GBM Resources Limited

Page 1 – Copyright © 2012 RM Research – www.rmresearch.com.au - Please read the disclaimer for terms.

This report addresses why investors should try to understand the inherent value andpotential GBM Resources Limited (“GBM” or “the Company”) represents.

GBM’s 100% owned Milo Prospect near Cloncurry in far north Queensland is fastbecoming a company making project as the Company moves towards completing aScoping Study in mid CY 2013 and a Preliminary Feasibility Study (PFS) in mid 2013. Asexploration progresses, it is clear that the project is more than a multi commodity IOCG(iron-oxide/copper/gold) deposit. Exploration has delineated sulphide mineralisationcontaining copper (Cu), gold (Au), molybdenum (Mo) and uranium (U) that has beenoverprinted and enveloped by widespread value adding rare earth elements (REE) andyttrium (Y).

Additional shareholder value will soon become apparent once GBM vends the phosphaterights held by its 100% owned Bungalien Phosphate Pty Ltd to joint venture partnerSwift Resources Ltd (“Swift”) (GBM ASX announcement, 16 February 2012). GBM willreceive A$3.3 million for 30% of its phosphate rights in the form of equity in Swift and willundertake an in-specie distribution of the shares to shareholders.

Based on an EV/Cu tonne of approximately A$450 for ASX listed copperexplorers/developers, we anticipate that Cu-REE or IOCG-REE companies should tradeat perhaps a 70-80% discount to reflect the lower recoveries (perhaps 30-40%), highercapital costs (+20-30%) and more limited market for concentrates (ie dominated byChinese smelters). Based on this methodology would translate to a six month share pricetarget of say A$0.35 per Share for GBZ whose Milo Project is essentially likely tocomprise around 30-40% Cu and 60-70% REE by contained value Speculative Buy.

INVESTMENT CASEMilo IOCG/REE: A Scoping Study and maiden JORC complaint resource statementdue by mid CY 2012 is an upcoming highlight. The initial conceptual explorationtarget of between 30-80 million tonnes of poly-metallic mineralization and REEsgrading 0.8%-1.2% Cu-equivalent has been well and truly exceeded as the maidenInferred JORC resource for the REE mineralization is already 103 million tonnes @760ppm for around 82,500 tonnes of REEYO.

The Milo Project resource has over 1 kilometre of continuous Cu & REEmineralization and is still open-ended to the north and south and at depth. Planneddrilling will be a highlight over the next quarter.

Swift will acquire 100% of the Bungalien Phosphate Project for the phosphate rightsand intends to list on the ASX. GBM shareholders will receive free shares in Swift.

GBM acquired a new tenement from Newcrest Mining (ASX: NCM) that surroundsIvanhoe Australia’s (ASX: IVA) Trekelano Cu-Au mine which extends over 1.2kilometres southwards to the Tick Hill gold mine. The potential will be determinedonce all previous data is assimilated, assessed and targets are generated.

The Bungalien IOCG JV Project’s maiden drilling program at the Bronzewing Boreprospect intersected significant widths of anomalous IOCG style coppermineralization.

At the Mt Morgan Project, a large porphyry Cu/Au system was discovered at theSandy Creek Prospect. This will now be a priority drill target for 2012.

Capital Structure

Sector Materials

Share Price (A$) 0.082

Fully Paid Ordinary Shares (m) 221.6

Opt (ex 20c, exp 30/06/13) (m) 129.5

Market Cap (undil) (A$m) 18.2

Share Price Year H-L (A$) 0.135-0.051

Approx Cash (A$m) 1.5

Directors & Management

Peter Thompson Chairman & MD

Neil Norris Exploration Director

Cameron Switzer Non-Exec Director

Guan Huat Sunny Loh Non-Exec Director

Kevin Hart Company Secretary

Major Shareholders

UOB Kay Hian Private Ltd 16.1%Swift Venture Holdings Ltd 5.0%

Superfine Nominees Pty Ltd 2.8%

Carpentaria Corporation P/L 2.1%

Australian Global Capital 2.0%

Analyst

Andy Comas +61 8 9488 0800

12 Month Share Price Performance

GBM Resources LimitedMaiden Resource due June Quarter at Milo...Phosphate Spinout...Mt Morgans exploration kicks into gear

10 April 2012

ASX Code: GBZ

Speculative Buy6 Month price target 35 cents

10 Ap

COMGBMprojeccoppeVictori

GBMCorpoand DBore,

The Bthe phproceepropos

EXPMilo PThe Mis locain far n

The mnorthwthat hminerathe IOto the the no

FIGURE 1: ProjectLocation Map (source:GBM Resources, ASXAnnouncement 31st

October 2011).

.

