Havilah Resources Limited (HAV)

Transcription

1 Havilah Resources Limited (HAV) UPDATE: OPENING UP PORTIA GOLD MINE TREASURE CHEST 19 October 2016 KEY POINTS RECOMMENDATION SPECULATIVE BUY HAV has confirmed its geological model of the Portia gold mineralisation and is on track to significantly increase the mining inventory, the production rate and the mine life of the operation. The bedrock mineralisation contained in a highly weathered saprolite beneath and adjacent to the current open pit and on initial appraisal is extrapolated to be in the order of 2 Mt at 2 g/t for 128,000 oz, amenable to gravity separation. The value of this potential mining inventory is estimated at $86m or $0.42 per share. HAV has many options to extend mine life including drilling high potential targets immediately along strike (e.g. Lorenzo and Shylock) and exploiting the nearby North Portia coppergold deposit. The responsibility for most of the processing operations is now in the hands of CMC, the mining contractor. This considerably reduces the capital funding, lowers operating costs and reduces operational risks for HAV. As well as maintaining strong capital discipline, HAV should receive about $10 million from the exercise of options before 30 June MAJOR PROJECTS SUMMARY The Portia gold mine is in production. HAV has arranged an innovative funding structure with a mining contractor to minimise capital expenditure, reduce risk to the company and avoid shareholder dilution. Mining activities started in March 2015, the first gold pour occurred in May 2016, earlier than expected. Over the coming months, HAV is expected to add significant value by delineating a mining inventory potentially three times (and possibly more) the original mineral resource that the decision to mine was based on. Additional value could also be derived using Portia mine infrastructure to develop the North Portia copper-gold mineral resource. HAV is fast-tracking a study to investigate the feasibility of such development in order to maintain revenues subsequent to completion of processing Portia ore. Kalkaroo is a medium size copper-gold deposit with some enviable characteristics (gold cap, native copper, free digging material, in-pit dumping). While there is still work to do to refine costs, it remains that HAV offers substantial value far beyond its current market capitalisation. The key to unlock such value is to identify a development/financial partner or sell the project. The transaction currently being progressed by Altona Mining (AOH) is an illustration of what can be achieved. Applying the transaction multiple observed of 2.7 /lb, a value of $89 million or $0.43/share could be derived for the Kalkaroo project. This compares well with our risk weighted valuation of $88m or $0.43/share for Kalkaroo. Previous Recommendation Speculative Buy Buy Risk Rating High Share Price (18 Oct 2016) $ Month Price Target $1.10 Price Target Methodology SOTP Total Return (Capital + Yield) 63% Market capitalisation $115.0m Debt (as at 31 Aug 2016) $2.0m Cash (as at 31 July 2016) $0.7m SHARE PRICE PERFORMANCE Share Price $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 Volume Price Sep-15 Target Oct-16 Target $ $ EARNINGS FORECASTS July Year End 2015A 2016E 2017E 2018E Revenue* (A$m) EBITDA margin nm nm 69% 61% EV/EBITDA (x) nm nm NPAT (A$m) (2.6) (2.0) EPS ( ) (1.6) (1.2) DPS ( ) PER (x) nm nm Dividend Yield 0% 0% 0% 7% Gearing 0% 11% 0% 0% Source: Terra Studio estimates. * from 50% of gold produced Trading Volume (million) Important: Havilah Resources Limited ( Havilah ) has paid for this report to be produced on commercial terms. Since July 2014 Phillip Capital Limited ( Phillip Capital ) has been and continues to be engaged by Havilah for corporate services on commercial terms. Phillip Capital managed a capital raising for Havilah in June 2015 and received fees. Phillip Capital commissioned Terra Studio Pty Ltd, Authorised Representative no of Phillip Capital Limited, to prepare this report on commercial terms. Representatives of PhillipCapital or parties associated with them own securities and/or have an interest in Havilah. See the back page for details.

