AIM CHAOS. Ferrum Crescent Ltd. Ticker: FCR 25 July Buy-in Price (p): Market cap ( m): 2.96

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1 Ferrum Crescent Ltd Ticker: FCR 25 July 2017 Buy-in Price (p): Market cap ( m): 2.96 Rationale: Significant positive news due; Company s value not recognized Company snapshot Ferrum Crescent Ltd ( FCR or the Company ) is focussed on lead-zinc exploration and development in Europe. The Company was founded in 2001: its flagship asset was the Moonlight Iron Ore Project, a large, high grade magnetite project located in South Africa. FCR listed on the ASX in 2005, and attained an additional listing via its AIM IPO in December 2010, during which it raised 10m gross at a post-new money valuation of 29.9m. In 2011 FCR attained a tertiary listing on South Africa s JSE. Last year, the Company underwent extensive restructuring both on a corporate and operational level. Corporate-wise, there were a number of Board reshuffles, the most notable being the appointment of a new executive chairman. Operationally, the Company opted to diversify its asset base, given the relatively slow progress made at Moonlight in the six years since listing on AIM. In September, the Company exercised an option to acquire 100% of GoldQuest Iberica S.L. for 0.33m in cash and 100m new ordinary shares in FCR. GoldQuest owns 100% of two lead-zinc exploration projects in the adjacent provinces of Leόn and Galicia, Northern Spain. The more advanced of the two projects, namely Toral, comes with significant amounts of historical geological and exploration data. This includes a NI Technical Report estimating an 8.71 Mt resource at a zinc equivalent ( Zn Eq. ) grade of 10.7%. This resource is at a depth of circa 300m to 500m. FCR has commenced a work programme at Toral, which is focussed on proving up a new hypothesis regarding the deposit: namely, that historical drilling despite having delineated a sizeable, high grade resource at depth was inefficient, and entirely missed out the potentially large, high grade, near surface mineralisation. Fieldwork (including soil sampling and rock chip sampling) over the winter months yielded encouraging results, which led to the decision to commence a short but highly targeted drill programme. Drilling commenced in late May, and assay results are due in the next few weeks. The second project, Lago, is less developed than Toral but nonetheless also demonstrates promising signs of high grade zinc mineralisation. Recent market sentiment, dealings in shares and share price movement In February, FCR terminated the farm-in and joint venture ( JV ) agreement with its South African-based partner for the Moonlight Iron Ore Project. Earlier this month, it then disposed of Page 1 of 7

2 the project entirely for a nominal sum. Management s rationale for doing so was based on a depressed iron ore market, coupled with the project's high capital cost and infrastructure requirements. It should also be noted that in the current market, magnetite deposits come a distant second to haematite deposits in terms of commercial attractiveness. Indeed, to our knowledge no new magnetite projects have come on line globally in the past three years. The withdrawal from South Africa and the iron ore market, and the rebirthing of the Company as a European-focussed lead-zinc pure play was, in our opinion, a shrewd move. The supply / demand dynamics of the zinc market are becoming increasingly attractive for the supply side, with the zinc price up over 85% in the past 18 months. However, the wide market did not share this opinion. Since the termination of the JV agreement in February, the Company s share price fell by as much as 60% in the subsequent months, from 0.20p to 0.08p. We believe that the sell-off was as a result of both traders who had bet on management generating near term value for shareholders from Moonlight via a new JV or a trade sale; and of long term investors in FCR who had been waiting for years on a definitive outcome for Moonlight. The executive chairman eroded market sentiment surrounding the stock still further by carrying out an equity placing in June at an all-time low share price of 0.07p. The share price has since recovered somewhat, but the Company is still only valued at 2.96m. Investment rationale In our view, 2.96m grossly undervalues FCR on account of its new zinc assets, particularly Toral. The resource delineated within the NI Report alone justifies an immediate price tag of $9.6m (or 0.30p per share) for Toral, as we demonstrate using comparable company analysis in Appendix I. This is before any positive results from the soon-to-be completed near-surface drilling programme, which could add significantly more value to Toral in time. In June, the Company released an encouraging update with regard to the ongoing drilling at Toral: FCR's current drill programme at Toral is progressing on schedule. Visual identification of leadzinc associated minerals in the core extracted from the completed holes to date, confirms the main precepts of the Company's new geological model with respect to the near-surface target zone. If the assay results do confirm high grade mineralisation and the above is strongly suggestive that they will then the Company intends to carry out a second, similar sized drilling programme in the autumn. It is likely that subsequent to the completion of phase II drilling, FCR will be in a position to announce a near-surface maiden resource by year end. Compounded with the ongoing resurgence of the zinc market, we believe that the development of Toral in H could begin to generate renewed interest in FCR, especially as hostility towards the Company brought about by the Moonlight debacle continues to fade. Even if the current work programme for delineating a near-surface lead-zinc resource is disappointing, the Company is in a position to convert the NI defined deep resource into a JORC code classified resource, which could then be more readily marketed to larger industry players. To summarise: our long position in FCR is based on its ownership of Toral a large, high grade (and crucially already proved up) lead-zinc resource and the market grossly undervaluing the asset; and on the potential for FCR to add significant further value to Toral in the next six months by expanding the resource base. A near-surface resource would also probably enhance the economics of a potential operation at Toral. Page 2 of 7

