2013 The Year of M&A? What You Need To Know and How To Capitalize. Sid Rajeev, B.Tech, MBA, CFA Head of Research

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1 2013 The Year of M&A? What You Need To Know and How To Capitalize Sid Rajeev, B.Tech, MBA, CFA Head of Research

2 Disclaimers Fundamental Research Corp. ( FRC ) does not own any shares, and have any investment banking business with the companies mentioned in this presentation. FRC was paid a fee by some of the companies mentioned. FRC takes steps to ensure independence including setting fees in advance and utilizing analysts who must abide by CFA Institute Code of Ethics and Standards of Professional Conduct. Additionally, FRC does not trade in any security under coverage. Forward-looking statements regarding the companies and/or stock s performance inherently involve risks and uncertainties that could cause actual results to differ from such forward-looking statements.

3 Fundamental Research Corp. Founded in 2003 Largest Independent Equity Research Provider in Canada No Investing No Banking Focus on small to mid cap stocks and exempt market securities Ranked #3 Overall and #1 in Basic Materials in 2010 based on the performance on our top picks (according to First Coverage)

4 M&A Potash Prospect Global / Karnalyte Resources / Encanto Potash Uranium Uranium One (Russia s ARMZ) for $1.3 billion / Fission Energy (Denison Mines) Gold Aurizon Mines (by Alamos Gold) for $780 million Number of $1+ billion deals in Canada 48 in 2012 ($123 billion) vs 34 in 2011 ($90 billion) Source: Major Deals in 2012: CNOOC -> Nexen Glencore -> Viterra Petronas -> Progress Energy

5 TSXV s Performance Down 52% in last five years! Mining accounts for over 50% of TSXV

6 How did commodities perform? 2007 Current Return Gold ($/oz) $650 $1, % Silver ($/oz) $14 $ % Copper ($/lb) $3.10 $ % Zinc ($/lb) $1.60 $ % Lead ($/lb) $1.03 $ % Nickel ($/lb) $24.00 $ %

7 TSXV 10 year Performance Up 9%

8 Actual Performance Gold Gross Margin 37% 42% Net Margin 21% 24% ROE 3.65% 5.10% Debt/Capital 12.10% 23.30% Cash from Operations (3 year CAGR) 29.10% Copper Gross Margin 12.80% 10.90% Net Margin 5.10% 3.10% ROE 16% 13% Debt/Capital 45.7% 46.7% Cash from Operations (3 year CAGR) 9.80% Source: Capital IQ

9 China 7.9% YOY in Q % YOY in E is 8%

10 Global GDP Forecasts IMF Forecasts 2012E 2013E World 3.30% 3.60% U.S. 2.20% 2.10% Euro -0.40% 0.20% China 7.80% 8.20% India 4.90% 6.00% Brazil 1.50% 4.00% Russia 3.70% 3.80%

11 Copper

12 Diversified Metal Ores Free Cash Flows (FCF) dropped by 39% p.a. in the past three years!

13 Who is a good acquisition target? Acquirer s Motive Diversification / Expansion Key Parameters: Location and Quality of Assets Synergy Stage Financial position Valuation

14 Stages of Mining Projects

15 Who is a good acquisition target? Acquirer s Motive Diversification / Expansion Key Parameters: Location and Quality of Assets Synergy Stage Financial position Valuation

16 Back of the Envelope Valuation Exploration Stage EV/Resource Gold Silver Copper (porphyry) Zinc Potash Uranium $60 per oz $1.02 per oz $ $0.03 per lb $0.01 per lb $0.39 per KCL tonne $ $2.25 per lb * EV = Market Capitalization + Debt - Cash * Resource Estimate - M+I and 50% of Inferred

17 Top Picks / M&A Targets

18 Temex Resources (TSXV: TME) Juby property - 934,645 ounces of gold grading 1.30 g/t indicated, and 905,621 ounces of gold at 1.00 g/t inferred; between AuRico Gold and IAMGOLD Whitney Gold project - held in a 60/40 joint venture with Goldcorp - 790,200 ounces of gold grading 2.09 g/t measured and indicated, and 241,000 ounces of gold at 1.82 g/t inferred $10M in cash/ MC - $46M EV / Resource - $18 oz Share price - $0.29 per share / FRC Fair value - $0.82 per share

19 Gowest Gold (TSXV: GWA) 100% owned Frankfield East deposit Timmins, Ontario Close to Goldcorp., Lake Shore Gold, St. Andrew Goldfields, Brigus Gold 6 million tonnes containing 945,600 oz of gold at a grade of 4.88 g/t Au, and an inferred resource of 4 million tonnes containing 536,800 ounces of gold at a grade of 4.22 g/t Au PEA completed in 2011 Feasibility study expected in 2013 Market Cap - $18M Share price - $0.12 per share / FRC Fair value - $0.50 per share

20 Candente Copper Corp (TSX: DNT) Canariaco Project Porphyry Cu - Northern Peru Copper bn lbs M&I bn lbs Inferred Gold MOz M&I MOz Inferred Silver: 45 MOz M&I + 9 MOz Inferred After-Tax NPV@10% - $375M at $2/lb CAPEX - $1.44 bn Cash Cost - $0.99/lb Market Capitalization - $54M / Cash - $12M EV/Resource (M&I + 50% Inf) $0.004 / lb *FRC does not cover DNT. FRC employees own DNT shares.

21 Strathmore Minerals (TSX: STM) PEA on Roca Honda, New Mexico 60/40 with Sumitomo Corporation of Japan BT 8% - $220M Gas Hills, Wyoming KEPCO has an option to earn up to 40% Copper Gold project in Wyoming with a positive PEA BT 5% - $160M Share price $0.27 per share / FRC Fair value - $1.35 per share

22 Western Potash Corp. (TSX: WPX) Exit strategy of juniors JV or Takeout Milestone project - 30 kilometres from Regina, SK Measured + Indicated + Inferred Resource Mt Positive Feasibility Study - Production by 2016 One of the very few advanced stage projects in SK that is yet to be acquired or subject to a JV Share price - $0.47 per share / FRC Fair value - $2.19 per share

23 Diamcor Mining (TSXV: DMI) Commenced Production at Krone Endora Diamond Project - Next to De Beer s Venetia Diamond Mine in South Africa Production goal - 120,000 carats per year increasing to 240,000 per year Strategic Alliance with Tiffany & Co. Market capitalization - $38M Share Price - $1.23 per share / FRC Fair Value - $2.14 per share

24 Pan American Goldfields (OTCBB: MXOM) New producer in Chihuahua, Mexico FY2013E 16koz / Revenues - $7M Cash cost $500 per oz PEA expected in March 2013 (6,000 7,000 tpd) Market capitalization - $11M Share price - $0.11 per share / FRC Fair value - $0.50 per share

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