2 FINANCIAL SUMMARY Date: 19-Oct-16 Havilah Resources Ltd HAV ASX Financial Year End: July Market Information Unit Amount Company Description Share Price (as at 8 Oct 2016) A$ Havilah Resources Ltd is a mineral resource company with an operating Market Capitalisation A$m gold mine at Portia, South Australia. The company has a portfolio of copper, Enterprise Value A$m gold and other minerals projects in South Australia. Key development 12 Month Hi-Lo A$ assets are the North Portia and Kalkaroo copper-gold projects. Issued Capital m Options (including 33m listed options) m 41.5 Profit & Loss (A$m) 2015A 2016E 2017E 2018E Fully Diluted m Revenue Operating Costs 0.0 (1.7) (9.7) (9.2) Valuation Method A$m Risk Adj. A$/share Royalties 0.0 (0.1) (1.6) (1.2) Portia 5% % 0.42 Corporate & Overheads (1.2) (1.7) (1.4) (1.4) Kalkaroo Transaction value % 0.43 Exploration (Expensed) (1.3) (0.9) (4.1) (4.1) North Portia Estimate EBITDA (2.5) (1.7) Benagerie Dome Estimate Depreciation (0.2) (0.2) (0.2) (0.2) Mutooroo Estimate EBIT (2.7) (1.9) Maldorky Estimate Net Interest Exploration Estimate Tax Land At cost NPAT (2.6) (2.0) Cash (post recent exercise of options) Abnormals Less: Debt (31 Aug 2016) (2.0) - (0.01) NPAT (reported) (2.6) (2.0) Less: Corporate & Overheads (13.8) - (0.07) Plus: Option conversion Cash Flow (A$m) 2015A 2016E 2017E 2018E Total NAV/ Price Target 1.10 Cash Receipts Assumptions 2015A 2016E 2017E 2018E Payments to Suppliers (1.3) (3.0) (11.1) (10.6) A$:US$ FX rate Tax Paid Gold Price (US$/oz) 1,208 1,185 1,250 1,250 Operating Cash Flow (1.4) (0.4) Gold Price (A$/oz) 1,476 1,625 1,667 1,667 Exploration and Evaluation (3.1) (1.9) (8.0) (8.0) Copper Price (US$/lb) Capex 0.0 (3.6) (1.4) (1.0) Copper Price (A$/lb) Other (0.3) (0.0) Investing Cash Flow (3.4) (5.5) (9.4) (9.0) Production Metrics 2015A 2016E 2017E 2018E Debt Drawdown (repaymen (1.1) 4.0 (4.0) 0.0 Portia (100% basis) Share Capital Throughput (kt) Dividends (8.5) Head grade (g/t Au) Financing Income/Exp. (0.3) (0.7) (0.0) 0.0 Gold produced (oz) - 4,892 67,940 48,869 Other HAV production (50% Portia) - 2,446 33,970 24,435 Financing Cash Flow (3.3) (8.5) Kalkaroo Opening Cash Throughput (kt) Increase / (Decrease) 0.9 (1.4) Head grade (% Cu) FX Impact Head grade (g/t Au) Closing Cash Copper produced (t) Gold produced (oz) Balance Sheet (A$m) 2015A 2016E 2017E 2018E Resources Cash Portia (100% basis) Tonnes Grade Metal Other current assets Mineral Resources Inferred 720, ,822 oz Current Assets Kalkaroo Property, Plant & Equip Mineral Resources Gold cap 18,690, ,664 oz Exploration & Develop CuAu measured 85,890, % 420,861 t Other Non-current Assets ,132,186 oz Payables CuAu indicated 38,620, % 166,066 t Short Term Debt ,748 oz Long Term Debt North Portia Other Liabilities Mineral Resources Copper I-I 11,360, % 101,000 t Net Assets Gold I-I ,700 oz Shareholders Funds Mutooroo Reserves (2.0) (2.0) (2.0) (2.0) Mineral Resources Copper M-I-I 13,127, % 192,000 t Retained Earnings (19.1) (21.1) Gold M-I-I ,700 oz Total Equity Maldorky Mineral Resources Indicated iron ore 147,000, % Ratios & Multiples 2015A 2016E 2017E 2018E Grants EBITDA Margin nm nm 69% 61% Mineral Resources Inferred iron ore 304,000, % EV/EBITDA nm nm 2.2x 2.9x Op. Cashflow/Share -$0.01 $0.00 $0.25 $0.18 Directors & Management P/CF -84.9x x 2.7x 3.8x Ken Williams Chairman EPS ( ) Chris Giles Managing Director EPS Growth nm nm 0% 0% Paul Mertin Non-Executive Director PER nm nm 3.0x 4.4x Walter Richards CFO & Company Secretary Jared Murray Operations Manager DPS $0.00 $0.00 $0.00 $0.05 Dividend Yield 0% 0% 0% 7% Substantial Shareholders Shares (m) % ROE -7% -5% 50% 28% Trindal Pty Ltd % ROIC -5% -3% 62% 26% Mrs Selvie Tjowasi % Debt/Equity 0% 11% 0% 0% First Names (Jersey) Limited % Net Interest Cover nm nm 879.0x nm Glencopper SA Pty Ltd % Book Value/Share $0.23 $0.22 $0.44 $0.55 Price/Book Value 2.9x 3.1x 1.5x 1.2x Source: Terra Studio estimates Page 2

3 TABLE OF CONTENTS 1. Sum of the Parts Valuation Portia Gold Mine... 4 Infrastructure... 4 Waste Stripping... 4 Ore Mining... 5 Processing Plant... 6 Base of Tertiary Mineralisation... 8 Bedrock Mineralisation... 9 Funding and Risk Management Valuation North Portia Valuation Benagerie Dome Prospects Kalkaroo Copper-Gold Project Location Mineral Resources Geology & Mineralisation Mining Processing Permitting Timetable Upside Potential Economics and Valuation Transaction Value of Copper Projects Mutooroo Maldorky Mineral Resource Mining Exploration Investment Risks Sum of the Parts Valuation Most of the value offered by Havilah Resources currently resides in two projects: Portia and Kalkaroo. Please refer to the Financial Summary. With the Portia Gold Mine now in operation, North Portia attracts more value due to the immediate proximity and the ability to treat part of its mineral resource (gold mineralisation) using the existing infrastructure. Numerous high quality targets ready to be drilled Outside the immediate extensions of Portia mineralisation, a number of high quality prospects have already been identified by previous tenement holders. Drilling on those prospects could attract additional value as mineable resources are delineated with the benefit of the Portia infrastructure to process the ore. Page 3

4 Successful explorer Similarly to Portia, as the other projects (Mutooroo and Maldorky) are de-risked, the valuation of those will increase. At any point, HAV could also sell all or part of its mineral resources projects and attract a sale price well beyond the valuation assigned currently. In parallel and considering the track record of exploration success, HAV could make a significant new large copper, gold, iron ore, tin or uranium discovery on its > 8,000 km 2, 100% owned tenements. Finally, HAV s management has recently demonstrated its ability to innovatively fund its first mine. The value of Kalkaroo (and other projects) could be unlocked in a similar manner when a financing deal or a funding partner is secured. HAV maintains a tight capital structure The valuation assumes the exercise of the listed and unlisted in-the-money options expiring in 2017, bringing about $10 million cash to the company and increasing the number of fully paid ordinary shares to 204,768, Portia Gold Mine The operations at the Portia Gold Mine have been progressing according to plan for most activities. Infrastructure Access to the Portia gold mine is via an unsealed public road from the Barrier Highway to Mulyungarie Station Homestead, followed by a station track to the site. The tailings dam and all associated site infrastructure (excepting the processing plant) were completed by the end of July With regards to water, an extensive network of dewatering pumps has been established near the crest of the open pit. Thanks to this network, modest water inflows have been encountered during the overburden removal and mining of the initial Base of Tertiary gold mineralisation. Those have been readily handled by pumping from a collection sump cut in the open pit floor. Opportunity to source process water from pit dewatering As the pit reached past the Base of Tertiary gold mineralisation, a significant water inflow of about 30 l/s has been opened in the pit floor, which provides very effective dewatering and a source of additional processing water. Waste Stripping The overburden and waste material movement have been recorded so far as follows: Overburden and Waste Stripping Waste mining in the order of 440,000 BCM per month 700, , , , ,000 BCM per month 440,490 Average 200, ,000 0, Terra Studio Page 4

