Due Diligence and Valuation Report - Tasman Resources€¦ · In May 2012, Tasman and Rio Tinto Exploration (RTX) completed formal Farm-in agreement for funding an accelerated exploration
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Full company name – Arrowhead BID 1 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
Due Diligence and Valuation Report
Arrowhead Code: 19-09-03
Coverage initiated: 03 Nov 2011
This document: 18 September 2012
Fair share value bracket: AU$0.35 to AU$1.19
Share price on date: AU$0.195i
Company: Tasman Resources Ltd.
Ticker: ASX:TAS
Headquarters: Perth, Australia
Managing Director: Gregory Howard Solomon
Website: www.tasmanresources.com.au
Analyst Team
Vishal Pasari Mohanarangam Purushothaman vishal.pasari@arrowheadbid.com mohanarangam.purushothaman@arrowheadbid.com
Market Data
52-Week Range: AU$0.061 – AU$0.205ii
Average Daily Volume: 502,212iii
Market Cap. on date: AU$44.08MMiv
Estimated EV (in AU$ MM)
Value Bracket
Copper Gold Silver Uranium Total EV
Low 20.2 3.8 13.0 42.0 79.0
High 92.3 7.6 23.2 146.6 269.8
Fiscal Year (FY) 1st July – 30th June
Summary
Tasman Resources Ltd. (Tasman), incorporated in
1987 and based in Perth, is a commodity
exploration company focused on IOCGU deposits,
along with interests in precious and base metals
and alternative energy. Tasman is focused
primarily on copper, gold, silver and uranium
mineralization in its large, strategically located
tenements on the Gawler Craton in South
Australia, which hosts some of the world’s major
copper/gold/ uranium projects.
The company has two flagship projects namely
Vulcan and Lucas Hill. The Vulcan Prospect,
located in Lake Torrens area, has been shown to
host a highly prospective, very large IOCGU
system, whilst the Lucas Hill tenement is also
considered to be prospective for IOCGU deposits.
In May 2012, Tasman and Rio Tinto Exploration
(RTX) completed formal Farm-in agreement for
funding an accelerated exploration program on its
Vulcan prospect. The agreement was conditional
subject to the results of the Aboriginal Cultural
Heritage Clearance.
In June 2012, Tasman entered into a
supplementary agreement with the Kokatha
Uwankara Native Title Claim Group to establish
guidelines and procedures for heritage clearance
surveys. The agreement covers approximately
10km2 in the Vulcan Exploration License area and
also provides for an additional heritage survey to
be conducted over priority drill targets.
Further to the agreement, Tasman conducted an
Aboriginal Cultural Heritage Survey in July 2012
and announced results in August 2012, as per
which the company obtained clearance for nine
drill sites located in Southern portion of the
prospect. Post the clearance, RTX had declared
the JV agreement unconditional, and is expected
to pay first milestone payment of AU$9MM to
fund the drilling program as per the agreement.
Tasman expects to commence a 12,000m drilling
program in Southern Vulcan prospect by
September 2012. The drilling program is expected
to be completed over a period of 12 months. The
company has also completed two deep diamond
drill holes at Lucas Hill to test discrete, gravity
anomaly, larger in area and of comparable
strength to that over the Carrapateena deposit.
Though still in the initial stages of exploration,
Tasman has achieved good progress and the risks
are mitigated by the extensive knowledge and
experience of the Tasman management team. Rio
Tinto JV is expected to reduce the company’s
financing risk and substantiate its resource
potential. Tasman also benefits from a good blend
of commodities through its several projects.
Given due diligence and valuation estimations
based on comparable resource based valuation
method, Arrowhead believes that Tasman
Resource’s fair share value lies between AU$0.35
and AU$1.19 v . Valuation is based on the
company’s flagship Vulcan prospect for copper,
gold, silver and uranium.
Tasman Resources Ltd. – Arrowhead BID 2 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
Table of Contents
Company Presentation ...................................................................................................... 3
News ................................................................................................................................. 6
Listing Information ........................................................................................................... 7
Contacts ............................................................................................................................ 7
Major Shareholders ........................................................................................................... 7
Management and Governance ........................................................................................... 8
Assets and Projects ........................................................................................................... 9
Technologies and Markets ............................................................................................... 15
Project Risk Profile Analysis ............................................................................................ 19
Risk Parameters – Definition ........................................................................................... 20
Peer Valuation and Risk Profile ....................................................................................... 21
Peer Analysis .................................................................................................................. 22
Value ............................................................................................................................... 23
Analyst certifications ...................................................................................................... 26
Valuation ......................................................................................................................... 27
Notes and References ..................................................................................................... 28
Tasman Resources Ltd. – Arrowhead BID 3 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
Company Presentation
Tasman Resources Ltd. (Tasman); incorporated in 1987 and based in Perth, is an exploration company
focused on IOCGU (Iron Oxide-Copper-Gold-Uranium) deposits. Tasman’s commodity base is a good
blend of precious and base metals in its tenements in South Australia, coupled with interests in
companies focusing on Alternative Energy and precious and base metals.
Amongst Tasman’s wide asset portfolio are its flagship projects, the Vulcan and Lucas Hill prospects. The
company commenced drilling at Lucas Hill in February 2012 and observed strong alteration and some
copper mineralization intersection in the two deep holes drilled.
We understand the Vulcan project to be top priority for Tasman, for which it could obtain the required
financing as well as technical expertise. The company had executed a formal conditional Farm-in/ Joint
Venture Agreement (Farm-In/JVA) with Rio Tinto Exploration (RTX), a subsidiary of Rio Tinto Limited,
with RTX making a non-refundable execution payment of AU$1MM to Tasman in May 2012. The
agreement was declared unconditional by RTX in August 2012, after Tasman announced that it has
obtained Aboriginal Cultural Heritage clearance, the only remaining condition precedent from the date of
execution of the Farm-In/JVA. Subsequently RTX is expected to pay First Milestone payment of AU$9MM
to Tasman to fund the drilling program, which is expected to commence in September 2012.
For more information on the Farm-in with RTX, please refer to the Tasman-Rio Tinto Farm-in agreement
details.
Company’s Portfolio and Premiums
A wide commodity base through the diverse and promising exploration prospects provides Tasman with
pre-eminent exploration potential. A strong and experienced management team further provides the
comfort for appropriately conducted and executed strategies.
Wide commodity base through diverse exploration
prospects: Tasman benefits from a good blend of
commodities through a wide number of projects in
South Australia. Its commodity base includes both
precious and base metals - Copper, Gold, Uranium,
Silver, Lead and Zinc. The strong diversity should
provide cushioning against fluctuating commodity prices
and adverse market conditions in the long term.
Tasman also avails some regional benediction from its
operations in South Australia, which is a globally
important destination for the exploration of metals
including copper, uranium, iron ore and goldvi.
Promising IOCGU Deposit: Arrowhead places huge
importance to the fact that the company’s flagship
projects (Vulcan and Lucas Hill) are into the exploration
of the IOCGU deposits, which we consider to hold immense economic potential, once proved for
resources. Additionally, the company benefits from the fact that its more than 2,000km2 tenements
neighbor the giant Olympic Dam mine.
Two of the six IOCGU targets on EL 4322, namely Vulcan and Titan, have been explored by the
company, with drilling continuing in Vulcan. These deposits each lie within approximately 35km of
Olympic Dam, with Vulcan having a target area similar to Olympic Dam of more than 12km2. Drilling at
the Vulcan prospect has yielded positive results, with ore grades and geological data indicating a
sufficient prospectivity for the world’s second largest mining company, the Rio Tinto Group, to enter into
a conditional farm-in agreement.
Lucas Hill’s geophysical characteristics are similar to Carapateena with a relatively larger area.
Arrowhead derives comfort from the Inferred Resources of 203MMT graded at 1.31% Cu, 0.56g/T Au,
Overview of major South Australian mines
Source: https://sarigbasis.pir.sa.gov.au/WebtopEw/ ws/plans/sarig1/image/DDD/204224-008
Tasman Resources Ltd. – Arrowhead BID 4 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
270ppm U3O8 and 6g/T Ag that Carapateena possesses, and which Lucas Hill could potentially possess
having similar geological characteristics. Apart from sound mineralization, the Lucas Hill prospect
benefits from good infrastructure access including a highway and railway line, power and water facility.
Considering these factors, Arrowhead considers these prospects offer considerable promise in terms of
both economic benefits as well as operational efficiency in the medium to long term.
