25 June 2013
Elementos Limited (ELT)
Cleveland tin project : 53kt tin JORC
ELT transitions from explorer to developer by acquiring the
Cleveland project, which has 53kt tin, 20kt copper and 8.8kt
tungsten in JORC Resources
Page 1 See Page 23 for Disclaimer and Disclosures 25 June 2013
Recommendation Elementos has announced a merger with the unlisted Rockwell Minerals, the major asset of which is the Cleveland tin-copper and tungsten project in Tasmania, which has over $1 .5B in JORC contained metal.
We estimate that the hard rock tin-copper project h as a NPV of $95m, for a capital investment of $80m; an IRR of 4 6%. We expect that ELT will secure a strategic investor to take a 30% stake in the project and secure debt.
ELT’s commitments are then funded.
BUY
Price
1.7c
Valuation
12.2c
Snapshot Market Cap. $2.6 million (pre-
merger)
Shares on Issue 154.3m pre-merger
406m post-merger
Tin price v. LME stocks
0 t
5,000 t
10,000 t
15,000 t
20,000 t
25,000 t
30,000 t
$ 5,000/t
$ 10,000/t
$ 15,000/t
$ 20,000/t
$ 25,000/t
$ 30,000/t
$ 35,000/t
$ 40,000/t
$ 45,000/t
Jan . 09 Jul. 09 Jan. 10 Jul. 10 Jan. 11 Jul. 11 Jan. 12 Jul. 12 Jan. 13
LME tin stocks Tin price, LME cash
Elementos is an ASX listed explorer with a
portfolio of tenements in N-W Qld,
focussing on the copper-gold-cobalt areas
at Millenium and Selwyn South and also
three copper and gold projects in Chile and
Argentina.
ELT announced its merger with Rockwell
Minerals in April 2013, adding the
Cleveland tin-copper project. Cleveland
was mined by Aberfoyle from 1968 to
1986, with 5,645kt of ore extracted to sell
about 24kt of Sn and 10kt of Cu in
concentrate.
Cleveland has an advanced 60kt tin-
equivalent JORC Mineral Resource. The
mine is near infrastructure, including
power, water and sealed roads, with the
port of Burnie about 70km away by road.
It has near term cashflow potential from a
low cost tailings resource and significant
potential to expand the tin-copper
resource, both at depth and along strike.
There is also a tungsten resource at depth.
Cleveland Tin – Hard Rock Project
Cleveland tin project has total JORC resources of 6.1Mt, grading 0.68% Sn and
0.25% Cu, for nearly 42kt of contained tin plus 15kt copper.
Beer & Co estimates that it will cost about $80m in capital to produce about
3,600t/yr of tin, at an all-up cash cost of about US$ 7.00/lb.
We estimate an after-tax NPV of $A 95m for 100% of this project. We expect
that ELT will sell a stake of about 30% to finance development.
We estimate that first product would be at the end of 2016, when we expect tin
prices to peak with the closure of Minsur’s San Rafael mine.
Proven mining and metallurgy, and 4 km decline in place from historical
operation significantly de-risks project and reduced future cap.ex.
Tailings Project
There are 3.85Mt of tailings grading 0.30% Sn and 0.13% Cu.
Beer & Co estimates that for cap.ex of about $25m, assuming about 50%
recovery of the tin and 75% recovery of the copper, to produce about 5,500t of
tin over 4 years, generating an after-tax NPV of $30m.
We expect that ELT will seek a partner for this project independent of the hard
rock project, as the product may be non-standard.
Potential
There is significant exploration potential for tin-copper mineralisation at depth
and along strike.
Cleveland also has a tungsten resource, which is presently 2.9Mt at 0.30% WO3,
but with intercepts of 177m and 162m, it is believed to have the potential to be
significantly larger. However, this is a longer term project.
Elementos Limited (ELT)
Page 2 See Page 23 for Disclaimer and Disclosures 25 June 2013
ELT has announced a
merger with the unlisted
company, Rockwell
Minerals.
Rockwell minerals’ asset
is the Cleveland mine,
which has 6Mt of hard
rock resources, grading
0.68% Sn and 0.25% Cu,
along with some tailings.
Beer & Co propose a
development scenario
focussed on the hard
rock Resources, while
seeking to monetise the
tailings.
Elementos : An emerging producer
Background
ELT has announced a merger with the un-listed company, Rockwell Minerals. Rockwell’s
main asset is its 50% share of the Cleveland tin mine in Tasmania, and its option to buy
the balance (final payment $700k by 31 Dec 2013).
Cleveland was operated
from 1968 to 1986 by
Aberfoyle, mining 5,645kt of
ore and producing about
24kt of Sn and 10kt of Cu in
concentrate.
Figure 1 shows that the mine
has JORC resources, from a
review of stored drill core
and operational records.
In this analysis, we are able
to ascribe a value to both
the hard rock tin - copper
resources and also the
tailings, but in our view
Figure 1 : Cleveland mine – JORC Resources
Cleveland mine, hard rock Tin and Copper Resources
Sn grade Cu grade
Indicated 4,239 kt 0.70 % 0.28 %
Inferred 1,880 kt 0.64 % 0.19 %
TOTAL 6,119 kt 0.68 % 0.25 %
Cleveland mine, Tin and Copper Resources in tailings
Sn grade Cu grade
Inferred 3,850 kt 0.30 % 0.13 %
Cleveland mine, Tungsten Resources
WO3 grade
Inferred 2,930 kt 0.30 % Source : ELT ASX announcement, April 2013, Beer & Co
the tungsten resource needs significantly more work before any more than a nominal
value can be ascribed to it.
Conceptually, it would be possible to develop the tailings first, which could be brought
into production while the hard rock resources are being progressed through feasibility.
However, we see potential issues with this approach :
� The metallurgical test-work to date suggests a recovery of about 35% - 50% to a
marketable tin concentrate (>50% Sn), but much higher recovery (63% - 68%) to a
lower grade concentrate, for which it will be more difficult to find a buyer
→ If a fuming plant is built, as has been proposed by Renison to treat their tailings,
then that becomes a potential buyer, so it is best to wait until that is resolved
before proceeding
� The tailings project could be joint ventured with a party different to the one that
would be interested in the hard rock project.
Development Scenario
In this analysis, we focus on the hard rock resources.
In our view, ELT will need to raise equity from its shareholders to complete
environmental clearance and a scoping study. We expect that this will require $2m -
$3m and take about 12 months.
We project that ELT will then seek a strategic equity, or possibly an industry investor to
upgrade the work to bankable standard. This should take a further 12 months, at a cost
of $5m - $7.5m.
The final step will be to seek an industry partner, such as a tin smelter, consumer or
trader, to buy a share in the project, which will fund ELT’s equity investment.
Elementos Limited (ELT)
Page 3 See Page 23 for Disclaimer and Disclosures 25 June 2013
Total cap.ex is $82m,
excluding feasibility
studies.
First product is projected
for end 2016.
Cash cost is projected to
be under $7/lb
Figure 2 summarises the projections
made by Beer & Co in this analysis.
Our analysis is based on exploiting the
JORC resources. We are confident that
the mine will have a significantly longer
life than the current resources.
Figure 3 shows the resulting cashflows
generated by the project, as well as the
details of our commodity price
assumptions (we use a discount rate of
10% for the industry investor, but no
value for franking credits).
