Right metals, right time

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1 Base Metals and Minerals Australian Equity Research 28 January 2018 SPECULATIVE BUY PRICE TARGET Price (26-Jan) Ticker A$0.04 A$0.02 VXR-ASX 52-Week Range (A$): Avg Daily Vol (M) : 18.9 Market Cap : 61.2 Shares Out. (M) : 3,598.4 Dividend /Shr (AUc): 0.0 Dividend Yield (%) : 0.0 Enterprise Value : 58.7 NAV /Shr : 0.04 NAV /Shr (5%) (A$): 0.05 Net Cash : 5.3 P/NAV (x) : 0.42 Major Shareholders: Northern Star Resources 19% FYE Jun 2017A 2018E 2019E 2020E Revenue (A$M) EBITDA (A$M) (3.0) (1.9) (0.9) NPAT (A$M) (2.6) (1.9) (1.8) 91.7 Zinc Production (000t) Copper production (000t) Feb-17 Mar-17 VXR Apr-17 Source:FactSet May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Priced as of close of business 26 January 2018 Canaccord Genuity (Australia) Limited has received a fee as a Joint Lead Manager, Joint Bookrunner and Joint Underwritter to the Venturex Resources Ltd capital raising announced on 16 November Nov-17 Dec-17 Jan-18 Tim McCormack Analyst Canaccord Genuity (Australia) Ltd. tim.mccormack@canaccord.com.au Right metals, right time Timing is everything. In the landscape of development-ready Australian base metals opportunities, there are few as advanced as Venturex Resources' (VXR) Sulphur Springs zinc/copper project. Despite depressed metal prices and limited access to capital over the past few years, VXR has done a good job of maintaining progress on the project, which in our view should be at a financing decision in 2H18. With both zinc and copper prices maintaining positive momentum in 2018, we believe the timing is ideal to be bringing a project of this nature on line. We expect VXR's "under the radar" Sulphur Springs project to garner increased market attention as it delivers a number of projectdefining catalysts in the short term and moves towards a development decision later this year. Successful drilling campaign in VXR s most recent exploration efforts were focused on increasing the confidence level of the high grade Inferred copper Resource (800kt at 4.2% copper and 0.8% zinc) at Sulphur Springs. Results from the close space drilling program were positive on a number of fronts, including (1) confirmed continuity of high grade copper mineralisation as per the Inferred Resource; (2) discovery of a highgrade, zinc-rich zone overlying the copper mineralisation; and (3) identification of the potential for the Sulphur Springs mineralisation to extend to the west, towards a welldefined Electromagnetic anomaly. Plenty of material news flow in the pipeline. During the next six months, we expect VXR to provide a number of key updates that should underpin a development decision on its Sulphur Springs project in 2H18. Catalysts we are looking for include an updated Resource on the back of the 2017 drilling program, metallurgical testwork outcomes and an updated Feasibility Study. In parallel, an exciting exploration program should commence in March 2018 that will immediately target extensions to high grade mineralisation outside the current Resource envelope. We highlight that the existing high grade copper zone of the open pit orebody drives significant FCF in the formative years of the operation and any extensions to this could have a meaningful impact on the project economics. Development decision in 2H18. In our view, VXR should be development ready and conclude project financing in 2H18. Our assumed production profile is conservatively based on the Value Engineer Study (VES) released by VXR in February 2017, and as such, we model an eight-year mine life (12 years in the VES) producing on average ~30ktpa zinc and ~12ktpa copper LOM. The key economic driver of the project is higher copper production in the early years of the mine, which positively skews cash flow in the early years of the mine plan. Valuation and recommendation. We have based our A$0.04/sh valuation for VXR on a DCF analysis (NPV10%) of the Sulphur Springs base metals project, plus nominal exploration value, net of corporate and other adjustments. Our valuation is diluted for a future equity raising of A$80m (A$0.02/sh) in 1H FY19 as part of our assumed 60:40 debt/equity project financing. We note that the project has exceptional leverage to higher metal prices, and even at spot, the NPV10% for Sulphur Springs increases to A$283m (from A$201m), or a target price of A$0.05/sh. With a company-defining year expected, we initiate coverage with a SPEC BUY recommendation. Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX) The recommendations and opinions expressed in this research report accurately reflect the research analyst's personal, independent and objective views about any and all the companies and securities that are the subject of this report discussed herein. For important information, please see the Important Disclosures beginning on page 22 of this document.