Farm-in agreement with RTX: The Farm-in by RTX for Tasman’s tenement in the Vulcan prospect, which
has been declared unconditional, should provide Tasman with both significant funding and additional
technological expertise for further exploration and development.
Experienced Management Team: Tasman’s management team, under the geological direction of Rob
Smith who worked at Olympic Dam for Western Mining for approximately 15 years, including six years
as chief geologist, has sound experience in the field of mining, which should help in efficient risk
management along with laying strategies appropriate to the company’s operational, financial and
business matrices. In addition, its experience and expertise in the contours of Olympic Dam provides it
the required competence for executing existing projects as well as provide forethought for prospective
assets.
For more details on the management, see the Management and Governance section of the report.
Company’s Portfolio and Risks
Tasman is in its discovery stage, which is a relatively higher risk stage for a mining company. The
intrinsic risks in the discovery stage derive from uncertainty regarding mineralization, gauging financing
needs and maintaining operational flexibility. We understand this risk to prevail until the company
reaches the development stage (or the ‘lower risk’ stage), which will be attained with a production
decision. Arrowhead understands that because of the size of its prospects which will require significant
testing, Tasman is quite likely to be at least two to three years distant from reaching the production
decision stage as it is currently testing or is in the process of testing its prospects with drilling.
Execution risk: We understand the company could also be exposed to the implementation challenges
that could arise with simultaneously operating two projects. Tasman is currently focused on its two
primary projects – Vulcan and Lucas. While Vulcan is in a more advanced drilling stage, drilling in Lucas
is only recently commenced. However, with both projects in the exploration stage, Tasman could be
faced with implementation and execution challenges including allocation of resources and capital. On the
other hand, a prolonged halt for the other project could result in a loss of exploration momentum.
However, we believe the risk has been substantially reduced as the company has executed Farm – in/
JVA with RTX which brings technical expertise and financial resources to the company.
Financing risk: Tasman is at the start-up stage and will require funding in each stage of the mining
cycle. The company has currently adopted only the equity mode of funding and Arrowhead believes that
failure to obtain additional funds or entering into partnerships could adversely impact its exploration
operations. However, financing risk for Tasman to some extent is mitigated with the Farm-in agreement
with Rio Tinto Exploration (RTX) for Vulcan prospect, which is expected to provide it with immediate
funding for Vulcan prospects and improves company’s cash balance for Lucas Hill projects.
Other risks: Tasman is additionally exposed to commodity price risk, environmental risk, title risk,
insurance risk and foreign exchange risk, amongst others.
For a detailed risk assessment, please refer to the Risk profile analysis section.
Company’s Corporate Strategy
Tasman’s strategy aims at further exploring its flagship projects – Vulcan and Lucas Hill, with a view to
then finding strategic joint venture partners for development. The company is primarily targeting very
large, high-grade copper, gold and uranium deposits from these projects and aims to provide growth
through focus on these proven but underexplored areas through drilling of select priority sites within the
Vulcan IOCGU system. The company has executed a formal Farm-in/ Joint Venture Agreement (Farm-
In/JVA) with Rio Tinto Exploration (RTX), a subsidiary of Rio Tinto Limited for funding an accelerated
exploration program on the Vulcan prospect. The agreement, which was conditional subject to Aboriginal
Tasman Resources Ltd. – Arrowhead BID 5 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
Heritage clearance survey results, has been declared unconditional by RTX post announcement of survey
results.
Tasman is a major shareholder in two former subsidiaries which it spawned as separate companies,
which we understand to be a part of its business model. Through these investments in Eden Energy and
Fission Energy, the company has interests in alternative energy and nickel and cobalt.
Tasman Resources Ltd. – Arrowhead BID 6 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
News
– BHP Billiton terminates contract to purchase six Stuart Shelf Tenements from Tasman
Resources: On September 10, 2012, Tasman received notice that BHP Billiton has terminated the
two conditional contracts pursuant to which it had conditionally agreed to purchase from Tasman five
Exploration Licences (ELs) and one Exploration Licence Application (ELA) (ELs 4206, 4300, 4405,
4770 and 4857 and ELA 2011/299) located on the Stuart Shelf in South Australia as previously
announced.
– Farm-in/JV deal over key tenement near Olympic Dam, goes unconditional: On August 6,
2012, Tasman announced it will receive AU$9MM payment from Rio Tinto Exploration Pty Limited
(RTX) after the conditional farm-in and joint venture deal between the two over a key exploration
tenement (EL4322) near South Australia’s Olympic Dam mine, was declared unconditional by RTX
following completion of an Aboriginal Heritage Cultural survey.
– Execution of Supplementary Agreement with Kokatha Uwankara Native Title Claimants: On
June 20, 2012, Tasman entered into a supplementary agreement (Agreement) with the Kokatha
Uwankara (KU) Native Title Claim Group that covers the whole Vulcan Exploration License area (EL
4322) (adjoining the Olympic Dam Project area in South Australia) which is the subject of a
conditional Farm-In Agreement and Joint Venture with Rio Tinto Exploration. This Agreement, which
is supplementary to an existing agreement between Tasman and the KU covering EL 4322, will
operate in relation to an area of approximately 10km2 of EL 4322.
– Tasman agrees to sell six Stuart Shelf Area Tenements: On June 13, 2012, Tasman agreed to
sell five Exploration Licenses (ELs) and one Exploration License Application (ELA) to BHP Billiton. All
six tenements are located on the Stuart Shelf in South Australia. Total consideration is AU$3.0 MM,
payable as AU$2.925MM upon transfer of the ELs and AU$75k upon transfer of the ELA to BHP
Billiton. The sales are each subject to several conditions precedent, including satisfactory completion
of due diligence by BHP Billiton, Ministerial Consent and completion of EL and ELA transfers within 6
and 9 months, respectively.
– Conditional FARM-IN/JV Agreement with Rio Tinto Exploration Pty Limited Executed: On
May 1, 2012, Tasman executed formal Farm-in/ Joint Venture Agreement, with RTX making a non-
refundable execution payment of AU$1MM to Tasman. This replaces the conditional Farm-In/JVA
Letter Agreement signed on 7 October 2011 over Tasman’s wholly owned Exploration License EL
4322. Under the terms of the Farm-In/JVA, RTX and Tasman have retained the original commercial
terms governing the Initial Exploration Program and RTX’s farm-in obligations and rights.
– Tasman publishes quarterly report for Q3 2012 ending 31st March 2012: On April 19, 2012,
Tasman published quarterly activities and cash flow report for Q3 2012 ending 31st March 2012. The
report gave update of Vulcan and Lucas Hill projects. The company at the end of Q3 2012 reported
net operating cash flow of AU$(1.13) MM and net cash flow of AU$(0.11) MM.
– Tasman updates the status of unlisted options: On April 17, 2012, Tasman advised that 1.3MM
unlisted options exercisable at AU$0.10, expiring 16 April 2012 have been exercised and 274,804
unlisted options exercisable at AU$0.10, expiring 16 April 2012 have lapsed.
– Drilling update from Lucas Hill project: On April 2, 2012, Tasman announced completion of two
deep diamond drill holes at the Lucas Hill project. The drilling results showed strong alteration and
some copper mineralization intersection in the two deep holes drilled. The alteration observed in
both holes is expected to be part of larger IOCGU although insufficient dense material was observed
in these holes to explain the strength of the observed gravity response in the Lucas Hill area.
– Tasman publishes half year report for H1 2012 ending 31st December 2011: On March 14,
2012, Tasman published interim financial report for H1 2012 ending 31st December 2011. The report
gave update of Vulcan and Lucas Hill projects. The company at the end of H1 2012 reported net
other income of AU$0.098MM and net loss of AU$0.36MM. The company’s diluted EPS for half year
was AU$c (0.18).
Tasman Resources Ltd. – Arrowhead BID 7 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
– Lucas Hill project: On November 15, 2011, the company announced that it had secured the
services of a drilling contractor. It expects to initially start drilling two holes in mid-January 2012, for
which it had obtained Aboriginal heritage clearance.
– Tasman announces dating results of Vulcan IOCGU project: On October 27, 2011, Tasman
announced that initial results from four samples indicated an average age of 1590 Ma (Million years).
This is the age of mineralization and is significant to prove that Vulcan can have a major deposit.
– Capital raising completion by Tasman: On October 20, 2011, Tasman announced the completion
of the capital raising process which it initiated on October 17, 2011, AU$2.16MM was raised by
issuing 14.37MM fully paid ordinary shares at an issue price of AU$0.15 per share to professional
and sophisticated investors.