5 The total amount of overburden and waste material moved for the project stands at 7.0 million BCM at the end of August. Significant commitment from CMC to the Portia mine Extensive fleet and support equipment readily available In July 2015, a second fleet of mining equipment, including a second Hitachi EX tonne excavator and five additional 100 tonne dump trucks was added by Consolidated Mining & Civil Pty Ltd (CMC) as well as a third crew, which allows continuous operations. This brings the total mining fleet on site to two Hitachi 250 tonne excavators, two 120 tonne excavators, twelve 100 tonne dump trucks, two Cat 637 scrapers, two Caterpillar D10T dozers, three water trucks plus various supporting equipment. The second fleet of equipment was not in the original mining plan, but provides additional operational flexibility and an ability to accelerate production if required. Portia Mine Site Source: CMC (Steve Radford) Low angle required for pit wall angles In May 2016, mining operations were suspended temporarily following a slippage of the northern pit wall and heavy rains at the time. The slippage had been predicted well in advance thanks to the laser scanning system which is constantly monitoring pit wall movements. Ongoing geotechnical testing and monitoring work has determined that a relatively low pit wall angle of approximately 22 degrees in the low strength sand and clay overburden material provides an adequate factor of safety. Ore Mining Thanks to a redesign of the short term mining plan, gold ore mining commenced in March 2016, three and half months earlier than originally scheduled. As CMC had removed 70m of overburden and waste stripping was within 5m of the targeted high grade gold mineralisation, Havilah drilled 13 holes from the within the pit floor to accurately determine the top and bottom of the Base of Tertiary gold rich layer. This information was then entered into the GPS controller on the 120 tonne excavator that allows the operator to mine the high grade ore with minimal dilution. The high grade gold horizon is contained within a grey clay and overlaid by lower grade pinkish clay, which is stockpiled separately for processing. Given the high value of the ore, Havilah s geologists are continually monitoring mining operations to ensure that each truck load of ore material is delivered to the correct location on the stockpile. Page 5

6 Portia Ore Mining Simple mining operation with visual control of the ore zones. 2m thick high grade ore zone (the grey clay in front of the excavator bucket) being exposed in the floor of the Portia open pit. This is overlain by lower grade pinkish clay. The mining objective is to selectively mine these two ore types and stockpile them separately on the ore pad ready for processing. Processing Plant Portia Processing Plant Simple gravity plant No crushing No milling No CIP/CIL circuit Source: Author. Apron feeder, trommel ad log washer in the background. Final gold separation and gold room in the centre of the image. Knelson concentrators in the foreground. Page 6

7 The processing plant was completed two and half months ahead of schedule and on budget in April In early May, the plant was commissioned and started treating high grade gold ore. The main components of the processing plant includes: Simple gravity plant No crushing No milling No CIP/CIL circuit a feed bin and apron feeder a trommel a log washer and attritionner various conveyors belts a number of large pumps two riffle tables a large vibrating screen (to size material for Knelson concentrators) two Knelson concentrators Wifley and gemini gravity concentration tables, and a gold furnace Riffle Table Wifley and Gemini Tables About 50% of gold currently recovered by the rifle tables Source: Author From the apron feeder, the run-of-mine ore is either fed to the trommel or the log washer. At the time of the site visit, a second apron feeder had just been installed to independently feed some of the clay material to the log washer. The oversize from the trommel is stockpiled for future re-processing after track rolling and crushing. The slurried ore feed from the trommel and log washer is pumped c to the riffle tables, and then over a vibrating screen that sizes the feed for the Knelson concentrators. Gold Produced Unusual gold nuggets Source: Author Page 7

8 So far up to 50% of the gold produced is recovered from the riffles in the form of nuggets up to 10mm in size. The finer gold particles in the 2mm sized fraction are recovered by two automated Knelson concentrators, with final clean-up via the Wiffley and Gemini concentrating tables. Good early days reconciliation From the July 2016 quarterly report and indications from management, we have estimated that about 30,000 t of ore have been processed with a head grade of about 5.4 g/t gold. At this point, the head grade compares quite favourably with the mining inventory grade of 4.7 g/t estimated prior to mining. Havilah has successfully designed, built, commissioned and operated the Portia gold processing plant through to 30 June Most of the processing responsibility including further expansion passed on to CMC From 1 July 2016 CMC offered to operate the processing plant, excluding the gold room, on a sliding scale fixed rate per tonne of ore processed. CMC were able to offer an attractive rate because of access to a skilled workforce on site and extensive local resources in Broken Hill, which HAV could not easily duplicate without a major investment in additional human resources, infrastructure and systems. Operation of the gold room and gold pours still remains the responsibility of HAV. Since operating the processing plant, CMC, assisted by HAV s technical team, have been working steadily on improving plant throughput and reliability and have achieved consistent daily throughput of more than 1,000 tonnes per day. Plans are afoot to boost this to 2,000 tonnes per day by making strategic modifications and improvements to the processing circuit. Reaching this increased throughput rate is critical to realising value from the additional bedrock mineralisation recently discovered. Initial small high grade gold resource The nature of the gold mineralisation is such that drilling intercept grades vary considerably Base of Tertiary Mineralisation Havilah s decision to develop and mine gold at Portia is based on an inferred mineral resource of 720,000 tonnes at 3.1 g/t gold for 71,760 ounces. This mineralisation is referred to as base of Tertiary gold mineralisation. From this mineral resource, Havilah defined a mining inventory of 355,000 tonnes at 4.7 g/t for 53,800 ounces, within an optimised open pit design. This gold mineralisation is contained in a tabular light grey clay layer about 2m thick with drill intercepts (1m interval) gold grades ranging from 5 to 30 g/t Portia Schematic Cross-Section Page 8

