RCR RMM Review 3Q10 Abridged[1]

8/7/2019 RCR RMM Review 3Q10 Abridged[1]

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Resource Capital Research


Suite 1306

183 Kent StreetSydney, NSW 2000

Tel: +612 9252 9405

Fax: +612 9251 2859

Email: [email protected]

Web: www.rcresearch.com.au


ACN 111 622 489

Rare and Minor Metals Company Review

September Quarter 2010

Resource Analyst (Rare and Minor Metals): Dr Trent Allen

Resource Analyst: Dr Tony Parry

Resource Analyst: John Wilson

This report is subject to copyright and may not be redistributed withoutwritten permission from RCR. The information contained in this

report is for use by US, Canadian and Australian residents only.

Copies are available for purchase from RCR.

7 September 2010




Rare and Minor Metals Company Review, September 2010. Disclaimer and disclosure attached. Copyright© 2010 by Resource Capital Research Pty Ltd. All rights reserved. 2

Contents

Contents .............................................................................................................................. 2 Overview and Investment Comment ........................................................................................ 3 RCR September Quarter 2010 Featured Company Summary ....................................................... 4 [Explorers‟ Development Cycle Chart ........................................................................................ ] [Comparative Charts ............................................................................................................... ] Financial Data ....................................................................................................................... 5 Company Statistics ................................................................................................................ 5 Reserves, Resources and Historic Mineralisation ........................................................................ 6 Valuation and Performance Data ............................................................................................. 6

Exploration, Development and Production Companies

[Alkane Exploration Limited ........................................................................................... ] Arafura Resources Limited ............................................................................................ 7 [Avalon Rare Metals Inc ................................................................................................ ] Globe Metals & Mining Limited ...................................................................................... 9 [Greenland Minerals & Energy Limited ............................................................................. ] [Gippsland Limited ....................................................................................................... ] Gunson Resources Limited .......................................................................................... 11 Galaxy Resources Limited ........................................................................................... 13 Icon Resources Limited .............................................................................................. 15 [King Island Scheelite Limited ........................................................................................ ] [Rodinia Lithium Inc ..................................................................................................... ] TNR Gold Corp .......................................................................................................... 17

Market Update: Lithium ........................................................................................................ 19 Market Update: Niobium ...................................................................................................... 21 Market Update: Tantalum ..................................................................................................... 23 Market Update: Tungsten ..................................................................................................... 25 Market update: Rare Earth Elements ...................................................................................... 27 Market Update: Zirconium and Zircon .................................................................................... 29

[Selected rare and minor metal price data and production statistics .............................................. ] [Exchange rates of some rare and minor metals, producers and consumers. .................................. ] [Rare and Minor Metal Company Share Performance Tables ......................................................... ]

Report Contributors ............................................................................................................. 31 Disclosure and Disclaimer ..................................................................................................... 32

[This is the Abridged Report version of the September Quarter RCR Rare and Minor Metals Company Review.

The purchase price of RCR‟s September quarter Subscriber Reports (uranium, gold, rare and minor metals, and

iron ore; copper (out soon)) is A$110. The annual rate for RCR reports – commodities covered may vary from

quarter to quarter – is A$440. Purchase details and research services for institutional investors can be found at

www.rcresearch.com.au]




Rare and Minor Metals Company Review, September 2010. Disclaimer and disclosure attached. Copyright©

2010 by Resource Capital Research Pty Ltd. All rights reserved. 3

Overview and Investment Comment

The outlook for rare and minor metals

Analyst: Dr Trent Allen

Rising rare and minor metal (RMM) demand and prices over the coming 4-5years should be met with increased supply from new and existing mineralprojects. RMM deposits can take 5+ years to develop as mines, sometimesdue to their geochemical complexity, and the challenge of financingprojects that are considered to be outside the resources mainstream.

This provides an opportunity for companies with relatively low-riskprojects, and which are advanced or can be fast-tracked, to gain RMMmarket share and potentially substantial returns on investment.

Some examples of commodities with a stable to strong outlook for the nextseveral years:

Lithium: Increasing intensity of use is expected to require additionalsupply beyond 2014. Niobium: Industry forecasts are for FeNb consumption growth of ~15%per annum to 2014. Rare earth elements (REE): Forecasts are for 20-30% compoundannual growth in prices to 2014. Reported prices up 355% year-on-year. Tantalum: A supply shortfall is expected to hand a competitiveadvantage to companies that provide a long-term supply of ethicallyproduced tantalum.

Tungsten: Supply shortages are indicated from 2013. Zircon/zirconium: A lack of greenfields projects could create supplyshortages and boost prices problems in the near to medium term (1-3 yrs).

These forecasts are based on expectations of increasing intensity of use innew or high-tech applications across all manufacturing sectors, and onrelated concerns about security of supply for manufacturers in view of China‟s dominance of some metal markets (e.g. ~97% of REE) and itspolicy of mining restrictions and tariffs (e.g. 20% tariff on ferrotungsten).

Equity performances

Share price performances of 358 exchange-listed companies with one ormore RMM projects (in lithium, REE, tungsten, zirconium, niobium andtantalum) have been tabulated. The unweighted average performance of these stocks over 1 month (to September 7) was +13%, compared to 0%for Australia‟s ASX S&P200 (ASX:XJO). Three-month performance was+19% (XJO 6%) and 12-month was +42% (XJO 3%).

Globally, RMM stocks have on average outperformed the ASX by asignificant margin in the past 12 months. Despite this, the average shareprice is 42% below its 12-month high – but also 114% above a 12-monthlow. The best performing stocks in the past one month are those withtantalum projects (+14%), which have benefitted from international effortsto stop illegal tantalite supplies from the Congo (DRC). REE stocks have

also lifted (+12%) due to tightening of Chinese export quotas, especiallyon the light REE. All six groups have outperformed over the quarter; theflattest was Li (3%), for which the price has been comparatively stable.

Demand for the rare

and minor metalsshould increase inthe next 4-5 years …

… which couldbenefit current and

near-term producers.

Strong medium tolong term marketand price growth islikely for many RMMs

…

… driven byincreasing intensityof use for high-techand energy efficientapplications.

Share prices of rareand minor metalcompanies haveoutperformed theASX 200 over thepast year, with+42% annualgrowth.






RCR September Quarter 2010 Featured Company Summary

AUSTRALIA

Company Code Commodities Comment

Alkane Exploration Limited ALK Definitive Feasibility Study

The world class Dubbo Zirconia Project (DZP) could be producing Zr, Nb and REE by 4Q12; withbase-case throughput of 400ktpa, mine life is +100 years. A Definitive Feasibility Study of 840koz

Au Tomingley is expected in 3Q10. Shares have gained 116% in three months.

Arafura Resources Limited ARU Bankable Feasibility Study

ARU's share price has jumped 110% in the past 3 months due to surging REE prices (up +255%

since 4Q09). A Bankable Feasibility Study of the globally significant Nolans Rare Earths-Phosphate-

Uranium Project (NT) is ongoing, and the project is on t rack for first production in 2013.

Globe Metals & Mining Limite d GBE Bankable Feasibility Study

The 60Mt Kanyika Niobium Project (Malawi) had a recent 77% increase in Measured and Indicated

resources. A mine plan is expected 3Q10, a Bankable Feasibility Study in 2011. Share price has

jumped 80% in 3 months due to strong rare metals market.

Greenland Minera ls & Energy Limi ted GGG Pre -Feasibi li ty Study

Trading in GGG has resumed after a long suspension: news is , the Greenland Government

maintains its zero uranium tolerance, for now. The feasibility stage Kvanefjeld Project is forecast to

be a major provider of REE (43.7kt/y r) and uranium (3.9kt/yr U3O8).

Gippsland Limited GIP Bankable Feasibility Study

Delays at the world class Abu Dabbab (Egypt) tantulum-tin project are being addressed, by the re-

negotiation of a current 10-year offtake agreement. A resolution could trigger debt and equity

financing for the A$200m project, and production in 2013.

Gunson Resources Limited GUN Definitive Feasibility Study

GUN's 100% owned ~A$170m Coburn Zircon Project in WA is now looking st rategically attractive

(DFS completed) with a zircon supply deficit looming. This will boost GUN's plans to bring in a big

brother, which if succesful could lift the share price.

Galaxy Resources Limited GXY Commissioning

With the Mt Cattlin Spodumene Mine expected to start production in 4Q10, and the A$55m Jiangsu

Lithium Carbonate Plant under construction near Shanghai, Galaxy could soon be one of the world's

major producers of battery grade lithium chemicals.

Icon Resources Limited III Scoping Study

Icon expects tungsten production at Mt Carbine (QLD) from as early as December 2010. Treatmentof tailings, stockpiles could be followed by mining in 2013. A resource upgrade (from 9.6mt @

0.22% WO3) is expected in September 2010.

King Island Scheelite Limited KIS Definitive Feasibility Study

Having doubled resource and reserve grades in 2Q10 and changed the mine plan from open cut to

underground, KIS could produce +3kt/ yr WO3 from 4Q12 at the King Island tungsten project, with

the backing of Hunan Nonferrous Metals Corp (HNC).

CANADA

Avalon Rare Metals Inc AVL Pre-Feasibility Study

A Pre-Feasibility Study of the Nechalcho REE Project (Canada) has shown its technical and

economic viability. The project, which has the second largest REE and third largest Nb resources in

the world, has a Bankable Feasibility Study expected in 2Q12 and could be in production in 2015.

Rodinia Lithium Inc RM Early-Mid Exploration

After a recent name change to reflect its focus on lithium, Rodinia is anticipating initial resourcestatements in 4Q10 at two Li brine projects in the US and Argentina. The strategy is to explore

salars in areas with k nown high grade Li and pre-existing infrastructure.

TNR Gold Corp TNR Early to Advanced Exploration

TNR is focused on early stage exploration for gold, and rare and minor metals. A TSX spin-out of

International Lithium Corp (ILC) in 3Q10 should add value to the Li and REE assets: priority Li

targets include Mariana (ARG), where C$1m drilling is planned from 4Q10.

Gold, Rare Earths,

Zirconium, BaseMetals

Rare Earths,

Phosphorus,

Uranium, Gold

Niobium, Tantalum,

Rare Earths,

Uranium, Fluorine

Rare Earths,

Uranium, Zinc,

Sodium Fluoride

Tantalum, Tin, Gold

Zircon, Titanium,

Copper, Gold,

Nickel

Lithium, Tantalum,

Manganese, Iron

Tungsten, Gold,

Base Metals, PGE

Tungsten, Copper,

Gold

Rare Earths,

Niobium, Tantalum,

Zirconium

Lithium

Gold, Copper,

Lithium, Rare

Earths






Financial Data

COM PANY Aust Canada USA Europe otherListed

optio ns Share Price (LC$/share)3

2

FullyDiluted

MarketCap Book

EnterpriseValue

Code Status1

Yr End 52 week Current Shares Opt+W2

C. Notes2

Shares (undiluted) Cash Debt Value (Undiluted)

7 September 2010 Hi Low (m) (m) (m) (m) (LC$m)3

(LC$m)3

(LC$m)3

(LC$m)3

(LC$m)3

AUSTRALIA (A$)

Alkane Exploration Limited ALK E Dec ASX ARUO 0.71 0 .23 0 .62 249 0 0 249 153 6 .7 0 .0 46 153

Arafura Resources Limited ARU E June ASX 1.29 0.38 0.85 291 17 0 308 247 17.2 0.0 63 247

Globe Metals & Mining Limited GBE E June ASX 0.38 0.12 0.27 99 3 0 102 27 1.5 0.0 17 27

Greenland M inerals & Energy Limited GGG E Dec ASX GGGO 0.94 0.30 0.40 232 174 0 407 92 5.8 0.0 50 92

Gippsland Limited GIP E June ASX GIX 0.09 0.03 0.04 545 56 0 601 23 0.5 0.0 5 23

Gunson Resources Limited GUN E June ASX 0.17 0.06 0.09 174 4 0 178 15 0.5 0.0 25 15

Galaxy Resources Limited GXY P June ASX GXYO 2.40 0.91 1.16 191 23 0 214 222 6.5 0.0 102 222