– Development update on Lucas Hill: On October 18, 2011, Tasman announced the completion of
geophysical modeling of the Lucas Hill target. This confirms the prospect as a high-priority IOCGU
target. South Australian government granted the exploration license and access clearance is being
sought by Tasman.
Listing Information
Tasman Resources Ltd. (TAS) is listed on Australian Stock Exchange (ASX) since December 18, 2001.
Contacts
Registered office Level 15, 197 St George's Terrace, Perth, WA, Australia, 6000
Telephone +618 9282 5889
Facsimilie +618 9282 5866
E-mail mailroom@tasmanresources.com.au
Major Shareholdersvii
Equity Holder No. of Shares Held (Million)
Percentage Holding
Solomon Gregory Howard 31.17 13.79%
Solomon Douglas Howard 30.66 13.56%
Luitingh Lafras 3.25 1.44%
Scaife Thomas Fleet 3.20 1.42%
Ernie Pty. Ltd. 2.50 1.11%
Le Page Guy Touzeau 1.78 0.79%
Kavel Pty. Ltd. 1.76 0.78%
Tan Biau Luan 1.51 0.67%
Resources & Land Management Services Pty. Ltd. 1.41 0.62%
Peto Proprietary Limited 1.36 0.60%
Malenki Pty. Ltd. 1.30 0.58%
Gasmere Pty. Ltd. 1.21 0.53%
Arden Medical Pty. Ltd. 1.18 0.52%
Glasson Michael John 0.31 0.14%
Smith Robert N 0.10 0.04%
Tasman Resources Ltd. – Arrowhead BID 8 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
Management and Governance
Tasman’s management comprises professionals with a proven track record and sound experience in the
exploration and mining industry, which we understand is relevant to channel the company’s strategies
by perceiving market conditions, mining opportunities, operational implications and the associated
economies.
Personnel (Qualification)
Designation Current and total experience
Gregory Howard Solomon
Executive Chairman
Mr. Solomon has been a director of Tasman since its incorporation in 1987. During his 27 years’ experience as a commercial / corporate lawyer in Western Australia, Mr. Solomon has had a very broad range of experience in mining, technology, corporate, commercial, finance and property law. Mr. Solomon has a rich experience in the field of mining due to his involvement in mining / exploration industry as a legal advisor and as a director on several companies with projects in Australia, Indonesia and the Philippines – including the establishment and floating of two mining / exploration companies. He has held directorships of several public companies over a period of more than 27 years.
Guy Touzeau Le Page
Non-executive Director
Mr. Le Page has a rich 10 years’ experience as an exploration and mining geologist in Australia, Canada and the United States, covering gold and base
metal exploration and mining geology. He also acted as a consultant to private and public companies, including production of both technical and valuation reports for resource companies.
Currently, Mr. Le Page is a corporate adviser at RM Capital Pty Ltd (specializing in resources) and is actively involved in mergers and acquisitions, initial public offerings to valuations, consulting and corporate advisory roles. Prior to joining Tolhurst Noall as a Corporate Adviser in July 1998, Mr. Le Page was Head of Research at Morgan Stockbroking Limited (Perth), responsible for the supervision of all Industrial and Resources research, and providing research on various mineral exploration and mining companies listed on the Australian Stock Exchange (ASX), when a Resource Analyst.
Douglas Howard Solomon
Non-executive Director
Mr. Solomon a partner in the legal firm Solomon Brothers and is a Barrister and Solicitor with more than 22 years’ experience in the areas of mining, corporate, commercial and property law
Robert N Smith Technical Expert
Mr. Robert has been associated with Tasman since 2003. He is a member of the Australian Institute of Geoscientists and has particular geological expertise in a variety of gold deposits and komatiite nickel deposits. He has more than 22 years’ experience in WMC Resources in a variety of exploration, operational and managerial roles across Australia. Mr. Robert has held the position of Chief Geologist at the Olympic Dam for six years and was also a member of the team involved in the discovery and development of the Olympic Dam deposit in South Australia.
Mr. Robert graduated from the University of Melbourne with a first class B.Sc (Hons) and M.Sc. degrees in geology in 1976.
Michael J Glasson
Technical Expert
Mr. Mike is a member of the Australian Institute of Geoscientists and has almost 30 years’ experience in gold, base metals and uranium exploration across Australia and in Fiji. He has an exploration background through his previous roles of a senior field geologist (Urangesellshaft (Australia) Pty Ltd), Chief Geologist (Metall Mining (Australia) Pty Ltd. and Sabminco NL) and Exploration Director (Kilkenny Gold NL). He has also acted as a Director for ten years of several ASX listed exploration companies.
Mr. Mike graduated from the University of Melbourne with B.Sc. (Hons) and M.Sc. degrees in geology in 1976.
Tasman Resources Ltd. – Arrowhead BID 9 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
Assets and Projects
Overview
Tasman’s asset portfolio comprises projects in geologically prospective regions of South Australia. The
company has large tenement holdings prospective for the iron-oxide associated copper-gold-uranium
deposits (IOCGU), epithermal gold-silver prospects, and diamonds. Tasman also has indirect interests in
Alternative Energy and Cobalt-Nickel.
Company’s Asset Portfolio
Tasman’s Projects in South Australia Tasman’s Projects
Source: Company filings Source: Company filings
Lake Torrens Project
Tasman’s interest: 100%
Asset Summary: The Lake Torrens Project,
which includes the Vulcan and Titan prospect, is
Tasman’s flagship project carrying enormous
strategic advantages evident from its proximity to
BHP Billiton’s Olympic Dam deposit. In addition to
the Vulcan prospect, Tasman has several other
priority IOCGU targets within its Lake Torrens
tenement holdings, including Zeus, Billy Barnes
and Marathon South.
Target commodities: Iron-oxide, Copper, Gold,
Uranium
Bouguer Gravity (Inset – Residual)
South Australia
Primary / Flagship Projects
•Vulcan Project - 100% interest; IOCGU Deposit
•Lucas Hill - 100% interest; IOCGU Deposit
South Australia
Secondary Projects
•Parkinson Dam - 100% interest; Gold-Silver (Lead-Zinc)
•Central Gawler - 100% interest; Gold
Equity Interest
Investments
•Eden Energy Ltd. - Alternative Energy company; 22.87% interest
•Fission Energy td. - Uranium Explorer and potential nickel-cobalt producer; 19% interest
Tasman Resources Ltd. – Arrowhead BID 10 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
Potential Mineralization: The project is within
close proximity of Olympic Dam Deposit and
geophysical benefits of its proximity to key
tectonic lineaments. Olympic Dam Deposit is the
world’s largest IOCGU deposit (largest uranium
deposit, 4th largest copper deposit, and 4th largest
gold deposit). As on June 2011, Proven reserves
at the Olympic Dam mine stood at 146MMT with a
grade of 1.98% Cu, 0.58kg/t U3O8, 0.69g/t Au
and 4.01g/t Agviii.
Location: Tasman has a tenement holding of
over 2,000km2, adjoining BHP Billiton's Olympic
Dam deposit in Central South Australia.
Lake Torrens Project – Location Plan
Recent Developments: On June 2012, Tasman
entered into a conditional agreement with BHP
Billiton to sell six outlying tenements located on
the Stuart Shelf in South Australia, which includes
five Exploration Licences (ELs) and one
Exploration Licence Application (ELA). However,
the contract was terminated on September 2012
Vulcan Prospect
Tasman’s interest: 100%
Asset Summary: Vulcan is a prime IOCGU target
in the Lake Torrens project, as it bears
geophysical similarities to the adjacent Olympic
Dam deposit. Vulcan prospect is spread over
more than 11km2 area and is a priority project for
Tasman Resources.
Target commodities: Primary focus on iron
oxide associated copper-gold-uranium
Location: Approximately 30km NNE of BHP
Billiton’s Olympic Dam IOCGU mine.
Regional geology: The prospect is within close
proximity to key tectonic lineaments which were
previously used in the original targeting of
Olympic Dam in the mid-1970s. Subsequent
analysis by the South Australian government,
detailed below, has also confirmed the age of the
Vulcan deposit to be essentially the same as the
Olympic Dam ore body.
Dating results: The South Australian
government, through its PACE 2020 initiative,
funded and technically coordinated the geological
dating of selected samples from Tasman’s IOCGU
project. The dating results indicated an
approximate average age of 1590 Ma (million
years), which is similar to the approximate
geological age of 1601 Ma of other proximate
IOCGU rich deposits like the Olympic Dam,
Prominent Hill and Carapateena.
