Financing Alternatives in Today’s Economic Climate: A Canadian Assessment

1. Financing Alternatives in Today’s Economic Climate: A Canadian Assessment Presenter: Janne Duncan Partner, Toronto office November 30, 2009 Tel.: 416 202-6715 Email: janne.duncan@macleoddixon.com

2. Emerging from the Dark Ages? • Dark Ages for Mining Companies: Late 2008 to Current • Global financial crisis following the collapse of Lehman Brothers in mid-September 2008 negatively impacted almost every industry • Commodity prices suffered as a result of lower demand for goods and services • Gilded Age: 2001 to 2008 • Long bull market, driven by growth in the BRIC countries: Brazil, Russia, India and China • Renaissance? • Market rally during last half of 2009

3. Where are we today? • As of March 2009 (the middle of the plunge), commodity prices were still above historical norms • 60% rise in stock prices since March 2009 (but still off cyclical highs)

4. Traditional sources of financing • Mining companies have 3 traditional sources of financing: • Internal cash flow from operations • Borrowing (issuing debt) • Equity (issuing shares)

5. Effects of volatility on traditional sources of financing • Before the crash, listed companies (of all stages) could raise equity: • Initial public offering (IPO) • Secondary offering of equity (short form prospectus) • Sometimes, secondary bond offerings

6. Effects of volatility on traditional sources of financing • Stock price volatility has made it extremely difficult to obtain cash flow from its 3 traditional sources of financing: • Internal cash flow from operations - affected by low commodity prices • Borrowing (issuing debt) – unavailable during the financial crisis • Equity (issuing shares) – companies that issue stock while stock prices are low risk substantial dilution

7. Exploration, Development, Production

8. Exploration, Development, Production

9. Exploration, Development, Production

10. Exploration, Development, Production

11. Trends • IPOs have been almost non-existent during the economic crisis but appears to be picking up • New listings on the Toronto Stock Exchange include international mining companies with non-Canadian assets that are already listed on other exchanges • ASX and, to a lesser degree, AIM-listed companies are listing on TSX (and we are seeing a lost of interest from AIM listed companies) • UK = Cluff Gold (UK-based company with assets in West Africa) • Australia = Allied Gold Limited (Australian-based company with assets in Papua New Guinea) • Bought deals have been successful for gold companies that are already listed: • Gammon Gold: $100 million bought deal (October 2009) • Great Basin Gold: $110 million bought deal (November 2009)

12. Mergers and Acquisitions • Anticipate continued consolidation in the mining industry • Valuations a challenge given volatility of stock prices • Deals may be friendly (between strategic partners in order to survive) or hostile because of perceived gaps in what the seller thinks the company is worth, and what the buyer is willing to pay • Possible increase in deals involving distressed companies

13. How to prepare • Listing on recognized exchange • Corporate Transparency • corporate governance • continuous disclosure, including in Technical Reports • Political stability • Favourable mining regulatory environment

14. Macleod Dixon’s Offices Calgary, Toronto Caracas Moscow Almaty, Atyrau Rio de Janeiro Macleod Dixon LLP is a global law firm with offices in six key centers of the energy industry:  Canada (Calgary and Toronto), Venezuela, Brazil, Russian Federation and Kazakhstan. Nine lawyers from Macleod Dixon have just been ranked as leading practitioners by Who's Who Legal, Mining 2010 - the highest number of any Canadian-based firm.  PLC Which Lawyer has also just ranked Macleod Dixon as the #1 Energy firm in Canada and Venezuela for 2010.