Icon Resources Limited III I June ASX 0.15 0.06 0.07 104 23 0 127 7 0.0 0.0 6 7

King Island Scheelite Limited KIS I June ASX 0.37 0.14 0.18 62 5 0 67 11 2.2 1.7 29 13

Total : (A$) 41.0 1.7 342.0 798

CANADA (C$)

Avalon Rare Metals Inc AVL E Aug TSX OTCQX 4.24 1.89 3.30 79 10 0 89 261 4.4 0.0 39 261

Rodinia Lit hium Inc RM E Dec TSX.V OTCQX 0.70 0.26 0.29 66 25 0 91 19 4.9 0.0 15 19

TNR Gold Corp TNR E Dec TSX.V 0.38 0.18 0.22 123 35 0 158 26 4.7 0.0 20 26

Total : (C$) 14.0 0.0 74.4 306

(1) P: Producer; E: Explo rer; I: Imminent - includes companies with bankable feasibili ty studi es and likely to be in prod uction within 3 years (2) Fully Diluted (shares, options + warrants (opt . + w), convertibl e not es (Conv. N), other oblig ations)

(3) L.C. - Local Currency unit; Sep '10F (4) AUD/USD: 0.89; CAN/USD: 0.94

Exchanges

Company Statistics

COM PAN Y

Code Land (A)/ (A+B) %

7 September 2010 ('000 ha) Jun-10 Sep-10 2 00 9 2 010 Jun- 10 Sep-10 2009 2010 Jun-10 Sep-10 2009 2010 Sep-10 2009 2010

AUSTRALIA (A$)

Alkane Explor ation Limited ALK 181 2.1 3.8 25.0 21.2 2.3 2.0 8.1 7.3 0.3 0.3 1.0 1.2 89 89 86

Arafura Resources Limited ARU na 15.0 6.3 0.0 15.0 2.8 3.8 10.9 13.2 0.7 1.8 5.1 6.0 68 68 69

Globe M etals & M ining Limited GBE 279 5.0 5.0 12.0 20.0 2.4 0.3 3.6 5.4 0.2 0.4 1.7 1.0 46 67 84

Greenland Minerals & Energy Limited GGG 211 1.0 1.0 10.0 8.0 2.9 2.5 11.0 9.1 1.2 1.4 4.0 6.0 65 73 60

Gippsland Limited GIP 1,330 0.0 0.0 2.0 2.0 0.1 0.1 1.2 0.3 0.5 0.5 2.4 2.4 16 32 10

Gunson Resources Limited GUN 273 0.6 0.5 0.6 4.9 0.7 0.3 1.7 2.2 0.2 0.1 0.6 0.6 71 75 79

Galaxy Resources Limited GXY 145 5.0 5.0 15.0 21.8 0.9 1.0 4.8 7.1 3 .1 2.0 1.8 8.9 33 73 44Icon Resources Limited III 441 2.0 1.0 0.0 8.0 0.9 0.3 1.3 2.2 0.1 0.1 0.3 0.3 80 80 88

King Island Scheelite Limited KIS na 0.0 0.0 0.0 0.0 0.1 0.3 1.0 0.7 0.3 0.2 1.4 1.1 53 41 38

2,859 30.7 22.5 64.6 100.8 13.0 10.6 43.5 47.4 6.5 6.7 18.5 27.4 58 66 62

CANADA (C$)

Avalon Rare M etals Inc AVL 4 5.0 5.0 10.3 22.2 3.0 3.0 6.8 11.9 0.5 0.5 3.2 2.1 86 68 85

Rodi nia Lithium Inc RM 31 0.6 0.6 0.2 2.3 0.8 0.8 1.4 3.1 0.4 0.4 1.3 1.6 67 53 65

TNR Gold Corp TNR 34 0.3 1.0 0.0 2.3 0.5 0.7 1.1 2.2 0.4 0.3 1.0 2.6 73 53 46

Total or Average: 69 6 7 10 27 4 4 9 17 1 1.2 5.5 6.3 75 58 65

(A) Exploration (L.C.$m) (B) Corporate (L.C.$m)Drilling ('000 m)

Prepared by Dr Trent Allen






Reserves, Resources and Historic Mineralisation

COM PANY

Code Status1

Contained Other Contained Other Contained Other

7 September 2010 Element M t oxide% kt oxide Element M t oxide% kt oxide Element M t oxide% kt oxide

AUSTRALIA

Alkane Exploration Limited ALK E REE 0.0 REE 73 0.75 549.0 2.8moz Au 0.0

Arafura R esources Limited ARU E REE 0.0 REE 30 2.80 848.0 3.9mt P2O5 0.0

Globe Metals & Mining Limited GBE E Nb 0.0 Nb 60 0.29 174.0 8.4kt Ta2O5 0.0

Greenland Minerals & Energy Limited GGG E REE 0.0 REE 279 1.07 2982.8 177mlb U3O8 0.0

Gippsland Limited GIP E Ta 15 0.026 3.9 16.5kt Sn Ta 72 0.018 12.5 20.4kt Sn 0.0 20.2kt Sn

Gunson Resources Limited GUN E Heavy mins 308 1.20 3700 [see not e 3] Heavy M ins 979 1.26 12300 366kt Cu 0.0

Galaxy Resources Limited GXY P Li 11 1.05 119.4 1.7kt Ta2O5 Li 16 1.08 171.5 2.5kt Ta2O5 0.0

Icon Resources Limited III I W 0.0 W 12 0.20 25.0 29.8kt Cu 0.0

King Island Scheelite Limited KIS I W 1.1 1.17 12.9 W 6 0.89 50.7 0.0

CANADA (C$)

Avalon Rare Met als Inc AVL E REO 12 1.7 204.2 REE 176 0.43 1958.0 0.0

Rodinia Lithium Inc RM E 0.0 Li 0.0 0.0

TNR Gold Corp TNR E 0.0 Li 0.0 0.0 90koz Au

(1) P: Producer; E: Explorer; I: Imminent - includes companies wit h bankable f easibility st udies and likely to be in pr oductio n within 3 years; IHC: Investment Holding Company

(2) Reserves, resources and mineralised material p ublished by the relevant company.

The applicable mineral resource codes are by country: Australian: JORC, Canadian: NI 43-101.

(3) The Coburn Zirco n Project reserve, cont ained heavy mineral tonnage, includes 23% zirco n and 48 % ilmenite

Focus commodity Focus commodity Focus commodity

Reserves (Equity)2

Resources (Equity)2

Historical/Mineralised Material (Equity)2

Valuation and Performance Data

COM PAN Y EV -Cash EV -Cash Product ion

Code P/Book P/Net Cash /Reserves /Res'v+resources Commencement

7 September 2010 (x) (x) US$/kt1 US$/kt Year 1 month 3 month 6 month 12 month Hi Lo

AUSTRALIA

Alkane Exploration Limited ALK 3.3 22.8 na 0.24 na 48 116 86 52 13 167

Arafura Resources Limited ARU 3.9 14.4 na 0.24 na 13 110 39 13 34 124

Globe Metals & Mining Limited GBE 1.6 17.2 na 0.13 na 32 80 35 -4 29 135

Greenland M inerals & Energy Limit ed GGG 1.8 15.8 na 0.03 na -7 4 -19 -39 58 32

Gippsland Limited GIP 4.6 44.5 5.17 1.59 na 27 45 5 5 54 56

Gunson Resources Limited GUN 0.6 29.2 0.00 0.00 na 27 19 -6 2 46 59

Galaxy Resources Limited GXY 2.2 34.3 1.60 1.12 2010 -2 18 0 -36 52 28Icon Resources Limited III 1.2 355.2 na 0.24 4Q10 2 -18 -33 -34 56 6

King Island Scheelite Limited KIS 0.4 22.9 0.72 0.18 2012 -3 na 3 -3 53 25

Total/Total Average 14 41 11 -4 39 63

CANADA

Avalon Rare M etals Inc AVL 6.7 59.6 1.18 0.12 na 27 67 28 -5 22 75

Rodinia Lithium Inc RM 1.3 3.8 na na na -10 -20 -51 -49 59 10

TNR Gold Corp TNR 1.3 5.6 na na na -7 -7 -10 -19 43 19

Total/Total Average 3 10 -8 -18 31 26

(1) EV-Cash / Reserves or / Resources appli es to kt of f ocus commodit y

(%)

Share Price Performance Current Share Price

% of f 12 month

Prepared by Dr Trent Allen






Arafura Resources Limited

1.29

Debt (A$m) - Sep 10F

Enterprise value (A$m)

Avg monthly volume (m)

Cash (A$m) - Sep 10F

Price/Cash (x) Cash (A$m)

Price/Book (x)Listed company options: Net asset backing (Ac/share)

Quarters refer to calendar year.

Resources

Mineralised Material (est., non compliant with JORC)

Contacts Directors

Dr Steve Ward

Managing Director, CEO

Tel: +61 (0) 8 6210 7666Perth, WA, Australia


34.2koz Au

0.0 0.0 0.0

13.3

mt

Mid. Expl.Jervois

Inferred

Nolans Project 100% 1.05.1 3.20

12.8

Project StatusRoute

344

A fr ee, in-depth report about Arafura Resources Ltd, dated 18 December 2009, is available from w w w .rcres earch.com.au, as are recent quarterly updates

100% Fe, V M'morphicnone

Rare Earth Elements

Reserves

2.80

ProcessOwnership/ Target

"

3 g/t Au

Opt ion Meta l

33.92

ProjectJV

23.5

5.9

1.6

kt mlb

848 3.9

2.9 0.7

Aust (NT)

na

Early Expl.

Adv Expl.

naFeasibility

Aust (NT)none

Sulphide

Reef

Aust (NT)

M'morphic

Various

Aust (NT)

(Ngalia)

REO

1.7

Aust (NT)Mid Expl.

Early Expl.

na

Leach

none

noneL Shasha (Exec)

T Jackson (Non Exec)

Nolans

Hammer Hill

Mt Porter / Frances Ck

REE, P, Fe100% REE, P, U

1.96

0.0 0.0

Cas h backing (Ac/s hare) 8.1

I Kowalick (Non Exec)none

Aileron / Reynolds 100%/(40%)

Indicated, inferred

6.9

22.1 22.121.6

17.2

8.120.16.4

0

19.08

1.84

69

5.12

0.00

- -

25,000

0

15,000

0

0

173.7

2009a 2010F

13.25

290.6

0

YEAR END: June

7.095.99

Exploration and evaluation (A$m)

Exploration/(Expl.+ Corporate) (%) 80 6868 62

Sep-10F

Rare Earth Elements, Phosphorus, Uranium, Gold

Corporate (A$m)

5.6333

5.3

Funding duration at current burn (years)

0.69

ARU's share price has jumped 110% in the past 3 months due to surging

REE prices (up +255% since 4Q09). A Bankable Feasibility Study of the

globally significant Nolans Rare Earths-Phosphate-Uranium Project (NT)

is ongoing, and the project is on track for first production in 2013.

0.7

11.35

Aust (NT)

Ni,Cu

Au

100% Au

A Losada-Calderon 100%

100%Kurinelli

Exchanges: ASX:ARU

Share price (A$) 0.85

S Ward (MD, CEO)

14.3

52 week range (A$/share)

Convertible notes (m )

0.38

307.6

3.9

33

Fully diluted (m )

247.1

World-class rare earth element (REE) deposit at Nolans

Project, with total resources of 30.3mt and production

expected in 2013.

Nolans project valuation of A$929m and NAV

A$3.10/share (10% nom, exchange 0.8, pre dilution) at

REO blend value US$20/kg, current is +US$40/kg.

Good access to infrastructure (railway, gas, highway).

Mine life of +20 years with annual production of 20kt rare

earth oxides (REO), plus phosphoric acid, uranium and

gypsum.

REO blend has high proportions of valuable REE, e.g.

neodymium (21.2%), europium (0.4%). Blend value was

US$43/kg in mid August 2010, up 255% since Dec '09.

Project risk decreasing: chemical plant site selection,

mining reserves, mine site EIS and BFS final technology

demonstration all expected in 2H10.