Residual Gravity image (Drilling sites)
Drilling results: The Company has drilled eight
holes to date, all of which have intersected
IOCGU alteration and/or mineralisation. VUD 003,
VUD 007 and VUD008 have exhibited the most
favorable results.
VUD
003 From To M
Cu
%
Au
g/T
U3O8
Kg/T
874.20 930.85 56.65 0.59 0.17 0.05
Includes 895.08 895.42 0.34 5.85 2.23 0.03
912.00 919.80 7.80 1.21 0.35 0.14
Includes 919.05 919.80 0.75 4.44 1.34 0.58
930.20 930.85 0.65 7.80 2.41 0.03
Tasman Resources Ltd. – Arrowhead BID 11 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
VUD
007 From To M
Cu
%
Au
g/T
U3O8
Kg/T
Mo
%
1065 1228 163 0.23 0.08 0.04 0.01
Incl. 1118 1208 90 0.25 0.09 0.05 0.02
VUD 008
From To M Cu %
Au g/T
U3O8 Kg/T
Mo g/T
899.7
5 1079.5
179.7
5 0.19 0.10 0.017 68
Incl. 910 931 21 0.63 0.28 0.023 107
Recent Developments: In May 2012, Rio Tinto
Exploration Pty Limited (RTX) and Tasman
Resources Ltd executed a formal Farm-in/ Joint
Venture Agreement, with RTX making a non-
refundable execution payment of AU$1MM to
Tasman. For more details, please refer to the
Tasman-Rio Tinto Farm-in agreement details.
In June 2012, Tasman entered into a
supplementary agreement with the Kokatha
Uwankara (KU) Native Title Claim Group covering
the Vulcan Exploration License area (EL 4322).
The agreement establishes guidelines and
procedures for heritage clearance surveys, and
further provides for an additional heritage survey
with KU representatives to be conducted over
priority drill targets. The Agreement is in addition
to an existing agreement between Tasman and
the KU and will cover approximately 10km2 area.
Tasman conducted an Aboriginal Cultural Heritage
Survey mid-July after supplementary agreement
and announced results in August 2012. The
company had obtained clearance for nine drill
sites located in Southern portion of the prospect.
As this was the only remaining condition
precedent from the date of execution of the
Farm-In/JVA, the agreement has been declared
unconditional by RTX, and RTX is expected to pay
first milestone payment of AU$9MM to fund the
drilling program.
Project schedule: Post Aboriginal Cultural
Heritage clearance, Tasman expects to commence
12,000m drilling program in Southern Vulcan
prospect by September 2012. The drilling
program is expected to be completed over a
period of 12 months.
Vulcan Program Details Status
Geological and Geophysics review, remodeling
Completed
Dating of selected samples Results available
Select new drill targets Completed
Conclude 9B agreement with KU
Completed
Heritage survey over new targets
Completed
Drill highest-priority targets Clearance obtained;
drilling to begin in Sep-12
Lucas Hill Project
Tasman’s interest: 100%
Asset Summary: Identification of the IOCGU
target at Lucas Hill was announced in Aug-2011.
Target commodities: IOCGU deposits
Location: 25km south east of Woomera on the
Stuart Shelf in South Australia. The prospect
apparently has good infrastructure facilities with
proximity to the main railway line and highway,
power and water.
Lucas Hill Project – Location Plan
Regional geology: Geophysical characteristics
suggest that the gravity anomaly was of strength
comparable to and size greater than the
Carapateena deposit. Carapateena contains
Inferred Resources of 203MMT graded at 1.31%
Cu, 0.56g/T Au, 270ppm U3O8, and 6g/T Ag.
Residual Gravity (Inset – Carapateena)
Tasman Resources Ltd. – Arrowhead BID 12 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
Recent developments: Tasman completed two
deep diamond drill holes at Lucas Hill Project in
Q3 2012. Strong alteration and some copper
mineralization intersection were observed in the
two deep holes drilled. While the depth of the
basement is significant, Tasman believes the
presence of strong alteration and some
mineralization associated with strong and
unexplained gravity anomaly, warrants further
geophysical work and possible drill testing. Assay
results are expected to be available in 4-6weeks.
Parkinson Dam Project
Tasman’s interest: 100%
Asset Summary: Exploration commenced in
mid-2005 resulting in the discovery of the
previously unknown epithermal gold-silver
mineralization.
Target commodities: Gold, Silver, lead, zinc
Location: Located approximately 60km west of
Port Augusta in South Australia. The prospect
benefits from a strategic location and
infrastructure, being close to major highways.
Drilling history: After the initial phases of RC
percussion and diamond drilling, Tasman
discovered high grade mineralization in drill hole
PD 63 (21m at 21g/t Au and 83g/t Ag). However,
further drilling did not yield similar positive
results with respect to the grade or width of the
intersection.
Project schedule: Though further targets for
drill testing have been identified, Tasman did no
further drilling during the year owing to its focus
on the ongoing drilling at Vulcan
Central Gawler Project
Tasman’s interest: 100%
Asset Summary: It has three prospects,
namely: Skye, Birdie and Golf North. Gold targets
have been identified based on regional calcrete
sampling and geophysical interpretation by
previous explorers. Tasman aims to improve the
identified target zones and find new targets.
Target commodities: Gold
Location: 95km southwest of Coober Pedy,
South Australia
Regional geology: Tasman had located a 15-m wide low-grade mineralized zone at the Skye
prospect including 6m @ 2.9g/t, indicating
potential for narrow high-grade plunging shoots.
Recent developments: Southern Gold reported
positive results from drilling at the Golf Bore
prospect, located several hundred meters
southwest of Tasman's Golf North prospect.
Project schedule: No work was carried out
during the year in these tenements as the area is
restricted by Department of Defense, which
Tasman expects to be resolved.
Garford - Columba Oil Shale Prospect
Tasman’s interest: 100%
Asset Summary: Drilling indicated 7m to 30m
thickness of strongly carbonaceous black organic
rich Tertiary mudstones at various points along its
40km length at shallow depths of around 7m to
15m. A 2m composite sample of carbonaceous
material from one hole was determined for its oil
shale potential. A pyrolysis gas chromatography
was conducted, which indicated good potential for
oil generation.
Target commodities: Oil Shale
Location: 80km southwest of Coober Pedy and
30km west of the Port Augusta to Darwin railway
Investments
Tasman has equity interests in Eden Energy and
Fission Energy, both possessing different
commodities / assets.
Tasman Resources Ltd. – Arrowhead BID 13 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
Eden Energy Ltd. (EDE)
Tasman’s interest: 22.87% on a fully diluted
basis, as on 30-Jun-12.
Target commodities: Alternative energy -
hydrogen, coal seam and abandoned mine
methane, and geothermal energy.
Company details: EDE is an alternative energy
company making promising progress in its carbon
/hydrogen pyrolysis project. At the same time,
EDE’s subsidiaries in the United States and India
are making progress in Optiblend Dual Fuel Kit
sales.
Fission Energy Ltd. (FIS)
Tasman’s interest: 19% as on 30-Jun-12.
Target commodities: Uranium, nickel-cobalt
Company details: FIS owns 50% in Mt Thirsty
Nickel-Cobalt Project located 20kms north-
northwest of Norseman, in Western Australia. Mt
Thirsty has current JORC resources as below:
Resource
(MMT) Co Ni Mn
Inferred 15.3 0.11% 0.51% 0.73%
Indicated 16.6 0.14% 0.60% 0.98%
Joint Ventures
Asset Summary: Flinders Mining Ltd (Flinders)
has a diamonds-only joint venture with Tasman.
The JV included all of Tasman’s tenements other
than the Lucas Hill and Parkinson Dam projects.
Based on the Joint Venture agreement, Flinders
could earn 70% of the diamond rights on
expending AU$750K over four years.
Target commodities: Diamond
Tasman Resources Ltd. – Arrowhead BID 14 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
Tasman – Rio Tinto Farm-in agreement
In May 2012, Rio Tinto Exploration Pty Limited (RTX), a wholly owned subsidiary of Rio Tinto Limited,
signed a conditional agreement with Tasman for funding an accelerated exploration program on its
Vulcan prospect making a non-refundable execution payment of AU$1MM to Tasman.