2 Change in Target Price Venturex Resources Limited FINANCIAL SUMMARY Venturex Resources Limited ASX:VXR Analyst : Tim McCormack Rating: Date: 26/01/2018 Target Price: $0.04 Year End: June Market Information Company Description Share Price A$ 0.02 Market Capitalisation A$m Month Hi-Lo A$ Issued Capital m SPEC BUY Venturex Resources is currently advancing the Sulphur Springs copper/zinc project in Western Australia towards development. On the back of a successful 2017 drilling program we expet to see a Resoruce upgrade and updated Feasibility Study in the 1H'18 and a decision to develop the project in the 2H'18. Options m Fully Diluted m Profit & Loss (A$m) 2017a 2018e 2019e 2020e Revenue Valuation (diluted for future equity raising) A$m A$/share Other Income Sulphur Springs 10% Operating Costs Exploration & additional resources Royalties Investments - - Exploration (Expensed) Corporate (5.3) (0.00) EBITDA Cash (current estimate) Dep'n Debt - - EBIT Future Equity Net Interest TOTAL NAV/ Price Target Tax P/NAV 0.42x NPAT TOTAL NAV/ Price SPOT Abnormals NPAT (reported) Assumptions 2017a 2018e 2019e 2020e Zinc Price (US$/lb) Cash Flow (A$m) 2017a 2018e 2019e 2020e Copper Price (US$/lb) Cash Receipts Silver Price (US$/oz) Cash paid AUD:USD Tax Paid Valuation Sensitivity Net Interest $0.10 $0.08 $0.06 $0.04 $0.02 $ % -20% -10% 0% 10% 20% 30% Change in input variable Copper Price Zinc Price US$ Exchange Rate Operating Cash Flow Exploration and Eval Capex and deferred mining Other Investing Cash Flow Debt Draw/(Pmt) Share capital Dividends Financing Expenses Financing Cash Flow Opening Cash Cash Increase/(Decrease) Production Metrics 2017a 2018e 2019e 2020e FX Impact Zinc in concentrate (kt) Closing Cash Copper in concentate (kt) Silver in concentrate (koz) Balance Sheet (A$m) 2017a 2018e 2019e 2020e All in Sustaining Cost (A$/lb Zn) Cash + S/Term Deposits Other current assets Resources & Reserves Mt Zinc (%) Copper (%) Silver (g/t) Current Assets Reserves Property, Plant & Equip West % 1.3% Exploration & Develop Resources Other Non-current Assets Sulphur Springs % 1.5% Payables Kangaroo Caves % 0.8% Short Term debt Whim Creek % 2.1% Long Term Debt Mons Cupri % 0.9% Other Liabilities Salt Creek % 2.0% Net Assets Liberty-Indee (70% owned) % 1.8% Shareholders Funds Total Reserves Retained Earnings Directors & Management Total Equity Name Position Anthony Kiernan Non-Executive Chariman Ratios & Multiples 2017a 2018e 2019e 2020e Anthony Reilly Executive Director EBITDA Margin nm nm nm 55% Darren Stralow NED EV/EBITDA nm nm nm 1.1x Angus Thomson Geology Manager Op. Cashflow/Share Trevor Hart Company Secretary P/CF nm nm nm 0.6x EPS nm nm nm 0.02 Substantial Shareholders % EPS Growth nm nm nm nm Northern Star Resources 19% PER nm nm nm 1.4x Regent Pacific 16% Dividend Per Share Precision Opportunities Fund 6% Dividend Yield 0% 0% 0% 0% ROE -17% -9% -2% 48% ROIC -3% -2% -1% 46% Debt/Equity 0.0x 0.0x 1.0x 0.3x Book Value/share Source: C anaccord G enuity estimates, C ompany Reports Price/Book Value 4.2x 3.0x 0.7x 0.3x 2 Speculative Buy Target Price A$ January 2018 Base Metals and Minerals 2

3 Table of Contents Valuation... 4 Development Strategy... 6 Corporate and Finance... 7 Peer Comparisons Assets Overviews Sulphur Springs Whim Creek Investment Risks Speculative Buy Target Price A$ January 2018 Base Metals and Minerals 3

4 Valuation We have based our A$0.04/sh valuation for VXR on a DCF analysis (NPV10%) of the Sulphur Springs base metals project, plus nominal exploration value, net of corporate and other adjustments. Figure 1 highlights the sum of parts comprising our valuation. On a per share basis, we have diluted for an assumed future equity raising of A$80m (A$0.02/sh) in the 1H FY19 as part of the project financing. This implies an increase in the number of current shares on issue (3.6bn to 7.6bn) on a diluted basis. We expect VXR to address the high share count via a consolidation as part of the project financing. Figure 1: Sum-of-parts valuation for VXR Valuation (diluted for future equity raising) A$m A$/share Sulphur Springs 10% Exploration & additional resources Investments - - Corporate (5.3) (0.00) Cash (current estimate) Debt - - Future Equity TOTAL NAV/ Price Target P/NAV 0.42x TOTAL NAV/ Price SPOT 0.05 Source: Canaccord Genuity estimates In deriving our valuation, base metals assumptions are internally generated and we utilise forward curve pricing for silver and FX assumptions. Figure 2: Metal and FX assumptions Assumptions 2017a 2018e 2019e 2020e 2021e 2022e 2023e LT (2024) Zinc Price (US$/lb) Copper Price (US$/lb) Silver Price (US$/oz) AUD:USD Source: Canaccord Genuity estimates Figure 3 demonstrates our forecast production and AISC profile for the Sulphur Springs project. We have assumed construction of a 1Mtpa processing facility as per the Value Engineering Study (VES) completed in February 2017, producing separate zinc and copper concentrates with ore sourced exclusively from the Sulphur Springs open pit and underground orebodies. In deriving the modelled eight-year mine life, we have assumed a Total Resource (13.4Mt at 1.5% copper and 4% zinc) to Reserve conversion of 60% for Sulphur Springs, which will see the recovery of 265kt and 119kt of zinc and copper in concentrate respectively (LOM). The current Reserve for Sulphur Springs is 7.3Mt at 1.2% copper (84kt) and 3.5% zinc (255kt), which we expect to be updated as part of the Feasibility Study due for release in the JunQ 18. Importantly, the update will incorporate the latest drilling, which is aiming to improve confidence levels of the high grade copper portion of the open pit Resource (~800kt at 4% copper) to Measured/Indicated. Annual zinc and copper production is forecast to vary year to year, but averages ~30ktpa zinc and ~12ktpa copper LOM. With significantly higher copper grades and production in the early years of the mine, AISC s are negative on a zinc basis, but then normalize to average ~US$0.28/lb based on our price deck. Cash flow is 4 Speculative Buy Target Price A$ January 2018 Base Metals and Minerals 4