Market capitalisation (undiluted) (A$m)

Major shareholders: ANZ Nominees (30.2%)

0.0

Australia

Bankable Feasibility Study

ARU.AU

247.0

to

0.0

290.6Number of shares (m)

17.0Options and warrants (m)

Capital Profile

7 September 2010

East China Min Expl & Devel Bureau (ECE, 22.4%)

I Laurance (Chairman)

Investment Points

Land holding ('000 ha)*

Funding from JV partners (A$m)

No

17.2

"

Nolans Total

Mt Porter

[email protected]

Vein

na

na

M Muir (Non Exec)

(Non Exec)

www.arafuraresources.com.au

0

0.0

0.00

na

Tenement costs ($k per year) -

Part ner Type

100% (Au)

-

0.0

11.123.5

0.0

Key Projects

0.00 0.0

1.7 g/t Au

2.82

Jun-10a

15,000

10.923.85

290.6

Indicated 1.0

Location

REE %

1.0

2.60

2.80

12.3

Reserves and Resources/Mineralised Material

Code for reporting mineral resources - Australian:REO

1.0

Measured

30.3

0.355

U

Mt

P2O5

Company Comment

0.0

163

Classification Project c/off(JORC)

Ore

Arafura Resources Limited

0.41.2

0 0

A$ 0.85

Production and Financial Forecasts

2011F

291.0

0

Drilling - Other/Diamond (m) 06,250

290.6

Drilling - RAB (m) 0

Shares on issue (pr end) (m shares)

na

Capital raisings (A$m)

Equity %

-

2.420.6

0

0.2

0.4

0.6

0.8

1

1.2

1.4

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Share Price ($

/Share)

ARU - Ar afura Resources Limited

Source: Bloomberg

Introduction: Arafura‟s flagship is the Nolans Rare Earths-Phosphate-Uranium Project (NT), 135km NNW of AliceSprings. The deposit has a JORC qualifying resource of 30.3mt containing 848kt of rare earth oxides (REO),3.9mt of phosphate (P2O5), and 13.3mlbs of uranium (U3O8). A Bankable Feasibility Study (BFS) is in progress.Mining is planned for 2013, when the Nolans Project could supply ~10% of the global rare earths market. ARUalso holds +5,000km

2of grassroots to advanced exploration +projects (REE, Au, Fe, Ni) in the NT.

Nolans Project: Planned annual production from Nolans is 20kt REO, 80kt P 2O5 (as phosphoric acid), 0.5mtCaSO4 (gypsum) and 0.33mlbs U3O8, with 400kt CaCl2 as residue that could be recycled into the chemicalprocess. Mining rate, by open cut, will be 1mtpa with mine life +20 years. Processing will be in three broad s tages:concentration; acid leaching for separation into RE/uranium and phosphate streams; and downstream productionof final commodities. Key inputs are chloralkali and sulphuric acid. Forecast capital costs are US$420m. Opexcould be US$150mpa, or US$150/t ore at 1mtpa. Infrastructure, includes an existing railway and gas pipeline.Road distance to rail is 90km; rail distance to Darwin is 1200km. On-site concentrate production would precedetransport to a chemical plant, a decision on the site for which is expected in 2H10.Valuation: NAV is highly sensitive to REO prices. Based on a conservative value for the Nolans REO blend ofUS$20/kg, with U3O8 at US$50/lb and phosphate at US$750/t, revenue would be US$476.5m/yr. At opex

US$150/t, and with a 30% pre-BFS discount, Nolans NPV is A$929m (10% DR, AU/US 0.8), or A$3.10/share(fully diluted) for the company; even with dilution from raising 50% of US$420m at a nominal A$1/share, NAV isA$1.88/share. At late August 2010 prices of ~US$40/kg, this increases to A$4.63/share.Corporate: ARU has a major foreign investor, the East China Mineral Exploration and Development Bureau(ECE), which paid A$22.94m for a 24.9% equity position in ARU (current 22.2%). In 1Q10, A$17.5m was raised atA$0.62/share from institutional and sophisticated investors. A 1:10 rights issue at the same mark raised A$2m.Development schedule: ARU‟s focus is on completing the Nolans Bankable Feasibility Study in 4 Q10. Expectedannouncements in 2H10 include a Mine Optimisation Study with mining reserves, and design and engineeringstudies of the Nolans beneficiation plant (Lycopodium, ASX:LYL). Groundwater studies began 2Q10 ahead of anEIS for the mine site. De-risking of the chemical process is at an advanced stage, with work on the RE/REOstream (ANSTO, Bateman) and acid recycling (Aker Solutions). Piloting and demonstration plants for processtesting have commenced. Subject to financing, construction could begin in 2012 and production in 2013.Investment Comment: Tight Chinese export quotas have led to soaring REO values (a +255% increase since4Q09) have boosted investor confidence and led to a 110 % jump in ARU‟s share price over three months. Thismomentum could continue as ARU reaches its 2010 project milestones, which should address and finalise all themining, industrial and environmental aspects of Nolans. Other value drivers could include a resource upgrade atNolans after drilling in 2H10, and in the medium term, project financing and offtake agreements. Above all else,the force driving Nolans to production will continue to be increasing rare earths demand (7%-9%pa) over the next5 years, against a background of supply constraint and export quotas in China, the major (+95%) REE producer.






Nolans Project valuation: economics are sensitive to the REO price, with US$20/kg

shown in blue. The NAV at this value is A$3.10/share, or A$1.88/share with dilution toraise 50% of capital costs (US$420m). Current REO blend value is +US$40/kg.

ARAFURA RESOURCES VALUATION

Target

Price (Low) (High)

Equity REO Valuation A$m A$m A$m

Projects (kt) US$/kt

+ Nolans Resource 100% 848 0.88 929 25 1278

+ Regional Exploration 100% 20 10 50

Sub Total 949 35 1328

+ Cash 17.2 17.2 17.2

+ Tax Losses 0.0 0.0 0.0

- Debt 0.0 0.0 0.0

- Corporate 13.4 13.4 13.4

Sub Total 3.9 3.9 3.9

ARU NET ASSET VALUE 953 39 1332

Capital Structure

Shares 290.6 290.6 290.6

Fully Diluted Shares 307.6 307.6 307.6

ARU NET ASSET VALUE PER SHARE :A$/share 3.28 0.13 4.58

ARU NET ASSET VALUE DILUTED :A$/share fully diluted 3.10 0.13 4.33

NOLANS PROJECT (NPV based on current resource, October 2007 PFS and August 2009 BFS update)

Equity

LONG TERM PRICE FOR NOLANS' REO BLEND :US$/kg 10 20 30 40 50

EXCHANGE RATE :AUUS 0.80 0.80 0.80 0.80 0.80

NOLANS NPV @ 10% NOMINAL* :A$m 100% 25 929 1628 2327 3025

NOLANS NPV @ 10% NOMINAL* :US$m 100% 270 743 1302 1861 2420

NPV/SHARE (fully diluted) :A$/share 0.08 3.02 5.29 7.56 9.83

* Includes a pre-BFS project discount of 30% of the project valuation: 30%*Assumes constant long term prices for phosphoric acid, of US$750/t; and uranium, of US$50/lb

NOLANS RARE EARTHS-PHOSPHATE-URANIUM PROJECT, KEY ASSUMPTIONS*

RESOURCE ESTIMATES

Current JORC Measured, Indicated and Inferred resource (1% REE cut-off) Ore REO P2O5 U3O8

Mt % % lb/t

30.3 2.80 12.900 0.44

Contained metal, kt 848 3900 5.9 (=13.3mlbs U3O8)

MINING METHOD Open Pit

PROCESS METHOD On site heavy media separation and flotation

Hydrochloric acid leach removing phosphate as liquid

From liquid: phosphoric acid, calcium chloride; from solid, production of REE, uranium

Year 1 Ye ar 20

PRODUCTION RATE :mtpa 0.5 1.0 Production ramp up: 25-75% yr1, 75% yr 2; 100% yr3

:ktpa REO 10 20 Head grade and blend are same as resource grade

:tpa P2O5 50 80

:mlbspa U308 0.17 0.33

:strip ratio 1.0 1.0

CAPITAL COSTS :US$ 420m Sustaining capex 4%pa

RECOVERIES TO CONCENTRATE :% 90 Heavy media recovers 90% of apatite and REE minerals

DOWNSTREAM RECOVERY :% 86 For REO; 85% phosphoric acid; 80% U3O8

OPERATING COSTS :$USm/yr 150

TAX :% 30

ROYALTY :% 3

MINE LIFE :Years 20+

COMMISSION DATE : 1Q13

* These figures are preliminary in nature and are intended to provide only a general indication of project potential scale and economic robustness.

Considerable refinement may result from Bankable Feasibility study, expected in 4Q10.

Valuation Sensitivity

Sensitivity






Globe Metals & Mining Limited

0.38



Avg m onthly volume (m)



Price/Book (x)Lis ted company options Net asset backing (Ac/share)

* Exploration June 2010 inc ludes JV contr ibution Quarters refer to calendar year.

Resources

Mineralised Material (est., non compliant with JO

*5Mt measured, 18Mt Indicated, 37Mt Infer red

Contacts Directors

Mr Mark Sumich

Managing Director

Tel: +61 (0) 8 9486 1779

West Perth, WA, Australia


Funding from JV partners (A$m) 1.2

-

1.917.8

- -

17.9

[email protected]

REEwww.globemetalsandmining.com.au

D Sumich (Non Exec) Location

na

Granitoid

Pegmatite

na

Route

Pegmatite

U (Nb,Ta)

REE0%/80%

none

ASX:RSL100%

0%/90%

Land holding ('000 ha)* 279

-

279

Ten em ent cos ts ($k per year) -

1.5

Acid leach

20,000

0

279

Ragusa Investments Ltd ( 6.7%), National Nom. (5.8%)

M Sumich (Exec Chair, MD)

Investment Points

1.5

Code for reporting mineral resources - Australian:

93.8

Drilling - RAB (m) 0

0.60.4

275

2.4

104.7

0

20,000

Globe Metals & Mining Limited

Drilling - Other/Diamond (m)

68.4

00

12,000

94.2

5,000

Shares on is sue (pr end) (m shares)

YEAR END: June

2.38 0.30

Corporate (A$m)

A$ 0.27


2011FSep-10F 2009a

GBE.AU

25.4

to

5

94Number of shares (m)

3.2Options and warrants (m)

Capital Profile


14

Fully diluted (m)

25.4

Valuation gap: Globe NAV (10% nom, 3Q10) based onscoping/feasibility study is A$299m or ~A$0.63/share postdevelopment funding - current market cap A$25.4m.

Kanyika Project BFS results expected 2011. ScopingStudy (Jun '08, Coffey; update May „09) - 4ktpa Nb asFeNb, opex US$13/kg-US$20/kg Nb, capex US$155m.

Key economic driver is niobium, used in s teel. Nb price isextremely stable, LT forecast US$39/kg in FeNb, currentUS$41/kg. Nb 70-85% revenue; tantalum 15-30%.

Kanyika resource of 60mt has 174kt Nb2O5 grading

0.29%, with 18.5mlbs tantalum as Ta2O5 and 11.9mlbs

U3O8, with 23mt Measured and Indicated.

MOU's for offtake covering 45% of forecast production.

Portfolio of exploration projects in Africa. Drilling resultsexpected from Machinga Project (REE,Nb,Ta).


Major shareholders: ANZ Nominees Ltd (10.7%)

0.0

Malawi, Mozambique

Bankable Feasibility Study (BFS)

3.58

0.27

The 60Mt Kanyika Niobium Project (Malawi) had a recent 77%increase in Measured and Indicated resources. A mine plan isexpected 3Q10, a Bankable Feasibility Study in 2011. Share price

has jumped 80% in 3 months due to strong rare metals market.