3 Appendix I Valuation for Toral Toral was drilled extensively by various previous owners over the past four decades circa 42 km of drilling has been carried out on site to date, which would usually be considered more than sufficient for a bankable feasibility study. Indeed, in 2011 a NI Report was published by a former owner of Toral (and reissued in 2012). [A NI Report, which is a national instrument for the Standards of Disclosure for Mineral Projects used by mining companies listed in Canada, is roughly the equivalent to Australia s JORC Code, although considered more stringent.] The NI Report delineated the following mineral resource at Toral: Exhibit 1: NI Report for Toral Indicated Mt Pb Zn Cu Ag (g/t) Inferred Mt Pb Zn Cu Ag (g/t) Indicated Pb (t) Zn (t) Cu (t) Ag (t) (t) Inferred Pb (t) Zn t) Cu (t) Ag (t) (t) 214, ,562 4, , , ,348 6, ,664 Source: Company data The total resource (indicate and inferred) amounts to 8.71 Mt. At today s metal prices, we calculate a Zn Eq. grade for this total resource of 10.7%. We utilise the existing NI Report for the deep resource in order to demonstrate the substantial discount that the Company is already valued at, relative to its peer group. In Exhibit 2 overleaf, we have compiled a list of primary zinc plays listed in Australia, Canada and the UK in order to understand how investors across the globe are generally valuing zinc pure plays. Page 3 of 7

4 Exhibit 2: comparable company analysis for lead-zinc pure plays Company Project Location Listing Stage Trevali Mining Corp Santander; Caribou Peru, Canada Zinc Equivalent Resource Zn Eq. Tonnage (Mt) Zn Eq. ( 000t) Company EV (US$m) Ownership of project EV/t Zn Eq. (US$/t) TSE In production % 4, % Griffin Mining Caijiaying China AIM In production % 2, % Heron Resources Woodlawn Australia ASX BFS complete % 1, % 8.25 Ironbark Zinc Citronen Greenland ASX BFS complete % 4, % 7.74 Aldridge Minerals Yenipazar Turkey CVE BFS complete % 1, % Red River Resources Thalanga Australia ASX PFS complete % % Energia Minerals Gorno Italy ASX PFS complete % % Canadian Zinc Corp Prairie Creek Canada TSE PFS complete % 3, % Rathdowney Resources Olza Poland CVE PFS complete % 1, % 7.83 Xtierra Bilbao Mexico CVE SS complete % % 8.59 Anglesey Mining Mineral & Financial Inv. Parys Mountain Lagoa Salgada Wales AIM SS underway % % Portugal AIM Resource delineation % % Peer group mean 8.42% Peer group median 6.71% Ferrum Crescent Toral Spain AIM Source: AIM Chaos, using various company data and reports Resource delineation % % 4.11

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6 It is important to note that the in-situ resource valuation methodology is only a basic technique: its major flaw is of course that is does not take into account the cost of mining and refining the resource, and thus the economic viability of the deposit is not considered or validated. Nevertheless, given the limited information that we have to hand on Toral, it is necessary to employ the methodology for now. As Exhibit 2 highlights, FCR is trading at a substantial discount to the wider peer group: the market is valuing each Zn Eq. tonne of Toral s resource base at US$4.11/t, whilst the mean valuation of the per group is US$34.26/t. The Company should indeed be trading at a discounted valuation relative to the peer group, in light of all the constituents of the group being at more advanced stages of project development than FCR is with Toral. Nevertheless, we feel that the current discount of 88.0% to the peer group average is unjustified. To put FCR s current valuation into perspective, we reference the two other lead-zinc pure plays listed on AIM: Mineral & Financial Investments Ltd ( MAFL ) and Anglesey Mining Plc ( AYM ). MAFL s project is at the same stage of development as Toral, namely undergoing further resource delineation. At present on an in-situ valuation basis, it is trading at a 358% premium to FCR. AYM has just completed a scoping study at its project: we believe that by this time next year, FCR will also have published a scoping study for Toral. AYM is therefore approximately only one year ahead of FCR in terms of development but is trading at a premium of just under 600%. We believe that for now, a 70% discount to the peer group average would be fair. This should be considered more than sufficient to account for both the higher exploration risk and the higher financing risk that FCR is subject to regarding the development of Toral. Exhibit 3: fair value calculations for Toral Peer group mean (EV/t Zn Eq. (US$/t)) FCR, current valuation (EV/t Zn Eq. (US$/t)) 4.11 Current discount to peer group mean 88.0% Targeted discount to peer group mean 70.0% Targeted valuation (EV/t Zn Eq. (US$/t)) Targeted enterprise value ($m) 9.63 Targeted value per share (p) 0.30 Source: AIM Chaos We attribute a value of 0.30p per share to the already-defined resource base at Toral. Page 6 of 7

7 Disclosure AIM Chaos is the research branch of a private investment vehicle named Sons of Ulster. It is responsible for generating investment ideas and subsequently monitoring held investments. The assembled information disseminated in this report is intended for internal use, and is neither a solicitation to buy nor an offer to sell securities to outside parties. All information collated and utilised in this report has been sourced from the public domain. AIM Chaos has no business relationship with Ferrum Crescent Ltd or with any other company referred to in this report, and has received no compensation from any party for writing this report. Sons of Ulster, which wholly owns AIM Chaos, does currently hold shares in Ferrum Crescent Ltd. Consequently this report should not be regarded as independent research. Page 7 of 7