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$0.195 i 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 [email protected][email protected]Market Data 52-Week Range: AU$0.061 – AU$0.205 ii Average Daily Volume: 502,212 iii Market Cap. on date: AU$44.08MM iv Estimated EV (in AU$ 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.
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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 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.
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$250/oz, and
reached record levels in early 2011 due to
increase in money supply in the US.
In first half of 2012, gold price has fallen
primarily due to lower imports from India and
tight credit conditions as a result of Eurozone
debt crisis. We expect gold price to rise in second
half of 2012, backed by increase in demand from
India and expected easing by US Central Bank.
Gold Price trend in last five years
Source: Infomine
Copperxi
Chemistry and Properties
Copper is a ductile metal with high thermal and
electrical conductivity possessing the chemical
symbol ‘Cu’ and atomic number 29.
Applications
Electronics: About 65% copper produced globally is
used for electrical applications. The important uses of copper include power generation and transmission of electricity. It is also used in wiring and contacts for appliances.
Architecture: About 25% copper produced globally is used in buildings as copper is a waterproof metal and is used for plumbing, roofing and cladding.
Industry and Transport: Copper is used in the production of industrial machinery and transportation vehicles. Transport accounts for about 7% of the global copper usage.
Biological Applications: Copper has biostatic, antimicrobial, and fungicide capabilities. Copper
bracelets are used to ease joint pains and arthritis. It is also used in providing hygienic surfaces in hospitals and other healthcare facilities.
World Mine Production World Mine Capacity Mine Capacity Utilization (%)
0
5,000
10,000
15,000
20,000
25,000
0
5,000
10,000
15,000
20,000
25,000
2004 2005 2006 2007 2008 2009 2010 2011 2012F
Pro
du
ctio
n (
KT)
Co
nsu
mp
tio
n (
KT)
Consumption Production
0
2000
4000
6000
8000
10000
12000
Jan-
07
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08
Jan-
09
Jan-
10
Jan-
11
Jan-
12
US$/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
$500.0
0.0 0.1 0.2 0.3 0.4 0.5 0.6
Full company name – Arrowhead BID 28 ASX:TAS
Due Diligence and Valuation Report See important disclosures on page 26 of this report.
Notes and References
i Bloomberg as on 18-Sep-12
ii Bloomberg as on 18-Sep-12
iii 3 months average daily volume from Bloomberg as on 18-Sep-12
iv Bloomberg as on 18-Sep-12
v Arrowhead Business and Investment Decisions Fair Value Bracket - AFVBTM. See information on valuation on pages 23-27of this report and important disclosures on page 26 of this report.
vi http://paceinvestors.pir.sa.gov.au/
vii Reuters, as on 13-Aug-12
viii http://www.mining-technology.com/projects/olympic-dam/
http://nextbigfuture.com/2012/03/australian-outlook-for-world-economy.html x http://goldinvestingnews.com/26319/2012-gold-q2-market-trends-outlook-price-investing-india-demand-united-states-comex-federal-reserve.html
xi http://www.miningweekly.com/print-version/new-mining-operations-to-impact-copper-supply-growth-2012-03-30;
xii http://en.wikipedia.org/wiki/Iron_oxide_copper_gold_ore_deposits; http://eprints.jcu.edu.au/4705/
xiii Recreated from information available in: http://en.wikipedia.org/wiki/Iron_oxide_copper_gold_ore_deposits
xiv http://www.pir.sa.gov.au/__data/assets/pdf_file/0005/104198/Baker_Tim.pdf
xv Source (EV): Bloomberg as on to 17-Sep-12. Resource for each project has been estimated after discounting individual projects of the peers in each product category.
Enterprise Value (EV) in AU$ MM and Estimated Resources are in thousands MT. Estimated EV/Resources is in AU$/MMT.