0.5

1.805.36

56

Jun-10a 2010F


0.19

93

Exploration and evaluation (A$m)*

Exploration/(Expl.+ Corporate) (%)Performance Shares (m)

102 0.9

0.35

84

1.75

6746

7 September 2010

0.12

Rare Metals, Uranium, Fluorine

Exchanges: ASX:GBE

Share price (A$)

92.9

5,000

279

No

1.5

17.0

2.816.4

Cash backing (Ac/share) 1.6

Type

ASX:RSL

none

Partner

JV

Project

Machinga

Kanyika 100%


0.60

4.2

0.00 0.00

17.7

0.0

Salambidwe

Mount Muambe

J Stephens (Non Exec)

W Hayden (Non Exec)

Livingstonia

MW

MZ

Early Expl

F Carb'tite

0.0

Early Expl

na

3.50

0.0

1.401.03

Company Comment

18.1

2.0

2.5

Option Me ta l

5.29

Project

7.1

2.3

(JORC)

2.5

2.3

ProcessOwnership/

BFS MW

Mid Expl

MW


0.0

Key Projects

0.00

Status

Target

0.00.0 0.00

Ta2O5 U3O8 Nb2O5

kt

c/off

% Nb2O5%

Code for reporting mineral resources - Austr (JORC)Nb, Ta, U Classification Project Ore Nb2O5

Reserves 0.0 0.0

Equity Mt

Kanyika Meas, Ind, Inf* 100% 60.0

% %

0.29 0.15 0.014 0.009

0.0 0.0 0.0

174.0

MW100%/20% U ASX:RSL S'stone na Adv Expl

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

Sep-09

Oct-09

Nov-09

Dec-09

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Share Price

($/Share)

GBE - Globe M etals and Mining Limited

Source: Bloomberg

Introduction: Globe Metals & Mining listed on the ASX in December 2005. It is an African-focused raremetals resource company. Its main project is the multi-commodity Kanyika Niobium Project. Globe alsohas exploration projects focused on rare metals, fluorite and uranium projects.Kanyika (uranium, central Malawi): GBE is targeting rare metals (niobium, tantalum), zirconium anduranium mineralisation in an alkalic granitoid in central Malawi. The main ore minerals are disseminatedpyrochlore (Nb, Ta, U) and zircon (Zr). GBE aims to bring Kanyika into production in late 2012, or 2013.Resource and grade – The current resource is 60mt, with a recent 77% increase in Measured andIndicated tonnes (now 23Mt). The resource is defined to 300m width, 250m depth and 2.3km of ~3.8kmknown strike within 5 zones: 60mt @ 0.29% Nb 2O5 (174kt), 0.009% U3O8 (11.9mlbs), 0.014% Ta2O5 (18.5mlbs) and 0.5% ZrSiO4. There is a high-grade resource at 3,000ppm Nb2O5 cut-off, of 21mt with0.41% Nb2O5 of which 10mt is M&I grading 0.47% Nb2O5 The deposit is open along strike in bothdirections (N-S). There is a high-grade Exploration Target of 40-50Mt @ 0.37-0.4% Nb2O5.Metallurgy – GBE aims to produce ferro-niobium (FeNb) for the steel industry, as well as oxides ofniobium, tantalum and uranium, and possibly magnetite (iron oxide) and zircon. Studies commenced in2008: two initial Phases reported encouraging costs and recoveries, and work is entering Stage 3 (bulk

testing pilot program. Studies were on hold due to a dispute with a former JV partner (Thuthuka Group);however, concentration and hydrometallurgical testing could recommence from 3Q10 and 4Q10.Mining Potential - the deposit could be mined open-pit with low strip ratio of 0.5-0.9. Higher-grade, nearsurface Measured and Indicated resources could be targeted first (critical for early payback of capex). AScoping Study (Coffey, Jun ‟08; updated May „09) examined 4ktpa Nb production as FeNb alloy, with59tpa Ta2O5 and 11.4-13.7ktpa ZrSiO4 (processing 2.2-3.5mtpa) with a 20yr LOM. Uranium would reportto aluminous slag for potential future processing. Current (revised) model prefers mining 1.5mt-2.5mtpa,for 3,000tpa Nb and 192tpa Ta2O5 over life-of-mine. Capex US$155m, opex US$40.3/t. A BankableFeasibility Study (BFS) is in progress, and a pit design should be completed in 3Q10 (Coffey Mining).Other Projects: GBE has exploration projects in Malawi and Mozambique that could provide positivenewsflow in the near term. The main focus is on Machinga (Southern Malawi), for pegmatite-hostedREE-Nb-Ta-Zr. Trenching in 2Q10 included 10m @ 1% TREO (total REO) and 0.5% Nb 2O5, with 0.34%HREO. Drilling results expected Sep „10. The Mount Muambe Fluorite Project could be drilled in 3Q10.Investment Comment: Based on our NAV for Globe of A$299m (@10% nom), GBE‟s share price couldpass A$0.50 as Kanyika milestones are reached, including the BFS and permitting. Other potential valuedrivers: exploration success in Malawi and Mozambique (Nb-Ta, REE, F, U); establishing ore reserves atKanyika; successful project funding in 2011; and increasing demand and prices for niobium, tantalum andpotentially zirconium. The exit of Thuthuka as a Kanyika JV partner, while a setback for the BFS, hasreturned 100% control of the project to GBE. The company has a good technical understanding ofKanyika and it could move forward without a partner until project financing is required. Increasing investorconfidence and the strong rare metals market has seen an 80% share price rise in 3 months.






Kanyika Project Valuation: economics are sensitive to the niobium price, with target set at

US$39/kg Nb in ferroniobium (current is ~US$40/kg). The fully diluted share price targetis A$0.63/share allowing for dilution at A$0.25/share.

GLOBE METALS AND MINING VALUATION

Target

Price (Low) (High)

Equity Niobium Valuation A$m A$m A$m

Projects (kt) US$/kg

+ Kanyika Resource 100% 174.00 1.01 220 26 736

+ Kanyika exploration 100% 160.00 0.37 74 3 52

+ Regional exploration 100% 5 1 10

Sub Total 299 30 798

+ Cash 1.5 1.5 1.5

+ Tax Losses 0.0 0.0 0.0

- Debt 0.0 0.0 0.0

- Corporate 2.0 2.0 2.0

Sub Total -0.5 -0.5 -0.5

GBE NET ASSET VALUE 299 30 798

Capital Structure

Shares 94 94 94

Fully Diluted Shares 102 102 102

GBE NET ASSET VALUE PER SHARE :A$/share 3.18 0.31 8.48

GBE NET ASSET VALUE DILUTED :A$/share fully diluted 2.93 0.29 7.82

With dilution at A$0.50/share to raise 50% of US$150m :A$/share fully diluted 1.03

With dilution at A$0.25/share to raise 50% of US$150m :A$/share fully diluted 0.63

KANYIKA SPECIALTY METALS PROJECT (NPV based on June 2010 resource, June 2008 Scoping Study a nd May 2009 update)

Equity

LONG TERM NIOBIUM PRICE (per kg in FeNb alloy)^ :US$/kg 25 35 45 55 65

EXCHANGE RATE :AUUS 0.80 0.80 0.80 0.80 0.80

KANYIKA NPV @ 10% NOMINAL* :A$m 100% 26 204 381 559 736

KANYIKA NPV @ 10% NOMINAL* :US$m 100% 21 163 305 447 589

NPV/SHARE :A$/share 0.28 2.17 4.06 5.94 7.83

* Inc ludes a pr e- BFS discount of 30% of t he pr ojec t valuation: 30%

^Niobium prices are modelled as flat line f rom start of production. Long term FeNb is US$39/kg (Nb), Ta2O5 US$65/lb, U3O8 US$46/lb

GBE's e quity assume d to be 100%; howe ver, Govt of Malawi could hold 15% in retur n for fiscal trade-offs s uch as tax and royalty reductions

KANYIKA SPECIALTY METALS PROJECT KEY ASSUMPTIONS*

RESOURCE ESTIMATES

Current JORC Indicated and Inferred resource (1,500ppm Nb2O5 cut-off) Ore Nb2O5 Ta2O5 ZrSiO4 U3O8

Mt % % % %

Model does not include zircon production 60 0.29 0.014 0.50 0.009

Contained metal, mlbs 383.6 18.5 661.4 11.9

Contained metal, k t 174.0 8.4 300.0 5.4

MINING METHOD Open Pit

PROCESS METHOD Dedicated Specialty Metals PlantConcentrate: crush, gravity (incl. seperation of zircon and magnetite), flotation.

Downstream: weak then s trong acid leaches, calcining (Nb, Ta, U), smelting with Fe (FeNb).

Ye ar 1 Ye ar 10

PRODUCTION RATE :mtpa 1.72 2.3 Head grade falls from 0.38% Nb2O5 to 0.29% Nb2O5

:tpa Nb 3,000 3,000

:strip ratio 0.6 1.9

CAPITAL COSTS :US$ 155m Excludes working capital; sustaining capex $4mpa.

RECOVERIES TO CONCENTRATE :% 65 All products (Nb, Ta, U)

DOWNSTREAM RECOVERY :% 69

OPERATING COSTS :US$/t 40 to 43 (Includes US$2.80/t mined, US$26 to 34/t milled)

TAX :% 30 Company tax in Malawi

ROYALTY :% 3 ASX:PDN at Kayelekera pays 1.5% for first 3 yrs, then 3%

MINE LIFE :Years 10+

COMMISSION DATE : June 2012

Valuation Sensitivity

Sensitivity

* These figures are preliminary in nature and are intended to provide only a general indication of project potential scale and economic robustness.

Considerable refinement may result from bankable feasibility study, expected in 2011.








GUN’s project portfolio is headlined by the advanced Coburn mineral sands project in WA (zircon is the

key mineral) and the Mount Gunson copper exploration project in SA’s Olympic Dam territory, w here GUNhas a small scale production project BFS underway. Fowler’s Bay is early stage nickel exploration, and

Tennant Creek early stage copper gold exploration.

The Mount Gunson Copper project (49% GUN) is situated in the 500km long Olympic Copper Gold Province

in South Australia which contains ~75% of the known copper resources in Australia – including theOlympic Dam, Prominent Hill and Carrapeteena deposits. The latter, potentially containing >4mt Cu (drilled

by Teck Cominco), is only 20km east of GUN’s tenements.






Galaxy Resources Limited

2.40



Avg monthly volum e (m)


Price/Cash (x) Cash (A$m)Price/Book (x)

Listed company options: Net asset backing (Ac/share)

Quarters stated on calendar year basis.

Reserves

Resources

Mineralised Material (est., non compliant with JORC)

Contact Directors

Mr Iggy Tan

(Managing Director)Tel: 61 (0) 8 9215 1700

West Perth, NSW, Australia

Shoemaker

RavensthorpeAnalyst: Dr Trent Allen Ponton Aus (WA)100% ,REE,Base

Mt Cattlin Proved, probable 1 00% 11.367 1.05 0.4

na Palabora na Early Expl

Early/Mid Explna

Mt Cattlin Spodumene 100% Crush, HMS

Project

LocationAus (SA)PegmatiteLi, Ta

100% 15.875

Project

Ownership/ Target

1.08

Partner

Mt Cattlin

Key Projects

Metal

Aus (WA)

Various

Jiangs u Li Carb Plant 100% Li

Aus (WA)

50%/20%

100%

na

GMC naBIF

Reserves and Resources/Mineralised MaterialCode for reporting mineral resources - Australian: (JORC)

X Ren (Alt)

6.518.3

StatusType

JV

0.4Meas, Ind, Inf

145 145

-

31.82

Mt

Ore

0 00


2011F


24

Jun-10a

33

190.6

8.00

Sep-10F

0.94 1.00

4.542.00 10.153.05

Galaxy Resources Limited

With the Mt Cattlin Spodumene Mine expected to start production in

4Q10, and the A$55m Jiangsu Lithium Carbonate Plant under

construction near Shanghai, Galaxy could soon be one of the world's

major producers of battery grade lithium chemicals.