5 positively skewed to the early years of the mine life, which bodes well for debt financing on favorable terms. Figure 3: Assumed LOM production and AISC profile for Sulphur Springs Source: Canaccord Genuity estimates We note that in our valuation we have omitted the Kangaroo Caves project (Resource of 3.6Mt at 6% zinc and 0.8% copper) from the modelled production forecasts, which, in the Value Engineering Study increased the envisaged mine life towards 12 years. Development of the asset (~6km from Sulphur Springs) represents upside to our valuation; however, we expect the exploration focus to remain at Sulphur Springs in the near term, which could see a development decision on Kangaroo Caves ultimately deferred. Key sensitivities to our valuation are copper and zinc prices as well as currency fluctuations which can be seen in Figure 4. At spot prices the NPV (10% for Sulphur Springs increased to A$283m (A$201m), or a target price of A$0.05/sh. Figure 4: Sensitivity analysis on the key commodity and currency inputs Source: Canaccord Genuity estimates 5 Speculative Buy Target Price A$ January 2018 Base Metals and Minerals 5

6 Development Strategy The VES completed in early 2017 represented a major advancement on the Feasibility Study completed by VXR in December 2012 and subsequent Optimisation Study in November In our view, the VES, and the incorporation of high grade copper mineralisation (previously interpreted as Supergene) in the open pit demonstrates a robust development pathway with improved economics, reduced risk profile and improved capital cost compared to previous work done on the project. We have assumed that VXR develops the Sulphur Springs project on a stand-alone basis, with first concentrate production by FY20, which allows for ~12 months construction. Key milestones in 2018 in order to achieve production on our modelled timeline include: Resource/Reserve update incorporating results from the 2017 infill drilling program. CG expects late MarQ 18. Updated Feasibility Study incorporating the new Resource/Reserve and Metallurgical outcomes on the high grade copper mineralisation in the open pit. CG expects mid JunQ 18. VXR has already received granted Mining Permits (2014) for development at Sulphur Springs as an underground operation; however, with VXR now envisaging a significant open pit operation, Clearing Permits, the Mining Proposal and Closure Plans need to be amended. The Environmental Protection Authority has stated that as part of the Environmental Review, no public engagement is required and we expect final approvals to be granted by mid Completion of project financing on the back of the updated Feasibility Study and receipt of all Permits. We have assumed this to be completed on a simple debt:equity basis (60:40), which would see the company access A$100m in debt and A$80m via equity markets to fund the capital requirements of the project. We note that optionality exists for VXR with regard to funding, and avenues such as prepayments, offtake finance and hybrids are being investigated as part of the funding process. Strategic partners and financiers are also options given the relative scarcity of new base metals projects both in Australia and globally. We expect financing to be completed in the 2H 18. The 2018 exploration program should commence in early March (currently wet season). We continue to look at the exploration upside at Sulphur Springs favorably, with good potential for extensions to the currently envisaged open pit Resource, as well as a number of regional targets identified as part of a recent HEM (Heliborne Electromagnetic) survey. While results are unlikely to be incorporated in the updated Feasibility Study, we believe there is good potential to improve the medium term production profile on the back of drilling success. Key inputs supporting our modeled production profile are outlined in Figure 5. We note, that with material updates likely to be released during 2018, we will refine our assumptions as new information becomes available. As a starting point, however, we view our current inputs as conservative and believe that as the project develops, further upside to our valuation may become apparent. 6 Speculative Buy Target Price A$ January 2018 Base Metals and Minerals 6

7 Figure 5: Sulphur Springs key inputs Key assumptions (100% basis) Assumed Resource to Reserve conversion (Sulphur Springs) 60% Zinc recovered LOM (in concentrate) 265kt Copper recovered LOM (in concentrate) 119kt Capex required (pre-production) A$175m Sustaining capex LOM A$35m Processing rate 1Mtpa Zinc recovery, concentrate grade and payablity 93%, 55% and 85% Copper recovery, concentrate grade and payability 90%, 26% and 95% Open pit strip ratio 8.5:1 First production DecQ'19 Mine life 8 years Source: Company Reports, Canaccord Genuity estimates Our modelled production scenario envisages the first five years of ore sourced from the Sulphur Springs open pit, before transitioning to underground for a further three years, with both phases of mining supporting the 1Mtpa processing rate. Upside to our production assumptions exist via higher-than-modelled milling rates (1.25Mtpa contemplated as an option in the VES), potential improvements to the open pit mine grades and exploration success over the medium term. Positive outcomes here could result in higher production rates, mine life and cash flow. Corporate and Finance As with most base metals developers, access to equity markets has been limited in recent years due to depressed commodity prices. VXR has completed a number of modest raisings to maintain progress on its core projects over the past few years. In our view, management has demonstrated a disciplined and frugal approach to working capital, while delivering a step change in the development potential of the asset portfolio, particularly over the past 12 months. The most recent equity issuance should see VXR with ~A$5m cash at the end of the DecQ 17, allowing the company to maintain a modest exploration program through the 1H 18, while it updates the Feasibility Study and finalizes project financing. The company s more recent equity issuances include: November 2017: Placement at A$0.018/sh to raise A$4m. July 2017: Fully subscribed Entitlement Issue (2-for-7) at A$0.005/sh to raise A$3.75m. August 2016: Placement and Entitlement Issue (2-for-5) at A$0.006/sh to raise A$4.05m. December 2015: Entitlement Issue (2-for-15) at A$0.005/sh to raise A$1m. VXR has a high share count, with 3.6bn shares currently on issue and a further 216m options sitting out-of-the-money at A$0.03/sh. While no firm strategy has been communicated to the market with regard to consolidating the register, we see a logical time to address the issue in line with the project financing. The liquidity in the stock is modest, and tends to be event driven (drilling results etc), and the 90-day average daily turnover is ~19m shares. 7 Speculative Buy Target Price A$ January 2018 Base Metals and Minerals 7