Figure 2 : Cleveland development
Hard-rock
First product Dec. 2016
Capital expenditure $A 89m
Ore processed annually 740 kt
tin recovery 70 %
Annual tin production 3,600t
Total tin produced 28,881t
all in cash cost US 699 c/lb
Project NPV $A 96m
Source : Beer & Co estimates
Figure 3 : Projected cashflows Cleveland mine, hard rock tin-copper project
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25
AUD-USD 0.950 0.938 0.888 0.840 0.830 0.830 0.830 0.830 0.830 0.830
Tin price USD /t 24,750 25,000 27,750 30,750 32,000 25,000 25,000 25,000 25,000 25,000
Copper price USD /t 6,614 6,614 6,614 6,614 6,614 6,614 6,614 6,614 6,614 6,614
Tin sold tonnes 0 1,507 3,529 3,626 3,626 3,626 3,626 3,394 3,315 2,632
Copper sold tonnes 0 603 1,425 1,554 1,554 1,554 1,554 1,181 1,055 837
Tin Revenue USD m 0 38 98 112 116 91 91 85 83 66
smelting charges USD m 0 (3) (8) (9) (10) (8) (8) (7) (7) (6)
Net copper revenue USD m 0 4 8 9 9 9 9 7 6 5
Cash Costs USD m 0 (23) (45) (44) (45) (46) (47) (49) (50) (42)
Royalties USD m 0 (2) (5) (6) (6) (5) (5) (4) (4) (3)
Dep'cn & Amort'sn USD m 0 (9) (17) (16) (16) (16) (16) (10) (2) 0
E B I T USD m 0 4 31 45 48 25 23 22 25 20
Interest Expense USD m (1) (4) (3) (2) (2) (1) (0) (0) (0) 0
Tax Expense USD m 0 (0) (8) (13) (14) (7) (7) (6) (8) (6)
N P A T USD m (1) 0 19 30 33 17 16 15 18 14
Project Cap.Ex USD m (58) 0 0 0 0 0 0 0 0 0
Sus. Cap. Ex USD m 0 (2) (3) (3) (3) (3) (3) (3) (2) 0
Net Project Cashflow USD m (59) 7 34 43 46 30 30 22 18 14
N P V = US$ 91m IRR = 43% Source : Beer & Co estimates
Selling a 30% stake in
the Cleveland project to
a strategic investor, who
can assist with project
finance, should generate
sufficient cash to pay for
the equity needed to
develop the project
Our valuation of the hard rock project is $A95m (after feasibility studies). Sale of a 30%
project stake to a potential off-take partner who can assist in securing debt finance
should provide sufficient funds for ELT’s equity contribution, which means that ELT may
not need to raise more equity to fund development
Our indicative valuation of the tailings project is USD 29m. Sale of a 50% stake would
provide ELT with enough capital to fund its share of equity in a $A 25m development; we
expect that ELT will need to retain a stake in the project to ensure effective
development.
In our view, the tin industry is amenable to special development options due to the tight
supply conditions, especially with the largest single mine, San Rafael which supplies
about 10% of the world’s supply, to shut in 2017, while significant demand, for solder in
the electronics sector, is insensitive to price.
Appendix 1 has more background on the tin industry.
Elementos Limited (ELT)
Page 4 See Page 23 for Disclaimer and Disclosures 25 June 2013
Valuation of Elementos
Figure 4 shows our projected cashflow, after-tax, for ELT from each asset. It shows our
projected tax payments as well the net cash from operations and project and sustaining
capital and also the cash received from the sale of a 50% interest in the tailings project
and a 30% interest in the hard rock project.
Figure 4 : Beer & Co projected cashflows for Elementos
2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26
Cleveland, hard-rock, afer tax, 70% share AUD m (1.9) (6.0) (22.8) 3.5 19.1 28.2 30.2 16.1 20.4 18.1 14.8 11.8
franking credits 0.0 (0.2) 0.3 6.9 11.0 12.2 6.4 6.2 5.6 6.4 5.1 0.0
Cleveland Tailings, afer tax, 50% share AUD m (0.5) (10.3) 7.8 9.2 11.7 7.4 0.0 0.0 0.0 0.0 0.0 0.0
franking credits 0.0 0.4 1.9 2.5 3.6 2.4 0.0 0.0 0.0 0.0 0.0 0.0
Asset sales 12.4 30.1
ELT corporate costs AUD m (2.0) (2.0) (3.0) (4.0) (4.0) (4.0) (4.0) (4.0) (4.0) (4.0) (4.0) (4.0)
Equity raised 2.5 5.0
Cash balance 10.5 27.5 11.7 29.9 71.3 117.4 150.1 168.4 190.4 210.9 226.8 234.6 Source : Beer & Co estimates
Beer & Co value ELT at
12.2c/share
We are bullish on tin.
We have a BUY
recommendation
To derive a valuation for ELT, we have discounted the cashflows in Figure 4 using a
discount rate of 12%. Figure 5 shows that we have then risked these valuations and also
given some value for taxes paid through the franking credits generated.
Figure 5 : Detail of Elementos valuation
risk 100% Product per share
Cleveland, hard-rock 75% $A 42 m $A 32 m 5.4 c
franking credits 45% $A 27 m $A 12 m 2.0 c
Cleveland Tailings 60% $A 13 m $A 8 m 1.3 c
franking credits 36% $A 7 m $A 2 m 0.4 c
Asset Sales 75% $A 34 m $A 26 m 4.3 c
Tungsten nom. $A 5 m $A 5 m 0.8 c
ELT other exploration nom. $A 2 m $A 2 m 0.3 c
ELT corporate costs 100% ($A 21 m) ($A 21 m) (3.6c)
Equity raised 100% $A 6 m $A 6 m 1.1 c
TOTAL $A 115 m $A 72 m 12.2 c
shares on issue 154.3m FPO shares
SPP raising 1.8 c 29m new shares
Issued to Rockwell 55% 225m new shares
Scoping Study 80m new shares
BFS 100m new shares
30 June 2013discount rate = 12 %
Source : Beer & Co estimates
Figure 5 shows that our base case valuation for ELT is now 12.2c/share, including some
nominal value for the exploration assets.
Conclusions
We are bullish on tin. We are confident that ELT is able to deliver this project.
We are confident that a fair valuation for ELT is a multiple of the current share price.
In the current risk averse environment, there are some real gems, and ELT is one, though
it does come with a funding risk.
We initiate research on ELT with a BUY recommendation.
Elementos Limited (ELT)
Page 5 See Page 23 for Disclaimer and Disclosures 25 June 2013
Cleveland is a tin-copper
project that was mined
from 1968 to 1986
It is located in N-W
Tasmania, in an historic
mining district
Cleveland mine
Background
As shown in Figure 6, the Cleveland
tin-copper mine is in north-west
Tasmania, an historic and current
mining district, with many current
mining operations within 50km.
A 2 lane bitumen road passes
through the tenement, with power
and water available, and 73km by
road from the port of Burnie.
The Cleveland tin-copper mine was
operated by Aberfoyle (ABF) from
1968 to 1986, being shut with the
collapse in the tin price.
The mine was very modern when it
was first developed as it was the
first to be operated by rubber-tyred
truck haulage, with decline access,
which is now standard, as opposed
to in mine tracks with shaft
haulage.
Figure 6 :Cleveland tin-copper mine
Source : ELT presentation, April 2013
Geology
Gossanous outcrops were first discovered by prospectors in 1898. Tin was first identified
in 1900 and mining commenced in 1908 and by 1917, when the mine closed, it had
produced about 275t of tin in a cassiterite concentrate.
Figure 6 showed that there are many mining operations in the vicinity of Mt Cleveland.
Figure 7 shows 3 principal rock groups :
� Tin-tungsten deposits, and some silver-lead (and zinc) deposits associated with
Devonian-Carboniferous granite;
� Base metal deposits (lead-silver-zinc and copper-gold) associated with the Cambrian
era Mt Read volcanics; and
� Iron ore deposits associated with the pre-Cambrian metamorphic rocks of the Arthur
Mobile belt.
As shown in Figure 7, the Cleveland mine is to the north of the outcrop of the Meredith
granite, which is believed to be the source of the mineralised fluids.
Tin-Copper mineralisation
The known tin-copper mineralisation at Cleveland occurs within a series of sedimentary
rocks, known as Hall’s Formation, which is underlain by sandstone and overlain by
volcanics. The sedimentary rocks are of Cambrian age and have been tilted to near
vertical, as shown in Figure 8.