2010F

10.49 4.003.39

A$ 1.16

2009a

Corporate (A$m)

0

Capital Profile

Options and warrants (m)

52 week range (A$/share) to

23

Share price (A$)

Number of shares (m) 191

5,000

0

Lithium, Tantalum, Manganese, Iron

Australia (WA), China (Shanghai), Mongolia

Comissioning

Exchanges: ASX:GXY

Convertible notes (m)

YEAR END: December1.16

0.91

149.9

0.00

33Exploration/(Expl.+ Corporate) (%)

- -

145

5,000



0

5.6

25

0

4.6

190.6 190.6

70

2.2

0

34.2


Drilling - RAB (m)

0.4

190.6

20,00019,630

0.2

0

27,130

18

Fully diluted (m)

221.1

www.galaxyresources.com.au

GXYO

2.2

7 September 2010

221.1

GXY.AU



Drilling - Other/Diamond (m )

Land holding ('000 ha)

214

9.6

HSBC Custody Nominees (12.6%), R Healy (5.8%), National Nom (5.1%)

0.0

Tenement costs ($k per year)

6.5

A near term producer of lithium and tantalum minerals in

Australia, and lithium carbonate in China. Target market

is the Li-ion battery industry (29% growth 2007-2008).

Mt Cattlin (WA): set to be the world's second-largest

hard rock lithium operation, producing 137ktpa of 6%

Li2O concentrate, 56klbspa Ta2O5. Mining has started.

Jiangsu Lithium Plant (China): will process Mt Cattlin

concentrate into lithium carbonate; will be the largest Li

producer in China. Under construc tion.

Offtake agreements signed for all Jiangsu output (17ktpa

Li Carb), customers are Chinese cathode

manufacturers and Mitsubishi Corp.

Both projects financed (equity and debt), capex A$145m.

Galaxy estimates pre-tax NPV (@8% real, exchange

0.9) as A$425m or A$1.98/share, IRR 36%.

Investment Points

Cash backing (Ac/share)

Project

48.4

3.4

Iron (Fe) Classification Ta2O5

58.5

%

53.3

-

%

Li2O

55.75.3

Company Comment

China

Construction

3.1

ppm

147 119.4

171.5

52.1

161

Li2O

na na

Mid Expl

88.00

145

00

53.6

145

-

Major shareholders: Creat Resources Holdings Ltd (19.9%),

Route

C Readhead (Chairman)

I Tan (MD)

83.4

Process

Equity

R Wanless

na

na

Y Zheng

I Polovineo

[email protected]

Li/Ta,Mn,Au na

Fe, Mn

0.0

Cut off

30.73

Option

0.0

2.8

0.00

1.6

kt0.00

0.50

1.00

1.50

2.00

2.50

Sep-09

Oct-09

Nov-09

Dec-09

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Share Price ($/Share)

GXY - Galaxy Resources Limited

Source: Bloomberg

Overview: Galaxy Resources plans to become one of the world‟s leading producers of lithium. It has two Liprojects under construction, the Mt Cattlin Mine in WA and a value-adding Li carbonate plant at Jiangsu inChina. Li is an essential component of some batteries, of the type used to power electric and hybrid vehicles.Mt Cattlin Spodumene Project (Li, Ta; WA):: will be the world‟s second largest hard rock producer of lithium. The mine is 2km north of Ravensthorpe (WA). Mineralisation is spodumene (LiAlSi 2O6) and tantalitein a flat lying pegmatite. Mining will be open cut, to produce a spodumene concentrate and tantalite by-product. Ore processing will be at a rate of 1mtpa averaging 1.1% Li2O (or 3.4mtpa including waste at stripratio 2.4:1) and produce 137ktpa of spodumene concentrate at 6.0% Li 2O (upgrade x6) and 56klbspa ofcontained tantalum (Ta2O5) in concentrate. Mine life is 16 years, with a reserve of 11.37mt @ 1.05% Li2O and147ppm Ta2O5. Capital cost is A$79m and cash operating cost is expected to be A$41/t (DFS revenueprojection A$71/t ore). Spodumene concentrate to be shipped via Esperance to China, for processing at thecompany‟s lithium carbonate plant (see below). Tantalum concentrate shipped from Fremantle. The plantwas commissioned in September ‟10 and the first shipment is expected in November, with pre-strip and ROMore stockpiling under way. There is resource and exploration upside in the project area. Recent resultsinclude 26m @ 1.61% Li2O within the pit area: potential to extend pit to +100m depth.Jiangsu Lithium Plant (China): Designed to add value to the Mt Cattlin spodumene concentrate, the plantwill be close to the Zhangjiagang Port in Jiangsu Province near Shanghai. Nameplate output will be 17ktpa„EV‟ battery grade (99.9%) lithium carbonate (Li2CO3), plus some „EV Plus‟ grade (99.99%) making GXY thelargest lithium producer in China. Capex is expected to be A$55m (DFS estimate), to be finalised in Oct ‟10.Site and slab prep has commenced.Offtake agreements: These are in place for 100% of Jiangsu output. Customers are Chinese Li cathodeproducers and Mitsubishi Corporation. GXY says the former are increasing capacity over the coming 12-24months, and appreciate the security of supply offered by Jiangsu. Terms are commercially confidential.Corporate: A share issue to Creat Resource Holdings in April 2010 raised A$33m, in addition to A$65mraised in HK in October 2009. A project loan facility of A$130m (US$105m) was granted from Austrian BankRZB and the China Development Bank in December 2009, which could be drawn down in Sep ‟10 subject tofinal documentation. Conditions precedent (including Jiangsu permitting) were met in June 2010.These fundsare sufficient to cover GXY‟s estimated capital costs for Mt Cattlin and Jiansu of A$145m (including workingcapital). A new board member, Ivo Polovineo, is the former CFO of Sino Gold (sold in 2009 for $2.4bn).Investment Comment: Galaxy‟s projects are 100% owned, advanced and well-funded, with secure offtakeagreements and healthy profit forecasts. Its share price is highly leveraged to the price of battery grade (i.ehigh quality) lithium carbonate. Lithium prices are forecast to increase due to advances in long life batteriesand electronics, and strong environmental policies in China. Li-ion battery output increased 29% year-on-yearfrom 2007 to 2008. World Li Carb demand is ~100ktpa, with 20-25ktpa in China; price is US$5,500-$6,000/t,

or higher for better grades (added US$3k/t for 99.9% pure). GXY estimates revenue from the Cattlin-Jiansuoperations will be A$143mpa for 16 years, with pre-tax net of A$69mpa. At capex A$145m, GXY est NPV(@8% real, exchange 0.9) is A$425m with IRR 36%. Fully diluted market cap is A$248m. Further progress atJiangsu, shipments from Mt Cattlin and an increase in Li prices could see the stock approach A$1.50.






Plan of Mt Cattlin Spodumene Mine: this diagram shows the proposed pit outline, lithium resource blocksand recent drill intercepts. Pre-strip has commenced, plant construction is underway and the mine is

expected to be producing spodumene mineral concentrate grading 6% Li2O from 4Q10.

Plant construction at Mt Cattlin: lithium concentrate will be shipped from the mine and converted to 17ktpa

battery grade lithium carbonate at the Jiangsu Lithium Plant in China. Offtake agreements are in place for100% of the Mt Cattlin/Jiangsu output.






Icon Resources Limited

0.15



Avg m onthly volume (m)



Price/Book (x)Listed company options: Net asset backing (Ac/share)

Quarters stated on calendar year basis.

Mt Carbine - open cut

Mt Carbine - u/ground

Mineralised Material (est., non c ompliant w ith JORC)

Contacts Directors

Dr John Bis hop L P retorius (Chairman)

Managing Direc tor J Bishop (MD)

Tel : +61 (0)2 9279 1252 S Bart ropSydney, NSW, Austral ia A White

kt

1.2

Project

WO3

6.35.3

%

1.1

Equity

Project WO3Ore

2.1

0.11

0.20

1.6

%

Location

Vein

25.0

0.0

Partner

0.2

0.4

0.0

1.5

Early Expl

Aus (QLD)

WO3

Aus (QLD)

0.30

441

-

1.8

100%

100%

Early Expl

Constance Range

100%

0.0

Aus (NSW)

Sn Mid Expl

Aus (QLD)

Status

Mid Expl.

none

Route

Scoping Aus (QLD)Grav, float

[email protected]

na

Inferred

100%

100%

100%

100% 9.6

Type

Zn,Pb100%

Au

InferredMt Carbine - tailings

Project

Ownership/

www.iconresources.com.au

W

100%

100%

Analyst: Dr Trent Allennone

none

Peel

New Century

2.1

Mid Expl

2.5

Process

na Aus (QLD)

21.1

0.0

0.22

0.2

nanone

Target

nonenone

21.1

none

Sedex Adv Expl

Aus (NSW)

na

na

Ironstone

Structu ra l na

IOCGU

Scoping Study

Key ProjectsAlso Fitzroy (QLD), has total Inferred Resource: 1.75mt @ 1.7% Cu, 2% Zn, 8.5g/t Ag, 0.2g/t Au, cutoff 1% equiv Cu in Nov '07

0.0

Classification

(JORC)

Cut Off

2.1

4


Funding duration at current burn (yea

L Pretorius (12.6%), S Bartrop & Assoc (7.8%)

Exploration/(Expl.+ Co rporate) (%)

0.0

Tenement costs ($k per year)

Drilling - RAB (m)

Drilling - Other/Diamond (m) 4,0008,0000

103.8

2010a

Land holding ('000 ha)* 441

0

97.8

0

Cu,Zn

IOCGU,Ni

Fe

Burketown

Fitzroy

Mt Carbine


Share price (A$)

Exchanges: ASX:III

Capital Profile

Convertible notes (m )

0.07

0.06

0


Number of shares (m)


104

YEAR END: June

Corporate (A$m)

25.0

na

na

441

0.0

1,0002,000

0

III.AU

23

Tungsten, Gold, Base Metals, PGE

Market capitalisation (und iluted) (A$m)

Major shareholders:

Fully diluted (m)

Australia (QLD, NSW, TAS)

to

6.9

7 September 2010

Icon Resources Limited

Icon expects tungsten production at Mt Carbine (QLD) from asearly as December 2010. Treatment of tailings, stockpiles could be

followed by mining in 2013. A resource upgrade (from 9.6mt @

0.22% WO3) is expected in September 2010.

1.31 0.90

A$ 0.07


2.20

Jun-10a

0.88

0.0

Code for reporting mineral resources - Australian:

0.0

0.0

Resources

Tungsten

0.0

89

0.0

97.8

355.2

Investment Points

0.0

-

127

6.9

Owns 100% of the historic Mt Carbine Project (QLD),formerly Australia's largest tungsten mine.

Mt Carbine: resources total 25kt WO3. Open pit 1.1mt @

0.2%, target 15mt @ ~0.2% WO 3. Increase due Sep '10.

Region prospective for W-Sn, Cu, with historic workings.

Three-phase mine plan: tailings, open pit and/orunderground. Hard rock production expected early 2013.

Early cash flow targeted from processing of tailings and

stockpiles - concentrate production from Dec '10.

Scoping Study of 5 year open cut project: pre-tax NPV @8% real of A$59m with potential for A$200m with gradeincrease, resource expansion; current mkt cap A$8.3m.

Tungsten conc. price up 22% Y-O-Y, outlook is positive.

Fitzroy Cu/Zn Project (VHMS) to be subject of IPO in late2010: includes resource of 1.75Mt @ 2.28% CuEq.