Terms of the agreement
Cash payment of AU$1MM by RTX, as non refundable execution payment within 5 business days. the original payment of AU$10MM will now be reduced by the timely amounts
1. Detail of changes in Letter Agreement (Clause for initial payment of AU$10MM)
1) Extension of date for satisfaction of the condition precedent for 6 months.
1 a) If satisfied: RTX will pay AU$9MM, balance of the AU$10MM payable under the Letter Agreement to undertake the Initial Exploration Program.
1 b) If not satisfied:
i) Extension of 18 months:RTX has the option to fund 2.4km drilling program on heritage cleared areas of the Vulcan prospect through payment of AU$1MM; extension of time for satisfaction of the condition for next 18 months
ii) Extension of 2 years: if not satisfied even after further 18 months, RTX has the option to fund 2.4km drilling program on heritage cleared areas of the Vulcan prospect through payment of AU$2MM; extension of time for satisfaction of the condition for next 2 years
iii) Waiver: if condition not satisfied even after further 2 years, RTX may elect to either waive the condition or allow the Farm-In /JVA to terminate.
2) If RTX elects not to waive the condition or exercise any of the above options, or at any time elects to withdraw, the Farm-In/JVA will terminate, and any payments made by RTX to Tasman will be retained by Tasman
3) If at any time prior to the termination of the Farm-In/JVA the condition is satisfied, the Farm-In/JVA will become unconditional and any outstanding balance of the original AU$10MM will become immediately payable; Tasman will be required to complete the outstanding drilling obligation under the Initial Exploration Program
4) Tasman to undertake an estimated AU$5MM exploration program that includes a total of at least 12km of drilling within the first 12 months after satisfaction of the condition. (including drilling undertaken before Abrginial Heritage access is secured for restricted area)
Option 1: 55% interest in the Agreement by RTX
Conditions:
1) Payment of a further AU$7MM to Tasman; and
2 a) Fund the delineation of a JORC compliant Inferred mineral resource and completing a concept study within three years of electing to farm-in; or
2 b) Disbursing an additional AU$25MM for funding exploration; whichever is earlier
Option 2: Increase interest from 55% to 80%
Conditions:
1) Pre-feasibility study should be completed within the next five years; or
2) Disbursing an additional AU$50MM for funding exploration; whichever is earlier
At 80% interest by RTX, Tasman can:
1) maintain the remaining interest and contribute to future funding; or
2) Offer its remaining stake to RTX (for compulsory purchase) for an agreed value of fair market value
Tasman Resources Ltd. – Arrowhead BID 15 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
Technologies and Markets
Uraniumix
Chemistry and Properties
Uranium is a toxic silvery-white, shiny metal that
is both ductile and malleable. The atomic number
for this element is 92 and the chemical symbol is
“U”. Uranium is a reactive element; it also
dissolves in acids and reacts with water. Uranium
is a rare element with density of about
19.05g/cm3.
Applications
Uranium finds its widest application as a fuel to
nuclear power plants. Its other applications
include:
explosive and yield booster in nuclear weapons
material for armor and armor-piercing projectiles
catalyst
additive for glass and ceramics (to obtain beautiful green or yellow colors)
toner in photography
mordant for textiles
additive for the preparation of biological
samples for electron microscopy
shielding material (depleted uranium)
ballast (counter weights)
Sources and Production
Sources: Uranium occurs in minerals including
pitchblende, carnotite, cleveite, autunite,
uraninite, uranophane, and tobernite. It is also
found in phosphate rock, lignite, and monazite
sands.
Production: The worldwide production of
uranium in 2011 amounted to 63,085 tonnes, of
which 31% was mined in Kazakhstan. Other
important uranium mining countries are Canada
(14%), Australia (9%), Namibia (5%), Russia
(5%), and Niger (7%).
Demand: Uranium’s demand is primarily driven
by its importance in power generation in nuclear
reactors, and determined by the number of
reactors in operation and their capacity. In 2011,
the supply of uranium met only 85% of the
demand.
The WNA projects that world uranium demand as
about 72,680T of U in 2015; most of this will
come directly from mines. It also expects the
future production from existing and new mines
will not be sufficient to meet the demand
requirements in WNA's upper scenario to 2030
(2030 demand 137k tU; 2030 primary production
97k tU).
Market Trends: Prices and drivers
Uranium prices have declined 25% post closure of
nuclear plants due to earthquake and Tsunami in
Japan. Currently, Uranium spot price remains at
US$50.75/lb from US$66.5/lb prior to
earthquake. However, prices have increased over
the last five years due to increased demand for
electricity and countries demanding more
uranium for utilization in nuclear plants.
In the medium term, we expect the uranium
prices to increase, primarily driven by rising
demand from Japan and China, coupled with
supply shortage. According to Australian Bureau
of Resources and Energy Economics and
Sciences, Uranium prices are expected to reach
US$81/lbs by 2016.
Uranium Price trend in last five years
Source: Infomine
Gold
Chemistry and Properties
Gold is the most widely accepted and applied
precious metal, with chemical symbol ‘Au’ and
atomic number ‘79’. It is dense, soft, shiny and
the most malleable and ductile pure metal.
Applications
Gold, due to its properties, has been a highly sought-after precious metal for coinage, jewelry
and other arts since the beginning of recorded
Tasman Resources Ltd. – Arrowhead BID 16 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
history, and has been majorly used for jewelry
(48% of the total application as on 2011),
investments (40%) and technological purposes
(12%).
Sources, Supply and Production
Production increased 5.4% y-o-y in 2011, with
China remaining the top producer. Australia, US,
Russia and South Africa followed China in
production. Total production in 2011 was
2,700MT, with 13% contributed by China.
World Gold Production 2011 (MT)
Source: USGS
Gold Market Driver
Gold demand is mainly driven by the need for
value preservation, which is affected by the
economic situation (money supply, inflation,
interest rates, debt and equity markets). Demand
for gold is generally seen to be rising during weak
economic conditions and is thus considered to be
a safe haven for investments.
Bar & Coin demand (%) vs Price
Source: Bloomberg; World Gold Council
Another important driver is the fabrication
demand from downstream sectors, predominantly
jewelry. Also, a structural shift in central bank
policy towards gold in recent times is driving
demand. Central banks have bought about 30Moz of gold since March 2009, which is about 12% of
global demand. Further, China, one of the largest
buyers of U.S. Treasuries, reduced its holdings in
US treasuries and is increasing gold reserves by
around 30% a year. This clearly shows its intent
to diversify foreign-exchange holdings.
Pricing x : Gold prices have been rising since
2001, when the price was around US$250/oz, and
reached record levels in early 2011 due to
increase in money supply in the US.
In first half of 2012, gold price has fallen
primarily due to lower imports from India and
tight credit conditions as a result of Eurozone
debt crisis. We expect gold price to rise in second
half of 2012, backed by increase in demand from
India and expected easing by US Central Bank.
Gold Price trend in last five years
Source: Infomine
Copperxi
Chemistry and Properties
Copper is a ductile metal with high thermal and
electrical conductivity possessing the chemical
symbol ‘Cu’ and atomic number 29.
Applications
Electronics: About 65% copper produced globally is
used for electrical applications. The important uses of copper include power generation and transmission of electricity. It is also used in wiring and contacts for appliances.
Architecture: About 25% copper produced globally is used in buildings as copper is a waterproof metal and is used for plumbing, roofing and cladding.
Industry and Transport: Copper is used in the production of industrial machinery and transportation vehicles. Transport accounts for about 7% of the global copper usage.
Biological Applications: Copper has biostatic, antimicrobial, and fungicide capabilities. Copper
bracelets are used to ease joint pains and arthritis. It is also used in providing hygienic surfaces in hospitals and other healthcare facilities.
0 500 1,000 1,500 2,000 2,500 3,000
World total
China
Australia
United States
Russia
South Africa
Peru
Indonesia
Canada
Other
2010 2011
0%
5%
10%
15%
20%
25%
30%
35%
40%
0
200
400
600
800
1000
1200
1400
1600
1800
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Price (US$) Bar & Coin Demand (%)
Tasman Resources Ltd. – Arrowhead BID 17 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
Sources and Production
Production: The top 10 corporate producers
control approximately 53% of global mine output,
with the remaining holdings being fragmented.
The top five producing countries viz. Chile, Peru,
China, US, and Indonesia, control 61% of the
total mine production. Chile leads the world in
mine production with a 34% share; China is the
major contributor to refined production and
demand at 23.8% and 39%, respectively. Mine
production expected to grow at a CAGR of 4.7%
by 2014 as a result of supply from new mines.