Page 2 – Copyright © 2012

pril 2012

MPANY OVERVIEWResources is a Perth based exploration company

cts with REEs and phosphate in the Mt Isa/Cloncurryer and gold projects near Rockhampton, Queensland,ia.

has a joint venture with Japanese firms Pan Pacoration (Pan Pacific/Mitsui JV discussed below) via th

Development Pty Ltd (“CED”) with a A$55 million farmTalawanta-Grassy Bore, Chumvale Breccia and Moun

ungalien Phosphate JV with Singapore based Swift Vhosphate rights on the Bungalien tenements has ped with acquiring 100% of the rights once certain csing to list on ASX.

PLORATION OVERVIEWProject

Milo Project (Figure 1, Figure 2) is the Company’s mostated due east of major regional town Mount Isa and junorthwest Queensland.

mineralization is hosted in a highly brecciated and altewest-south and is coincident with magnetic highs withinas been interpreted as a possible buried granite thaalization. The REE and yttrium mineralisation (REEY) a

OCG style Cu Au Ag Mo U Co mineralisation. Drilling seast, is possibly fault related, and that higher grade

orth.


October 2011).

.

RM Research - www.rmresearch.com.au

with IOCG-type copper and goldy district of Queensland, porphyry, and copper and gold projects in

cific Copper (“PPC”) and Mitsuihe company Cloncurry Exploration

m-in agreement on the Bronzewingt Margaret Projects.

Venture Holdings Corporation forroven successful. Swift will nowconditions have been met and is

t advanced exploration project andst 20 kilometres west of Cloncurry

ered rock that is generally strikingn a broader magnetic low anomalyat gave rise to the IOCG & REEappears to overprint and envelopeshows that the mineralization dips

e copper mineralization plunges to


October 2011).

.

10 Ap

In DemineraprevioAt theMIL01

The gthat thpositivreceivincludmineraan ecoand Requiva

In regare ligheavytouch

Drillingwhichthe prleast anoma

Given REEYcould this is

FIGURE 2: Milo ProjectLocation Map (source:GBM Resources ASXAnnouncement 31st

October 2011).


pril 2012

cember 2011, a six hole diamond drilling programalisation at depth and along strike to the north. T

ous geological mapping and anomalous assays returnee time of writing, only three drill holes have been 3) (Figure 3).

ood news is that the geology observed in the drill corhe copper and REEY mineralisation extends over 40vely correlates with the geochemical anomaly (Figure ved to date for MIL011 which returned 124 metres @ 0ing 21 metres @ 1.0% Cu-equivalent together alisation. As a stand-alone copper resource, the copponomic single commodity mining operation. However, tREE composition add significant economic value aalent grade >0.5% is looking quite robust.

ard to the REE mineralisation at Milo, assay results sght rare earth elements (LREE) Cerium (Ce), Lanthay rare earth elements (HREE) Yttrium (Y), Dysprosium

on the REE significance in the Resource Statement se

g to date has delineated over 1 kilometre of continuis interpreted to be up to 200 meters wide. The geoc

reviously reported soil sampling continues north-westanother 500 meters (Figure 3). There are also a alies to the north-west which may be structurally relate

the positive correlation between the geochemical sigY mineralisation delineated by exploratory drilling, the t

conceivably extend for up to two kilometres. Future drithe case.


October 2011).

RM Research – www.rmresearch.com.au

commenced in order to test forThese targets were outlined fromed from the soil sampling program.completed (MIL011, MIL012 and

re from these three holes confirms0 metres further to the north and3). Assay results have only been

0.5% Cu-equivalent from 82 metrewith several zones of REEY

per grades are on the low side forthe associated IOCGU mineralogyand hence a large tonnage Cu-

suggest that REEs of significanceanum (La), Neodymium (Nd) andm (Dy), and Europium (Eu). I willection below.

uous Cu and REE mineralizationchemical anomaly generated fromterly past drill hole MIL013 for atnumber of parallel geochemical

d but have yet to be drill tested.

gnature in the soil and copper andtotal strike length of mineralisationilling programs should determine if


October 2011).

10 Ap

Essendetermrequireresour

FIGURE 3: Milo Projectdrill location mapoverlying the soilanomaly and magneticimage (source: GBMResources ASXAnnouncement 29th

February 2012).


pril 2012

ntially, the Milo mineralisation is still open-ended and mine the extent of mineralisation both along strike and ed in the future as the project develops in order to rce under the JORC reporting standards.


February 2012).


further drilling will be required toat depth. In-fill drilling will also beupgrade the classification of the


February 2012).