No

0.08

80 80

0.1

441

0

-

0.11

Tara naGranite

VHMS

JV

Option Metal

Cash ba cking (Ac/share)

-

Reserves

0.0

0.2

0.30

Sep-10F 2009a

Mt

420

0.33

0.0

68.2

0.44


2.351.690.45

0.3


0.0

7588

1.8

0.30

5.3

121.0

2011F

0

3.04

1.8

Inferred


1.55.3

0.0

kt M mtu

0.00.0

-

6.5

0.0

0.0

WO3 Eqty

Company Comment

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

Sep-09

Oct-09

Dec-09

Mar-10

May-10

Aug-10

Share Price ($/S

hare)

III – Icon Resources Limited

Source: Bloomberg

Overview: III listed on the ASX in June 2006. Its flagship project is the historic Mt Carbine tungstendeposit in QLD. It also has a diverse portfolio of exploration tenements in eastern Australia.Mt Carbine (W, QLD, 100%): 120km from Cairns. Prior to its closure in the mid 1980s, Mt Carbine wasAustralia‟s largest tungsten producer. A total of ~13.1mt was mined by open cut; production of ~0.8-1.2kt/yr WO3 was in the form of high-grade, low impurity concentrates of wolframite and scheelite fromsheeted veining. There was no recovery of <75 micron material, which was lost to tailings. III is targetinga bulk tonnage operation focused on the existing granted Mine Leases (ML), with a three-stagedevelopment program. This involves retreating the mine tailings (JORC inferred resource 1.6mt @ 0.1%WO3) in a two year operation; re-opening the open pit (1.05mt @ 0.2% WO 3) and potentially wastedumps (non-JORC estimate ~18mt @ ~0.1% WO3); and, later, re-opening the underground development(resource 9.6mt @ 0.22% WO3 accessible by a 500m decline). There is an exploration target for theunderground material in the range of 55-60mt at 0.07- 0.09% WO3, based on historic drilling. Asignificant resource increase is expected in Sep „10. In 2Q10, two exploration permits (EPM, 210km

2)

surrounding the ML were acquired. These have historic W-Sn workings (e.g at Mt Holmes, 10km SE ofCarbine) and are prospective for Carbine-style sheeted vein mineralisation, as well as alluvial tin andtungsten deposits. Metallurgy: The historic mine used visual ore sorting technology, which has improved

since that time, as have downstream metallurgical recoveries. An XRF sorter will be tested in 3Q10. Thisbeneficiation could reduce the concentrator throughput by 80%. Trials of gravity separation of tailingsrecovered 50-53% to a ~65% WO3 concentrate, and 75% to a ~45% WO3 concentrate (centrifuge,flotation). Scoping Study: October 2009 (Mining One P/L); the study contemplates an open cut minewith a 5 year life, producing 1.5mtpa grading 0.21% WO3 for 2,350t WO3 pa, mill recovery 75% (X-rayore sorters and gravity), capex A$60m, opex A$22.72/t. At A$250/mtu for a 70% WO 3 concentrate, thestudy found pre-tax NPV (@8% real) to be A$59m; increasing grade 20% and tonnage 50% boosts NPVto A$200m. The latter scenario is reasonable given the exploration potential at Mt Carbine. An update ofthe hard rock mining model and project financial forecasts are expected in late 3Q or early 4Q10.Eastern Australian Exploration (100%): Icon may divest or JV some assets, to focus on Mt Carbine. Acurrent focus is on the Peel Fault Project (NSW), where III holds 75km strike over historic hard-rock goldworkings and a chargeability anomaly. Drilling in 1H10 found 14m @ 1g/t Au from 137m. Other projectsinclude Fitzroy (Central Qld), which has an Indicated JORC resource 1.75Mt @ 1.7% Cu + 2% Zn, andcould be spun out in a separate ASX listing („Fitzroy Resources‟) in late 2010.Investment Comment: In our previous research note on III, 2Q09, the company was within 6-12 monthsof being in tungsten production from the Mt Carbine tailings and waste heaps, and potentially ~2-3 yearsfrom hard rock production. The GFC caused a 1 year delay to the operation but it now seems to be backon track, with the same schedule. Recent share placements funded A$0.88m exploration in 2Q10 butmore funding may be needed in 2H10, ahead of possible early cash flow from the tailings operation.Significant short to mid-term value drivers for III could include the expected resource upgrade (Sep „10),a successful trial of the XRF ore sorter on ROM and waste dumps (2H10), commencement of the tailingsoperation (Dec „10), and a strengthening tungsten market. The planned Fitzroy spin-off could unlock the

value of this VHMS project for III holders.






Mt Carbine Project location map: III is focused on this historic tungsten deposit (QLD), where it plans todevelop a tailings re-processing operation, followed by open-cut and underground mines. The two EPMs

around the Mining Lease are recent acquisitions, and are prospective for Carbine-style mineralisation.

Mt Carbine Project: As well as hard rock resources and mineralised dumps, the area has pre-existinginfrastructure, including a mining lease and 132KV power line. Tailings reprocessing is planned for late2010 and hard rock mining for 2013. The original operation closed in 1986 due to weak tungsten prices.






TNR Gold Corp

0.38

Debt (C$m) - Sep 10F

Enterprise value (C$m)

Avg monthly volume (m)

Cash (C$m) - Sep 10F

Price/Cash (x) Cash (C$m)

Price/Book (x)Listed company options: Net asset backing (C¢/share)

Quarters s tated on calendar year basis. Years are financial.

Reserves

Resources *

Mineralised Material (historic, non NI43-101 compliant)

Shotgun Inferred

* Los Az ules Project has 922mt grading 0.551% copper for 5.08mt (11.2 bliiion lbs) metal; TNR claims a 25% back-in r ight

Contact Directors

Mr Jerry Huang

(Investor Relat ions) (Exec Chai r, Pres, CEO)

Tel: +1 (604) 687 7551

Toll free: 1800 667 4470 Paul Chung

Vancouver, BC, Canada Hari Varshney Mariana

www.tnrgoldcorp.com Nevada

Moose

Mavis Lake

Shotgun AK (USA)50% Au na Breccia na Adv Expl

na Mid Expl NT (CAN)

100% Li- REM - Pegmatite na Mid Expl ON (CAN)

0.0 0.0 0.0

Mid Expl Salta (ARG)

Pump Ea rl y Exp l NV (USA)

Brine Pum p

na

Gold Classification Au

Target

koz

Eqty

Reserves and Resources/Mineralised MaterialCode for reporting mineral resources - Canadian: (NI43-101)

t koz

[email protected]

na Mid Expl

Li

JV

Option

0%/70% of 75% Au-Cu

Ownership/

-

-

0%/100%

100%

Li

100%

0.0

980

Location

S. Juan (ARG)

Status

Project

Mt

15.4

na na

Project Ore

13.1 15.1

4.70.3

34

Au

Company Comment

14.3

30

16.1

30 34

na

5.15.0


2011F

Exploration and evaluation (C$m)

TNR.CN

1.25

0

Sep-10F 2009a

0.54

53

1.00

56

0.25 2.59

C$ 0.22

Jun-10a

TNR Gold Corp

TNR is focused on early stage exploration for gold, and rare andminor metals. A TSX spin-out of International Lithium Corp (ILC) in

3Q10 should add value to the Li and REE assets: priority Li targets

include Mariana (ARG), where C$1m drilling is planned from 4Q10.

0.67

2010F

1.12 2.672.18

Capital Profile


52 week range (C$/share) to

35

Gold, Copper, Lithium, Rare Metals

Argentina, USA, Canada, Ireland

Early to Advanced Exploration

Exchanges: TSX.V:TNR

Convertible notes (m)

Year End: December0.22

0.18

Corporate (C$m )

0

Share price (C$)

Number of shares (m) 123

7 September 2010

5.0

73Exploration/(Expl.+ Corporate) (%)

na na

34

26.5

158

0.42

123 133

500 0

0.9

133

1,5001,300

0.7

68

144

2,000

46

1,000Drilling - RAB (m)


300

0

107

500

No

Capital raisings (C$m)

Institutional holders (20%, incl Barrick Gold, Pinetree Capital)

0.0

Tenement costs ($m per year)

4.7

5.6

1.3 Cas h backing (C¢/s hare)

Funding from JV partners (C$m )

Market capitalisation (undiluted) (C$m)


Drilling - Other/Diamond (m )

Land holding ('000 ha)

Au-Cu-Mo

2

Fully diluted (m)

21.8

na

Metal

0.3

1.2

na

g/t

Au

2.4

3.63.2

0.0

3.5

Partner Type

Porphyry

Process

Key Projects

33

S. Juan (ARG)

Mid Expl

49030.5

na

2.5

5.0

2.4

Focused on exploration for precious and base metalswith a strategic emphasis on high-demand rare and

minor metals, e.g. rare earth elements and lithium.

Business model is "Lead Project Generator”, acquiringearly stage projects, and adding value by internal and JV

development (diversify cost, risk) or corporate spin-off.

Lithium and REM asset spin off, as International Lithium

Corp, planned for TSX.V in 3Q10, mkt cap C$15m wouldmake it undervalued compared to peers (see chart).

TNR holds early stage gold-copper (porphyry) projects in

Argentina and Canada, including 50% of 920koz Au atShotgun. Significant potential for large-scale discoveries

Tight capital structure: TNR management and insidersown 48%, institutions 20%.

Highly experienced management and technical team.

Investment Points

0.0

c/off

0.0

g/tEquity


Li-Ta - Pegmatite

Porphyry

Brine

2.6

na

Project

na

Petra

-

El Tapau

0%/100%El Salto

50% 0.93 0.50

Major shareholders: Management and insiders (48.5%, incl K Klip 23.5%),

Route

Gary Schellenberg

Kirill Klip (Non Exec Chair)

0.10

0.15

0.20

0.25

0.30

0.35

0.40

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Share Pr

ice ($/Share)

TNR -TNR Gold Corp.

Source: Bloomberg

Overview: TNR Gold Corp has early to mid-stage exploration assets, with 18 active projects held as threegroups: Argentina gold-copper; lithium and rare metal projects; and Alaskan gold. A TSX spin-out of the Li-REM projects, as International Lithium Corp, is planned for July 2010. The Alaskan projects could follow.Lithium-REM projects and corporate spin-off: TNR has nine early stage lithium brine and hard-rock lithium / rare metal projects, commodities that are used in high-tech applications (e.g. batteries and magnets), and havea growing market in the automotive industry as it moves towards the production of electric vehicles. TNR plansthat these assets will be spun off as International Lithium Corp in 3Q10. The parent company andshareholders should retain ~87% of ILC, and there will be a C$2.5m IPO. Year 1 exploration budget isexpected to be C$1m-$1.5m. The initial focus is on Mariana (ARG), which covers 160km

2among the Andean

Salars (ARG). Brine samples range 250-650mg/L Li – current producers range from 150-1500mg/L of Li. Aresource could follow drilling in 4Q10 (up to 20 holes to 100m depth). ILC will also advance brine projects inNevada (5,285 hectares), in the area of Clayton Valley (producing Li since 1967). The pegmatite projects,prospective for lithium and the rare metals (e.g. tantalum, niobium and the REE) include Moose (CAN), whichlies 12km from Thor Lake (TSX:AVL) and is a past high-grade producer of Li and Ta (samples include 6.7m @2.07% Li2O). The Mavis Lake Project (CAN) has channel samples including 5.3m @ 1.24% Li2O.Argentina projects (Au-Cu-Ag): Among 5 active projects in San Juan Province, the primary focus is on El

Salto (13,300 hectares) and El Tapau, which are both early stage and have potential for bulk tonnage Au-Cu-(Mo) porphyry discoveries. El Salto has a 6 x 1.5km chargeability anomaly and limited drilling (incl 55m @0.21% Cu and 0.012% Mo). El Tapau has three target areas; exploration includes grab sampling averaging2.2g/t Au over 4.5km strike, and limited drilling (incl 82m @ 0.49% Cu). Both projects will be the target ofgeophysics and follow up drilling. TNR retains a 25 per-cent back-in right to certain of the properties at the LosAzules Cu-Au-Ag deposit, which contains 11.2 billion lbs Cu grading 0.55%, with a high grade core of ~2.3blbsgrading 1% Cu. The back-in terms are the subject of a legal dispute with Xstrata, which assigned its interest toMinera Andes Inc. TNR served a back-in notice in April 2010 and has a C$5m loan facility that can be drawndown to support Los Azules. Minera Andes rejected the back-in notice and the validity of the back-in notice isthe subject of a legal dispute with Minera Andes. The project has a high conceptual NPV: with capexUS$2.7bn, opex US$0.85/lb, and production 170ktpa (375mlbs) for 23.6 years, and applying no adjustment forrisk, the NPV is US$2.9bn, or US$725m for 25% (LT Cu US$2.50/lb, disc rate 10%).Alaskan Projects (Au, Cu): TNR has 50% of Shotgun, a breccia-hosted Au target with a non compliantresource of 980koz Au grading 0.93g/t and drill ready gold targets. The Iliamna Project is < 80km from thegiant porphyry-hosted Pebble Deposit (18.8blbs Cu and 31.3moz Au), with which it has geological similarities.Investment Comment: TNR has built its exploration portfolio to the point where discrete groups of projectscan be spun off as separate listed entities. This is a well tested strategy for unlocking the value of mineralassets. If listed on the TSX with a starting market cap of C$15m, ILC should be seen as significantlyundervalued in comparison to its immediate peers (capitalised at C$15-C$150m). Further value should beadded to both TNR and ILC by ongoing exploration and resource definition, e.g. at Mariana, which bears earlycomparison to the nearby Hombre Muerto (Fenix) mine of FMC, currently providing 14% of global lithiumsupply. For TNR, a positive decision over the Loz Azules back-in would be a boost but is not vital – other share

price catalysts would be exploration success at El Salto and El Tapua.






