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Exploration Speculation 101: 

Exploration Speculation 101 May 2006 Presented by John Kaiser www.KaiserBottomFish.com www.ExhibitorResearch.com

What is mining all about?: 

What is mining all about? Cash Flow from a Depleting Resource

Slide3: 

What are the key inputs for mining cash flow? Revenue Inputs Tonnage Grade Commodity Price Production Rate Cost Inputs Operating Cost Taxes Capital Cost Annual Gross Revenue less Operating Costs = Operating Profit less Taxes = After Tax Cash Flow

What is an orebody worth? Discounted Cash Flow Model: 

What is an orebody worth? Discounted Cash Flow Model Annual Cash Flow (1 + Discount Rate)n n = mine life (years of mining) ∑

Examples of Recent Takeover Bids: 

Examples of Recent Takeover Bids Diamondfields – Voisey’s Bay - $4 - $160 Arequipa – Pierina - $0.50 - $30 Dia Met – Ekati - $0.60 - $60 Canico – Onca Puma - $1 - $21 Virginia Gold – Eleonore - $1 - $14 Western Silver – Penasquito - $0.50 - $33

Slide9: 

How do we get to an orebody?

Slide10: 

How do we get to an orebody?

Slide11: 

How do we value a project before it reaches the production stage? The Probability Ladder

Rethinking the target outcome at each exploration stage aka Ultimate Project Value (UPV): 

Rethinking the target outcome at each exploration stage aka Ultimate Project Value (UPV) $100 million $500 million $2 billion

Reviewing a Basic Gambling Concept : 

Reviewing a Basic Gambling Concept Fair Bet – 10:1 odds, pays 10:1 Poor Bet – 10:1 odds, pays 5:1 Good Bet – 5:1 odds, pays 10:1 The probability of an anticipated outcome should match the payout delivered when the outcome is achieved.

Slide14: 

Applying basic gambling logic to exploration projects Find the fair speculative value corresponding to the target outcome and the exploration stage

Slide15: 

How is the market pricing a project? Buffalo Gold’s Mt Kare Project Calculating Implied Project Value = Market Price X Fully Diluted Shares Net Project Interest = ( $1.05 x 57,300,000)/0.65 = $93,000,000

Implied Values for Flagship Projects: 

Implied Values for Flagship Projects

Thank You: 

Thank You