Elementos Limited (ELT)
Page 6 See Page 23 for Disclaimer and Disclosures 25 June 2013
The mineralisation
occurs in near vertical
lenses, with strike of up
to 550m, width up to
30m and extending
down dip for up to 800m
In other similar mines, at
Renison and Cornwall,
the mineralisation
continues down to the
granite contact, which
for Cleveland is 4km
below the surface
The sedimentary rocks have
been intruded by Devonian-
Carboniferous era Merdith
granite. A separate quartz
porphyry dyke occurs 350m
below the surface.
Tin and copper is borne in
semi-massive sulphide lenses,
comprises 20% - 30% sulphide
minerals, dominated by
pyrrhotite (FeS) and pyrite
(FeS2), with quartz, fluorite
and carbonates.
The semi-massive sulphide
was formed by the
replacement of limestone and
is geologically similar to the
tin bearing semi-massive and
Figure 7 : Geology of N-W Tasmania
Source : April 2013 Mineral Resource report
massive sulphide mineralisation at Renison, which has Resources of 9.64Mt grading
1.56% Sn and 0.27% Cu.
As shown in Figure 8, the
mineralisation occurs in faulted, near
vertically dipping, lenses with strike
lengths of up to 550m, thickness across
strike up to 30m and down-dip extents
up to 800m.
Figure 8 shows the lodes of tin-copper
mineralisation. It also shows the
quartz porphyry dyke and
demonstrates how the transportation
of the mineralised fluids and resulting
distribution of mineralisation was
controlled by a number of faults.
Modelling of the granite, based on geo-
physical gravity survey, indicates that
the top of the granite is at a depth of
nearly 4 km from the surface, which is
deeper than thought by the explorers
from 1960s to 1980s.
At Renison the mineralisation
continues down to the granite contact,
as it does at Cornwall, UK.
This suggests that there is significant
scope for further extensions of
mineralisation at depth.
Figure 8 : Cleveland mine geology
Source : ELT presentation, April 2013
Elementos Limited (ELT)
Page 7 See Page 23 for Disclaimer and Disclosures 25 June 2013
There is also a deep
tungsten Resource, of
nearly 8kt of contained
WO3
The Cleveland mine was
developed as a modern,
under-ground mine
Tungsten mineralisation
The tungsten mineral,
wolframite, is borne in
quartz stock-works, about
500m below the surface,
(350m from portal), as
shown in Figure 9. The
tungsten bearing stock-work
(veinlets) was formed by
intense quartz veining
around, and possibly from,
the quartz porphyry dyke, in
the manner of a halo. The
dyke dips vertically and has
Figure 9 : Cleveland mine orebodies
Source : ELT presentation, April 2013
a known strike length of 300m and is up to 300m across strike and has a down dip
extent of 900m.
Note the very significant intersections, up to 177m of mineralisation, shown in Figure 9.
Cleveland : Hard Rock Mine
While Figure 1 includes a tailings resource, our valuation shows greater value in the hard
rock resources.
In the view of Beer & Co, the hard rock resources are also more easily able to be financed
as it is more similar to tin concentrate produced by other tin mining operations.
Mining
Figure 10 is a graphic of the
resources estimated in Figure 1. It
clearly shows the steeply dipping,
near vertical nature of the
mineralised lenses.
It also shows existing decline
development, in red.
While the Cleveland mine was
developed by Aberfoyle in the mid
1960s, it was developed in the
manner of a modern under-ground
mine, with decline access and
haulage by rubber tyred trucks.
The rock is highly competent; from a
site visit, the Hall’s Open Cut (refer to
Figure 8) was inspected and while it
was developed nearly 50 years ago,
the unsupported walls still stand as
shown in Figure 11.
Figure 10 : Graphic of resources
Source : ELT presentation, April 2013
Elementos Limited (ELT)
Page 8 See Page 23 for Disclaimer and Disclosures 25 June 2013
It was mined by open
stoping
The rock walls are highly
competent so the stopes
have not been back-
filled
Figure 11 : Walls of Hall’s open cut, 50 years later
Source : Beer & Co site visit
The shape of the ore lenses, as shown in
Figure 10, coupled with the highly
competent rocks, as illustrated by
Figure 11, suggest that the mining will be
amenable to bulk mining methods.
Figure 12 is a diagram of open stope
mining, which was employed by Aberfoyle.
In its mining, Aberfoyle generally did not
backfill, so there are significant voids in
the mine.
Historically, the mine had relatively low
mining costs, despite low equipment
utilisation rates.
As shown in Figure 13, there is 4km of
decline development in place, down to
500m below surface, by 5.0m x 5.0m
drives, and over 11km of under-ground
development.
Figure 12 : Mined by open stoping
Source : ELT presentation, April 2013
Figure 13 shows the development undertaken by Aberfoyle. The paths shown are the
transport drifts, so the area above them should be open.
In Figure 13, the red circle, a little higher than the middle, is the portal access. The mine
is in a hill, so it was accessed by an adit, with significant development both above and
below the access at the base of the hill.
The processing operations were sited at this access.
Elementos Limited (ELT)
Page 9 See Page 23 for Disclaimer and Disclosures 25 June 2013
There is an existing,
though closed, portal
access at the base of the
hill, but with
mineralisation both
above and below it.
A modern operation
should be able to
achieve much better
metallurgical results
than the historical
results.
The mine is substantially
developed, having been
previously mined.
Figure 13 : Cleveland development
Processing
While the tin and the copper mineralisation
are associated, they are metallurgically
independent; the tin is cassiterite (SnO2) and
the copper in chalcopyrite (CuFeS2), with
some bornite (Cu5FeS4).
As the mine operated for nearly 20 years,
there is a good history of metallurgical
operations.
However, as shown in Figure 2, the historical
operations were probably not highly efficient
as the grades of the tailings are nearly half
that of the primary ore, so that recoveries
must have been about 60%.
There are a number of reasons for the poor
historical recovery :
� The grain size of the mineralisation is
relatively fine, generally 5µm - 20 µm;
� SnO2 flotation was introduced only in
1974, and since then, better reagents
have been developed; and
� Copper recovery was not operated for
periods
Source : ELT presentation, April 2013
Recoveries were also negatively impacted as the mill was campaigned, 5 days a week, for
part of its operations, due to tin quotas.
Review of the historical operating records shows that overall tin from cassiterite
recoveries were 69% in some years, with many years over 70% through the concentrator,
after allowing some losses through the Heavy Media Separation circuit.
The proposed circuit is a conventional crush, grind, then a sulphide float to capture the
copper, gravity capture of the coarser tin in the tailings and then a Cassiterite float.
Development
The pathway into
production is relatively
quick as Cleveland has
previously been developed
as an operating mine.
However, the mine has
filled with water as it is
open at the top of the hill,
as shown in Figure 13.
The major clearance
Figure 14 : Project timeline
time completed
Clearances 9 months Mar. 2014
Scoping 6 months Sep. 2014
Bankable F S 9 months Jun. 2015
Finance 3 months Sep. 2015
Mill construction, etc 12 months Sep. 2016
First product 3 months Dec. 2016 Source : Beer & Co estimates
required is to be able to pump water from the mine, which has filled with rain water
which has entered through the surface open-cut. While discussions have been held,
ELT will need to engage an appropriate consultant who will then undertake the analysis
and should lodge the application before year end for approval by March 2014.
Elementos Limited (ELT)
Page 10 See Page 23 for Disclaimer and Disclosures 25 June 2013
The first step will be to
drain the mine of the
rainwater than has
entered though the
open void of the open
cut operations.
Then a scoping study will
be a relatively near term
result
There is a pattern
developing of strategic
partners in certain
projects, especially
those in strategic metals,
or those for which
supply is constrained.
Tin is both supply
constrained, due to the
expected closure of the
largest rock mine
(Minsur’s San Rafael in
Peru), and its use as
solder in electronics
Our understanding is that the water tested to date is effectively rain water. The major
issue is timing the release in a wet area so that the existing systems are able to cope with
the flow.
As the mine is progressively dried, the major step will be to survey the existing mine. If
safe then ELT will inspect to assess the geo-technical conditions, assess the clean-up
work required and inspect the state of development to determine the potential presence
of developed but un-stoped ore.