8 Figure 6: VXR issued capital Issued capital Ordinary shares 3,598,434,633 A$0.03 options (3/8/2018) 41,666,667 A$0.03 options (31/8/2018) 174,619,460 Fully diluted 3,814,720,760 Source: Company Reports, Canaccord Genuity estimates A key point of difference with the VXR register vs many of its peers is the presence of Northern Star Resource (NST-ASX: $6.26 HOLD PT: A$6.10 Analyst Tim McCormack) at 19%. NST has been a longtime supporter of VXR, and since the focus sharpened on developing Sulphur Springs, NST has been vocal on the project s merit during conference calls and at its AGM (November 2017). While it s difficult to know NST s ultimate intentions, we see its presence on the register as a positive endorsement for the project. Regent Pacific and Henghou Industries are long-term shareholders, but have been diluting in the past few capital raisings. Precision Opportunities Fund is the company s newest significant shareholder, building a position over the past 12 months. Figure 7: VXR s major shareholders Major Shareholders Northern Star Resources 19% Regent Pacific 16% Precision Opportunities Fund 6% Henghou Industries 5% Board and management 3% Source: Company Reports, Canaccord Genuity estimates In funding the development of the Sulphur Springs project, we have assumed 60:40 debt:equity financing, raising a total of A$180m. While a daunting amount for a company capitalized at A$62m, we see higher cash flow in the formative years as being attractive to debt providers that will help in gaining favorable terms. We assume the debt to be repaid over three years, but note this could be accelerated comfortably if required. The A$80m equity component of the financing is assumed to be raised at the current share price which was A$0.02/sh at the time of publishing. In Figure 8, we illustrate the EBITDA, FCF and net cash build over the assumed mine life. Once at steady state production, VXR could generate EBITDA of +A$100m pa, and FCF of ~A$70m pa. We note the spike in the first full year of production (FY21) which coincides with mining the high grade copper part of the orebody in the open pit. 8 Speculative Buy Target Price A$ January 2018 Base Metals and Minerals 8

9 Figure 8: Forecast EBITDA, FCF and net cash over the assumed mine life Source:, Canaccord Genuity estimates Board and Management Anthony Kiernan Non-Executive Chairman Mr Kiernan is a former solicitor with extensive experience gained over 35 years in the management and operation of listed public companies. As both a lawyer and general consultant, he has practiced and advised extensively in the fields of resources, media and information technology. He is Chairman of Pilbara Minerals Limited (PLS-ASX: $1.01 HOLD PT: A$0.95/sh Larry Hill) and of Chalice Gold Limited (CHN.ASX Not rated) Anthony Reilly Executive Director Mr Reilly has over 20 years investment banking experience including financial markets, financial risk management and corporate finance. He worked in investment banking in London for over 10 years, and since leaving banking has spent 8 years working in the small-cap mining space. He was a founding Director of a private Brazil incorporated gold exploration company and he has also served as an Executive Director of several ASX-listed resource companies. Darren Stralow Non-Executive Director Mr Stralow is a mining engineer with over 15 years experience in the resources industry. After starting his career in the WA goldfields, he has held senior roles with Intrepid Mines Limited and is currently the COO of Northern Star Resources Limited. Mr Stralow has a Bachelor of Engineering (Mining) from the Western Australian School of Mines and a WA First Class Mine Manager s Certificate. Trevor Hart CFO and Company Secretary Mr Hart is a Certified Practicing Accountant with a Bachelor of Business in Accounting and a Chartered Secretary. He has over 20 years experience including 15 years in the resources and mining services industry. He has provided consulting services covering accounting, financial and company secretarial matters to various companies in these sectors. Prior to joining VXR, he has held a number of senior financial positions in other ASX-listed companies. 9 Speculative Buy Target Price A$ January 2018 Base Metals and Minerals 9