10 Ap

RES

HREE

C CREO CREO CREO

TREEYO CeO2 La2O3 Pr2O3 Sm2O3 Eu2O3 Gd2O3 Y2O3 Dy2O3 Er2O3 Others

Grade (ppm) 760 340 180 30 14 5 12 57 9 5 10

Tonnes 82,500 34,600 18,600 3,080 1,460 520 1,190 5,900 970 550 1,080

REEO(US$/t) 32,000 35,000 1 165,000 69,000 3,420,000 105,000 93,000 1,410,000

Duringequivaapprox(Tablephospresour

The trand/orHREEthey a

In 201Energrisk toDOE dbe the

Using statemSm-Dycompoaroundyttrium

TABLE 1: Inferred REEanalysis (source:modified GBMResources ASXAnnouncement 29th

February 2012).

FIGURE 4: CriticalityAssessment of REEs,Present -2015 (source:US Department ofEnergy, DEC 2011:Critical MaterialsStrategy).


pril 2012

SOURCES AND RESERVES

LREE

CREO CREO CREO CREO

TREEYO CeO2 La2O3 Nd2O3 Pr2O3 Sm2O3 Eu2O3 Gd2O3 Y2O3 Dy2O3 Er2O3 Others

Grade (ppm) 760 340 180 95 30 14 5 12 57 9 5 10

Tonnes 82,500 34,600 18,600 9,800 3,080 1,460 520 1,190 5,900 970 550 1,080

REEO(US$/t) 32,000 35,000 170,000 165,000 69,000 3,420,000 105,000 93,000 1,410,000

g the last quarter, GBM announced a maiden Infealent) for the REEY component of the Milo Project ofximately 82,500 tonnes of TREEYO based on a 400p

e 1). A maiden JORC resource for the IOCG polymetaphate and magnetite content is pending. The total rce will then become apparent and may well revalue th

raditional classification of REEs into predominately lr heavy rare earth elements (HREE) is not necessar

Es and a recent category known as the critical rare eartare considered to be the more valuable REEs in the fore

10, the inaugural Critical Materials Strategy report prey (DOE) defined which REEs were in critical supply b

o clean energy applications. The annual update was redeclared that the supply of dysprosium, terbium, euro

e CREOs essential to clean energy applications over th

the published inferred tonnages of REE oxides ment (Table 1), the contained REEs are predominatey mineralogy. On this basis, the Milo TREEYO resoosition with a significant proportion of the CREOs. Thd 21% of the total REE mineralisation consists of th

m and dysprosium. That may be so, but what will the re


February 2012).



LREE HREE

CREO CREO CREO CREO

TREEYO CeO2 La2O3 Nd2O3 Pr2O3 Sm2O3 Eu2O3 Gd2O3 Y2O3 Dy2O3 Er2O3 Others

Grade (ppm) 760 340 180 95 30 14 5 12 57 9 5 10

Tonnes 82,500 34,600 18,600 9,800 3,080 1,460 520 1,190 5,900 970 550 1,080

REEO(US$/t) 32,000 35,000 170,000 165,000 69,000 3,420,000 105,000 93,000 1,410,000

erred JORC resource (NI43-101103 million tonnes at 760ppm for

ppm cut off grade of the data usedallic copper mineralisation and thepotential economic value of the

he share price as a result.

light rare earth elements (LREE)rily important, but the presence ofth oxides (CREO) are important aseseeable future.

epared by the U.S. Department ofbased on the supply and demandleased in December 2011 and the

opium, neodymium and yttrium willhe next 15 years (Figure 4).

(REEO) in the JORC resourceely Ce-La-Nd with additional Y-Pr-ource has a hybrid mostly LREE

he assay results to date show thathe CREOs neodymium, europium,ecovery rates be?


February 2012).


Page 6 – Copyright © 2012 RM Research – www.rmresearch.com.au

10 April 2012

The mineralogical composition, metallurgical, processing and recovery tests have yet to becompleted, however the results of initial test work suggests that between 30% and 70% ofindividual REEs may be recoverable. Ongoing testing and the upcoming scoping study willclarify the recovery issue.

As exploratory and infill drilling of the resource is incomplete both along strike and at depth itis conceivable that the total tonnage and grade may increase, particularly to the north.Geological modelling of all the current data suggests that the cut-off grade will be an importantvariable in the economics of the resource. Naturally, by using a lower cut off grade the totaltonnage generally increases and conversely, by using a higher cut-off grade, the tonnage willdecrease. The Scoping Study will however provide a clearer understanding of what grade andtonnage will support a viable mining operation.

Metallurgical Test Work

Metallurgical test work was initiated in April 2011 on the poly-metallic mineralisation prior tothe discovery of the REE mineralisation in 2H 2011. Since that time, it has been demonstratedthat a copper/gold/molybdenite concentrate, a low grade gold concentrate for cyanidation, andtailings for uranium leaching can be economically extracted. Recoveries of up to 80% werereported for Cu, Au, Ag, Mo, and over 90% of the uranium. The Co, magnetite and phosphaterecoveries will be reported as part of the scoping study by mid CY 2012.