The result will be the scoping study.
Feasibility Study
The work required for the feasibility study will be
� some confirmatory drilling of the exiting resource,
� assess the cost and detail of repair work required for areas developed
� develop an indicative mine plan
� some metallurgical test work on the ore to be mined as part of the design of the
processing circuit.
We expect this will take about 9 months.
Finance and development
ELT will be working with potential industry / off-take partners. Two current examples
include :
� Toyota Tsusho’s investment for 20% of Kasbah Resources’ (KAS) tin development at
Achmmach, where TTC invested at the pre-feasibility stage to fund the BFS, with a
top-up based on the value of the operation produced by the BFS to have a 25% JV
interest
� Toyota’s investment to take a 25% JV interest in Orocobre’s (ORE) Olaroz lithium
development in Argentina.
Beer & Co is aware of similar deals in the pipeline that have yet to be publicly
announced.
In our view, the timing of such negotiations will suit ELT as we expect the tin market to
be much tighter in 2015.
We expect that the sale of a 30% stake should fund ELT’s equity requirements.
Financial Analysis
Figure 15 shows the operational projections made by Beer & Co and used in this analysis.
It shows that Beer & Co has assumed
� A mine life that corresponds to the total of the present resources
− While many will use only Reserves to value an operation, we feel that this takes
no account of the mineralisation that could be mined, as we are confident that
the mine life will extend beyond this time frame;
� Recovery of 70% for the tin, which compares with 74% for KAS’s Achmmach project
in Morocco and 72% projected for the Heemskirk project being developed by Stellar
Resources (SRZ), about 50km south of Mt Cleveland, at Zeehan in western Tasmania;
Elementos Limited (ELT)
Page 11 See Page 23 for Disclaimer and Disclosures 25 June 2013
We have based our
assumptions on
comparative operations
and also the historical
work of Aberfoyle
� Recovery of 80% of the copper, which compares with around 90% for most copper
mines
− however, recovery is related to grade and with a low copper grade, lower
recoveries should be expected.
� A mining rate of 740kt/yr, which compares with 600kt/yr assumed by SRZ for
Heemskirk and typically 600kt – 800kt/yr for an under-ground mine
− the mine geology lends itself to higher productivity bulk under-ground mining
− Aberfoyle mined over 500kt of ore in 1973, but generally mined around
350kt/yr, though some of this was constrained by tin quotas
− We expect that using 40t and 50t trucks, as opposed to the 25t and 35t trucks
used by Aberfoyle, coupled with effective mine communications, the mine will
produce at higher rates.
Figure 15 : Beer & Co projections for Cleveland mining operations
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25
Resources
Indicated '000 tonnes 4,239 3,888 3,148 2,408 1,668 928 188 0 0 0
tin 0.70 % 0.70 % 0.70 % 0.70 % 0.70 % 0.70 % 0.70 % 0.00 % 0.00 % 0.00 %
copper 0.28 % 0.28 % 0.28 % 0.28 % 0.28 % 0.28 % 0.28 % 0.00 % 0.00 % 0.00 %
Inferred '000 tonnes 1,880 1,880 1,880 1,880 1,880 1,880 1,880 1,328 588 0
tin 0.64 % 0.64 % 0.64 % 0.64 % 0.64 % 0.64 % 0.64 % 0.64 % 0.64 % 0.00 %
copper 0.19 % 0.19 % 0.19 % 0.19 % 0.19 % 0.19 % 0.19 % 0.19 % 0.19 % 0.00 %
Mining operations
Ore Mined '000 tonnes 0 352 740 740 740 740 740 740 740 588
Sn grade 0.70 % 0.70 % 0.70 % 0.70 % 0.70 % 0.70 % 0.70 % 0.66 % 0.64 % 0.64 %
Sn recovery 60 % 61 % 68 % 70 % 70 % 70 % 70 % 70 % 70 % 70 %
Sn in conc tonnes 0 1,507 3,529 3,626 3,626 3,626 3,626 3,394 3,315 2,632
Conc grade 45 % 46 % 53 % 55 % 55 % 55 % 55 % 55 % 55 % 55 %
Sn conc tonnes 0 3,259 6,645 6,593 6,593 6,593 6,593 6,171 6,028 4,785
Cu grade 0.28 % 0.28 % 0.28 % 0.28 % 0.28 % 0.28 % 0.28 % 0.21 % 0.19 % 0.19 %
Cu recovery 60 % 61 % 69 % 75 % 75 % 75 % 75 % 75 % 75 % 75 %
Cu in conc tonnes 0 603 1,425 1,554 1,554 1,554 1,554 1,181 1,055 837
Conc grade 20 % 20 % 23 % 24 % 24 % 24 % 24 % 24 % 24 % 24 %
Cu conc tonnes 0 2,941 6,126 6,475 6,475 6,475 6,475 4,921 4,394 3,488 Source : Beer & Co estimates
Our estimated mining
costs rise over time
Figure 16 shows our projected costs of operations shown in Figure 15. Figure 16 shows
mining costs rising steadily over time as the mine face migrates further from the portal,
increasing trucking distance and travel time from the surface to the work face.
Figure 16 : Beer & Co projected operating costs, Cleveland hard rock project
2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25
UNDERGROUND MINING $ 11.7m $ 24.7m $ 26.5m $ 28.3m $ 30.0m $ 31.7m $ 33.4m $ 35.1m $ 29.7m
AUD /t ore 33 33 36 38 41 43 45 47 51
PROCESSING $ 8.9m $ 17.5m $ 17.5m $ 17.5m $ 17.5m $ 17.5m $ 17.5m $ 17.5m $ 14.2m
AUD /t ore 25 24 24 24 24 24 24 24 24
SITE ADMIN $ 3.8m $ 7.0m $ 7.0m $ 7.0m $ 7.0m $ 7.0m $ 7.0m $ 7.0m $ 5.8m
AUD /t ore 11 9 9 9 9 9 9 9 10
TRANSPORT $ 0.6m $ 1.2m $ 1.2m $ 1.2m $ 1.2m $ 1.2m $ 1.0m $ 1.0m $ 0.8m
AUD /t ore 1.6 1.6 1.6 1.6 1.6 1.6 1.4 1.3 1.3
AUD /t conc 92 92 92 92 92 92 92 92 92 Source : Beer & Co estimates
Elementos Limited (ELT)
Page 12 See Page 23 for Disclaimer and Disclosures 25 June 2013
Our estimated costs are
higher than others we
know well, due to lower
Sn grades
However, initial cap.ex is
much lower.
Figure 17 shows the same information in terms of product costs. It shows that we
estimate cash costs, over the life of Mine, including royalties and sustaining capital, to be
just under $7.00/lb. This is slightly higher than other tin operations with which we are
familiar, reflecting the lower grade.
However, the Cleveland project has a much lower capital cost due to the mine
development already in place.
Figure 17 : Cleveland hard rock project – estimated tin costs
2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25
Mining US 317 c/lb 327 c/lb 281 c/lb 279 c/lb 294 c/lb 311 c/lb 329 c/lb 370 c/lb 398 c/lb 425 c/lb
Processing US 191 c/lb 247 c/lb 199 c/lb 184 c/lb 181 c/lb 181 c/lb 181 c/lb 194 c/lb 198 c/lb 202 c/lb
Site Admin US 77 c/lb 105 c/lb 80 c/lb 74 c/lb 73 c/lb 73 c/lb 73 c/lb 78 c/lb 80 c/lb 82 c/lb
Transport US 13 c/lb 16 c/lb 13 c/lb 13 c/lb 12 c/lb 12 c/lb 12 c/lb 11 c/lb 11 c/lb 11 c/lb
TC/RC US 72 c/lb 79 c/lb 83 c/lb 69 c/lb 69 c/lb 69 c/lb 69 c/lb 69 c/lb 69 c/lb 69 c/lb
Royalties US 64 c/lb 66 c/lb 75 c/lb 62 c/lb 62 c/lb 62 c/lb 62 c/lb 61 c/lb 61 c/lb 59 c/lb
Copper (US108c/lb) (106c/lb) (108c/lb) (115c/lb) (115c/lb) (115c/lb) (115c/lb) (93c/lb) (85c/lb) (85c/lb)
Sustaining Capital US 60 c/lb 77 c/lb 63 c/lb 58 c/lb 58 c/lb 58 c/lb 58 c/lb 62 c/lb 50 c/lb 0 c/lb
TOTAL US 685 c/lb US 811 c/lb US 687 c/lb US 624 c/lb US 635 c/lb US 652 c/lb US 670 c/lb US 752 c/lb US 782 c/lb US 764 c/lb Source : Beer & Co estimates
Financing
Figure 18 shows our estimate of the project cashflows, after completion of the feasibility
study. The resulting valuation, using a discount rate of 10%, is US$ 91m.