10 Peer Comparisons A key observation of the base metals companies under coverage is the lack of valuation upside among the larger cap, more established names (OZL, IGO, SFR, WSA). P/NAV s basically descend in order with market capitalization as seen in Figure 9, and with positive zinc and copper price tail winds remaining, we expect investor focus to turn towards the smaller end of the market for better fundamental value and leverage on the base metals thematic. Given the small end of the base metals sector has been starved of capital over the past five years while commodity prices have been depressed, very few projects are progressed to the point of being development ready. VXR is a standout in this regard, being one of a select few that could potentially finance a project during The table below outlines the base metals companies under coverage, with the additional of VXR being our second developer covered in the space with MOD resources (MOD.ASX SPEC BUY PT A$0.10/sh Larry Hill). Figure 9: Base metals coverage, noting the lack of fundamental value in the larger stocks Company Code Commodity Price A$/sh Mkt Cap A$m Analyst Rating Target Price (A$) P/NAV Producers Independence Group IGO Nickel, Gold $5.10 $2,939 Tim McCormack SELL $ OZ Minerals OZL Copper, Gold $9.11 $2,720 Patrick Chang SELL $ Sandfire Resources SFR Copper, Gold $7.18 $1,134 Patrick Chang HOLD $ Western Areas WSA Nickel $3.19 $870 Patrick Chang HOLD $ Metals X MLX Copper, Tin $1.00 $611 Tim McCormack BUY $ Avanco Resources AVB Copper, Gold $0.09 $216 Patrick Chang BUY $ Finders Resources FND Copper $0.24 $182 Larry Hill SPEC BUY $ Red River Resources RVR Zinc/copper $0.36 $179 Larry Hill SPEC BUY $ Developers MOD Resources MOD Copper $0.06 $110 Larry Hill SPEC BUY $ Venturex Resources VXR Zinc/copper $0.02 $62 Tim McCormack SPEC BUY $ Source:, Canaccord Genuity estimates (priced 24 January 2018) Figure 9 shows the cost curve for the global zinc producers (2017) on a payable basis. While VXR s proposed production profile is modest in comparison to many on the chart, with the significant copper credits we envisage the operation to comfortably sit in the lowest quartile of producers (<US$0.60/lb payable) Figure 10: Production and cost curve globally significant zinc producers Source: SNL 10 Speculative Buy Target Price A$ January 2018 Base Metals and Minerals 10

11 Assets Overviews Under various iterations of management, VXR s focus has swung between its Sulphur Springs and Whim Creek projects, both located in the Pilbara region of Western Australia. However, following the release of the VES on Sulphur Springs in early 2017, and a subsequent management change, Sulphur Springs has become the focus for the company. Exploration efforts in 2H17 were centered on converting the high grade Inferred copper Resource in the planned open pit. The high grade Resource opens up the opportunity to mine and process high-margin near-surface material at the front end of the production schedule, significantly improving project economics and capital payback. Figure 11: Key project locations Source: Company Reports, Sulphur Springs Location and Background Sulphur Springs is located ~144km south-east of Port Hedland, in Western Australia. Broadly speaking, the Sulphur Springs project also includes the Kangaroo Caves deposit located ~6km to the south, and both are defined as Volcanogenic Massive Sulphide (VMS) copper/zinc deposits. The project is accessible via the sealed Marble Bar Road for 82km and an existing unsealed haul road for 62km that runs to within 6km of the project site. The project is located on granted Mining Leases with an existing Mining Agreement in place with the indigenous Njamal people. VXR is the 100% owner of the project. Geology The Sulphur Springs and Kangaroo Caves deposits are VMS zinc/copper deposits located in the central east of the Archean Pilbara Craton. Mineralisation lies within the Kangaroo Caves Formation of the Sulphur Springs Group of volcanic and sedimentary rocks. 11 Speculative Buy Target Price A$ January 2018 Base Metals and Minerals 11

12 The Sulphur Springs mineral deposit is interpreted as a single stratabound VMS mineralising event, which has been off-set into two massive sulphide lenses (East and West) by a post-mineralisation sub-vertical fault. The deposit has a strike length (east-west) of 500m, with economic mineralisation up to 16m in true width, down to a depth of 400m with each lens dipping to the north at approximately Underlying the massive ore is a volcanic rock sequence which contains disseminated copper mineralisation that VXR will look to recover in the open pit where it contains economic grades. Kangaroo Caves is interpreted as having the same stratigraphic position as Sulphur Springs and similar in character, albeit less advanced. Resources and Reserves for Sulphur Springs and Kangaroo Caves are shown in Figure 12 and 13. In our modelling we have taken a reasonably conservative approach to material mined and only include ~8Mt of ore from the Sulphur Springs deposit (60% Resource conversion or ~100% the current Reserve) which underpins our eight-year mine life. We note that in the VES, VXR envisages the Reserve contributing ~66% of the material within a Production Target 11.7Mt at 3.6% zinc and 1.4% copper) with Inferred Resources accounting for the ~34% balance. VXR also included 1.8Mt of ore from Kangaroo Caves in the VES. Figure 12: Resource for Sulphur Springs and Kangaroo Caves Source: Company Reports Figure 13: Reserve for Sulphur Springs Source: Company Reports 12 Speculative Buy Target Price A$ January 2018 Base Metals and Minerals 12

13 2017 exploration outcomes VXR s exploration efforts were focused on increasing the confidence level of the high grade Inferred copper Resource (800kt at 4.2% copper and 0.8% zinc) at Sulphur Springs during The most recent close space drilling program was focused on in-fill drilling the western portion of the high-grade Resource, located towards the top of the Sulphur Springs orebody. The 14-hole program saw all drill holes returning ore grade intersections. Key outcomes of the program included: Confirmed continuity of high-grade copper mineralisation as per interpretations from the Inferred Resource. Identified a previously unrecognised zinc-rich lens which overlies the copper zone Highlighted the potential for extensions of the mineralisation to the west (and east), a view which is supported by the westernmost drill results and the results of the Heli EM survey flown over the project area. We expect these to be key targets for the 2018 drilling program. Provided samples for metallurgical test work with outcomes expected in the near term. The full suite of assay results are displayed in Figure 14, with some of the highlights including: SSD089: 38.2m at 3.49% copper from 98m, including 14m at 6% copper SSD090: 40.3m at 3.35% copper 94m, including 13m at 6.1% copper SSD091: 20m at 3.1% copper from 102m SSD094: 20m at 12% zinc from 83m SSD097: 16m at 10% zinc from 99m SSD099: 30m at 9% zinc from 169m, 36m at 3.3% copper from 204m SSD101: 6m at 13.6% zinc from 102m SSD102: 16m at 9% zinc from 133m and 40m at 3.6% copper from 158m Based on the results, we expect to see +50% of the existing Inferred Resource move into the Measured and Indicated category, and potentially into Reserve pending the metallurgical test work outcomes. There is also good potential for the additional zinc lenses to add incremental metal which could further improve the economics of the proposed open pit. Drill collar locations are shown in Figure Speculative Buy Target Price A$ January 2018 Base Metals and Minerals 13

