Beginning with the End in Mind: Rare Earths - Sept 2013 - Greenfields Research / Curtin University / University of Western Australia

1. © Greenfields Research Ltd

3. © Greenfields Research Ltd • • • • • • • • •

5. © Greenfields Research Ltd 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 200,000 Aug2007 Dec2007 Apr2008 Aug2008 Dec2008 Apr2009 Aug2009 Dec2009 Apr2010 Aug2010 Dec2010 Apr2011 Aug2011 Dec2011 Apr2012 Aug2012 Dec2012 Apr2013 Aug2013 Metal Pages La Oxide 99% min FOB China (CN) / tonne

6. © Greenfields Research Ltd 0 2 4 6 8 Mt Weld Dubbo Nolans Delay (years) 0 5 10 15 Frequency

14. © Greenfields Research Ltd “Getting your ducks in a row” – all appears in order (compliance) Legs madly working away below the surface (strategy)

16. © Greenfields Research Ltd “Taking a Risk for Rare Earths” New York Times, Keith Bradsher, 8th Mar 2011 “The Fear of a Toxic Rerun” New York Times, Keith Bradsher, 29th Jun 2011

20. © Greenfields Research Ltd 0.000 2.000 4.000 6.000 8.000 10.000 12.000 14.000 16.000 18.000 TotalRareEarthOxideGrade(%) Advanced light rare earth deposits Early stage light rare earth deposits Most advanced rare earth projects are the highest grade – early mover advantage

21. © Greenfields Research Ltd • • • • • • • Examples: Molycorp, Lynas

23. © Greenfields Research Ltd MarketGrowth(requiringinvestment) DOGS/PETS Not profitable. Usually “pet projects” that provide a non-financial benefit i.e. synergies, labour retention etc CASH COWS High market share in slow growth industry – “milked” to fund other investments STARS Leading assets/products dominating fast growing markets, still requiring investment. QUESTIONS Also known as “problem children”. High growth sector but large capital investment required. Market Share (beating the competition)

24. © Greenfields Research Ltd Market Share (beating the competition) MarketGrowth(addingtothecompetition) PET PROJECTS Not profitable. Usually “pet projects” that provide a non-financial benefit i.e. synergies, labour retention etc CASH COWS High grade, small scale projects, which are quickly cash generative, allowing access to an industry and providing cash for investment elsewhere. STARS World class assets with high grades and large scale. Will dominate future sector and be hugely profitable. PROBLEM CHILD Challenging projects with scale, that could be stars in a high growth industry, assuming some structural changes.

25. © Greenfields Research Ltd 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 Lofdal Wolverine Hastings Kutessay II Bokan Thor Lake (Basal) Strange Lake (Enriched) Kipawa Norra Karr Olserum Buckton South Buckton Strange Lake (Granite) Mt Weld (Duncan) Foxtrot Thor Lake (Upper) Dubbo Grande-Vallee Mt Weld (CLD) Mt Pass Total Rare Earth Oxide Basket Value (US$/kg) Heavy rare earth deposits Advanced light rare earth deposits

26. © Greenfields Research Ltd 0.000 0.020 0.040 0.060 0.080 0.100 0.120 0.140 0.160 0.180 DysprosiumOxideGrade(%) Heavy rare earth deposits Advanced light rare earth deposits Early stage light rare earth deposits Some “heavy” rare earth projects actually have a very low heavy rare earth grade The highest grade “heavy” rare earth deposits are actually the high grade “light” projects

27. © Greenfields Research Ltd 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00 0.00 1.00 2.00 3.00 4.00 5.00 TREOBasketValue(US$/kg) TREO Ore Value (US$/kg) Focus should be on these: mainly advanced “light” rare earth projects Focus is on these projects: mainly “heavy” rare earth projects Gold ore equivalent: 23.7g/t 47.3g/t 71.0g/t 94.7g/t 118.3g/t

28. © Greenfields Research Ltd 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00 0.00 1.00 2.00 3.00 4.00 5.00 TREOBasketValue(US$/kg) TREO Ore Value (US$/kg) Gold ore equivalent: 23.7g/t 47.3g/t 71.0g/t 94.7g/t 118.3g/t PROBLEM CHILDREN PET PROJECTS CASH COWS STARS

29. © Greenfields Research Ltd • • • • • • • • Examples: Northern Minerals, Hastings Rare Metals, Stans Energy, Tasman Metals, Quest Rare Minerals

30. © Greenfields Research Ltd Likely to be > 10 years for a new material Construction Finance PFS Off-take Permitting Metallurgy (Separation) Metallurgy (Extraction) BFS Metallurgy (Benification ) Scoping Resource s Exploration Likely to be > 10 years for a new mine

32. © Greenfields Research Ltd 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 Lofdal Wolverine Hastings Kutessay II Bokan Thor Lake (Basal) Strange Lake (Enriched) Kipawa Norra Karr Olserum Buckton South Buckton Strange Lake (Granite) Mt Weld (Duncan) Foxtrot Thor Lake (Upper) Dubbo Grande-Vallee Mt Weld (CLD) Mt Pass Total Rare Earth Oxide Basket Value (US$/kg) Heavy rare earth deposits Advanced light rare earth deposits Assumes separated rare earth oxide prices Assumes 100% recovery of all rare earths No assessment of resource grade