Copper Mine Production (KT)
Source: icsg.org
Supply is expected to be deficit (~240kmt) in
2012; however with increased output from new
and existing mines in 2013, supply is expected to
be in surplus.
Demand: Demand is expected to grow by a
lower rate of 2.5% in 2012 as a result of slow
growth in China (3.6%) and US (3.9%) and a
contraction in demand from EU. However, in
2013, demand growth is expected to reach 3.9%,
backed by improved macroeconomic conditions
and rise in Chinese consumption (4.9%)
Copper demand (KT)
Source:
www.codelco.cl/prontus_codelco/site/artic/20110803/asocfile/20
110803155044/codelco_update_july_2011.pdf
Copper Price Trend
Copper prices declined 21% in 2011, however,
have recovered in Jan-2012 with stabilization in
Chinese manufacturing and relatively improving
economic conditions in Europe. Price is expected
to rise during 2012-2014, until the global
inventory pipeline is replenished. Post 2015,
excess supply is expected to lead to a reduction
in copper price.
Copper Price Trend
Source: Bloomberg
74
76
78
80
82
84
86
88
0
5,000
10,000
15,000
20,000
25,000
2006 2007 2008 2009 2010 2011 2012F
% U
tiliz
atio
n
Min
e P
rod
uct
ion
(K
T)
World Mine Production World Mine Capacity Mine Capacity Utilization (%)
0
5,000
10,000
15,000
20,000
25,000
0
5,000
10,000
15,000
20,000
25,000
2004 2005 2006 2007 2008 2009 2010 2011 2012F
Pro
du
ctio
n (
KT)
Co
nsu
mp
tio
n (
KT)
Consumption Production
0
2000
4000
6000
8000
10000
12000
Jan-
07
Jan-
08
Jan-
09
Jan-
10
Jan-
11
Jan-
12
US$/m
t
Tasman Resources Ltd. – Arrowhead BID 18 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
IOCGU Deposits
Propertiesxii
IOCGU (Iron oxide-copper-gold-uranium) deposits are the significantly valuable concentrations of
copper, gold and uranium ores hosted within iron oxide dominant gangue assemblages sharing a
common genetic origin.
The IOCGU deposits generally possess the following properties:
Economic metals comprise copper, with or without gold
Ore style is hydrothermal with strong structural controls
Magnetite and hematite is found in abundance
Fe oxides with Fe / Ti are greater than that found in most igneous rocks and bulk crust
Mineralization
The IOCGU deposits are hugely mineralized with contained ore in the range 10MMT to 4BT with a
grading between 0.2% to 5% copper and 0.1 to more than 3 g/T gold.
Important global depositsxiii
Advantages and disadvantages of exploring IOCGU deposits
The underlying benefit of IOCGU deposits is the resultant profitable mines, which is generally an
outcome of the large size of such deposits, comparatively simple metallurgy and comparatively high
grade of IOCG deposits.
At the same time, IOCGU exploration is difficult owing to vast alteration systems and difficult to drill
unaltered rocks. Additionally, numerous occurrences, and a wide variety of deposit styles widens
exploration effortsxiv.
Tasman Resources Ltd. – Arrowhead BID 19 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
Project Risk Profile Analysis
Tasman in comparison to its peers carries a
medium risk profile. However, from a medium-to-
long term perspective, we believe Tasman will be
able to quickly advance its projects by defining
resources for development, considering it has
huge potential in South Australia and the required
management expertise
Peer Risk Analysis
We have evaluated the risk profile of Tasman
compared with other exploration companies in
Australia possessing a similar commodity base,
with however relatively more advanced stages in
exploration. We identified the risk as
Low/Medium/High and assigned a score of 1/2/3
respectively based on the risk profile of the major
projects pursued by the companies. The
important risk categories considered for the study
include
– Project Maturity Risk: LOW - Near feasibility;
HIGH - Proof of concept stage
– Financing Risk: LOW - Near negotiations /
lower exploration capex; HIGH - Funding need
for exploration or no well-known funding
sources
– Operational / execution Risk: LOW - Advanced
stages of production and stable grade
extraction; HIGH - Early development stages
and volatile grade extraction or more
– Key Man Risk: LOW - All key operations /
decisions do not depend on a few people;
HIGH - Few decision makers whose presence
is critical for decision making
The individual risk parameters and the underlying
rationale for the scores are discussed in the
subsequent sections.
Peer Risk Profile
Tasman has a relatively higher operational and
project stage risk, while it fares relatively better in
terms of key man risk and financing risk.
Ticker
Total
Risk
Score
Project
Stage
Risk
Financing
Risk
Operational
Risk
Key man
Risk
TAS 1.6 2.0 1.0 2.0 1.5
GCR 2.0 2.0 2.0 2.0 2.0
RXM 2.1 2.5 2.0 2.0 1.5
HAV 1.4 1.5 1.5 1.5 1.0
Lake Torrens and Lucas Hill Projects
Project Stage Risk –MEDIUM
– Tasman is in the initial stages of exploration,
with ongoing drilling activity in Vulcan and
drilling expected to commence in Lucas Hill.
– At the same time, it has achieved good
progress with the drilling it has conducted till
date. Thus, we consider it to be in the
medium risk category.
Financing/Capex Risk – LOW
– The company has zero debt and has strong
backing of strong private players. Nearly 25%
of the equity is held by strong private players.
This should support funding its capex
requirements
– Tasman’s Farm-in with RTX should provide it
with good financial flexibility for its Vulcan and
other projects. RTX is also expected to pay
Tasman AU$9MM to fund drilling program, as
the agreement became unconditional in
August 2012.
Operational / execution Risk – MEDIUM
– Tasman could be challenged for appropriate
allocation of resources (capital and personnel)
with two of its flagship projects – Vulcan and
Lucas Hill running nearly simultaneously
– Sound technical expertise should support
Tasman’s on the functional and operational
front.
Key man Risk – LOW
– We understand Tasman to face Key man risk
considering it has a small board of directors,
thus limiting scope for planning and
implementing decisions at a larger forum.
– However, the long association of the
management with the company mitigates this
risk to a great extent.
Tasman Resources Ltd. – Arrowhead BID 20 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
Risk Parameters – Definition
Project Stage Risk
The different stages in a project are:
Early stage exploration: In this stage, the
exploration location is decided using
combination of various techniques such as,
samplings, drilling, geophysics, and other
extensive geological and exploration services.
Pre-feasibility study: A preferred Base Case
option will be identified from the possible
options available to the company. The
preferred Base Case option will provide some
level of confidence in the production capacity,
ore grades, metal recovery, capital and
operating costs, project schedule, and project
risks / opportunities. A financial analysis will
also be carried out in order to assess the
economic viability of the project.
Feasilbility study: This includes a collection
of more detailed information, additional
designs, and project-specific cost information
to refine the project cost and schedule. This
will also address information gaps, issues of
concern, risks, and opportunities identified in
the advanced exploration stage.
Detailed engineering: Detailed designs
based on the project scope, concept designs
and purchase of key plant equipment will be
completed.
Site construction: Site construction starts as
per the field engineering designs and is
expected to confirm adherence to appropriate
quality control practices.
Commissioning and start of operations:
After completion of construction, operability
testing and acceptance, the Owner will be
asked to confirm whether the project
construction and performance is as designed
and meets the required plant performance
and safety requirements. The final operating
control programs will be completed, installed,
and tested for fuctional efficiencies.
We consider a project to carry lower risk profile if
feasibility study is complete and detailed
engineering has been conducted as the
uncertainty regarding the sustainability of the
project reduces significantly.
Project Financing Risk
Initial stages of exploration, development and
production requires high levels of capital
investment. Investments will be riskier when
done in exploration stage as the economic
viability of deposit is not determined. The risk
level of the capital reduces as it advances through
the various exploration stages.
Initial stages of exploration, and development of
the project attracts high-risk-capital investors. As
the project stages proceed, they have varied
options like equity (IPO), debt financing, etc.
We consider a project to carry lower risk profile if
the exploration capital expenditure is low and the
company has secured financing to fund its capital
expenditure.
Operational Risk
Mining machinery, transport and new
technologies are used for operations in areas
which have complicated geological and climatic
conditions. There are increased risks of flooding,
pit slope and rim slide, accidents caused by the
use of mining transport equipment due to adverse
weather conditions and problems in power supply
facilities and recovery plants. These risks could
result in delayed ore production and recovery,
increased costs, health, safety and environmental
issues and affect the company’s production
activities. Additionally, the quality of ore reserves,
and the method used for extraction also
contribute to the operational risk.
