Metals X. Leaner and meaner. Initiating coverage with an Outperform. Getting Nifty back to full fitness. Renison growing beyond its age

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1 AUSTRALIA MLX AU Price (at 04:50, 23 Mar 2017 GMT) Outperform A$0.74 Valuation A$ - DCF (WACC 9.0%, beta 1.4, ERP 5.0%, RFR 3.8%) month target A$ month TSR % Volatility Index High GICS sector Materials Market cap A$m day avg turnover A$m 2.3 Number shares on issue m Investment fundamentals Year end 30 Jun 20A 2017E 2018E 2019E Revenue m EBITDA m EBIT m Reported profit m Adjusted profit m Gross cashflow m CFPS CFPS growth % PGCFPS x EPS adj EPS adj growth % nmf nmf PER adj x nmf Total DPS Total div yield % Franking % nmf nmf 0 0 ROA % ROE % Net debt/equity % P/BV x Source: FactSet, Macquarie Research, March 2017 (all figures in AUD unless noted) 24 March 2017 Macquarie Securities (Australia) Limited Leaner and meaner Initiating coverage with an Outperform We are initiating coverage on MLX with an Outperform rating and set a $1.00 price target. MLX offers unique exposure to copper and tin through its operating mines at Nifty in Western Australia and Renison Bell in Tasmania. Post the demerger of its gold assets, we believe a leaner MLX is better positioned to unlock the significant organic growth potential within its asset portfolio. Both Nifty and Renison offer strong production growth potential. We believe MLX can boost copper production at Nifty by 30% and tin production at Renison by 25% within the next 2-3 years. The strong organic production growth should also see cash costs fall, driving material earnings appreciation over the same period. The strong organic growth at Nifty and Renison Bell should see MLX deliver a four-year Ebitda CAGR of 27% on our forecasts and 32% using spot prices. Getting Nifty back to full fitness MLX acquired the Nifty copper mine in mid-20 from Aditya Birla (unlisted) for A$72m. The project had a poor operational history, which culminated in a severe failure of the underground and the subsequent suspension of the mining licence. Nifty has produced 36ktpa of copper over the past five years at an AISC of US$2.82/lb. We recently attended a site tour to Nifty which confirmed most of the previous operational issues were attributable to a chronic undercapitalisation of the mine. MLX has a clear plan to boost production at Nifty and extend the mine life, both of which look eminently achievable by simply injecting capital underground. Renison growing beyond its age The Renison Bell tin mine in Tasmania was MLX s sole source of cash flow from 2008 to Renison boasts a long history, having first commenced production in MLX is the operator of the project which is a 50/50 JV between Yunnan Tin Corporation ( CH, Rmb13.43, not rated) of China and MLX. Renison Bell averaged ~6ktpa (100% basis) of tin in concentrate production over the past five years at an AISC of ~US$8.80/lb. MLX has identified a simple upgrading process that could lift production by 20-25% by adding in an ore sorter at the front of the process plant. The project is now underway and should drive solid production growth at Renison over the next 2-3 years. Organic growth options in tin and nickel In addition to the improvements at Nifty and Renison, MLX has the potential to add further revenue streams organically. The Rentails project could boost group tin production by ~5ktpa (100% basis) by processing previously mined tailings from Renison. A definitive feasibility study is due to be released in the next few months. On our estimates Rentails generates a 22% IRR, and we have included a development of the project in our estimates. In the medium to long term MLX has the potential to add nickel and cobalt production through the development of the Central Musgrave Nickel Project. Our development scenario generates an IRR <10% and as a result we have not included the project in our base case forecasts for MLX. We believe pursuing growth through acquisitions will remain a core part of MLX s strategy, although we see limited base metal targets in Australia as this point. Please refer to page 32 for important disclosures and analyst certification, or on our website