Identification of the minerals hosting the REEs is underway and initial test-work indicates thatmineralisation is hosted by apatite and a range of carbonate minerals. Apatite is a phosphategroup mineral that yttrium can be found in and initial flotation test work has indicated thataround 30% of the TREEYOs can be recovered as an apatite concentrate using traditionalflotation techniques. The relationship of the REEs to the poly-metallic mineralization stillwarrants further investigation.

SCOPING STUDYA Scoping study has been in progress since mid-2011 and is expected to be completed bymid-2012. Mining One Pty Ltd will manage the study that will address the parameters that willdetermine whether the Milo Project has the economic viability to proceed to a mining scenario.

The technical hurdles to be addressed are summarized as follows:

Maiden JORC resource statement

Metallurgical test results on the recovery of cobalt, magnetite & phosphate

Metallurgical test work on the rare earths to produce a saleable concentrate

Metallurgical test work on the recovery of IOCG metals

Potential pilot plant design

Potential pit design

Resource modeling e.g. optimal cut-off grades and tonnage

Project economics modeling to demonstrate commercial viability

In tandem with the Scoping Study, the following exploration still needs to be completed:

Geological mapping and extension of the soil sampling to test for extensions of Cuand REE soil anomalies.

Infill resource drilling to increase the level of confidence in the data to a JORCcompliant category above inferred status.

Further exploration drilling to define the northern, western and depth extremities ofthe mineralisation.

On the completion of the scoping study, and assuming a sucessful outcome, a PreliminaryFeasibility Study (PFS) will be the next step in advancing the Milo Project.

10 Ap

PPC/

GBMCorpoDevelTalaw

CEDdevelofree ca

Bung

The PtargetsProspis covat the anomaand ca

Limiteanomaexplorthe seeach p

Talaw

CoinciDiamointersefinalise

FIGURE 5: PPC/MitsuiJV Project LocationMap (source: GBMResources ASXAnnouncement 31st

October 2011).


pril 2012

Mitsui JV Project, QLD

entered into a farm-in agreement with Pan Pacoration (“MC”) via their co established Australian comopment Pty Ltd (“CED”) in April 2011. The farm-in

wanta-Grassy Bore, Chumvale Breccia and Mount Marg

can earn up to a 90% interest by spending A$55opment of the IOCG style projects over a minimum sarried interest of 10% through to the completion of a Ba

galien IOCG Project

PPC/MC JV covers exploration of basement lithologies s strong magnetic anomalies at the Bronzewing Bects. Geophysics is an important exploration tool to ge

vered by 100-500 meters of sediments. Three diamondBronzewing Bore Prospect and all holes have intersec

alous albeit low grade copper. The chalcopyrite is assarbonate alteration.

ed deep drilling to date at the Bungalien projects hasalous IOCG style mineralization which is noteworthration. It is obvious that there has been a widespreadearch down to a higher grade core is the result I’d likeproject’s potential.

wanta-Grassy Bore

ident gravity and magnetic highs are the conceptual taond drill hole TGD003 was completed at Talawanta hoected. Further drilling has been deferred until laned.


October 2011).


cific Copper (“PPC”) and Mitsuipany Cloncurry Exploration and

n agreement is on the Bungalien,garet Projects (Figure 5).

5 million on the exploration andsix year period. GBM will retain aankable Feasibility Study.

for IOCG style mineralization andBore, Malbon2 and Horse Creekenerate targets as the project aread drill holes have been completedcted broad widths (>100 meters) ofsociated with magnetite +/- chlorite

s intersected significant widths ofhy given the dearth of any priord mineralizing event but narrowinge to see. Future drilling will define

argets at this typical IOCG project.owever only low grade copper wasndholder negotiations have been


October 2011).

10 Ap

Chum

The Ccompl

Moun

Thesesimilartenemarea dgenera

Bung

The inshareslisted GBM’sSVHC

Mayfi

Just aNewcPermitProjecis ownjust no

The siand go

The T1991-pit and

The Bungalien Phosphate Project(Figure 6) is a JV with Singaporebased Swift Venture HoldingsCorporation (“SVHC”). SVHC’swholly owned subsidiary SwiftResources Limited (“Swift”) hasconditionally agreed to acquire100% of the JV’s phosphate rightson the successful listing of Swift onthe Australian Stock Exchange(ASX).

