Raising Finance in the Current Marketplace

RICHARD CHASE

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Disclaimer

The views expressed in this presentation are those of the authors and do not necessarily reflect those of

Ambrian. Any opinions expressed are subject to change without notice.

The information contained herein is compiled from a number of sources and is believed to be correct, but

cannot be guaranteed and should not be relied upon.

This document does not constitute, or form any part of, and is not to be construed as an offer, invitation or

solicitation top buy or sell any securities of any companies. The value of any investments referred to herein

and the income derived there from nay fall or rise against the investor’s interest and past performance is not a

guide to the future.

No representation or warranty, expressed or implied, is given by Ambrian or any of their respective directors,

partners, officers, employees or professional advisers as rto the accuracy, completeness or fairness of the

information or the opinions contained in this document and no responsibility or liability is accepted for any such

information or opinions or errors or omissions.

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Ambrian’s Hypothesis

We are at an inflexion point for the junior mining sector in London

The liquidity crunch will push the most underwhelming exploration companies into

the abyss

It will help bring together those companies whose assets and management teams

would benefit from the symbiosis in order to attract further funding and ultimately

commercial development

It will crystallise value for those investors skill full – or lucky – enough to own the

outright winners

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Introduction

The mining boom and the equity capital markets

The impact of the credit crunch on financing

Raising equity finance

M&A transactions

Other financing options

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Number of mining companies listed on exchanges

1335

600

229

64 46 54

0

200

400

600

800

1000

1200

1400

1600

TSX Group ASX LSE - AIM AMEX NYSE JSE

..

Source: Exchange Websites; year end 2007

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AIM – IPOs and Further Issues (2001 – H1 2008)

0

200

400

600

800

2001 2002 2003 2004 2005 2006 2007 H1 2008

No. o

f Iss

ues

0

500

1000

1500

2000

2500

Fund

s Rai

sed

(£m

)

IPOs Further Issues IPOs £m Further Issues £m

Source: London Stock Exchange

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Share Price Performance Since IPO

Down 50% or

more

37%

Down 0 - 50%

31%

Up 0 - 50%

13%

Up 50% or

more

19%

Source: Ernst & Young

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A lack of liquidity

The abilities and self-interests of brokers,

Research coverage and distribution,

The company’s commitment to marketing, Having sufficient stock placed in the UK market

− a particular issue for dual-listed companies and for companies on AIM, where there is no minimum threshold,

A preponderance of institutional investors,

A lack of retail clients, and

London’s enigmatic market making system.

Investors in smaller companies are at risk of getting in to potential “Lobster pots”

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Mining Sector Risks

Skills shortage

Infrastructure access

Carbon footprint, climate change and environmental compliance

Rising costs

Pipeline shrinkage

Resource nationalisation

Increased regulation.

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The Impact of the Credit Crunch on Financing

Investors want production – which means cash flow

The consequences of project delays and overruns can be severe on the share price

Even good projects can be regarded as uneconomic and unattractive investment

propositions if there are repetitive delays

There is the real possibility that further cash injections become impossible for the

smaller companies

− Validated by the number of companies announcing spending reviews,

emergency financing and even administration.

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Raising equity finance

Either low cost, long life assets that can survive lower metal prices or highly

leveraged assets underpinned by…

− Respected management with a proven track record

− A long term commitment to its investors: at least one UK-based director and proper communication links

− Well balanced shareholder list with an appropriate institutional/retail weighting

− A value-based proposition

Ideally: cash flow or near term cash flow

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Cash Reserves of AIM’s Mining Companies

Less than £1m

16%

Between £1m and £5m

40%

Over £5m

44%

Source: Ernst & Young

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M&A Transactions

Size

Management

Assets

The influence of the global mining houses on M&A activity on AIM has been very

limited

A far more significant contribution has been hedge funds and activist investment

firms

−get to know your shareholders…and develop new ones!

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Other financing options

Exploration Single Asset

Company or greenfield development

Intermediate

Producer with small number of operating assets

Feasibility Stage

Company in the process of completing feasibility study

Equity Finance

Capital Markets

Private

Project Finance

Equity

Debt

Pre-financial close hedging

Cost overrun funding

Structured Facilities

Hybrid project and corporate aspects

Convertible debt

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Other financing options

The sale of non-core assets

Farm-ins and Farm-outs for joint ventures

Equipment leasing

Forward sales

The sale of project equity to an off-taker

Development agency support

The sale of a royalty

Export credit finance

Debt swaps / Debt Conversion

Private Equity

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Conclusions

Difficult to raise equity finance for exploration and development

Mid and large-cap miners are cash rich from high metals prices and will snap up

promising juniors

The number of juniors will reduce through natural attrition and through mergers and

acquisition

There is an increased role for private equity – both on and off the equity capital

markets, with de-listing presenting opportunities

The availability of debt for project finance is severely constrained – but there are

other options

Juniors that survive will thrive

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Ambrian Capital plc is an independent investment banking group listed on AIM(AIM: AMBR)

Tel:- +44 (0) 20 7634 4700

www.ambrian.com