We consider a project to carry lower risk profile if
the company is in the advanced stages of its
operations and extracts fairly stable grades.
Key Man Risk
The company is run by its management who
brings prior experience and knowledge to the
table. Also, it is important that a company does
not rely heavily on very few individuals who have
vast experience in the field.
We consider a project to be of lower risk profile if
the management team is highly qualified, has
good number of years of experience in oil and gas
field and has lesser dependability on few people.
Tasman Resources Ltd. – Arrowhead BID 21 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
Peer Valuation and Risk Profile
We have also evaluated the companies based on
the value per resource and the risk profile.
Enterprise Value per Resource has been
evaluated. AU$/T has been used as a proxy for
the valuation measure.
The Risk Profile has been assessed as a weighted
blended score based on the project maturity risk
(30% weightage), financing risk (30%),
Operational risk (20%) and key man risk (20%).
The individual risk score have been provided in
the risk profile table in the Peer Risk Profile table
in the previous section.
Valuation Vs Risk Profile Chart
Valuation Vs Risk Profile
Company Total Risk
Score
Enterprise
Value/
Resource
(AU$ /T)
Enterprise
Value
(AU$ MM)
Total
Resource
(MMT)
TAS 1.6 0.01 44.0 3,630.0
GCR 2.0 0.05 8.3 162.4
RXM 2.1 0.22 72.1 329.0
HAV 1.4 0.20 60.9 311.4
The analysis clearly indicates our assertion that
Tasman commands a premium compared to its
peers, considering the medium risk profile of its
projects.
TAS
GCR
RXM
HAV
-
0.1
0.1
0.2
0.2
0.3
- 0.5 1.0 1.5 2.0 2.5 3.0
EV A
U$
/T
Company Risk Score
Tasman Resources Ltd. – Arrowhead BID 22 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
Peer Analysis
Name of Company Project name Market cap (MM AU$)
EV (MM AU$)
Resources MMT
EV/Resources (AU$/T)
Tasman Resources Ltd. Vulcan 45 44 3,630 0.01
Golden Cross Resources Copper Hill 12 8 162 0.05
Rex Minerals Ltd Hillside Project
(Pine Point Copper Belt)
128 72 329 0.22
Havilah Resources Kalkaroo 63 61 311 0.20
EV/Resources (AU$/T)
0.22
0.20
0.05
0.01
-
0.05
0.10
0.15
0.20
0.25
Rex Minerals Ltd Havilah Resources Golden CrossResources
Tasman ResourcesLimited
EV/Resources (AU$/T)
Tasman Resources Ltd. – Arrowhead BID 23 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
Value
The Fair Market Value for Tasman Resources’ shares stands between AU$79.03MM and AU$269.81MM.
The Fair Market Value for one of Tasman Resources’ publicly traded shares stands between AU$0.35 and
AU$1.19.
Tasman Resources Comparablesxv
The Comparable Resources valuation uses Peer’s resource, resource grade/project stage and Enterprise
value to arrive at Tasman's fair value. The peers have been identified on the basis of similar resources
and region of operation.
The valuation is done using regression analysis between the grade of the resource or project stage and
EV/Resource of the comparables. We have used the resource grade or project stage depending on the
correlation factor between the resource grades or project stage and EV/resource of the peers.
Arrowhead has estimated the resources for Vulcan based on the drilling results disclosed in company
filings.
Copper Comparables
Ticker Company Enterprise Value
(AU$ MM) Estimated
Resources (KT) Estimated
EV/Resources
TAS Vulcan Project $44 4,515 4,515
BHP Olympic Dam $199,423 69,039 69,039
HGO Kanmantoo $115 303 303
OZL Prominent Hill $1,488 2,305 2,305
OZL Carapateena Project $1,488 798 798
Gold Comparables
Ticker Company Enterprise Value
(AU$ MM) Estimated
Resources (Koz) Estimated
EV/Resources
TAS Vulcan Project $44 1 $29,466
BHP Olympic Dam $199,423 85,239 $2,340
HGO Kanmantoo $115 200 $573
OZL Prominent Hill $1,488 4,810 $309
OZL Carapateena Project $1,488 1,110 $1,341
Silver Comparables
Ticker Company Enterprise Value
(AU$ MM) Estimated
Resources (Koz) Estimated
EV/Resources
TAS Vulcan Project $44 31 $1,432
BHP Olympic Dam $199,423 392,187 $508
HGO Kanmantoo $115 3,764 $31
OZL Prominent Hill $1,488 22,262 $67
OZL Carapateena Project $1,488 11,760 $127
Uranium Comparables
Ticker Company Enterprise Value
(AU$ MM) Estimated
Resources (T) Estimated
EV/Resources
TAS Vulcan Project $44 72,537 $0.6
BHP Olympic Dam $199,423 2,163,263 $92.2
UUU Honeymoon $2,641 5,902 $447.4
RIO Ranger $117,638 84,473,984 $1.4
Tasman Resources Ltd. – Arrowhead BID 24 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
Important information on Arrowhead methodology
The principles of the valuation methodology employed by Arrowhead BID are variable to a certain
extent, depending on the sub-sectors in which the research is conducted. But all Arrowhead valuation
researches possess an underlying set of common principles and a generally common quantitative
process.
With Arrowhead commercial and technical due diligence, the company researches the fundamentals,
assets and liabilities of a company, and builds estimates for revenue and expenditure over a coherently
determined forecast period.
Elements of past performance such as price/earning ratios, indicated as applicable, are mainly for
reference. Still, elements of real-world past performance enter the valuation through their impact on the
commercial and technical due diligence.
We have presented the comparable method based on enterprise value per resource unit (AU$/unit) as a
primary measure of fair value, which is central to the methodology applied towards building the fair
value bracket.
Arrowhead BID Fair Market Value Bracket
The Arrowhead Fair Market Value is given as a bracket. This is based on quantitative key variable
analyses such as key price analysis for revenue and cost drivers or analysis and discounts on revenue
estimates for projects, especially relevant to projects estimated to provide revenue near the end of the
chosen forecast period. Low and high estimates for key variables are produced as a valuation tool.
In principle, an investor comfortable with the high brackets of our key variable analysis will align with
the high bracket in the Arrowhead Fair Value Bracket, and, likewise, in terms of low estimates. The
investor will also note the company intangibles to analyze the strengths and weaknesses, and other
essential company information. These intangibles serve as supplementary decision factors for adding or
subtracting a premium in investor’s own analysis.
The bracket should be taken as a tool by Arrowhead BID for the reader of this report and the reader
should not solely rely on this information to make his decision on any particular security. The reader
must also understand that while on the one hand global capital markets contain inefficiencies, especially
in terms of information, on the other, corporations and their commercial and technical positions evolve
rapidly. This present edition of the Arrowhead valuation is for a short to medium-term alignment
analysis (one to twelve months). The reader should refer to important disclosures on page 26 of this
report.
Information on the Tasman Resources Limited Valuation
Tasman Resources Valuation Methodology: The Arrowhead fair valuation for Tasman is based on
the comparable Resource Based Valuation method. Arrowhead has adopted Resource Based Valuation as
the company is currently in the exploration stage and is yet to demonstrate existence of a feasible
mineral deposit in its flagship projects. Arrowhead has identified comparable resources in companies
comparable to Tasman, which could be relatively larger in size and at an advanced stage of mining. We
have discounted each resource based on the stage of operation. Currently, Arrowhead has based the
valuation on Vulcan project.
Comparable Companies: Tasman is at the early stage of exploration with prime focus on mining
copper, gold, silver and uranium. The company has completed geological and geophysical review
remodeling, selected new drill targets and concluded 9B agreement with KU. The comparable deposits
include Olympic Dam, Prominent Hill, Carapateena, and Honeymoon. All these comparables are into the
exploration / production of Cu, Au, Ag and U, providing good benchmark for estimating the company’s
EV/Resources.
Underlying Business Plan: Tasman Resources, with diversified projects, is focused on developing its
flagship projects – Vulcan and Lucas Hill. The company has drilled eight holes in Vulcan till date, and
Tasman Resources Ltd. – Arrowhead BID 25 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
expects to commence drilling in Southern Vulcan prospect by September 2012, post Aboriginal Cultural
Heritage Clearance. Tasman has entered into a Farm-in agreement with Rio Tinto Exploration (a
subsidiary of Rio Tinto Ltd), which is expected to provide with additional technical expertise and the
required financing.