Figure 18 : Cleveland hard rock project – projected cashflows
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25
AUD-USD 0.950 0.938 0.888 0.840 0.830 0.830 0.830 0.830 0.830 0.830
Tin price USD /t 24,750 25,000 27,750 30,750 32,000 25,000 25,000 25,000 25,000 25,000
Copper price USD /t 6,614 6,614 6,614 6,614 6,614 6,614 6,614 6,614 6,614 6,614
Tin sold tonnes 0 1,507 3,529 3,626 3,626 3,626 3,626 3,394 3,315 2,632
Copper sold tonnes 0 603 1,425 1,554 1,554 1,554 1,554 1,181 1,055 837
Tin Revenue USD m 0 38 98 112 116 91 91 85 83 66
smelting charges USD m 0 (3) (8) (9) (10) (8) (8) (7) (7) (6)
Net copper revenue USD m 0 4 8 9 9 9 9 7 6 5
Cash Costs USD m 0 (23) (45) (44) (45) (46) (47) (49) (50) (42)
Royalties USD m 0 (2) (5) (6) (6) (5) (5) (4) (4) (3)
Dep'cn & Amort'sn USD m 0 (9) (17) (16) (16) (16) (16) (10) (2) 0
E B I T USD m 0 4 31 45 48 25 23 22 25 20
Interest Expense USD m (1) (4) (3) (2) (2) (1) (0) (0) (0) 0
Tax Expense USD m 0 (0) (8) (13) (14) (7) (7) (6) (8) (6)
N P A T USD m (1) 0 19 30 33 17 16 15 18 14
Project Cap.Ex USD m (58) 0 0 0 0 0 0 0 0 0
Sus. Cap. Ex USD m 0 (2) (3) (3) (3) (3) (3) (3) (2) 0
Net Project Cashflow USD m (59) 7 34 43 46 30 30 22 18 14
N P V = US$ 91m IRR = 43% Source : Beer & Co estimates
Beer & Co projects that the project will be financed :
� public equity to fund the scoping study
� strategic equity investors to find the Feasibility Study
� An industry partner to buy a stake in the project that will find ELT’s equity to develop
the project
Elementos Limited (ELT)
Page 13 See Page 23 for Disclaimer and Disclosures 25 June 2013
Our estimate of project
capital costs of $81.5m,
plus a further $7.5m in
feasibility assessments
We project that selling a
30% stake will provide
enough equity to fund
ELT’s share
Beer & Co is confident
that there is strong
interest from strategic
industry parties
There are good reasons
to expect that
commercial product can
be extracted from the
tailings
Figure 19 shows the detail of Beer
& Co’s estimate of the capital
costs to bring Cleveland back into
production.
There is a high degree of
estimation in these estimates as
the mine has yet to be inspected
so we cannot know how much
work is needed to be done.
Figure 20 shows our projections
for funding. It shows that we
have assumed that ELT sells a 30%
stake in the project.
We have assumed that the
investor is able to assist in debt
financing for the project.
Figure 19 : Project capital costs
Feasibility Studies $A 7.5m
Mobile plant and equipment $A 10.0m
Tailings dam $A 5.0m
Mine development - underground $A 5.0m
Fixed plant / mill $A 35m
Power / utilities $A 2.5m
Civils, offices, etc $A 5.0m
initital working capital $A 5.0m
Owner's costs $A 2.5m
E P C M $A 5.0m
Contingency $A 6.5m
TOTAL $A 89.0m Source : Beer & Co estimates
Note that the project cost in Figure 20
is after the cost of the feasibility
study.
Figure 20 shows by selling a 30%
stake, and being able to secure 60%
debt finding, ELT will not require any
further equity to develop its share of
the Cleveland project.
Beer & Co is confident that funding of
this nature is very feasible due to the
strategic nature of tin as a
commodity.
Figure 20 : Cleveland funding
Project Cap.ex $A 82m
Project Finance 60%
leaves Equity Funding $A 33m
Project stake sold 30%
leaves ELT to fund $A 23m
Revenue from sale of stake ($A 29m)
ELT corporate costs $A 4m
Net ELT equity ($A 2m) Source : Beer & Co estimates
Cleveland : potential tailings project
Figure 1 showed that there is a JORC Resource at Cleveland in the tailings, which is also
shown in Figure 21.
Figure 21 : Cleveland Tailings Resources
Sn grade Cu grade
Inferred Resources 3,850 kt 0.30 % 0.13 % Source : ELT ASX announcement, April 2013
Above we discussed that the tails results from a combination of
� Grain size of the mineralisation, which is is relatively fine, generally 5µm - 20 µm;
� SnO2 flotation was introduced only in 1974, and since then, better reagents have
been developed;
� The mill was, for a period, operated only 5 days a week; and
� Copper recovery was not operated for periods.
Elementos Limited (ELT)
Page 14 See Page 23 for Disclaimer and Disclosures 25 June 2013
ELT would achieve a
good commercial
outcome producing a
low grade (10% - 15%
Sn) conc, due to its high
recovery (63% - 68%
from testing).
We have chosen to
evaluate a standard
grade concentrate with
lower recoveries, and
higher cap.ex, as it
present a more readily
saleable product.
ELT may well be able to
achieve a better
outcome than we have
projected.
First product could be by
the end of 2014.
Development
There are 2 possible development routes :
(i) Produce a high grade, commercial concentrate, grading 50% - 60% Sn in conc, but at
a recovery of only about 35% of the tin in the tailings; or
(ii) Produce a high recovery (65%), but low grade (15%) concentrate.
High grade v. low grade conc
In our analysis, the latter option provides a better potential commercial return, but it is
hostage to be able to sell the low grade concentrate.
The Renison mine has, for many years, had a proposal to build a fuming plant. It is being
now considered more actively as the hard rock mine gets deeper and the tailings, which
had a Measured Resource of 20,461kt at 0.45% Sn and 0.21% Cu.
There is also the possibility of selling the low grade concentrate to a party in China that is
able to process it.
In this analysis, we assume that the tailings are developed through the low recovery,
higher grade product.
Development route
We have assumed that this project is developed independently of the hard rock project.
This reflects our view, based on the work done by Beer & Co, that the parties that would
be interested in the hard rock project are not the same as those that would be interested
in a low cap.ex, short life, tailings retreat project.
In our view, the tailings project must be done as the existing tailings dams have been
compromised by forestry activities.
In our view, ELT could well
find a suitable partner for
this project as part of its
marketing of the hard rock
project. Figure 22 shows
that the tailings project
could be in production by
the end of 2014.
Figure 22 : Potential development time-frame
time completed
Clearances 6 months Dec. 2013
Engineering 3 months Mar. 2014
Construciton 6 months Sep. 2014
First product 3 months Dec. 2014 Source : Beer & Co estimates
Financial Analysis
Figure 23 shows the project parameters
for a potential tailings project.
Note that at a processing rate of 1.0Mt/yr,
the resource of 3.85Mt gives a project life
of 4 years.
Figure 24 shows our projected cashflows
for the potential tailings project.
It shows that our analysis has assumed no
debt financing.