Assuming all the conditionsprecedent are fulfilled, GBM willreceive 16.5 million fully paid Swiftshares @ 20 cents each for a totalof A$3.30 million and, subject toShareholder Approval, willdistribute the Shares in specie toGBM shareholders. It is envisagedthat GBM shareholders will receiveone Swift share for every 15 GBMShares held on the record date

FIGURE 6: BungalienPhosphate ProjectLocation Map (source:GBM Resources ASXAnnouncement 31st

October 2011).


pril 2012

mvale Breccia

Chumvale Breccia is a five kilometer by one kilometer eted and assay results are pending.

nt Margaret Projects

e tenements are prospective for deep basement lithr to the nearby Ernest Henry Mine. Very little wo

ments by GBM however a Squitem geophysical surveduring the December Quarter 2011. The data is sate prospective drilling targets in 2012.

galien Phosphate Project

nitial public offer (IPO) by Swift is expected to be for us at an issue price of 20 cents each to raise up to Aon ASX by mid-2012 however if it is not admitted ts interests in the phosphate rights will revert to an uni

C’s interest will be 70% and GBM’s interest 30%.

ield Project

as GBM divests itself of the Bungalien Phosphate Projerest Operations Limited (ASX: NCM) to acquire t (EPM1411) that is just west of the Bungalien ten

ct (Figure 7)as it will be known, completely surrounds ned by Ivanhoe Australia (ASX: IVA) and extends arorth of the Tick Hill gold mine (Figure 7).

ignificance of this acquisition is that the Trekelano coold deposit that IVA is drilling and reporting exceptiona

ick Hill gold mine (currently owned by Xstrata) was a h1995 produced 513,333 ounces of gold at a head gradd underground operations (DRX ASX announcement 4

The(FigbasCorwhoRescon100on tthe (AS

Assprecreceshaof AShadistGBthatoneSha


October 2011).


target. Two drill holes have been

hology IOCG style mineralizationork has been carried out on they was conducted over the project

still being interpreted in order to

up to 25 million fully paid ordinaryA$5 million. Swift is seeking to beto the official list then SVHC andncorporated joint venture in which

ect, it has reached agreement witha highly prospective Explorationements (Figure 5). The Mayfieldthe Trekelano copper mine which

round 24 kilometres southwards to

opper mine is a high grade copperal high grade copper intersections.

high-grade gold producer that fromde of 22.6 g/t gold from both open

4 Sept 2009).

e Bungalien Phosphate Projectgure 6) is a JV with Singaporesed Swift Venture Holdingsrporation (“SVHC”). SVHC’solly owned subsidiary Swiftsources Limited (“Swift”) hasnditionally agreed to acquire0% of the JV’s phosphate rightsthe successful listing of Swift on

Australian Stock ExchangeSX).

suming all the conditionscedent are fulfilled, GBM willeive 16.5 million fully paid Swift

ares @ 20 cents each for a totalA$3.30 million and, subject toareholder Approval, willtribute the Shares in specie toM shareholders. It is envisagedt GBM shareholders will receive

e Swift share for every 15 GBMares held on the record date


October 2011).

10 Ap

The Mthat wexplorprogra

MounThe Mmine wheyda

The coon-goiconduduringalteratchip a

Of gredata thits heaand m

FIGURE 7: MayfieldProject Location Map(source: GBMResources ASXAnnouncement 31st

October 2011).


pril 2012

Mayfield Project has the potential to host high-grade which bookends this project. GBM intends to assration data on the various prospects within the tenam.

nt Morgan ProjectMount Morgan tenements (Figure 8) are adjacent to thewhich produced over 8 million ounces of gold and 40

ay.

ompilation and assessment of all historical data pertaing exercise, however initial soil and rock chip samplin

ucted during the last quarter generated a number ofg 2012. The priority is likely to be the Sandy Creetion zone measuring around 1,500 metres x 700 metre

assays up to 39% Cu, 8.5g/t Au and 44ppm Ag.

eat significance though is GBM’s geological due diligehat has turned the accepted interpretation of the minerad. Historically, mineralisation in the area was interpret

modern exploration was for a Mt Morgan look-a-like dep


October 2011).


Au & Cu mineralization similar tosimilate and assess all previousnement and announce a forward

e world class Mount Morgan Au-Cu00,000 tonnes of copper during its

aining to the tenements will be ang and detailed geological mappingf targets for follow-up explorationek Prospect where an extensivees was delineated with some rock

nce and interpretation of historicalralisation in the Mt Morgan area onted to be of massive sulphide styleposit.


October 2011).

10 Ap

GBMcoppe

The cand linigneoucoppefeature

An iniwhethdiscov

Victo

No sigprojecexist.

FIGURE 8: Mt MorganProject magnetics,structural lineaments,and historical mines(green dots). (source:GBM Resources ASXAnnouncement 9th

February 2012).

Rock chip assays up to39% Cu.


pril 2012

believes that the target should be for intrusion relateer and gold mineralisation.

rux of this new theory is the inter-relationship betweeneaments, north-west trending structures, strong radus intrusives, and associated hydrothermal alteratio

er and gold assays from the soil sampling correlated es.

itial RC-drilling program slated for 2H 2012 will be er this new theory is the key to unlocking the co

veries similar to the nearby Mount Morgan Au-Cu mine

orian Projects

gnificant exploration was completed during the last cts located in and around Ballarat and Bendigo whereRefer to GBM’s website for previous exploration details


February 2012).



ed systems giving rise to porphyry

en major north-east trending faultsdiometric anomalies, a number ofon zones (Figure 8). Anomalouswell with alteration and structural

watched for closely to determineontrols of mineralisation for new

e.

quarter on any of the Victoriannumerous historical gold workingss.