For its Lucas Hill project, Tasman has secured the services of a drilling contractor. It has initially drilled
two holes, for which it had obtained Aboriginal heritage clearance, in mid-January 2012.
Tasman Resources Ltd. – Arrowhead BID 26 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
Analyst certifications
I, Mohanarangam Purushothaman, certify that all
of the views expressed in this research report
accurately reflect my personal views about the
subject security and the subject company.
I, Vishal Pasari, certify that all of the views
expressed in this research report accurately
reflect my personal views about the subject
security and the subject company.
Important disclosures
Arrowhead Business and Investment Decisions,
LLC received fees in 2011 and 2012 from Tasman
Resources for researching and drafting this report
and for a series of other services to Tasman
Resources, including distribution of this report
and networking services. Arrowhead BID owns
long positions in Tasman Resources equity as well
as long call options in Tasman Resources equity.
Aside from certain reports published on a periodic
basis, the large majority of reports are published
by Arrowhead BID at irregular intervals as
appropriate in the analyst’s judgment.
Any opinions expressed in this report are
statements of our judgment to this date and are
subject to change without notice.
This report was prepared for general circulation
and does not provide investment
recommendations specific to individual investors.
As such, any of the financial or other money-
management instruments linked to the company
and company valuation described in this report,
hereafter referred to as “the securities”, may not
be suitable for all investors.
Investors must make their own investment
decisions based upon their specific investment
objectives and financial situation utilizing their
own financial advisors as they deem necessary.
Investors are advised to gather and consult
multiple information sources before making
investment decisions. Recipients of this report are
strongly advised to read the information on
Arrowhead Methodology section of this report to
understand if and how the Arrowhead Due
Diligence and Arrowhead Fair Value Bracket
integrate alongside the rest of their stream of
information and within their decision taking
process.
Past performance of securities described directly
or indirectly in this report should not be taken as
an indication or guarantee of future results. The
price, value of, and income from any of the
financial securities described in this report may
rise as well as fall, and may be affected by simple
and complex changes in economic, financial and
political factors.
Should a security described in this report be
denominated in a currency other than the
investor’s home currency, a change in exchange
rates may adversely affect the price of, value of,
or income derived from the security.
This report is published solely for information
purposes, and is not to be considered as an offer
to buy any security, in any state.
Other than disclosures relating to Arrowhead
Business and Investment Decisions, LLC, the
information herein is based on sources we believe
to be reliable but is not guaranteed by us and
does not purport to be a complete statement or
summary of the available data.
Arrowhead Business and Investment Decisions,
LLC is not responsible for any loss, financial or
other, directly or indirectly linked to any price
movement or absence of price movement of the
securities described in this report.
Full company name – Arrowhead BID 27 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
Valuation
Resource Based Valuation for the Vulcan Prospect
Copper Low High Remarks
EV/Resources 1344.08 3636.90 Correlation
of 93%
between
resource grade and
EV/Resource
Slope
268165.54 268165.54
Intercept
-1994.58 -1994.58
Grade (%) 1.2% 2.1%
Value Bracket
Estimated EV/Resources
Mineral content (in KT)
Attributed EV
(AU$ MM)
Value/ Share (AU$)
Low 1,344 15.1 20.23 0.09
High 3,637 25.4 92.33 0.41
Gold Low High
EV/Resources 772.43 1075.20 Correlation
of 32% between
resource
grade and
EV/Resource
Slope 2018.45 2018.45
Intercept 65.97 65.97
Grade (g/t) 0.35 0.50
Value Bracket
Estimated EV/Resources
Mineral content (in Koz)
Attributed EV
(AU$ MM)
Value/ Share (AU$)
Low 772 5.0 3.84 0.02
High 1,075 7.1 7.64 0.03
Silver Low High
EV/Resources 126.90 170.34 Correlation
of 1.74%
between
resource grade and
EV/Resource
Slope 54.30 54.30
Intercept -3.41 -3.41
Grade (g/t) 2.40 3.20
Value Bracket
Estimated EV/Resources
Mineral content (in Koz)
Attributed EV
(AU$ MM)
Value/ Share (AU$)
Low 127 102.3 12.99 0.06
High 170 136.5 23.25 0.10
Uranium Low High
EV/Resources 173.56 209.05 Correlation
of 1.28% between
resource
grade and
EV/Resource
Slope 93.40 93.40
Intercept 154.88 154.88
Grade (kg/t) 0.20 0.58
Value Bracket
Estimated EV/Resources
Mineral content (in T)
Attributed EV
(AU$ MM)
Value/ Share (AU$)
Low 174 241.8 41.96 0.19
High 209 701.2 146.58 0.65
ARROWHEAD FAIR VALUE BRACKET
Value Bracket
Copper Project
Gold Project Silver Project Uranium project
Total EV (AU$ MM)
Value/ Share (AU$)
Low 20.2 3.8 13.0 42.0 79.0 0.35
High 92.3 7.6 23.2 146.6 269.8 1.19
y = 268166x - 1994.6R² = 0.9296
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
0.0% 0.5% 1.0% 1.5% 2.0%
y = 2018.5x + 65.974R² = 0.3198
$0
$500
$1,000
$1,500
$2,000
$2,500
0.0 0.2 0.4 0.6 0.8
y = 54.299x - 3.4132R² = 0.0174
$0
$100
$200
$300
$400
$500
$600
2.0 3.0 4.0 5.0
y = 93.401x + 154.88R² = 0.0128
$0.0
$50.0
$100.0
$150.0
$200.0
$250.0
$300.0
$350.0
$400.0
$450.0
$500.0
0.0 0.1 0.2 0.3 0.4 0.5 0.6
Full company name – Arrowhead BID 28 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
Notes and References
i Bloomberg as on 18-Sep-12
ii Bloomberg as on 18-Sep-12
iii 3 months average daily volume from Bloomberg as on 18-Sep-12
iv Bloomberg as on 18-Sep-12
v Arrowhead Business and Investment Decisions Fair Value Bracket - AFVBTM. See information on valuation on pages 23-27of this report and important disclosures on page 26 of this report.
vi http://paceinvestors.pir.sa.gov.au/
vii Reuters, as on 13-Aug-12
viii http://www.mining-technology.com/projects/olympic-dam/
ix http://www.world-nuclear.org/info/inf23.html;
http://www.theaustralian.com.au/business/mining-energy/global-uranium-demand-expected-to-skyrocket/story-e6frg9df-1226306620160; http://www.roperld.com/science/NuclearPowerDecline.htm;
http://www.macquarieprivatewealth.ca/dafiles/Internet/mgl/ca/en/advice/specialist/noel/documents/matt-noel-uranium-report.pdf;
http://www.theaustralian.com.au/business/mining-energy/uranium-supply-in-focus-as-reactors-poised-to-come-back/story-e6frg9df-1226395185001;
http://www.wallstreetdaily.com/2012/04/26/uranium-price-forecast-the-nuclear-industrys-fundamental-shortage/;
http://nextbigfuture.com/2012/03/australian-outlook-for-world-economy.html x http://goldinvestingnews.com/26319/2012-gold-q2-market-trends-outlook-price-investing-india-demand-united-states-comex-federal-reserve.html
xi http://www.miningweekly.com/print-version/new-mining-operations-to-impact-copper-supply-growth-2012-03-30;
http://www.icsg.org/images/stories/pdfs/icsg_press_release_-_2012_04__forecast.pdf;
http://www.platts.com/RSSFeedDetailedNews/RSSFeed/Metals/6472905;
http://www.marketwatch.com/story/societe-generale-cuts-2012-copper-gold-outlook-2012-06-11; http://www.businessinsider.com/here-are-morgan-stanleys-commodity-predictions-for-2012-and-2013-2012-5?op=1;
http://www.commodityonline.com/news/anz-trims-2012-gold-silver-copper-forecast-48459-3-48460.html
xii http://en.wikipedia.org/wiki/Iron_oxide_copper_gold_ore_deposits; http://eprints.jcu.edu.au/4705/
xiii Recreated from information available in: http://en.wikipedia.org/wiki/Iron_oxide_copper_gold_ore_deposits
xiv http://www.pir.sa.gov.au/__data/assets/pdf_file/0005/104198/Baker_Tim.pdf
xv Source (EV): Bloomberg as on to 17-Sep-12. Resource for each project has been estimated after discounting individual projects of the peers in each product category.
Enterprise Value (EV) in AU$ MM and Estimated Resources are in thousands MT. Estimated EV/Resources is in AU$/MMT.
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