Figure 23 : Tailings project
Tailings
First product Dec. 2014
Capital expenditure $A 25m
Ore processed annually 1,000 kt
tin recovery 50 %
Annual tin production 1,500t
Total tin produced 5,541t
all in cash cost US 469 c/lb
Project NPV $A 30m Source : Beer & Co estimates
Elementos Limited (ELT)
Page 15 See Page 23 for Disclaimer and Disclosures 25 June 2013
In any event, it is 4 year
project that generates
good cashflows
We assume that ELT sells
� A 30% stake in the
hard rock project,
after the FS has
been completed in
mid 20915; and
� A 50% stake in the
tailings project in
early 2014.
Figure 24 : Financial projections, Cleveland tailings project
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19
AUD-USD 0.950 0.950 0.950 0.938 0.888 0.840
Tin price USD /t 22,269 22,086 24,750 25,000 27,750 30,750
Copper price USD /t 7,165 6,889 6,614 6,614 6,614 6,614
Tin sold tonnes 0 338 1,181 1,200 1,200 645
Copper sold tonnes 0 244 780 788 894 535
Tin Revenue USD m 0 8 29 30 33 19
smelting charges USD m 0 (1) (2) (2) (2) (1)
Net copper revenue USD m 0 1 5 5 5 3
Cash Costs USD m 0 (5) (16) (16) (15) (8)
Royalties USD m 0 (0) (2) (2) (2) (1)
Dep'cn & Amort'sn USD m 0 (2) (6) (6) (5) (3)
E B I T USD m 0 2 9 10 15 10
Interest Expense USD m 0 0 0 0 0 0
Tax Expense USD m 0 (1) (3) (3) (4) (3)
N P A T USD m 0 1 6 7 10 7
Project Cap.Ex USD m (0) (21) 0 0 0 0
Net Project Cashflow USD m (0) (18) 12 12 15 9 Source : Beer & Co estimates
Tungsten
Figure 4 showed a tungsten resource.
It shows that this resource underlies the tin. Hence, we expect that it be developed after
the tin mine has been in operation.
Also, the deposit requires further drilling and drilling from the surface is expensive.
Instead, we expect it will be drilled from the depths of the tin mine. As the hard rock tin
mine only comes into operation at the end of 2017, definitional drilling can only take
place at a later time.
Consequently, the present value of an operation will be small, and we only give it a
nominal valuation.
Financial Analysis of Elementos
In our analysis, Beer & Co assumes :
� ELT sells a 30% stake in the hard rock project, receiving 100% of the value;
� ELT sells a 50% stake in the tailings project, receiving 90% of the value;
� ELT’s existing exploration projects in Argentina and Chile, which have significant
known copper-gold mineralisation, have a nominal value; and
� Cleveland’s tungsten resource has a nominal value.
Figure 25 shows Beer & Co’s projected cashflows for ELT at a total, corporate level.
Figure 26 shows projected financials for ELT.
Elementos Limited (ELT)
Page 16 See Page 23 for Disclaimer and Disclosures 25 June 2013
Figure 25 : Beer & Co’s projected cashflows for Elementos
2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26
Cleveland, hard-rock, afer tax, 70% shareAUD m (1.9) (6.0) (25.1) 3.2 18.4 27.6 29.6 15.4 20.3 18.2 14.8 11.8
franking credits 0.0 (0.2) 0.1 6.6 10.7 11.8 6.1 5.9 5.5 6.4 5.1 0.0
Cleveland Tailings, afer tax, 50% shareAUD m (0.5) (10.3) 7.8 9.2 11.7 7.4 0.0 0.0 0.0 0.0 0.0 0.0
franking credits 0.0 0.4 1.9 2.5 3.6 2.4 0.0 0.0 0.0 0.0 0.0 0.0
Asset sales 12.4 28.8
ELT corporate costs AUD m (2.0) (2.0) (3.0) (4.0) (4.0) (4.0) (4.0) (4.0) (4.0) (4.0) (4.0) (4.0)
Equity raised 2.5 5.0
Cash balance 10.5 26.1 7.9 25.4 65.9 111.0 142.7 160.0 181.8 202.4 218.3 226.1 Source : Beer & Co estimates
Figure 26 : Beer & Co’s projected financial outcomes for Elementos 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25
AUD-USD 0.950 0.950 0.950 0.938 0.888 0.840 0.830 0.830 0.830 0.830 0.830 0.830
Tin price USD/t 22,269 22,086 24,750 25,000 27,750 30,750 32,000 25,000 25,000 25,000 25,000 25,000
Copper price USD/t 7,165 6,889 6,614 6,614 6,614 6,614 6,614 6,614 6,614 6,614 6,614 6,614
Tin sold, ELT share 0t 193t 679t 1,801t 3,220t 2,941t 2,538t 2,538t 2,538t 2,376t 2,321t 1,842t
Copper sold, ELT share 0t 122t 390t 816t 1,444t 1,355t 1,088t 1,088t 1,088t 827t 738t 586t
Tin Revenue AUD m 0 5 18 48 101 107 98 76 76 72 70 55
smelting charges AUD m 0 (0) (1) (4) (8) (9) (8) (7) (7) (6) (6) (5)
Net copper revenue AUD m 0 1 2 5 10 10 8 8 8 6 5 4
Cash costs AUD m 0 (3) (8) (26) (44) (41) (38) (39) (40) (41) (42) (35)
Royalties AUD m 0 (0) (1) (3) (5) (6) (5) (4) (4) (4) (4) (3)
Corproate AUD m (2) (2) (2) (3) (4) (4) (4) (4) (4) (4) (4) (4)
Depreciation AUD m 0 (1) (3) (10) (17) (15) (14) (14) (14) (8) (2) 0
E B I T AUD m (2) (1) 4 9 33 42 37 17 16 14 17 13
Net Interest AUD m 0 0 (1) (3) (3) (2) (1) (1) (0) (0) (0) 0
Tax Expense AUD m 0 (0) (2) (3) (10) (13) (12) (6) (6) (5) (6) (5)
N P A T AUD m (2) (1) 2 3 20 27 24 10 10 9 11 8
e p s (0.4c) (0.2c) 0.4 c 0.5 c 3.4 c 4.5 c 4.0 c 1.7 c 1.7 c 1.5 c 1.8 c 1.3 c Source : Beer & Co estimates
Beer & Co has a risked,
base case valuation of
ELT of 12.2c/share
Figure 27 shows Beer & Co’s derived valuation, on a per share basis, for ELT.
Figure 27 : Beer & Co valuation of ELT
risk 100% Product per share
Cleveland, hard-rock 75% $A 42 m $A 32 m 5.4 c
franking credits 45% $A 27 m $A 12 m 2.0 c
Cleveland Tailings 60% $A 13 m $A 8 m 1.3 c
franking credits 36% $A 7 m $A 2 m 0.4 c
Asset Sales 75% $A 34 m $A 26 m 4.3 c
Tungsten nom. $A 5 m $A 5 m 0.8 c
ELT other exploration nom. $A 2 m $A 2 m 0.3 c
ELT corporate costs 100% ($A 21 m) ($A 21 m) (3.6c)
Equity raised 100% $A 6 m $A 6 m 1.1 c
TOTAL $A 115 m $A 72 m 12.2 c
shares on issue 154.3m FPO shares
SPP raising 1.8 c 29m new shares
Issued to Rockwell 55% 225m new shares
Scoping Study 80m new shares
BFS 100m new shares
30 June 2013discount rate = 12 %
Source : Beer & Co estimates
Beer & Co projects that ELT will need to raise equity to completed the scoping study and
undertake the feasibility study.
Elementos Limited (ELT)
Page 17 See Page 23 for Disclaimer and Disclosures 25 June 2013
Comparatives
The tin market is a relatively small market, with total consumption of about 360kt/yr.
Nearly all listed companies with tin are listed on the ASX. Figure 28 show the companies
and some details about them. Only those highlighted would be regarded as being
genuine tin exposure.
