal level of risk.

Hold A sound well managed company that may achieve market performance or less, perhaps due to an overvalued share price, broader sector issues, or internal challenges.

Sell Risk is high and upside low or very difficult to determine. We expect a strong underperformance relative to the market and see better opportunities elsewhere.

Disclaimer / Disclosure This report was produced by RM Research Pty Ltd, which is a Corporate Authorised Representative of RM Capital Pty Ltd (Licence no. 221938). RM Research will receive payment of A$35,000 for the compilation and distribution of four research reports. RM Research Pty Ltd has made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, RM Research Pty Ltd does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities. The securities recommended by RM Research carry no guarantee with respect to return of capital or the market value of those securities. There are general risks associated with any investment in securities. Investors should be aware that these risks might result in loss of income and capital invested. Neither RM Research nor any of its associates guarantees the repayment of capital. WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particular investor’s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any decision. DISCLOSURE: RM Research Pty Ltd and/or its directors, associates, employees or representatives may not effect a transaction upon its or their own account in the investments referred to in this report or any related investment until the expiry of 24 hours after the report has been published. Additionally, RM Research Pty Ltd may have, within the previous twelve months, provided advice or financial services to the companies mentioned in this report. As at the date of this report, the directors, associates, employees, representatives or Authorised Representatives of RM Research Pty Ltd and RM Capital Pty Ltd may hold shares in Vector Resources Limited.

Vector Resources Limited

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