February 2012).



10 April 2012

PEER COMPARISON AND ESTIMATE OF VALUEIn an attempt to peg the performance of GBM against some of its peers and determine therelative value it soon became obvious that any comparison would be a challenge. Do Icompare GBM with peers in the Cloncurry district exploring for IOCG-type copper deposits orwider afield with REE explorers? Not only that, GBM is more than just the Milo Project and anenterprise valuation (EV) based on the Milo resource alone would not be representative of theadditional inherent value that extends to GBM’s other projects.

Directly comparable small market capitalisation (market cap) peers were not readily apparentso instead I have distilled a blend of predominately REE explorers together with some of theCloncurry district’s IOCG/REE explorers. As a REE explorer, GBM‘s peers with a market capof less than A$100 million would include Northern Minerals (ASX: NTU), TUC Resources(ASX: TUC), Hastings Rare Metals (ASX: HAS) (see RM Research, Hastings Rare MetalsLimited, 6 February 2012), Kimberley Rare Earths (ASX: KRE), and Krucible Resources(ASX: KRB). Junior Cu-Au explorers in the Cloncurry district would include Exco Resources(ASX: EXS), Chinalco Yunnan Copper Resources (ASX: CYU), Queensland Mining Corp(ASX: QMN), Goldsearch (ASX: GSE), and Paradigm Metals (ASX: PDM). The currentmarket caps of these companies are shown in Figure 9.

Obviously, the larger explorers and miners in the district such as Cudeco (ASX: CDU) havemuch larger market caps and EVs than GBM (Figure 9).

CYU’s Cloncurry district projects are similar in style to GBM’s Milo project in so far as the Cu-Co-Au mineralization has been overprinted in places by late stage uranium +/- REEmineralization. The light rare earth elements (LREE) cerium, lanthanum and neodymium makeup around 95% of the TREEYO mineralisation with a general dearth of the higher valueHREEs and CREOs. The CREO content of the Milo project is currently around 21%.

QMN has similar style Cu mineralisation to GBM’s Milo Project and the JORC resource for itsprojects in the district currently tallies to a much smaller total resource of around 36 Mt hencethe lower EV (Figure 10).

FIGURE 9: MarketCapitalisations ofselected REE andIOCG/REE Explorers.(source: RM Researchinternal modelling, April2012).


10 April 2012

EXS’s Cloncurry/Mt. Isa district projects cover over 2,900 km2, a vast areal extent of highlyprospective ground with the majority of the projects being Cu/Au exploration projects. Theyalso have a 50/50 JV with PDM on the Toolebuc REE Project (similar in style to GBM’s MiloProject) together with a number of other JV projects with Xstrata, BHP, QMN and IVA and anoperating gold mine in South Australia. Their EV (Figure 10) is double that of GBM’ssuggesting that the EV ascribed to GBM undervalues the Milo resource and does not assignany value to their portfolio of projects. If that were the case and GBM had a similar EV, thenthat would equate to a share price of at least 15c per GBM share.

Based on an EV/Cu tonne of approximately A$450 for ASX listed copperexplorers/developers, we would anticipate that Cu-REE or IOCG-REE companies shouldtrade at perhaps a 70-80% discount to reflect the lower recoveries (perhaps 30-40%), highercapital costs (+20-30%) and more limited market for concentrates (ie dominated by Chinesesmelters). This would translate to a six month share price target of say A$0.35 per Share forGBZ. In addition to the REE, we believe that the Cu and Cu-equivalent values of thecontained metals Au, Ag, Co, Mo etc are also likely to add significant additional value to theMilo Project.

Of the predominately REE companies, NTU and TUC have yet to publish maiden JORCcompliant resource statements and until they do, it is difficult to calculate comparablevaluation numbers. NTU’s and TUC’s projects differ from GBM’s Milo project in that theyhave a high HREO to TREEYO ratio and the mineralisation is richer in the higher valueCREOs yttrium and dysprosium. However, GBM and NTU are making progress towards themetallurgical testing and Scoping Study stages whereas TUC’s Stromberg HREE project iswell behind GBM in the various stages or hurdles to conquer in order to progress to thepenultimate production stage.

Keep in mind though that GBM’s inherent value should be based on more than just the Cuand REE content of their Milo Project especially since their Bungalien IOCG JV Project, theMt Morgan Project and the newly acquired Mayfield Project are all in the early stages ofexploration and their respective values will be better realised as exploration progresses.