Figure 28 : Other listed tin exposures on the ASX ASX Market Status Project
Code Capitalisation tin grade contained tin tin grade contained tin share M&I Sn M&I Sn eq. Rec total Sn total Sn eq Rec
Metals X - Renison Bell MLX.ASX $A 182m Producing 3.7 Mt 1.06% Sn 39 kt Sn 4.8 Mt 1.07% Sn 51 kt Sn 50% $ 994/t $ 1,487/t $ 744/t $ 1,112/t
including Rentails Scoping 13.9 Mt 0.51% Sn 71 kt Sn 15.1 Mt 0.56% Sn 84 kt Sn 50% $ 547/t $ 818/t $ 461/t $ 690/t
adding gold projects DFS Jan 2013 (??) 6,803 kt Sn eq 10,031 kt Sn eq varies $ 9/t $ 6/t
Gippsland Limited GIP.ASX $A 14m Commissioning 14.6 Mt 0.11% Sn 16 kt Sn 20.0 Mt 0.09% Sn 17 kt Sn 45% $ 408/t $ 639/t $ 370/t $ 580/t
including tantalum 14.6 Mt 0.47% Sn eq 68 kt Sn eq 44.5 Mt 0.19% Sn eq 83 kt Sn eq 45% $ 211/t $ 174/t
Wolf Minerals Ltd WLF.ASX $A 59m Funded, but 117 Mt 0.02% Sn 23 kt Sn 401 Mt 0.02% Sn 80 kt Sn 100% $ 1,228/t $ 1,861/t $ 358/t $ 543/t
including tungsten not fully permitted 117 Mt 0.16% Sn eq 187 kt Sn eq 401 Mt 0.15% Sn eq 603 kt Sn eq 100% $ 15/t $ 48/t
Venture Minerals VMS.ASX $A 32m BFS Nov. 2012 9.5 Mt 0.30% Sn 29 kt Sn 13.4 Mt 0.30% Sn 40 kt Sn 100% $ 227/t $ 315/t $ 161/t $ 223/t
including iron & tungsten 9.5 Mt 0.55% Sn eq 52 kt Sn eq 13.4 Mt 0.50% Sn eq 67 kt Sn eq 100% $ 101/t $ 97/t
Kasbah Resources Ltd KAS.ASX $A 42m BFS due Dec 2013 11.8 Mt 0.87% Sn 103 kt Sn 12.2 Mt 0.86% Sn 105 kt Sn 80% $ 101/t $ 136/t $ 97/t $ 132/t
Consolidated Tin Mines Ltd CSD.ASX $A 9m PFS due Aug 2013 1.3 Mt 0.72% Sn 9 kt Sn 4.8 Mt 0.60% Sn 29 kt Sn 50% $ 411/t $ 604/t $ 134/t $ 197/t
including iron 1.3 Mt 0.60% Sn eq 8 kt Sn eq 4.8 Mt 0.51% Sn eq 24 kt Sn eq 50% $ 211/t $ 159/t
Stellar Resources Ltd SRZ.ASX $A 12m PFS due June 2013 1.4 Mt 1.25% Sn 18 kt 6.3 Mt 1.14% Sn 71 kt Sn 100% $ 211/t $ 285/t $ 52/t $ 70/t
Ausnico Limited ANW.ASX $A 2m Scoping 0.0 Mt 0.00% Sn 0 kt Sn 46.8 Mt 0.15% Sn 68 kt Sn 100% $ 0/t $ 0/t $ 11/t $ 15/t
Elementos ELT.ASX $A 5m Scoping 4.2 Mt 0.70% Sn 12 kt Sn 10.0 Mt 0.53% Sn 53 kt Sn 100% $ 77/t $ 110/t $ 60/t $ 85/t
including tcopper & ungsten 4.2 Mt 0.56% Sn eq 24 kt Sn eq 13.9 Mt 0.33% Sn eq 46 kt Sn 100% $ 11/t $ 69/t
New Age Exploration NAE.ASX $A 15m Scoping 0.0 Mt 0.00% Sn 0 kt Sn 9.1 Mt 0.21% Sn 19 kt Sn 100% $ 0/t $ 0/t $ 205/t $ 293/t
including tungsten, copper & silver 0.0 Mt 0 kt Sn eq 9.1 Mt 0.61% Sn eq 56 kt Sn eq 100% $ 0/t $ 70/t
Monto Minerals MOO.ASX 100%
Measured & Indicated Resources Total Resoruces EV per tonne of (recoverable) tin in Resources
Source : IRESS, various companies, Beer & Co
A comparative shows
that more mature
projects are more highly
valued.....
which should follow as
more capital has been
put into them.
Figure 29 shows the comparative valuations of the ASX tin stocks. Figure 29 is organised
in order of maturity, and it shows that the producer, MetalsX, is the most highly valued,
while Venture and Kasbah are the next to get into production.
Figure 29 : EV per tonne of tin in Resources
$ 0/t
$ 100/t
$ 200/t
$ 300/t
$ 400/t
$ 500/t
$ 600/t
$ 700/t
$ 800/t
Metals X - Renison Bell
Venture Minerals
Consolidated Tin Mines Ltd
Kasbah Resources Ltd
Stellar Resources Ltd
Elementos
Ausnico Limited
Source : IRESS, various companies, Beer & Co
Figure 29 shows a decline in value with maturity, partly due to the capital that needs to
be invested to become a producer.
Elementos Limited (ELT)
Page 18 See Page 23 for Disclaimer and Disclosures 25 June 2013
Conclusions
Elementos is in the process of merging with the unlisted company, Rockwell Minerals.
Rockwell Minerals’ main asset is the Cleveland tin-copper mine, which has 53kt of tin in
JORC Resources, plus 20kt copper and nearly 9kt tungsten.
Beer & Co speculates that ELT will
� raise equity to fund the completion of a scoping study;
� then proceed to a feasibility study;
� use the FS as a basis for attracting a joint venture party to assist in financing the
development; and
� seek strategic investors to monetise the tailings resources.
Our valuation of ELT on this basis is about 12c/share.
Figure 30 compares ELT to its most direct peers. It shows that ELT may have higher all in
cash costs, but much lower initial capital.
Figure 30 : Comparison of ASX listed tin companies
Achmmach Heemskirk Cleveland
Mining Inventory 14,000 kt 6,280 kt 6,119 kt
Sn grade 1.00 % Sn 1.14 % Sn 0.68 % Sn
other n/a n/a 0.25 % Cu
Annual mining rate 1,000 kt 600 kt 740 kt
Annutal tin production 7,400t 4,700t 6,600t
all in cash cost US 492 c/lb US 610 c/lb US 699 c/lb
First product Jun. 2015 Mar. 2015 Dec. 2016
Capital Cost (after FS) $A 167m $A 100m $A 82m Source : Beer & Co estimates
We believe that ELT is an outstanding investment opportunity.
While it has risks, it also has options and the development path may differ from that we
have used in this analysis.
We initiate research with a Buy recommendation.
Elementos Limited (ELT)
Page 19 See Page 23 for Disclaimer and Disclosures 25 June 2013
Appendix
Tin Fundamentals
Figure A1 shows recent historical tin prices and Beer & Co’s projected tin prices, showing
that we expect tin prices to be high at this time as, in 2017, the world’s largest single
source, Minsur’s San Rafael mine, in Peru, is expected to shut taking out about 38kt/yr of
supply. We are confident that the mine will cease as Minsur state on their web-site that
they have ceased near mine exploration, and also production has been falling, with 2012
down to 26kt.
Figure A1 : Tin prices, historical v. projected and LME tin stocks
0 t
5,000 t
10,000 t
15,000 t
20,000 t
25,000 t
30,000 t
35,000 t
$ 0/t
$ 5,000/t
$ 10,000/t
$ 15,000/t
$ 20,000/t
$ 25,000/t
$ 30,000/t
$ 35,000/t
Jul. 07 Apr. 08 Jan. 09 Oct. 09 Jul. 10 Apr. 11 Jan. 12 Oct. 12 Jul. 13 Apr. 14 Jan. 15 Oct. 15 Jul. 16 Apr. 17 Jan. 18 Oct. 18 Jul. 19 Apr. 20
LME tin stocks
Tin price, LME cash
Projected prices
Source : IRESS, Beer & Co
Figure A1 shows that the tin price has performed in line with our expectation when we
prepared our estimates, in September 2012.