TNR has 18 active projects worldwide, which can be divided into three broad groups: Argentinian gold-copper; lithium and rare metals (REM); and Alaskan gold. TNR’s projects are in the exploration phase,

providing an opportunity for investors to benefit as value is added by further development.

The TNR lithium/REM assets could be spun out in 2H10, as International Lithium Corp, ILC:TSX. This chartshows that ILC, with 60m shares at C$0.25 (mkt cap C$15m) and early stage projects, could be viewed as

good value relative to some comparable, if more advanced, lithium-focused companies.






Market Update: Lithium

Investment Comment

Increasing intensity of lithium use could require new capacity beyond2014. Resources are ample but could be slow to bring online, due tofinancial and technical hurdles faced by some projects. Relatively flatprice forecasts represent stable revenue in a growing sector. There is anopportunity for developers, with projects that are advanced or can befast tracked, to gain market share as demand increases.

PricingLithium carbonate is trading in the range US$5,500-US$6,000/t, havingimproved from the US$5,300/t average of 2009. The CAGR of Licarbonate 2005-2009 was 6.2%, with 2.0% forecast for 2010-2014(Source: ASX:GXY). By 2015, nominal prices are expected to approachthose seen before the GFC (2007, US$6,731/t; 2015, US$6,757/t).

Chinese lithium carbonate export prices in US$/t 2000-2009,plus forecast 2010-2015.

Source: Galaxy Resources

Market: Supply and Demand

The main producers of lithium in 2009 were Chile (brines, 7.4kt Li),Australia (pegmatites, 4.4kt), China (2.3kt) and Argentina (2.2kt), witha total 18kt Li, down from 25.4kt in 2008 (Source: USGS). Li converts toLi carbonate at ~5:1 by mass, i.e. LiCarb production in 2009 was ~95kt.Global reserves are thought to be 9.9Mt Li, of which 76% are in Chile.

World consumption of Li by end use (t Li Carbonate; Roskill)

Lithium producers,current or near-term,will be well placed totake advantage of forecast increases in Liprice and demand.

Lithium carbonate is

selling for ~US$5,500-US$6,000/t.

CAGR of 2% isforecast for 2010-

2014.

Li is produced frombrines and pegmatites,with ~95kt Licarbonate in 2009.

Other than batteries,

uses include ceramicsand glass, andlubricants.






Li carbonate consumption in 2008 was ~120kt but fell 15% in 2009 dueto the GFC. It is expected to recover by +11% to ~113ktpa in 2010 andbe ~148kt by 2013 (+31.5% from 2010). [Source: USGS, Roskill]. Thethree main uses of lithium by industry sector in 2009 were ceramics andglass (31%), batteries (23%) and greases (9%-10%).

The USGS (US Geological Survey) publishes an annual commoditysummary about Li. Important points from the 2010 edition:

Batteries, especially rechargeables, are the market for lithiumcompounds with the largest growth potential. Automobile companies are developing lithium batteries forelectric vehicles, although most such vehicles currently use other types. The US has invested $2.4B to help develop its domestic batteryand electric vehicle industries. The Li-ion battery supply chain (material-manufacture-recycle) received ~$940M in grant money.

Li batteries are gaining favour due to low heavy metal content (e.g. Pb,

Cd, Hg), long life, fast recharge and high power/weight ratios comparedto traditional Pb acid, NiCad and Ni hydride rechargeables.

Galaxy Resources (after Market Avenue) reports that Li-ion batteryoutput increased 29% between 2007 and 2008, with sales of US$8.03Bn. Strong demand is expected to continue, in line with globaldemand for electric vehicles, especially in China.

Current and forecast total lithium carbonate demand versusproductive capacity, 2008-2020.

Source: Roskill

Elemental FactsLithium is the lightest solid element, with atomic number 3. It is highlyreactive, with a high electrochemical potential and specific heatcapacity. These attributes make it especially useful for making batteriesand ceramics/glass. The most commonly traded forms of lithium aremineral concentrates and refined lithium carbonate. Lithium is extractedfrom pegmatites (igneous), brines (salar lakes) and hectorite clays.


Consumption of ~113kt is expected in2010, for annualgrowth of +11%.

The main growth areafor Li is battery

manufacture,especially for electricand hybrid vehicles.

The US has paidUS$940M to supportits domestic lithiumsupply chain.

Li ion batterymanufacture increased29% in 2007-2008.

This rate of growthcould require new Licarbonate capacity

from 2014 onwards.

Lithium‟s low massand high electro-chemical potential

make it useful forbattery manufacture.






Market Update: Niobium

Investment Comment

Industry forecasts are for ferroniobium (FeNb) consumption growth of ~15% per annum to 2014. New niobium producers have a chance tomeet this increase in demand and find secure revenue in the form of long-term supply contracts. Prices should remain stable (RCR long termUS$39/kg in FeNb) so long as CBMM does not feel its dominant marketposition to be threatened, which is unlikely, as most advanced Nbprojects are of a much smaller scale than Araxa.

Pricing

All measures show that Nb prices have risen in the past several years,and were quite resistant to the GFC, likely because Nb is only a smallportion of steel production costs, and the price is set by the mainproducer, CBMM.

The current EU price in FeNb is ~US$41/kg, as it was in October 2008.The 2009 low, of US$34/kg, was reached in March 2009. This fall of ~21% compares favourably to declines in base metal prices of ~40% ormore over the same period. RCR‟s long-term forecast for modellingpurposes is US$39/kg Nb in FeNb, based on the apparent stability of Nbprices at or near the current levels.

Ferroniobium import prices, Chinese yuan (66% Nb from Brazil)

0

50,000

100,000

150,000

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300,000

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Nov-06

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May-10

Aug-10P

rice

(RMB/t of 66% FeNb, Brazil to China)

Lo HiSource: Metal Pages Market: Supply and Demand Over the period 2002-2007, the annualised rate of growth in globalproduction of FeNb (21%) was more than 2.5x the rate of growth insteel production (8%). Long-term growth of Nb consumption has been7.9% pa (1990-2007), compared to 4.1%pa for steel over the same

period.

With 15% pa growthforecast, and a steadyprice, the outlook forNb is strong.

Prices were resilientin the face of theGlobal FinancialCrisis.

This was helped bythe refusal of CBMMto lower its price,which the steel millscontinued to pay.

The Nb market hasgrown at the rate of 7.9% per annumbetween 1990 and2007.






FeNb consumption versus crude steel production

Prior to the GFC, global production of FeNb was ~60kt (contained Nb).Media reports in 2Q10 from the leading producer, CBMM of Brazil,indicate that volumes have recovered to ~80% of these levels and thatthe market could be fully recovered by early 2011. Brazil is by far thelargest producer of Nb, with 93.5% of world production (Source: USGS).

China is a major force in consumption of the metal: it currentlyrepresents ~20% of FeNb use and >50% of the growth in this market.This gap could close over the next 20 years due to modernisation andincreasing sophistication of steel production in China and otherdeveloping markets; over this period, the percentage of steel productsusing niobium could increase from 10-12% presently to over 20%(Sources: GBE and Roskill Information Services; RCR).

In terms of companies, there are currently three major producers of ferro-niobium: industry leader CBMM (Araxa deposit, Brazil), and two„second tier‟ producers, Anglo American (Catalao mine, Brazil) andIAMGOLD (Niobec mine, Canada). CBMM currently holds 76% marketshare, with 6-8% each for the others. The Araxa reserve grade at 2.5%Nb2O5 is orders of magnitude higher than its competitors‟ (1.2%Catalao, 0.6% Niobec) and at 500mt it is more than ten times as large

as the other two put together. In other words, CBMM dominates globalNb production. In terms of new projects coming online, only Mabounié inGabon (Eramet) could threaten any of CBMM‟s market share (resource350mt @ 1% Nb2O5) but the project must overcome poor recoveries andhigh capex before it can enter production.

Elemental Facts Approximately 90% of Nb is consumed as FeNb by the steel industry, inhigh-strength low alloy (HSLA) steel products for construction projects,oil and gas pipelines and the automobile and shipping industries.

Niobium is not an exchange traded commodity: 95% of FeNb is sold

under individually negotiated contracts based on a benchmark price setby the main producer, CBMM (Brazil).


Ferroniobiumproducer Niobec isforecasting 15%compound annualgrowth rate (CAGR)for FeNb consumptionin 2010.

China consumes 20%of FeNb but is thedriving force behindincreasing intensity of usage.

World Nb productionis dominated by Brazil(93.5% in 2008) andspecifically by oneproducer, CBMM,

which sets the FeNbprice.

Niobium is usedprimarily by the steelindustry. Prices aredecided bynegotiation of

individual contracts.






Market Update: Tantalum

Investment Comment

A tantalum supply shortfall is expected to last until at least 2013. Thiscould benefit companies that can provide a long-term supply of ethicallyproduced tantalum. RCR‟s long-term price forecast, based on theassumptions of Ta industry participants (e.g. ASX:GBE) is US$143/kg(US$65/lb) Ta2O5.

PricingThe current price of Ta as tantalite (30% Ta2O5) is US$75-85/lb Ta2O5 (Metal Pages). This is (on average) 132% higher than the 2009 low(August, 2009; US$33.00-36.00/lb Ta2O5), which was the lowest pricesince March 2007 (US$32.22-34.33/lb Ta2O5).

The increase is recent and is due largely to anticipation of a supply

shortage as the market is starved of DRC tantalite. This shortage isanticipated to last until at least 2013 (Source: Gippsland Minerals).

Tantalite basis 30% Ta2O5

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/lb)

Lo HiSource: Metal Pages

Market: Supply and DemandBefore the GFC, global Ta2O5 consumption was estimated to be 6mlbsper annum. Industry commentators suggest that the market is growingat ~ 7% per annum (Sources: GBE, Gippsland Ltd).

Leading commercial consumers are HC Starck GmbH ( part of Germanconglomerate Bayer AG), as well as Cabot Corporation (USA), Ulba OJSC(Kazakhstan), Mitsui-Kinzoku (Japan) and Ningxia Non-Ferrous Metals(China) plus various other Chinese groups.

The supply deficit inTa markets could lastbeyond 2013.

Tantalum prices arecommonly reported aslbs of its main oremineral, tantalite.

Ta prices have soared132% in the past

year, partly due tointernationalmeasures takenagainst the DRC,which supplies“conflict tantalum”.

Ta consumers aremanufacturers of advanced technology,in Europe, Asia andthe USA.






Until recently, the state of play in tantalum production was quiteunclear. According to the USGS, world mine production of Ta metal in2008 and 2009 was ~1.16kt-1.17kt. From 2005-2008, approximatelyequal proportions were supplied as ores and concentrates, metal, andscrap.

For concentrates, 53% was supplied by Australia. The major Ta metalproducer was Brazil (23%) and the biggest secondary producer (wasteand scrap) was China (27%).

Until 2009, the major corporate producer of tantalum was TalisonMinerals from its Wodinga mine in WA‟s Pilbara. However, this closedduring the GFC. It is uncertain when or if this mine will re-open.Obviously, the downturn in Ta-intensive industries during the GFC led toWodinga‟s closure and prevented any problems with undersupply.