14 Figure 14: Drill results for the most recent 14 hole drill program at Sulphur Springs completed in late 2017 Source: Company Reports 14 Speculative Buy Target Price A$ January 2018 Base Metals and Minerals 14

15 Figure 15: Drill hole locations targeting the western portion of the high-grade Inferred Resource Source: Company Reports Figure 16 represents a typical cross section from the recent drilling campaign which has targeted high grade mineralisation immediately below the base of weathering. The strike length of the defined high grade mineralisation tested was <150m, but proved to be consistent. We note that the previously unrecognised zinc-rich zone overlying the copper zone is a new discovery consistent with a classic VMS model, which could increase the metal content of the existing Resource. Figure 16: Typical cross section through the high grade Resource Source: Company Reports 15 Speculative Buy Target Price A$ January 2018 Base Metals and Minerals 15

16 Exploration plan and potential upside An EM survey targeting conductive VMS-style base metal mineralisation was completed in late 2017 and identified 11 geophysical targets. These have been interpreted as associated with a Marker Chert horizon, which hosts the Sulphur Springs deposit at the contact between it and the underlying felsic volcanic unit. Importantly, two high-priority targets have been identified on the eastern and western flanks of the Sulphur Springs deposit, which in our view will serve as priority targets. We note that the western-most holes of the recent drilling program (SSD095 and SSD096) demonstrate the potential for the Sulphur Springs mineralisation to extend to the west, towards the XA6 EM anomaly. Both holes recorded significant zinc and copper intersections, which, together with the large EM anomaly provides a logical target for testing in the initial 2018 drilling program. VXR will likely test the XA6 initially given the proximity to the most recent drilling results. The anomaly extends ~ m beyond the current Resource and only requires modest clearing to establish drill pads. Similarly, XA5 anomaly located on the eastern flank of the orebody extends for a further ~ m beyond the current Resource. Figure 17: Priority drill targets flanking the Sulphur Springs orebody Source: Company Reports 16 Speculative Buy Target Price A$ January 2018 Base Metals and Minerals 16

17 VXR also plans to complete further detailed field investigation, ground EM surveys and potential drill testing on a number of the 11 EM targets across the broader landholding. Eight of the anomalies identified are associated with, or within close proximity to, the prospective geological contact that occurs between the Marker Chert and the underlying felsic volcanic units, which, as previously mentioned hosts both the Sulphur Springs and Kangaroo Caves deposits. Development Strategy The VES envisages open pit mining followed by bulk underground using the core and shell mining method. Processing will be via a conventional sulphide flotation plant, producing two high quality concentrates that will be trucked to Port Hedland, and shipped in bulk to Asian markets. As a greenfield development, required infrastructure includes; power station, communications, processing plant and buildings, accommodation village, raw and potable water and tailings facility which is incorporated in the A$180m capex (included pre-strip). The open pit mine life is projected to be ~5.5 years, producing ore at a rate of 1Mtpa, which is in line with the processing plant capacity and the pit is expected to have a LOM strip ratio of ~8.3:1 (including pre-strip). Figure 18: Long section showing the proposed pit shell and underground for at Sulphur Springs Source: Company Reports Establishing the underground is expected to commence in the final year of the open pit, with development and infrastructure forecast ~A$20m. A portal will be established on the footwall side of the orebody in the open pit, which is designed to provide good access to both the East and West Lodes. VXR plans to utilise the core and shell mining method for the East Lode below the open pit. This method involves the initial extraction of a core using conventional open stoping, followed by large volume blasting of the rib and floor pillars formed. This method has the advantage of low development costs, high productivity and low fill costs with over 50% of the ore being recovered in the core stopes without 17 Speculative Buy Target Price A$ January 2018 Base Metals and Minerals 17

18 requiring paste fill. In contrast, the company is planning conventional open stoping to extract the West Lode. We note that in the VES, underground mining accounts for an additional six years of mine life (including Kangaroo Cave); however, we have taken a more conservative approach and only model an additional three years of production, primarily due to omitting Kangaroo Caves from our development plan. Processing plant and Metallurgy The planned 1Mtpa processing plant will be a conventional SAG/Ball mill configuration, grinding ore to 80% passing to 63 micron. Copper and zinc sulphides will be sequentially floated into separate concentrates, before being thickened and filtered ready for transport. We note that comprehensive metallurgical testwork has been completed on the Sulphur Springs underground as part of a number of Feasibility Studies completed on the deposit. No metallurgical test work has been completed on the Kangaroo Caves deposit, however, with similar mineralogy to the Sulphur Springs, VXR expected to have similar metallurgical performance. Metallurgical test work on the high grade copper zone of the open pit is also pending and should be released early in the JunQ 18. The VES assumed zinc recovery of 93%, producing a 55% zinc concentrate and copper recovery of 90% producing a 26% concentrate, which we have incorporated in our modelling of the project. In terms of product offtake, VXR has an agreement with Toho Zinc (part of the consideration for Sulphur Springs), where Toho has the off-take rights capped at 230kt of zinc in concentrate from Sulphur Springs on international benchmark terms. The copper concentrate offtake is currently uncommitted. Permitting The Sulphur Springs project sits on a granted Mining Lease; however, the Permits in place relate only to the development of an underground operation (based on the 2012 Feasibility Study). In order to progress the project in line with the VES, VXR commenced amending the existing Permits to incorporate an open pit mine and larger tailings storage facility. The company has most recently received notification from the Western Australia Environmental Protection Authority (EPA) confirming that the permitting pathway for the Sulphur Springs requires no public review of the Environmental Review document. VXR has guided that it expects to complete the final submissions by late March 2018, and expects to receive the final Approvals and Permits by mid Whim Creek VXR s Whim Creek project is located 115km south west of Port Headland, Western Australia (~200km west of Sulphur Springs) and is readily accessible via the NW Coastal Hwy. While VXR s principal focus has been on advancing Sulphur Springs towards a development decision by mid-2018, budget constraints have seen work limited on Whim Creek to low cost geophysical surveys and reclogging/interpreting historic drilling data. VXR s aim at Whim Creek is to make new discoveries or incrementally increase the exiting Resource base; however, with only a limited works program for 2018, we expect it make take some time for this aspect of the story to play out. 18 Speculative Buy Target Price A$ January 2018 Base Metals and Minerals 18