9 Mineralisation extension to the South confirmed by drilling Bedrock mineralisation represents significant upside potential Bedrock mineralization characterised by vein/replacement style An 11 hole aircore drilling program from a temporary ramp in the southern wall of the open pit was completed in order to test continuity of mineralisation in the southern extensions of the Portia resource. Higher grade base of Tertiary gold mineralisation, which has been the primary mining objective at Portia to date, was intersected in all southern extension drillholes and averages 12.2 g/t over approximately 2m thickness in nine drillholes. Bedrock Mineralisation Bedrock material 1 was exposed in the pit floor for the first time during the July quarter and shows a vein/replacement mineralisation system similar to that at Kalkaroo and in the same regional prospective sequence stratigraphic package of rocks. A pervasive carbonate - sulphide cross cutting vein system is observed over the 60m width of the current pit floor mostly within a distinctive black graphitic pelite unit (see photograph below). Sampling and panning of the oxidised vein material accessible in the pit walls shows abundant visible finegrained gold, similar to that typically observed in the drill samples. The host mineralised unit dips east at approximately 45 degrees and HAV has now commenced a drilling program to determine the down-dip extensions of the gold mineralisation beneath the current open pit (see Portia bedrock gold target identified on the diagram below). This will extend earlier limited pit floor drilling that was completed in an accessible part of the open pit. Gold Mineralisation in Bedrock (saprolite) Dip angle well defined Free digging material. Note the marks of the excavator bucket teeth indicating free digging material In the southern end of the pit, the 11 hole aircore drilling program has confirmed the presence of high mineralization in bedrock. Results are summarized below: Portia Aircore Drilling Programme Results Highlights (Aug. 2016) Drillhole From To Interval Grade Significant width and very high grade intercepts Latest drilling results confirm the historical results PTAC m 94m 30.5m 39.3 g/t PTAC m 74m 6m 53.6 g/t PTAC m 92m 13m 8.4 g/t PTAC m 90m 4m 35.4 g/t PTAC m 88m 7m 3.2 g/t 1 In the context of Portia and part of the Benagerie Dome, bedrock refers to mostly weathered and oxidised free digging metamorphic rocks of Broken Hill age (circa 1.6 billion years) Page 9

10 These results corroborate earlier high grade bedrock intersections, that were reported during initial resource drilling almost ten years ago including: Portia Aircore Drilling Programme Results Highlights (Aug Feb. 2007) Drillhole From To Interval Grade PTAC m 104m 8m 10.0 g/t PTAC m 101m 26m 15.4 g/t PTAC m 97m 13m 33.5 g/t PTAC m 99m 25m 14.5 g/t PTAC m 98m 26m 9.0 g/t Assays have been derived by washing the entire percussion drill samples available (typically in excess of 10 kg) and then having an independent laboratory fire assay the resulting concentrate. This method, although time consuming is considered to produce a far more reliable result than the traditional assay using only 50g charge from a 2-3kg split sample 2. The bedrock mineralization is characterised by vein/replacement style whereby mineralised fluids have been injected into and replaced a particularly reactive carbonate rock strata. Consistency of stratigraphy bodes well for regional exploration potential At a regional scale, the same stratigraphic series is consistently found with an association of gold (Portia) or copper-gold (North Portia, Kalkaroo) mineralisation. Considerably more work will be required to accurately determine the grade, distribution and likely tonnages of any such bedrock economic material. Considering the thickness and grade of the initial drilling results, the mine is preparing itself for an extended operation. Portia Long Section 2 In order to mitigate the coarse gold nugget sampling problem, Havilah routinely takes the balance of any samples with anomalous gold fire assay results (typically amounting to more than 10 kg sample weight) and produces a concentrate of several grams by gemini tabling and panning. This concentrate is sent to ALS Townsville laboratory for fire assay. Havilah calculates the original sample gold grade by dividing by the weight concentration factor obtained by dividing the fire assay gold prill weight by the original drill sample weight. Page 10

11 First cutback to be progressed Very light gearing Limited hedging requirement Innovative funding costs structure based on success Only $4m out of $6m drawn down and now only $2m left to repay Owing to the promising drilling results, the economics of cutting back the southern wall are presently being evaluated. In anticipation, HAV is currently working through the permitting requirements for a 120m cut back of the southern open pit wall. This cutback will require removal of an additional approximately 3 million BCM of overburden, i.e. about 6 month mining to access approximately 30,000 tonnes 3 of high grade base of Tertiary ore material and approximately 100,000 tonnes 2 of medium grade bedrock (saprolite) ore material. Funding and Risk Management Beyond the innovative mining and funding contract entered with CMC in January 2015, HAV announced that it had secured Investec Group for a $6 million Loan Facility and Risk Management Facility from Investec Bank Group. The proposed Risk Management Facility involved HAV hedging 10,000 ounces of gold production to improve the certainty of future cash flow from the Portia mine. The average prices hedged is A$1,618/oz. The Loan Facility provided HAV with funding for the Portia project to allow it to complete the refurbishment, transportation and installation of the gravity processing plant. The provision of the facilities is subject to a success fee. The fee will apply only to HAV share of production and only if total production exceeds 50,500 oz of gold in total and is capped to a total production of 80,000 oz. Here again, HAV demonstrates its ability to innovate to minimize upfront cash outflows and remunerate service providers based on success. With only $4 million of the facility drawn down, and already half of the amount repaid, HAV has mitigated its financial risk. Valuation The confirmation of the presence of bedrock mineralisation is a great outcome for the Portia Gold Mine and brings considerable additional value to the operation, hence to both HAV and its mining/processing contractor CMC. In the absence of mine plan, ore reserves, mineral resources and with very limited drilling, one can only grossly extrapolate the bedrock mining inventory as well as its potential extent along strike and down dip. Extrapolation required to estimate bedrock mining inventory 2 million tonnes of bedrock mineralisation assumed initially Considering the whole bedrock gold target zone, one could assume the following mineralised envelope: 475 metres strike length with modest north and south extensions, the current BOT mineralization has been confirmed over a strike length of over 700m. 90m down dip extension, a 45 degrees dip towards the east has been derived from measurements in the pit and drilling 25m thickness of ore zone average density of 1.8 for saprolite This gives a tonnage of about 2 million. With regards to grade, until we get adequate density drilling data and assay results, the average grade is quite difficult to estimate with any certainty. 3 These are approximate volume estimates only for indicative purposes and are not JORC status resource estimates at this stage, pending generation of block models. Page 11