Our bullishness is underlined by the importance of Minsur to global supply; in 2011,
Minsur produced about 36kt, or about 10% of global tin consumption of about 360kt/yr.
ITRI is MORE bullish
Figure A2 : Analysts all expect higher prices
Source : ITRI presentation, September 2012
Elementos Limited (ELT)
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Figure A2 shows that ITRI (International Tin Research Institute) expects higher future
prices; higher than the projections used by Beer&Co in our analyses. ITRI is the only
organisation that undertakes tin market research, to complement its function of
developing tin consumption.
Tin supply is struggling
Figure A3 shows that the supply of tin from major producers has continued to fall, since
peaking in 2005.
Figure A3 : Production by major tin producers
0kt
50kt
100kt
150kt
200kt
250kt
300kt
350kt
2004 2005 2006 2007 2008 2009 2010 2011 2012
Other Latin America China
Other Indonesia P T Koba P T Timah
Source : ITRI, Beer & Co
However, Figure A4 shows that the shortfall in mine production has been generally
balanced by increasing secondary production. It also shows that the stock-piles
accumulated during the time of the International Tin Council, have been progressively
consumed.
Figure A4 : Falling primary but rising secondary production
$ 5,000/t
$ 10,000/t
$ 15,000/t
$ 20,000/t
$ 25,000/t
$ 30,000/t
150kt
200kt
250kt
300kt
350kt
400kt
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
secondary tin supply primary (mined) tin supply
tin demand tin pirce (real, 2012, USD terms)
Source : ITRI, Beer & Co
Figure A5 is a list of tin projects nominated by ITRI as contributed to projected supply.
We have reviewed each project on this list and we regard some on this list as being
unlikely to proceed, in the absence of much higher tin prices than at present.
Elementos Limited (ELT)
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Accordingly, we have ranked the projects in terms of likelihood, and we believe that we
have been very kind in this ranking (in other words, if we were investing in these
projects, we would have fewer projects in the “high likelihood” category).
Reviewing this list shows that even with our generous treatment of projects, the volume
of tin that is expected to be produced from projects with a high likelihood is barely
enough to replace the projected fall in mine production from the San Rafael mine alone,
leave alone the expected continued fall in Indonesian and Chinese production.
This suggests that the trend in primary production shown in Figure A4 is likely to
continue; primary production is likely to continue to fall, or at best, remain flat
Figure A5 : Potential new sources of mined tin supply
Company Project Country High Medium Low
Minsur San Rafael talings Peru 7,500 t/yr
Syrymbet Syrymbet Kazakhstan 6,500 t/yr
Kasbah Resources Achmmach Morocco 5,600 t/yr
Amerilangui Ujin Narsiin Khundlen Mongolia 5,200 t/yr
TMR Limited offshore dredges Indonesia 5,000 t/yr
Metals X Rentails Australia 4,000 t/yr
Stellar Resources Heemskirk Australia 4,000 t/yr
Venture Minerals Mt Lindsay Australia 3,700 t/yr
P T Timah Deep offshore dredges Indonesia 3,600 t/yr
Consolidated Tin Mines Mt Garnet Australia 3,200 t/yr
Adex Mining Mt Pleasant Canada 3,200 t/yr
Deutsche Rostoff Gottesberg Germany 3,000 t/yr
Elementos Cleveland Australia 4,800 t/yr
Yunan Tin Wu Chang Ping China 3,000 t/yr
Sinchi Wayra Colquiri tailings Bolivia 2,700 t/yr
TNT Mines Aberfoyle Australia 2,500 t/yr
TNT Mines Ringarooma Bay Australia 500 t/yr
TNT Mines Moina Australia 1,000 t/yr
Silver Standard Pirquitas Argentina 2,500 t/yr40,400 t/yr 17,900 t/yr 13,200 t/yr
Source : ITRI, Beer & Co
Demand is soft
Figure A4 shows that demand peaked in 2007 at about 373kt. It fell in 2008 to about
350kt and has been around that level since, apart from 2012, when demand fell to 333kt.
However, Figure A4 also shows that the fall in demand in 2012 matched a fall in supply so
that the year overall was roughly in balance.
Figure A6 shows that nearly half of tin consumption is in consumer electronics, which
includes computers and similar.
Tin is able to be recovered from consumer electronics relatively easily, which accounts
for the significant rise in secondary production shown in Figure A4.
It also accounts for the softness in tin demand shown in Figure A4 as demand has been
mitigated by miniaturisation, such as a tablet or note-book as opposed to a desk-top
computer, and thrifting.
We, along with nearly all other analysts, expect that demand will recover in 2013, leading
to supply deficits, though the projected deficit is well within available stocks.
Elementos Limited (ELT)
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Figure A6 : Tin consumption by sector
Figure A7 : Tin consumption by end use
13.5 %
18.5 %
32.0 %
21.2 %
7.8 %
6.9 %
Construction
Transport
Consumer Elecronics
Packaging
Machinery
Other
44.4 %
9.0 %
16.7 %
14.7 %
4.6 %
1.8 %
8.8 %
Solder - electronic
Solder - industrial
Tinplate
Chemicals
Brass & Bronze
Float glass
other
Source : ITRI, Beer & Co Source : ITRI, Beer & Co
Our $25,000/t Long Run price is modest
Figure A1 shows that we project a Long Run tin price of about $25,000/t. Figure A8
shows a supply curve for tin, to which we have added a line at $25,000/t to show that
our Long Run price projection is consistent with the data in this chart.
Figure A8 : Projected costs of tin supply
Source : ITRI / Greenfields Research, ITRI presentation, September 2012. Beer & Co
Conclusions
The tin price has held up reasonably well, especially compared with other mined
commodities. However, LME stocks of tin have increased during 2013 and are now a
little under 14kt, or about 10 days of supply, which is the tightest of LME metals, apart
from lead. However, much of this stock is of Indonesian refined material that barely
meets LME specification, but requires further refinement to be used as solder.
Tin prices have been subdued compared with expectations as demand has been weak.
All analysts expect demand to pick up as “hidden” stocks are exhausted and consumer
electronic demand recovers with the wave of miniaturisation being worked through.
Our bullishness is due to supply. Mine supply has fallen consistently, and we project that
mine supply, at best, will remain flat, and is likely to continue to fall, though not as
sharply as it has done in recent years.
Elementos Limited (ELT)
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information herein has been obtained from reliable sources and that any estimates, opinions, conclusions or
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General Advice
The content is of a general nature and is based on a consideration of the securities alone, and as such is conditional
and must not be relied upon without advice from a securities adviser as to the appropriateness to you given your
individual investment objectives, financial situation and particular needs. Whilst this document is based on
information and assessments that are current at the date of publication, Beer and Co Pty Ltd has not undertaken
detailed due diligence on the information provided and has no obligation to provide revised assessments in the
event of changed circumstances.
Disclosure
Beer and Co Pty Ltd have been engaged by Elementos Limited to prepare this research report and is being paid a
fee for its preparation. In the future, Beer and Co Pty Ltd may provide capital raising services to Elementos Limited
on commercial terms. Directors of Beer and Co or other associate companies may own securities in Elementos
Limited. Beer and Co Pty Ltd seeks to do work with those companies it researches. As a result, investors should be
aware that Beer and Co Pty Ltd may have a conflict of interest that could affect the objectivity of this report.
Analyst Certification
The analyst responsible for this research report certifies that all of the views expressed reflect his personal views
about the securities and the issuer.
Report prepared by : Michael Beer
BEER AND CO PTY LTD ABN 88 158 837 186, AUTHORISED REPRESENTATIVE MELBOURNE VENTURE SECURITIES PTY LTD AFSL No.
224 313
Melbourne Office: Level 2, 11 Bank Place, Melbourne, Vic, Australia 3000
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