19 Figure 19: Key deposits within the Whim Creek project Source: Company Reports Key deposits within the greater Whim Creek landholding include Mons Cupri, Whim Creek, Salt Creek and Evelyn which have a combined Resource of 7.2Mt at 1.3% copper and 2.1% zinc (90% Indicated). Whim Creek and Mons Cupri also have modest Reserves delineated of 221kt at 2.7% copper, 1.3% zinc and 951kt at 1.7% copper and 2.2% zinc, respectively. Figure 20: Whim Creek Resource table Source: Company Reports 19 Speculative Buy Target Price A$ January 2018 Base Metals and Minerals 19

20 We note that a Scoping Study on the Whim Creek was completed in November 2010, which identified the potential for a 13ktpa copper (equivalent) operation to be established with a nine-year mine life. While as a base project it looks interesting, we agree with VXR s strategy of pursuing the larger scale, Sulphur Springs project as a development priority. VXR has flagged the potential for conglomerate gold on its Whim Creek project. Field reconnaissance work has confirmed that the Mt Roe Basalt and associated basal conglomerate units occur at Loudens Patch, immediately along strike from De Grey Mining s (ASX: DEG Not rated) recent conglomerate-hosted gold discovery. VXR has some boots on the ground currently investigating the potential of this, but it remains a relatively low priority for the company. In addition to ongoing exploration activities at Whim Creek, VXR has a profit share agreement with privately owned Blackrock Metals Pty Ltd, which provides access and the ability to manage the reprocessing of the existing Whim Creek oxide copper heap leach to produce copper cathode. VXR received no profit share for FY17, and to date has received a total ~$1m from the total production of 3kt of copper cathode. Investment Risks The risks below are inherent in the metals and mining industry and one or all could impact our valuation and therefore our SPECULATIVE BUY rating. Funding risk As a pre-production company with no material income, VXR is reliant on equity and debt markets to fund Feasibility Studies and development of its Sulphur Springs project. We can make no assurances that accessing these markets will be done without further dilution to shareholders. Exploration risks Exploration is subject to a number of risks and can require a high rate of capital expenditure. Risks can also be associated with conversion of inferred resources and lack of accuracy in the interpretation of geochemical, geophysical, drilling and other data. No assurances can be given that exploration will delineate further minable reserves. Metallurgical risk Currently VXR has assumed recoveries in the VES for the high-grade copper part of the orebody (open pit), which was previously interpreted as supergene/transitional to in line with the extensive metallurgical work completed on the deeper fresh part of the orebody. Outcomes from test work currently underway have the potential to impact the economics of the project if results yield lower recoveries than expected. Operating risks Once in production, the company will be subject to risks such as plant/equipment breakdowns, metallurgical, seismic activity and other technical issues. An increase in operating costs could reduce the profitability and free cash generation from the operating assets considerably and negatively impact valuation. Further, the actual characteristics of an ore deposit may differ significantly from initial interpretations which can also materially impact forecast gold production from original expectations. 20 Speculative Buy Target Price A$ January 2018 Base Metals and Minerals 20

21 Commodity price and currency fluctuations As with any mining Company, VXR is directly exposed to commodity price and currency fluctuations. Commodity price fluctuations are driven by many macroeconomic forces including inflationary pressures, interest rates and supply and demand of commodities. These factors could reduce the profitability, costing and prospective outlook for the business. 21 Speculative Buy Target Price A$ January 2018 Base Metals and Minerals 21