12 We shall consider several cases: lower case: average grade 1 g/t Au base case: average grade 2 g/t Au upper cases: average grade 3 and 4 g/t Au Mining operations are outside Havilah s area of responsibility, hence no mining costs are considered. With regards to processing, we assumed a throughput rate of 800,000 tpa (i.e. 125tph for 19 hours a day and 95% availability). Recovery is assumed to be 95% and processing costs assumed at $10/t. The resulting NPV 5% are summarised in the table below: Portia Gold Mine Valuation with extrapolation of Bedrock Mineralisation Value directly related to grade Assumed Head Grade NPV 5% Value per Share 1 g/t gold $43m $ g/t gold $86m $ g/t gold $128m $ g/t gold $167m $0.81 Source: Terra Studio estimates For the sum of the part valuation of HAV, we have retained the estimate based on a 2 g/t head grade, i.e. $86 million. Page 12

13 3. North Portia North Portia lies 500m north of Portia. Actually the crest of the North Portia and Portia open pit designs lie within 200m of each other. View of the Portia Mine Site Layout and North Portia Proposed Development Project in the immediate vicinity of Portia North Portia contains a JORC Indicated and Inferred Resource of 11.3 million tonnes of 0.89% copper and 0.64 g/t gold. The North Portia mineral resource is summarised in the table below: Mineral resource include gold mineralisation amenable to gravity separation North Portia Copper-Gold Mineral Resource (Nov. 2010) Category Tonnes Cu Au Copper Gold Indicated (supergene) 2.75 Mt 1.00% 0.65 g/t 27,500 t 57,500 oz Inferred (sulphide) 8.61 Mt 0.85% 0.64 g/t 73,200 t 177,100 oz Total I+I Mt 0.89% 0.64 g/t 100,700 t 234,600 oz Indicated (supergene) ppm Mo The copper, gold and molybdenum mineralisation at North Portia is located on the easterly dipping limb of the Benagerie Dome. There are many similarities with the larger Kalkaroo deposit 30km to the south, especially in the replacement and vein/breccia style mineralisation. HAV is fast-tracking a study to investigate the feasibility of mining the North Portia copper-gold deposit. This development could take advantage of the considerable investment in mining and site infrastructure already put in place at Portia and would either increase or extend mining revenues. Page 13

14 No mining study has been carried out on North Portia to date because HAV had planned to develop the Kalkaroo copper-gold mine first and then utilise this processing plant to treat the North Portia copper sulphide ore. However, given the new synergies provided by the adjacent Portia gold mining operation, a new mining plan is being developed for North Portia based on an updated resource block model. In general terms there is about 4 million tonnes of free digging oxidised material that could be readily mined that compared with Portia would require twice the amount of overburden and could generate about two and a half times the revenue The viability of the project is potentially enhanced by several positive factors: Valuation Comparatively low mining cost due to the free-digging nature of the overburden and oxidised ore Limited crushing or grinding required for the soft oxidised ore. Additional metallurgical test work will determine the extent to which the existing gravity plant can be employed to recover copper and gold Mining equipment and site infrastructure is already in place North Portia lies within the Portia Mining Lease. Permitting could be reduced to the approval of a new Program for Environment Protection and Rehabilitation (PEPR). We have valued North Portia at $19 million. This value is derived from increased resource multiple assigned to the existing mineral resource. Page 14

15 4. Benagerie Dome Prospects Benagerie Dome refers to the large dome-like structure defined by the aeromagnetics as shown in the image below, and interpreted to be a complexly folded sequence of highly altered and mineralised metamorphosed sediments of Broken Hill age (circa 1.6 billion years old). Benagerie Dome Aeromagnetic Image 5km Tremendous amount of historical drilling defining targets ready to be followed up Portia Outstanding exploration potential The prospectivity of the area has been confirmed by numerous gold intercepts recorded through historical drilling undertaken by previous tenement holders Pasminco-Werrie Gold joint venture in the late 90 s. Among the results one of the highest grade and widest gold drilling intersections recorded 23m at 79 g/t gold from a RC hole at the Shylock Prospect. Other results appear relatively inconsistent likely due to the use of conventional assaying in the context of coarse nuggetty gold mineralisation. HAV is looking at following up those historical results with a drilling programme planned this year. Any economic mineralisation discovered will benefit from the immediate proximity of the Portia gold treatment plant and infrastructure. Page 15

16 Benagerie Dome Prospects 5km Tremendous amount of historical drilling defining targets ready to be followed up Benagerie Dome Prospects Outstanding exploration potential Page 16