The market is complicated by the considerable black market for Ta(about 20% of the global market), illegally supplied by artisanal mines

in the Democratic Republic of Congo (DRC) and allegedly used to fund acivil war in that country, ie. “conflict tantalum”.

In July 2010, however, the US Congress passed the Financial StabilityAct, which requires US companies to disclose if their products containtantalum (and tin, tungsten or gold) that is sourced from the DRC oradjoining countries. This should prevent the use of DRC material and,due to the stringent supply chain reporting requirements of the Act, mayalso turn buyers away from the adjoining countries (being Uganda,Rwanda, Burundi, Kenya, Tanzania, Zambia, Angola, Republic of Congo[Brazzaville], Sudan and the Central African Republic).

Elemental FactsTantalum is used in diverse high technology applications. It is resistantto corrosion, has a low thermal coefficient of expansion, and a highdielectric constant, so its main uses are in capacitors (e.g. for consumerelectronics), chemical plant and equipment, aviation turbine blades and,as tantalum carbide, for cutting tools. The majority of the world‟stantalum is sold via long-term offtake agreements.


Brazil and Australiawere major producersof tantalum from2005-2008 but thelatter has ceasedproduction.

DRC illegal productioncomplicates themarket but the USConflict Minerals Billshould remedy theproblem.

Tantalum is used inhigh-tech applicationssuch as capacitorsand alloys.






Market Update: Tungsten

Investment Comment

Industry participants and commentators are bullish about the medium-term outlook for tungsten. For example, Icon Resources (III:ASX)recently stated: “The market price for [concentrates and APT] hasimproved from mid-2009 returning to pre-GFC levels. Recent marketanalysis has projected longer-term strength for tungsten, particularly fornon-Chinese supply beyond 2012, with supply shortages indicated from2013.” Annual Report 2010.

These forecasts are based partly on concern about security of supply formanufacturers, in view of China‟s policy of mining restrictions and tariffs(e.g. 20% on ferrotungsten), and its intent to boost manufacturing. Thisscenario favours existing producers and companies with advancedtungsten projects that can enter production within 2-3 years.

PricingPrices have recovered to pre-GFC levels, during which they had arelatively soft landing due to simultaneous cuts in demand andproduction. For mine modelling, RCR has used a conservativeUS$150/mtu contained tungsten in 65% concentrate.

The current price of ferrotungsten in Europe at 75% W isUS$386.60/mtu (of contained W), APT to China (FOB) is US$242-247/mtu and concentrate in China is at 65% W is US$197/mtu(contained W). These figures are typical of the value-add for increasedtungsten processing. Concentrate prices are up 23% year-on-year,2009-2010.

Tungsten Industry Price Projections.

Source: Hazelwood Resources and CRU.

Companies withadvanced tungstendevelopmentscould benefit fromelevated prices,flowing fromChinese control(i.e. ~81%) overthe current supply.

Prices held steadyduring the GFC dueto synchronousfalls in supply anddemand.Concentrate pricesare up 23% Y-O-Y.

The outlook to2013 is positive,with further priceincreasespredicted by mostcommentators.






Market: Supply and Demand

China is the metal's prime consumer. For example, global consumptionof tungsten in 2007 was 62.9kt, of which China accounted for 31.6%, or19.8kt. Its consumption of the metal has more than doubled over thelast decade. From 1998 to end-2007, global consumption of tungstengrew at 5.8% per annum, with the other significant tungsten consumersbeing the U.S., Western Europe and Japan. Consumption fell below 60ktin 2009 but is widely forecast to exceed 60kt in 2010, and approach80kt in 2013 (e.g. CRU).

China dominated world tungsten production in 2009 (~81%).

China

81%

Other

6%

Russia

4%

Canada

3%

Austria

2%

Bolivia

2%Portugal

2%

Source: USGS.

Global tungsten metal production in 2008 was 55.9kt (USGS) and anestimated 58kt in 2009 (an increase of ~3.8%). Of the 2009 estimate,China accounted for 81%, producing 47kt. It was followed by Russia(2.4kt), Canada (2kt) and Austria (1kt). The 2008-2009 increase wasaccounted for by China (+3.5kt), while the rest of the world decreasedoutput by 1.4kt due to the Global Financial Crisis.

Elemental Facts

Tungsten is the hardest metal, and has a high density (19.25g/cc;slightly less than gold, 19.3g/cc), melting point and tensile strength.Tungsten is mined from or adjacent to igneous rocks (e.g. in skarns). It

has two economically important minerals: wolframite ((Fe,Mn)WO4) andscheelite (CaWO4). The majority of the world‟s 2.8Mt economic reservesare held by China (with 1.8Mt or 64%. Source :USGS).

Tungsten is primarily used in wear-resistant cemented carbides akahardmetals (56%) and steel/alloys (20%), as well as in lighting,heating, and welding applications. Tungsten chemical compounds areused in catalysts, inorganic pigments, and high-temperature lubricants.Tungsten is sold in five common forms – APT (ammoniumparatungstate), ferrotungsten, tungsten concentrate (usually 65%WO3), and tungsten carbide and oxides. Prices are quoted in $US orRMB and the main units are mtu (metric tonne units, of 10kg WO3, ie

7.9kg W) and kilograms. It is usually sold on long-term contract.


The world‟s largestconsumer of tungstenis China, which used31.6% of the 2007

total of 62.9kt.

Global 2009 mineproduction was~58kt, of which Chinaaccounted for ~81%.

China increasedproduction in the GFC,while the rest of theworld cut back.

The main applicationfor tungsten is in

„hardmetal‟, astungsten carbide. InChina, steel-makingaccounts for thehighest % use.

Ferrotungsten is usedfor steelmaking, whileAPT feeds into the

cemented carbide andchemical stream.








China could supply 160-170kt REO; sufficient to supply its own needs(120kt) plus some exports, but 30-50kt short of forecast global demand.

Rare earths, forecast supply and demand curves

Source: Arafura Resources Ltd; BCC Research

As a sign of growing demand, Metal Pages reported in early July thatChina‟s REO export quota for 2H10 was 7,976t, a 64.2% decrease fromthe 22,282t REO allocated in 1H10 to both Chinese and foreign-ownedcompanies and a 72% drop from the 28,417t allocated in 2H09. Thisbrought the total export quota for 2010 down to 30,258t REO, a 40%reduction from the total quota allocated in 2009.

In 2008, according to the British Geological Survey (after Kingsnorth,

2009), the five main uses of REO (rare earth oxides) were in magnets(21%), catalysts (19%), alloys (18%), polishing (12%) and glass(10%).

Elemental Facts

The rare earth elements (REE) are the 15 lanthanoid elements (atomicnumbers 57 to 71). They are divided into the light rare earths (LREE,lanthanum to samarium) and heavy rare earths (HREE, europium tolutetium). Many deposits are related to igneous rocks, such as trachytesor carbonatites. The large deposits in China, source of much of theworld‟s current REE supply, are laterites, i.e. weathered deposits.

REE are critical to many high-technology developments and in productsassociated with high growth sectors: energy, electronics and technology,and the environment. For example, they are a component inrechargeable batteries and the magnets in electric motors, of the typeused in consumer electronics and hybrid motor vehicles. REE are alsoused as phosphors in energy-efficient light globes, and in the screens of LCD displays.


This could createsevere undersupply of some elements,especially the scarcemiddle and heavy rareearths.

This graph clearlydemonstrates the

looming supply issuesfor the REE market.

China has dramatically

cut export quotas for2H10.

REE have numeroushigh growth

applications.

The main REE mineralsare bastnäsite andmonazite

The REE‟s chemicalproperties lend themto a variety of uniqueapplications, for which

few other metals cansubstitute.






Market Update: Zirconium and Zircon

Investment Comment

Currently, there are few greenfields zircon projects under development.This could create supply tightness in the near to medium term (ie 1-3years) and favourable market conditions- ie moderately to stronglyincreasing demand - for existing or near-term zircon suppliers.

PricingAccording to Iluka, consensus broker zircon price forecasts for 2010 to2013 average US$861; US$906; US$927 and US$1,016, respectively.The average broker forecast CAGR in pricing from 2010 to 2013 is 5.7%.

Zircon Prices in nominal dollars (FOB), historic and forecast(August 2010).

Market: Supply and DemandThe main producers of zircon in 2009 were Australia (510kt), SouthAfrica (395kt) and China (140kt), with a total estimate 1.23Mt (Source:USGS), the majority from heavy mineral sands.

Global consumption of zircon in 2012 could be an estimated 1.4Mtpa.Of this, 18% or 250Ktpa will be for zirconia and Zr chemicals (Source:TZMI, Alkane Resources).

As is the case with most commodities, consumption by China has asignificant effect on demand. China imports more than 80% of its zircon– one of its highest material import dependencies.

Australia‟s Iluka Resources (ASX:ILU) estimates that an appreciableincrease in current zircon prices would be needed to induce new supply.This is partly because zircon production is closely associated withtitanium production, through heavy mineral sands (in which the currentzircon/TiO2 ratio is ~0.2), i.e. titanium prices would also need to rise inorder to bring on new heavy mineral projects. Any increase in demandbeyond ~1.4Mt-1.5Mtpa zircon in the period 2012-2014, even with a50% price increase, could create a supply shortage.

Price increases could

benefit near-termproducers. A potentialsupply crunch would

provide the chance togain Zr market share.

Average CAGR brokerzircon forecasts 2010-2013 is 5.7%.

Global zirconconsumption in 2009was ~1.23Mt, with1.4Mt forecast for2012.

China imports +80%

of the zircon itconsumes.

Production couldremain at ~1.4-1.5Mtpa through

2011-2015, even witha 50% price increase.






Zircon demand by end use, 2000 to 2012.

Zircon supply: induced new projects at 0%, 25% and 50%pricerises on 2008 levels (Source: Iluka).

Source: Iluka

Elemental Facts

Zirconium in economic concentrations occurs most commonly in thesilicate mineral zircon (ZrSiO4). Due to its hardness, zircon is resistantto weathering and is often found in heavy mineral sand deposits, alongwith iron-titanium minerals such as rutile and ilmenite. It also occurs inhard rock rare metal deposits. According to the USGS: “Ceramics,foundry applications, opacifiers, and refractories are the leading enduses for zircon. Other end uses … include abrasives, chemicals, metal

alloys, welding rod coatings, and sandblasting.” Metallic zirconium andzirconia (ZrO2) are used by the nuclear and chemical industries.Analyst: Dr Trent Allen

Zircon and zirconia areextremely hard; theirmain use is inceramics andrefractory coatings.

The use of zircon forceramics is increasingover time.

Zr production from

mineral sands isbuffered by Tidemand, and there is alack of grassrootsprojects - so even bigZr prices might see adelay in new output.

Zirconium, as themineral zircon, isprimarily extractedfrom heavy mineral

sands. Zirconium isalso found in hard rockrare metal deposits.






Report Contributors

Trent Allen: Trent has a BSc (Hons) and a PhD from the University of Sydney, specialising in thepetrology, trace-element geochemistry and economic geology of alkaline igneous rocks. HisAustralian mining industry experience includes several years with Newcrest‟s Cadia Valleygold/copper mines, where he was engaged in resource definition and geotechnical engineering.Trent has also worked as an exploration consultant, university lecturer in geology and civilengineering, and as a journalist and newspaper editor.

Tony Parry: Tony has extensive experience in metallurgical process development, (working with MIMLimited for five years) and in mining equity research, equity sales and mining corporate finance(working in London for five years and subsequently Perth). He was a founding Director and CEO of an ASX listed exploration company and has been engaged extensively as a strategic planningconsultant to many small-medium enterprises. Tony‟s qualifications include a BSc (Hons) inMetallurgy and a PhD in Metallurgy from the University of NSW.

John Wilson: John has a background in mining, finance and equity research. He worked on WallStreet for 6 years and has covered US, Australian and Latin American mining stocks. He has alsoworked with BHP in their minerals division. Qualifications include an MBA from the Wharton Schoolof the University of Pennsylvania and a Bachelor of Engineering from the University of Sydney.






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Documents

RCR RMM Review 3Q10 Abridged[1]