Toronto Denver London Vancouver Quebec City

1. Valuation of Mineral PropertiesFINEX ‘12Deborah A. McCombe, P.Geo.Executive Vice President & Principal GeologistRPA October 31, 2012 Toronto Denver London Vancouver Quebec City

2. Overview Setting the stage Property value vs. stock price Mineral property life cycle Types of mineral properties Valuation methods Valuation of mineral properties Option agreement terms analysis Market comparable transactions $ value per unit metal Valuation examples

3. What is Being Valued? Important to distinguish between valuation of mineral property and valuation of a company (and the company’s share price) Components of mining company share price: Mineral properties Other assets and liabilities (e.g. cash and debt) Commodity markets and general market sentiment Quality of management Market recognition and liquidity Focus of this presentation: Fair Market Value of mineral properties Non-producing properties of junior companies

4. Fair Market Value or Market Value FMV or MV used for most purposes Value that would have been paid Open and unrestricted market Between informed and prudent parties Acting at arms length Effective date of valuation critical Mining and exploration cyclical Value changes as property is advanced

5. Exploration Property ValuesChange Over Time, Depending on Results

6. Mineral Property Life Cycle

7. The Exploration Process Exploration is vital to replace depleted mines Exploration proceeds in stages designed to screen properties for promising potential Each stage is designed for go/no go decision Each stage is progressively more expensive Property value changes with time, depending on results of each exploration stage Only a very small number of exploration properties become profitable mines

8. Types of Mineral Properties Producing mineral properties (senior and some junior companies Producing mines Development planned or under construction Mineral reserves ± mineral resources Non-producing mineral properties (senior and junior companies) Early stage exploration properties Drilling stage exploration properties Properties with identified mineral resources Prefeasibility or feasibility stage projects Marginal development properties Past producing mines

9. So Why is a Non-Producing Mineral Property Worth Anything? Non-producing properties represent potential for eventual mineral production through Exploration discovery Enhancement of existing mineral resources Improved circumstances, (e.g. new roads or higher metal prices) New ownership A market exists for non-producing mineral properties With mineral resources Without mineral resources Deals are commonly option or farm-in agreements

10. Valuation Approaches • Income Approach • Based on expectation of income • Discounted cash flow method and variations • Market Approach • Based on principle of substitution • Sales comparison/comparable transactions • Cost Approach • Cost of equivalent property • Appraised value method • Multiple of exploration expenditures • Geoscience factor

11. Valuation Approaches forDifferent Types of Mineral Properties

12. Comparable Transactions Analysis for Valuation of Individual Properties No true comparables – mineral properties are unique Market size is small with relatively few transactions Can use transactions on a number of similar properties to obtain a range of values Complex property deals need analysis to obtain a value of the property Can adjust comparable transaction values by property area or by metal contained in resource Transaction date is very important since market activity and value change over time

13. Selection of Comparable Transactions Use similar characteristics to those of subject property: Commodity or group of commodities, e.g. gold Political jurisdiction Location, access, infrastructure Property size Geological setting Mineral deposit type Stage of exploration and exploration potential Exploration results and targets Activity on neighbouring properties Similar resource tonnage and grade, if any

14. Option Agreement Terms Analysis Analysis needed for valuation of market transactions Most non-producing mineral property transactions are option or earn-in agreements to earn an interest in the property The option or earn-in period may last several years; three to four is common Earn-in terms include cash, stock, work commitments and royalties Usually first year is firm and subsequent years optional Option agreement terms analysis: Schedule of payments and work commitments Estimate probability of realization of future commitments Date of the agreement is the valuation date

15. Option Agreement Terms Analysis Example Published description of the deal: Hot Commodity Resources can earn a 60% interest in the Rocky River Rare Earths property of Owl Enterprises by making payments totalling $600,000 and expending a total of $2,500,000 on exploration over four years. The first year requires $50,000 cash on signing and an expenditure commitment of $250,000. Further optional annual payments and work commitments are shown in the following analysis table.