17 5. Kalkaroo Copper-Gold Project Location Kalkaroo is a medium size copper-gold deposit with over 622,000 tonnes of copper and 2 million ounces of gold. It is located close to infrastructure, 120 km from Broken Hill and 55 km from the trans-continental railway. The Kalkaroo Station is owned by HAV and is currently used as an exploration base. Location of Havilah s main resource projects 622,000 t of copper 2,000,000 oz gold One of the largest undeveloped copper-gold resource in Australia 120km from Broken Hill mining centre and close to infrastructure Mineral Resources The mineral resource is summarised in the table below: Kalkaroo Copper-Gold Mineral Resource (Feb. 2012) Mineral resource classified in the indicated and measured categories due to the consistent geology Category Tonnes Cu Eq. Cu Au Cut-Off Grade SG Gold cap 18.7 Mt g/t 0.2 g/t Au 1.86 Measured 85.9 Mt 0.81% 0.52% 0.41 g/t 0.3% Cu Eq Indicated 38.6 Mt 0.68% 0.45% 0.33 g/t 0.3% Cu Eq Total M+I Mt 0.77% 0.50% 0.39 g/t 0.3% Cu Eq Cut-off grades of 0.3% Cu Eq. for the main deposit and 0.2 g/t Au for the gold cap. Page 17

18 The Indicated category is defined by all ore blocks that lie more than 50m distant from the nearest drill hole. The Measured category includes all ore blocks lying within 50m if a drill hole and reflects the excellent geological continuity of mineralisation and host rocks observed between drill sections and individual drill holes. The deposit is remarkably consistent over the 3km strike length known from resource definition drilling, thereby justifying the measured status of the mineral resource Supergene gold and native copper, Recoverable by gravity methods Geology & Mineralisation Kalkaroo is a large replacement copper-gold-molybdenum deposit located on the northern faulted portion of a major structural dome. Hydrothermal fluids have replaced particular favourable units in a m thick mine sequence package of rocks. At Kalkaroo, the mineralisation is stratiform and uniformly distributed along an arcuate 3km strike length. It is hosted in a m thick horizon, that has been exposed to prolonged and deep weathering. Consequently, the deposit shows typical supergene enrichment features, caused by the oxidation of sulphide minerals in the weathering zone, resulting in the following subhorizontal stratification of mineralisation, from top to bottom (with the percentage of total resource): 1. Supergene gold cap in saprolite (13%), with >95% recovery indicated for Carbon-In-Leach (CIL) 2. Native copper in saprolite (9%), largely recoverable by gravity methods 3. Chalcocite (Cu 2 S) dominant with gold (21%), recoverable by conventional flotation 4. Chalcopyrite (CuFeS 2 ) dominant with gold (57%) and locally rich in molybdenum, recoverable by conventional flotation Kalkaroo Mineral Resource by Mineralisation Type Category Tonnes % Tonnes Cu Au SG Saprolite Gold 18.7 Mt 13% g/t 1.86 Native Copper 13.1 Mt 9% 0.55% 0.58 g/t 2.02 Chalcocite 29.5 Mt 21% 0.56% 0.43 g/t 2.49 Chalcopyrite 81.9 Mt 57% 0.47% 0.34 g/t 2.68 Total Mt 100% Mining HAV revised the open pit mine design using metal prices of A$6,000/t (A$2.72/lb) copper and A$1,600/oz gold. The optimised pit shell captures million tonnes split between the gold cap and the main copper-gold orebody, as summarised in the table below: High conversion rate of mineral resource to mining inventory Kalkaroo Mineral Resource within Optimised Pit Shell Category Tonnes Cu Au Copper Cu Gold Gold Cap 16.7 Mt g/t 413 koz Main Ore Body 98.9 Mt 0.55% 0.42 g/t 527 kt 1,338 koz Total Mt 527 kt 1,751 koz This represents about 81% of the mineral resource and is contained within a total pit volume of million tonnes, resulting in life of mine strip ratio of 3.2 to 1. Page 18

19 Waste above 120m depth is free digging and consequently no blasting will be required, which along with in-pit dumping, significantly reduces mining costs. Likewise the gold and native copper saprolite ores will not require blasting. Ultimately, the drill and blast capacity will be around 7 Mtpa to match the expected throughput tonnage of fresh sulphide ore. Conventional processing routes Processing Processing will be tailored to maximise recoveries of the oxidised and nonoxidised ore types via a multi-stage processing plant (see flow chart below). It is proposed that the gold cap saprolite ore containing gold will initially be disaggregated in a relatively low capital scrubbing and screening plant with the feed going directly to a conventional CIL circuit with recoveries >95% indicated and a nominal 1 Mtpa throughput. The native copper saprolite ore will be mined and treated separately. After scrubbing and screening, the feed will go to a 1 Mtpa gravity separation plant, in order to capture the coarse-grained native copper. The finer native copper, not collected by screening or gravity methods will be recovered by flotation. The harder primary sulphide ore will be treated in a conventional grinding and flotation processing circuit, with a nominal throughput of 7 Mtpa. Metallurgical testwork indicates acceptable chalcopyrite separation by flotation, with copper recoveries up to 85% at a concentrate grade exceeding 27%. Kalkaroo is expected to produce 35,000 t of copper and 108,000 oz of gold per annum over a 14 years mine life (high capital start-up option). Kalkaroo Processing Flow Chart Concentrates will be dewatered and dried and stored on site prior to transportation in covered containers to the railway some 50 km to the south. From there the concentrates will be freighted by rail to port, either Port Pirie or Port Adelaide. Page 19