RM Research is therefore of the opinion that the overall intrinsic value of GBM has yet to berecognised and that the release of the pending scoping study will confirm this. Theexpectation is that GBM should then be better acknowledged by the investment community.

EV/T Cu Equiv selected ASX Explorers/DevelopersFIGURE 10 EnterpriseValue per tonne of Cuequivalent for selectedcopper REE andIOCG/REEExplorers/Developers.(source: RM Researchinternal modelling, April2012).


10 April 2012

SUMMARYFrom the discussion above, it is apparent that GBM’s market cap and EV (Figure 10) are onthe low side compared to many of its peers. It is difficult to truly evaluate GBM in total giventhat of all its projects, the Milo Project is the most advanced and it is too early to quantify theinherent value of all its other projects until such time as GBM reports JORC compliantresource statements for each project.

I believe that any company with REE mineralisation needs to be considered on its own merits,how far it has progressed on the REE industry’s widely understood steps to production, andultimately the composition of its mineralogy. I would assign a higher valuation on a resource ifthe HREE and CREO contents are relatively high compared to its peers as they are of highervalue and in shorter supply. A predominately LREE deposit may not necessarily beeconomically viable given that the Chinese dominate the global supply at much lower costsand can ramp up production of LREE as they see fit.

The REE industry is capital intensive at each stage of a project’s development and a goodsource of funding is required together with joint ventures and commercial relationships. Thefuture pricing and market supply and demand equation will ultimately determine thecommercial viability of any given project depending on the ratio of individual REEs containedin the mineralisation. There is no guarantee that prices for REEs contained in a particularresource will render the project as economic in the future.

It is well documented that China will continue to dominate the global supply and demand ofREEs and other strategic metals and commodities and the refining and production of metalalloys for the foreseeable future. I expect to see Chinese dominance to continue to movebeyond its borders as they farm-in, joint venture or takeover promising resource projects andtake-up ground to explore in their own right as they have in the Cloncurry district (as ASX-listed companies) and elsewhere in the world.

PENDING MILESTONESRM Research forecast news releases to the ASX are as follows:

April 2012

Milo North drilling assay results due (MIL012, MIL013)

Mt. Morgan field exploration results due

Pan Pacific/ Mitsui IOCG JV 2012 month budget approval

May-July 2012

Successful IPO of the Bungalien phosphate JV project as Swift Resources Ltd

June 2012

Expected release of the JORC compliant inferred resource for the Milo Project.

Milo Project Scoping Study results

July 2012

Preliminary Feasibility Study for the Milo prospect starts


10 April 2012

RISK ANALYSISFurther exploration may not define an economic JORC compliant resource at any of theCompany’s projects as to date the level of drill exploration is not close-spaced enough todefine a sufficient level of confidence in the continuity of the data. This may have anegative impact on the securities of the Company.

GBM has just over A$1.5 million cash left for exploration and other activities. A capitalraising will be required to increase cash reserves to continue exploration and to completethe scoping study and pre-feasibility study in 2012. This could be dilutionary to existingshareholders.

Further declines in equity markets may continue to put pressure on junior resourcecompanies as investors switch out of “risk” into perceived safe haven investments suchas cash, gold and counter cyclical equities. Our medium term view is that the riskpremium has been eroded for many junior resource companies and we see near termupside as risk adverse shareholders would have exited these stock by now.

It is currently unknown as to whether all or any of the REEs will be able to be extractedeconomically. The upcoming scoping study will clarify this issue.

Metallurgical test work has yet to determine the optimal extraction and concentratemethodology for the Milo mineralogy.

Positive ongoing exploration results, a maiden JORC compliant resource statement and apositive scoping study should have positive impacts on the company’s share price.

Further drilling at Milo North is expected to discover further Cu and REE mineralisationthat will extend the strike length of the resource beyond one kilometer in length.Additional tonnes and higher grades will have a positive effect on the project’scommercial viability.


10 April 2012

DIRECTORS AND MANAGEMENT

Peter Thompson, CPA. CHAIRMAN & MANAGING DIRECTOR

Mr Peter Thompson is a senior resources industry figure with over 30 years experience acrossAustralia, the UK, and South America including stints at MIM Holdings, Xstrata Plc, and MtEdon Gold Mines. He has held directorships at Queensland mining and civil contractor JJMcDonald & Sons Group and ASX listed Golden West Resources. He is a CPA qualifiedaccountant and a Fellow of Chartered Secretaries Australia.

Neil Norris EXECUTIVE DIRECTOR

Mr Neil Norris has some 25 years experience in mining and exploration as a geologist withinvolvement in the discovery of Newcrest’s Cadia and Ridgeway mines in New South Walesto his credit and the Phoenix gold deposit at Fosterville in Victoria. Before joining GBM, MrNorris held senior roles with Newmont Australia Ltd and was Group Exploration Manager forPerseverance Corporation Ltd. He is the main driver of GBM’s technical and strategicdirection.