16. Option Agreement Terms Analysis Example- Option to Earn a 60% Interest

17. Comparable Transactions Analysis Compile information on properties with similarities to the subject property Options agreement terms analysis to estimate value of comparable properties Express values of market comparable properties in terms of: Overall property value Value per hectare $ per oz Au or $ per unit metal in resource Considerations in analysis of comparable values: Examine mean and median values Eliminate outliers Consider which properties are more similar to the subject Determine an appropriate range of values to apply to the subject property

18. Analysis of Comparable Transactions Example 1: South American Gold Property

19. Analysis of Comparable Transactions Example 2: Southwest USA Gold Property

20. Valuation by $ per Unit Metal inMineral Resource Use comparable properties for valuation Same commodity, e.g., gold, uranium, copper Same political jurisdiction Similar geological setting Similar mineral deposit type Similar size and grade of resource Similar stage of exploration or development Determine $/unit metal for market comparables Analyze transaction terms to get property value Calculate units of metal in mineral resource estimate Calculate $ per unit metal, e.g., $/oz Au, $/lb U3O8 or $/lb Cu Analyze $/unit metal values to determine an appropriate range of values for the subject property

21. Analysis of Comparable Transactions Example 3: West African Gold Property

22. Analysis of Comparable Transactions Example 4: Western USA Uranium Property

23. Comparable Transactions Analysis Using Metal Transaction Ratio Valuation of properties with more than one metal in the mineral resources (polymetallic deposits) Metal Transaction Ratio (MTR) is the ratio of the transaction value to the gross in situ “dollar content” of all metals in the resource Gross in situ “dollar content” uses metal prices as of the transaction date Analogous to $ per unit metal expressed as % of metal price

24. Analysis of Comparable Transactions Example 6: South American Porphyry Copper Property

25. Mineral Property Market Overview Market sample of gold property transactions 624 transactions on gold properties in Canada Property value range and statistics Property value per unit area Value per unit metal in resource $/oz gold transacted $/lb copper transacted $/lb uranium oxide transacted Metal transaction ratio Examples

26. Values of 624 Gold Property Transactions in Canada 2003-09

27. $ per Hectare Values of 421 Gold Property Transactions in Canada 2003-09

28. Market Overview Observations Wide range of gold property values and $ per unit area values Skewed distribution of values with numerous lows and few highs (chart plotted in log intervals) Small properties have high $/ha values Large properties have low $/ha values Use comparable transactions rather than overall market to value individual mineral properties

29. Valuation by Unit Metal in Resource Can be expressed as: $ per ounce gold (Au) $ per pound copper (Cu) $ per pound uranium oxide (U3O8) Widely used yardstick for gold property transactions Applied to both properties and companies Gold equivalent ounces can include silver Sometimes expressed as % of metal price Can use Metal Transaction Ratio for polymetallic deposits

30. US$ per Ounce Au Values29 Transactions 2005-2008

31. Valuation by $ per Ounce Au Note large range in $/oz Au values (plotted on log scale) Little or no correlation with other factors: Magnitude of deal in $ Magnitude of deal in total gold ounces Gold grade of the deposit Categories of resources and reserves Use of overall market average $/oz figures not reliable except as secondary method or rule of thumb to check valuations by other methods Use comparable transactions on similar properties to derive an appropriate $/oz gold value for resources

32. Final Words Value of exploration and other non-producing mineral properties lies in their potential for hosting a viable mining operation Comparable transactions method works reasonably well using properties similar to the subject property Technical experience and judgement is a critical requirement for valuation of non-producing mineral properties Mineral property asset value is but one component of the value of a mining company and the share price

33. About RPA Technical advisors to investors in the mining industry Mining companies, banks, law firms, individual investors Extensive experience in all aspects of mine exploration, finance, valuation, development, and operation Due diligence, M&A, exchange listings (Toronto, London, Hong Kong, Australia) Offices in Toronto, London, Denver, Vancouver, Quebec

34. Contact us: Deborah A. McCombe, P.Geo. Tel: +1 (416) 642-1476 +44 (0) 203-440-5775 Email: deborah.mccombe@rpacan.com Toronto Denver London Vancouver Quebec City