20 Mining Lease proposal lodged Land Owned by Havilah Resources Permitting HAV has lodged a Mining Lease Proposal document with the Department of State Development (DSD) in support of its mining lease application over the Kalkaroo deposit. This document met DSD s stringent internal adequacy checks and was posted on DSD s website for the mandatory public exposure period, during which comments from the public were received for consideration by HAV. The area is covered by the Stage 2 native title claim by the Adnyamathanha people, which has yet to be determined. Native title mining negotiations with the Adnyamathanha people are advancing. In December 2014, HAV purchased the Kalkaroo Station for $2.1 million HAV s ownership of the land removes any landholder issues and is a major step forward in the Company s strategy to eliminate risk and clear the path for the development of this project. Kalkaroo Station: homestead and outbuildings The Kalkaroo deposit lies about 1.5km to the north (left of the photo) Opportunity to lower operating costs Another positive aspect of owning Kalkaroo Station is the opportunity to direct vegetation clearance offset cash payments, which would otherwise go to the State Government, towards conservation and environmental improvement works on the property. This means that over its four currently proposed development projects, HAV could potentially direct almost $1 million worth of vegetation offset cash payments towards approved conservation and environmental improvement projects on Kalkaroo Station. Timetable Currently, the resource block model and open pit mine design are being refined to incorporate new drilling results obtained since the last resource update. Additional metallurgical testing is focusing on the sulphide ore treatment to enable finalisation of process plant design and more accurate estimation of capital and operating costs. This in turn will allow completion of an updated feasibility study. Page 20

21 Concurrently with this work, HAV will complete the Program for Environmental Protection and Rehabilitation (PEPR) document required in order to obtain mining approval from the regulators, and will seek funding partners to provide the necessary development capital. Kalkaroo deep drilling confirmed the excellent geological continuity of the prospective sequence Upside Potential The existing resource and reserve provides already a significant mine life of 14 to 18 years depending in the start-up capital option. The Kalkaroo Prospective Sequence (KPS) displays excellent geological continuity and there is considerable scope to extend resources as the prospective sequence extends further. Kalkaroo deep diamond drilling Hole KKDD411, testing the extension of the KPS, has returned the longest drill intercept for the project to date. The hole intercepted HAV s longest mineralised intercept with 174m at 0.25% copper and 0.15 g/t gold from 261m. Mineral resource upside and potential production upside Overall, holes KKDD % Cu and 0.45g/t Au from 291m), KKDD % Cu and 0.27g/t Au from 365m) and KKDD411 (see above) confirm the excellent continuity of the mineralised sequence and the potential to expand the currently defined resource down dip of the current open pit design. Page 21

22 Kalkaroo replacement mineralisation conceptual target KKDD406 has intersected the uppermost unit in the KPS at 499.6m downhole or about 448m vertically below surface. The mineralisation intersected at KKDD406 indicates that: 1. the saddle geological concept is quite valid and 2. the discovery of shallower ore lenses is possible 0.99% Cu and 1.05 g/t Au from 198m depth). Kalkaroo NW-SE cross-section Kalkaroo KKDD401 cross-section Page 22

23 The cross-sections above indicate the location of new drillholes in relation to the proposed Kalkaroo open pit. Currently the open pit converts most of the mineral resource (drilling) into ore reserve. Economics and Valuation Based on the operational projections and costs announced by HAV, we have derived the following NPV valuation: 1. High capital start-up: High capital start-up NPV of $508m Low capital start-up NPV of $295m 9 mtpa throughput (2 mtpa oxidised ore + 7 mtpa sulphide ore) initial capital expenditure: A$340 million 34,000 tpa copper and 108,000 oz gold 14 years mine life 10% A$508 million 2. Low capital start-up: 2 mtpa oxidised ore plant then 7 mtpa sulphide ore plant initial capital expenditure: A$83 million (+ $177 million) rising to 35,000 tpa copper and 106,000 oz gold from year years mine life 10% A$295 million For valuation purposes, selecting the low capital option and applying a 40% risk adjustment factor results in a value of $118 million for Kalkaroo. Transaction Value of Copper Projects The following table summarises some of the recent transactions observed in the copper sector: Transaction Value of Copper Projects or Companies Target Date Mineral Resource Cu Au Copper Gold Cu Eq. Share Price Price/ Resource Aditya Birla Oct Mt 2.10% kt kt 100% $80m $0.084/lb Cloncurry (AOH) Indophil Resources Blackthorn Resources Jun Mt 0.57% ,635 kt 368 koz mt 60% $105m $0.028/lb Sep-14 2,940 Mt 0.50% mt 18 moz 18.9 mt 37.5% $153m $0.010/lb Aug Mt 2.19% 0.03 g/t 850 kt 37 koz 858 kt 100% $43m $0.023/lb Aston Metals Apr Mt 0.39% kt kt 100% $37m $0.024/lb Augusta Resource Jun Mt 0.40% 0.1 g/t Ag 4.0 mt 3.3 moz Ag 4.7 mt 100% $555m $0.053/lb Copperwood Feb Mt 1.60% 4 g/t Ag 527 kt 4.3 moz Ag 538 kt 100% $31m $0.026/lb Nanadie Well Dec Mt 0.42% kt kt 75% $4m $0.016/lb Northparkes Aug mt 2.4 moz 2.2 mt 80% $820m $0.21/lb Cloncurry (EXS) Apr Mt 0.85% 0.22 g/t 472 kt 394 koz 558 kt 100% $175m $0.14/lb Kalkaroo n/a Mt 0.50% 0.44 g/t 623 kt 2 moz 1.1 mt 100% n/a n/a Difference with Cloncurry (AOH) -62% +444% -38% Assumed metal prices for Cu Eq calculations: Cu $2.50/lb, Au $1,200/oz. Source: company announcements Page 23