33. © Greenfields Research Ltd 0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00 16.00 18.00 20.00 Ce (US$/kg) La (US$/kg)

34. © Greenfields Research Ltd Recoveries range: 6.5% to 41.0% Recoveries range: 65% to 90% Remember: “basket values” analysis assume even 100% recovery

35. © Greenfields Research Ltd RARE EARTHS 101 Resources x reserve recovery x mining recovery x grade x processing recovery x cracking recovery (x separation recovery) = LOM production 90% recoveries: 90% x 90% x 90% x 90% x 90% = 59% 75% recoveries: 75% x 75% x 75% x 75% x 75% = 24% 50% recoveries: 50% x 50% x 50% x 50% x 50% = 3%

36. © Greenfields Research Ltd 0 5 10 15 20 25 30 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00 10.00 ConcentratingFactor(multiple) Ore Grade (%) 96.7% 93.3% 90.0% 86.7% 83.3% 80.0% 76.7% 73.3% 70.0% 66.7% Percentages indicate equivalent mass loss to take ore to a 30% concentrate

37. © Greenfields Research Ltd 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 LYNAS: Mt Weld (Forecast 12 years from purchase to production) Project Farm In Resource Drilling Scoping Study Feasibility Study Peer Review Project Funding GFC Refinancin g Construction PRODUCTION >>> ALKANE: Dubbo (Forecast 15 years from purchase to production) Project Purchas e Feasibility Study Financing Definitive Feasibility Study GFC Definitive Feasibility Study Expanded FS Financing / Construction PRODUCTION >>> ARAFURA: Nolans (Forecast 12 years from purchase to production) Project Purchas e Scoping Study Prefeasibilit y Study Feasibilit y Study GFC Feasibility Study Expanded Feasibility Study Financing / Construction PRODUCTION >>> Second mover rare earth projects • Shorter development time, and lower development cost • Maturing new market outside of China Targeting 5-10 years from purchase to production? COMPARISON OF AUSTRALIAN RARE EARTH PROJECTS First mover rare earth projects • Delays due to technical problems at feasibility stage • Faced funding problems throughout due to lack of investor awareness Typical development timeframe will be 12-15 years

38. © Greenfields Research Ltd 0.00 2.00 4.00 6.00 8.00 10.00 0.0 200.0 400.0 600.0 800.0 1000.0 1200.0 TREOGrade(%) Ore (Mt) Major early stage light rare earth projects Major late stage light rare earth projects Heavy rare earth projects Early stage light rare earth projects

39. © Greenfields Research Ltd 0.00 2.00 4.00 6.00 8.00 10.00 1.0 10.0 100.0 1000.0 10000.0 TREOGrade(%) Ore (Mt) PROBLEM CHILDREN CASH COWS PET PROJECTS STARS

40. © Greenfields Research Ltd • • • • • • • Examples: Rare Element Resources, Arafura Resources, Peak Resources, Frontier Rare Earths

42. © Greenfields Research Ltd 0.00 2.00 4.00 6.00 8.00 10.00 1.0 10.0 100.0 1000.0 10000.0 TREOGrade(%) Ore (Mt) PROBLEM CHILDREN CASH COWS PET PROJECTS WHERE ARE ALL THE STARS?

43. © Greenfields Research Ltd 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00 0.00 1.00 2.00 3.00 4.00 5.00 TREOBasketValue(US$/kg) TREO Ore Value (US$/kg) Gold ore equivalent: 23.7g/t 47.3g/t 71.0g/t 94.7g/t 118.3g/t PROBLEM CHILDREN PET PROJECTS CASH COWS WHERE ARE ALL THE STARS?

49. © Greenfields Research Ltd $5 billion $1 billion 20% 80% $800 million $1,000 million $200 million 200 20% 5,000 1,000 80% 1,000

50. © Greenfields Research Ltd • • • • • • • • Examples: Greenland Minerals, Pele Mountain Resources, Alkane Resources, CBMM

53. © Greenfields Research Ltd Kvanefjeld (Greenland Minerals & Energy) Mt Weld (Lynas) Mountain Pass (Molycorp) Zandkopsdrift (Frontier Rare Earths) Nolans Bore (Arafura Resources) Dubbo (Alkane Resources) Strange Lake (Quest Rare Minerals) Eco Ridge (Pele Mountain Resources) Hastings (Hastings Rare Metals) Bear Lodge (Rare Element Resources) Sarfartoq (Hudson Resources) Thor Lake (Avalon Rare Metals) Kipawa-Zeus (Matamec Explorations) Market Capitalisation (equiv. US$10 million) Project Capital Cost (equiv. US$100 million)

58. © Greenfields Research Ltd Market Share (beating the competition) MarketGrowth(addingtothecompetition) 6) CASH DOG 1) CASH COW 4) FIND A STAR! 2) HEAVY PROBLEM CHILD 3) LIGHT PROBLEM CHILD 5) BY-PRODUCT CASH COW 7) DO SOMETHING ELSE!

Beginning with the End in Mind: Rare Earths - Sept 2013 - Greenfields Research / Curtin University / University of Western Australia

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