Cameron Switzer NON-EXECUTIVE DIRECTOR

Mr Cameron Switzer is a Queensland based geological consultant with over 20 yearsexperience as a geologist across the globe and importantly for GBM he was PrincipalGeologist with MIM Exploration Ltd the diverse experience he gained across a range ofgeological deposits and environments benefits the company in its exploration activities.Additionally, he has held senior roles including Senior Project Geologist at Newcrest MiningLtd’s Telfer gold mine in Western Australia and Geology Manager at Acacia ResourcesLtd’s Union Reef gold mine in the Pine Creek goldfields.

Guan Huat Sunny Loh NON-EXECUTIVE DIRECTOR

Mr Sunny Loh brings corporate and investment banking expertise in the Asian region to GBMand represents major shareholder Swift Venture Holdings Corporation of which he is theManaging Director. Mr Loh is also the Vice Chairman of Shanghai Fortune Capital, aninvestment banking and corporate advisory firm. Mr Loh holds a BBA from National Universityof Singapore, an MBA of Strategic Marketing from the University of Hull, and is an associateof the Institute of Chartered Secretaries and Administrators.

CONCLUSIONThe Milo Project is GBM’s priority exploration project that is rapidly progressing towards thecompletion of a scoping study by mid-2012. A successful outcome that reports aneconomically viable extraction process and saleable concentrate will ensure that the projectproceeds to the next stage of a feasibility study. The Holy Grail is for a commercial miningscenario dare I say as early as 2015?

To answer the question as to whether the Milo Project will be a copper or REE story, RMResearch considers that given the IOCG mineralisation is overprinted and enveloped byREEYOs, the resource is likely to be a hybrid deposit whereby the IOCG metals and the REEsmay all be commercially extractable but with variable recovery rates. The maiden JORCcompliant resource statement will go a long way to better value the project and the company.

GBM’s value lies in more than just the Milo Project and it will be positively correlated withexploration success at the Bungalien IOCG JV Project, the Mt Morgan Project and theMayfield Project which are all in the early stages of exploration and hence their respectivevalues have yet to be realised.

RM Research considers that the potential of GBM is de-risking as exploration successprogresses and have placed an initial share price target of 35c within the next six months.Speculative Buy.


10 April 2012

Registered OfficesPerthLevel 2, 6 King’s Park RoadWest Perth WA 6005

Phone: +61 8 9488 0800Fax: +61 8 9488 0899

PO Box 154West Perth WA 6872

Email / [email protected]

RM Research Recommendation CategoriesCare has been taken to define the level of risk to return associated with a particular company.Our recommendation ranking system is as follows:

Buy Companies with ‘Buy’ recommendations have been cash flow positive for some time and have a moderate tolow risk profile. We expect these to outperform the broader market.

Speculative Buy We forecast strong earnings growth or value creation that may achieve a return well above that of thebroader market. These companies also carry a higher than normal level of risk.

Hold A sound well managed company that may achieve market performance or less, perhaps due to anovervalued share price, broader sector issues, or internal challenges.

Sell Risk is high and upside low or very difficult to determine. We expect a strong underperformance relative tothe market and see better opportunities elsewhere.

Disclaimer / DisclosureThis report was produced by RM Research Pty Ltd, which is a Corporate Authorised Representative of RM Capital Pty Ltd (Licence no. 221938). RM Research will receivepayment of A$35,000 for the compilation and distribution of four research reports. RM Research Pty Ltd has made every effort to ensure that the information and materialcontained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of theinformation and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, RM Research Pty Ltddoes not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is forinformation purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities. The securities recommended by RM Researchcarry no guarantee with respect to return of capital or the market value of those securities. There are general risks associated with any investment in securities. Investorsshould be aware that these risks might result in loss of income and capital invested. Neither RM Research nor any of its associates guarantees the repayment of capital.WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particularinvestor’s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this documentwithout obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financialsituation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any)before making any decision.DISCLOSURE: RM Research Pty Ltd and/or its directors, associates, employees or representatives may not effect a transaction upon its or their own account in theinvestments referred to in this report or any related investment until the expiry of 24 hours after the report has been published. Additionally, RM Research Pty Ltd may have,within the previous twelve months, provided advice or financial services to the companies mentioned in this report. As at the date of this report, the directors, associates,employees, representatives or Authorised Representatives of RM Research Pty Ltd and RM Capital Pty Ltd may hold shares in GBM Resources Limited.

GBM Resources Limited

Documents

gbm shareholders

milo project resource

bungalien phosphate

swift gbm asx announcement

gbm willreceive

ree mineralization

iocgree companies

owned milo prospect