22 Appendix: Important Disclosures Analyst Certification Each authoring analyst of Canaccord Genuity whose name appears on the front page of this research hereby certifies that (i) the recommendations and opinions expressed in this research accurately reflect the authoring analyst s personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analyst s coverage universe and (ii) no part of the authoring analyst s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the research. Analysts employed outside the US are not registered as research analysts with FINRA. These analysts may not be associated persons of Canaccord Genuity Inc. and therefore may not be subject to the FINRA Rule 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. Sector Coverage Individuals identified as Sector Coverage cover a subject company s industry in the identified jurisdiction, but are not authoring analysts of the report. Investment Recommendation Date and time of first dissemination: January 28, 2018, 14:30 ET Date and time of production: January 28, 2018, 14:08 ET Target Price / Valuation Methodology: Venturex Resources Limited - VXR We have based our A$0.04/sh valuation for VXR on a DCF analysis (NPV10%) of the Sulphur Springs base metals project, plus nominal exploration value, net of corporate and other adjustments Risks to achieving Target Price / Valuation: Venturex Resources Limited - VXR Funding Risk: As a pre-production company with no material income, VXR is reliant on equity and debt markets to fund Feasibility Studies and development of its Sulphur Springs project. We can make no assurances that accessing these markets will be done without further dilution to shareholders. Exploration risk: Exploration is subject to a number of risks and can require a high rate of capital expenditure. Risks can also be associated with conversion of inferred resources and lack of accuracy in the interpretation of geochemical, geophysical, drilling and other data. No assurances can be given that exploration will delineate further minable reserves. Metallurgical risk: Currently VXR has assumed recoveries in the VES for the high grade copper part of the orebody (open pit), which was previously interpreted as supergene/transitional to in line with the extensive metallurgical work completed on the deeper fresh part of the orebody. Outcomes from test work currently underway have the potential to impact the economics of the project if results yield lower recoveries than expected. Operating risks: Once in production, the company will be subject to risks such as plant/equipment breakdowns, metallurgical, seismic activity and other technical issues. An increase in operating costs could reduce the profitability and free cash generation from the operating assets considerably and negatively impact valuation. Further, the actual characteristics of an ore deposit may differ significantly from initial interpretations which can also materially impact forecast gold production from original expectations. Commodity price and currency fluctuations: As with any mining Company, VXR is directly exposed to commodity price and currency fluctuations. Commodity price fluctuations are driven by many macroeconomic forces including inflationary pressures, interest rates and supply and demand of commodities. These factors could reduce the profitability, costing and prospective outlook for the business. Distribution of Ratings: Global Stock Ratings (as of 01/28/18) Rating Coverage Universe IB Clients # % % Buy % 41.02% Hold % 28.85% Sell % 14.29% Speculative Buy % 65.00% 942* 100.0% *Total includes stocks that are Under Review Canaccord Genuity Ratings System Speculative Buy Target Price A$ January 2018 Base Metals and Minerals 22

23 BUY: The stock is expected to generate risk-adjusted returns of over 10% during the next 12 months. HOLD: The stock is expected to generate risk-adjusted returns of 0-10% during the next 12 months. SELL: The stock is expected to generate negative risk-adjusted returns during the next 12 months. NOT RATED: Canaccord Genuity does not provide research coverage of the relevant issuer. Risk-adjusted return refers to the expected return in relation to the amount of risk associated with the designated investment or the relevant issuer. Risk Qualifier SPECULATIVE: Stocks bear significantly higher risk that typically cannot be valued by normal fundamental criteria. Investments in the stock may result in material loss. 12-Month Recommendation History (as of date same as the Global Stock Ratings table) A list of all the recommendations on any issuer under coverage that was disseminated during the preceding 12-month period may be obtained at the following website (provided as a hyperlink if this report is being read electronically) Required Company-Specific Disclosures (as of date of this publication) Venturex Resources Limited currently is, or in the past 12 months was, a client of Canaccord Genuity or its affiliated companies. During this period, Canaccord Genuity or its affiliated companies provided investment banking services to Venturex Resources Limited. In the past 12 months, Canaccord Genuity or its affiliated companies have received compensation for Investment Banking services from Venturex Resources Limited. Canaccord Genuity acts as corporate broker for Venturex Resources Limited and/or Canaccord Genuity or any of its affiliated companies may have an agreement with relating to the provision of Investment Banking services. Venturex Resources Limited Rating History as of 01/25/2018 AUD0.035 AUD0.03 AUD0.025 AUD0.02 AUD0.015 AUD0.01 AUD0.005 AUD0.00 Apr 13 Jul 13 Oct 13 Jan 14 Apr 14 Jul 14 Oct 14 Jan 15 Apr 15 Jul 15 Oct 15 Jan 16 Apr 16 Jul 16 Oct 16 Jan 17 Apr 17 Jul 17 Oct 17 Jan 18 Closing Price Price Target Buy (B); Speculative Buy (SB); Sell (S); Hold (H); Suspended (SU); Under Review (UR); Restricted (RE); Not Rated (NR) Past performance In line with Article 44(4)(b), MiFID II Delegated Regulation, we disclose price performance for the preceding five years or the whole period for which the financial instrument has been offered or investment service provided where less than five years. Please note price history refers to actual past performance, and that past performance is not a reliable indicator of future price and/or performance. Online Disclosures Up-to-date disclosures may be obtained at the following website (provided as a hyperlink if this report is being read electronically) or by sending a request to Canaccord Genuity Corp. Research, Attn: Disclosures, P.O. Box Pacific Centre, Granville Street, Vancouver, BC, Canada V7Y 1H2; or by sending a request by to disclosures@canaccordgenuity.com. The reader may also obtain a copy of Canaccord Genuity s policies and procedures regarding the dissemination of research by following the steps outlined above. General Disclaimers See Required Company-Specific Disclosures above for any of the following disclosures required as to companies referred to in this report: manager or co-manager roles; 1% or other ownership; compensation for certain services; types of client relationships; research analyst conflicts; managed/co-managed public offerings in prior periods; directorships; market making in equity securities and related derivatives. For reports identified above as compendium reports, the foregoing required company-specific disclosures can be found in a hyperlink located in the section labeled, Compendium Reports. Canaccord Genuity is the business name used by certain wholly Speculative Buy Target Price A$ January 2018 Base Metals and Minerals 23