24 6. Mutooroo The Mutooroo mineral resource is summarised in the table below: Mutooroo Copper-Gold Mineral Resource (Oct. 2010) Category Tonnes Cu Au Copper Gold Measured sulphide Mt 1.23% 0.18 g/t 50,800 t 24,500 oz Indicated sulphide Mt 1.52% 0.35 g/t 25,700 t 19,300 oz Inferred sulphide Mt 1.71% 0.21 g/t 113,900 t 46,000 oz Measured oxide Mt 0.56% 0.08 g/t 3,300 t 1,600 oz Total Mt 1.48% 0.22 g/t 192,000 t 92,700 oz In the long term, those resources relatively close to Kalkaroo could complement the ore feed at Kalkaroo or become part of a wider development plan. Note the Mutooroo has significant cobalt credits that could be realised by recovery of pyrite, which represents a sizeable cobalt resource in its own right. Similar comments apply to Kalkaroo, but at this stage no value has been attributed to the cobalt content. 7. Maldorky The Maldorky deposit has several favourable attributes that HAV believes will make it a particularly attractive mining proposition in the emerging Braemar iron ore province : Excellent geometry Minimal overburden Relatively high iron ore grade Close to infrastructure A flat, shallow, deposit covering only 62.4ha requiring a simple open pit mine plan. Minimal overburden (0-5m) and internal waste material resulting in minimal waste mining costs. Relatively high grade (30%) and high yield (approximately 37.5% of the ore converted to saleable product), meaning lower unit mining and processing cost per tonne of saleable product. Only 26 km from the railway line (the closest of all known Braemar iron ore resources to date), minimizing haulage costs. The Maldorky iron ore deposit was discovered as the result of drilling a prominent magnetic anomaly associated with poorly outcropping Braemar Iron Formation. Mineral Resource Maldorky Indicated Mineral Resource - June 2011 Cut-off Grade Tonnes Average Grade Average Density 0% Mt 27.8% Fe % Mt 29.3% Fe % Mt 30.1% Fe 3.69 The Indicated Resource category is justified by the high degree of confidence in the continuity of mineralisation, the internal consistency of the assay data and the adequate drill hole spacing for the simple geometric shape. It is anticipated that further drilling will expand the orebody. Page 24

25 3D cut-away of the topography showing the Maldorky deposit lying just below the surface Mining Based on the previously published Indicated Resource, a 3 stage open pit was designed as indicated below: Three stage Maldorky open pit design This mine design has a comparatively low (waste to ore) strip ratio of 0.19 due to the flat nature of the deposit and the minimal volumes of internal waste. This implies favourable mining economics for the Maldorky deposit. Maldorky Mining Parameters - December 2011 Pit Stage Cut-Off Ore Fe Waste Strip Ratio 1 18% 49.6 Mt 32% 1.3 Mt % 48.7 Mt 30% 6.4 Mt % 41.4 Mt 29% 18.8 Mt Mt 30% 26.6 Mt 0.19 Page 25

26 Based on a range of industry standard comminution measurement criteria, metallurgical results indicate that the Maldorky iron ore is classified as soft. All parameters lie in the lowest quartile for crushing and grinding resistance. Considerable work was undertaken on compilation of the Maldorky mining lease proposal (MLP), which was lodged with the Department of State Development in July Work is currently focused on addressing public comments, landholder access and native title issues. Good metallurgical characteristics The current mining proposal is for a 5 year mining plan, in which 24 million tonnes of iron ore will be mined to produce 8.5 million tonnes of saleable concentrate. The mining proposal will be revised to cater for expanded mining rate beyond five years, subject to available infrastructure capacity. The predominantly hematite project has the advantage of being close to existing and available rail and port infrastructure. The iron ore mineralisation can be readily beneficiated resulting in low contaminant sought after hematite rich concentrate. Mining operations are likely to be low cost compared to their peers due to very low stripping ratio and easy grinding. Finally, the deposit is located in a resource-supportive regulatory jurisdiction with reduced environmental and social risks. 8. Exploration HAV s immediate exploration objective is to identify economic mineralisation in the vicinity of the Portia gold mine that could utilise the existing infrastructure. Exploration drilling, first by the Pasminco-Werrie Gold joint venture and then HAV, have shown that the Benagerie Dome is highly mineralised and very prospective for new copper-gold and gold discoveries. With regard to gold specifically, several bonanza grade gold drill intercepts have been returned from the bedrock. At Shylock, the Pasminco-Werrie Gold joint venture made one of the highest grade gold intersections in modern history in South Australia, namely 23m at 79.4 g/t gold in drill hole BEN0677. HAV has recently intersected similar bonanza grades in PTAC m at 39.3 g/t gold in the southern extensions at Portia, highlighting the high grade potential. Beyond Portia, HAV have a solid reputation and track record of exploration success, discovering eight deposits in the last eight years and delineating JORC compliant mineral resources for each of them. Page 26

27 Development Stages of Havilah s Mineral Assets Portia Au MINING: mining commenced March 2015 Kalkaroo Cu-Au North Portia Cu-Au, Mutooroo Cu-Co, Maldorky Fe, Grants Fe Eurinilla Cu-Au, Wilkins Cu-Au, Lilydale Fe >8,000 sq.km tenements, including many promising copper-gold prospects - Croziers, Green and Gold, Birksgate plus Prospect Hill tin prospect PRE- DEVELOPMENT: planning, costing, permitting, and securing funding partnership PRE-FEASIBILITY: JORC resources, feasibility studies, mining lease proposals ADVANCED PROSPECTS: multiple promising drill results EXPLORATION: MMG major copper exploration initiative HAV s 8000 km 2 discoveries tenements are highly prospective for further new mineral 9. Investment Risks HAV is exposed to a number of risks including: Geological risk: the actual characteristic of an ore deposit may differ significantly from initial interpretations. Resource risk: all resource estimates are expressions of judgment based on knowledge, experience and industry practice. Estimates, which were valid when originally calculated may alter significantly when new information or techniques become available. In addition, by their very nature, resource estimates are imprecise and depend to some extent on interpretations, which may prove to be inaccurate. Capital cost and operational cost risk: an increase in capital costs and operating costs will reduce the profitability and free cash generation of the project. Commodity price and exchange rate risk: as with all mining and mineral exploration companies, commodity price and exchange rate risk should also be considered. Management and labour risk: an experienced and skilled management team is essential to the successful development and operation of mining projects. Joint venture risk: the future viability and success of any of the joint ventures entered into by Havilah could be affected by the financial failure or default of any of the joint venture participants. Jean-François Bertincourt Director, Terra Studio Pty Ltd. Authorised Representative No of Phillip Capital Limited. Page 27