2 Inside Leaner and meaner 3 Valuation, recommendation, risks 8 Getting Nifty back to full fitness 12 Renison growing despite its age 19 Organic growth in tin and nickel 22 Company overview 25 Board and Management 26 Tin price outlook 27 Copper price outlook 29 Macquarie Quant View 31 Company profile (MLX AU) is a diversified base metals producer with unique exposure to copper and tin. The company owns and operates the Nifty Copper Mine in Western Australia, and has a 50% stake in the Renison Bell tin mine in Tasmania. MLX also owns the Wingellina nickel / cobalt laterite project in Western Australia. The company recently refined its corporate structure, spinning out its gold assets into a new listing called Westgold Resources (WGX AU). MLX is now focused solely on ramping up production at Nifty and implementing an expansion project at Renison Bell. Nifty is currently producing around 30ktpa of copper in concentrate but we believe there is strong potential to increase output beyond 40ktpa by increasing underground capital expenditure and returning the process plant to full capacity. This should also reduce AISC back towards US$/lb. The Renison Bell tin mine has been MLX s main source of cash flow since 2009 and has produced 6-7ktpa of tin in concentrate (100% basis) over the past five years. A plan to upgrade mined ore via an ore sorter should boost production to ~8ktpa (100% basis) within two years. Fig 1 MLX Ebitda profile by commodity 18 Tin (A$m) Copper (A$m) Gold / other (A$m) FY14 FY15 FY FY17e FY18e FY19e FY20e FY21e FY22e FY23e FY24e Fig 2 MLX AU vs Small Ordinaries, & rec history Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, March 2017 (all figures in AUD unless noted) 24 March

3 Leaner and meaner Initiating coverage with an Outperform Unique exposure to copper and tin MLX can deliver a 15% production CAGR over the next three years We are initiating coverage on MLX with an Outperform rating and set a $1.00 price target. MLX offers unique exposure to copper and tin through its operating mines at Nifty in Western Australia and Renison Bell in Tasmania. Post the demerger of its gold assets, we believe a leaner MLX is better positioned to unlock the significant organic growth potential within its asset portfolio. Both Nifty and Renison Bell offer strong production growth potential. We believe MLX can boost copper production at Nifty by 30% and tin production at Renison by 25% within the next 2-3 years from current production rates. The strong organic production growth should also see cash costs fall, driving material earnings appreciation over the same period. Over the next five years we expect copper to rise to 56% of total Ebitda, with tin contributing the remaining 44%. On a copper equivalent basis we expect MLX to deliver a 15% production CAGR over the next three years from current production rates. Fig 3 MLX copper equivalent production outlook Fig 4 MLX Ebitda by commodity next five years 7 Renison Bell (kt) Rentails (kt) Nifty (kt) Copper (A$m) 56% Tin (A$m) 44% 2 1 FY15 FY FY17e FY18e FY19e FY20e FY21e FY22e Source: Company data, Macquarie Research, March 2017 Source: Company data, Macquarie Research, March 2017 MLX can deliver a four-year Ebitda CAGR of 27% The strong organic growth potential at Nifty and Renison Bell should see MLX deliver a fouryear Ebitda CAGR of 27% on our forecasts and 32% using spot prices, compared with an average CAGR of 17% and 13% of its ASX peer group on Macquarie estimates (Fig 5) and spot prices (Fig 6), respectively. Fig 5 Four-year EBITDA CAGR Macquarie forecasts Fig 6 Four-year EBITDA CAGR spot prices 30% 35% 25% 30% 20% 25% 15% 20% 15% 10% 10% 5% 5% 0% Western Areas Independence Group OZ Minerals Sandfire Resources 0% Independence Group Western Areas OZ Minerals Sandfire Resources Source: Company data, Macquarie Research, March 2017 Source: Company data, Macquarie Research, March March

4 Getting Nifty back to full fitness MLX has a clear plan to boost production at Nifty and extend the mine life MLX acquired the Nifty copper mine in mid-20 from Aditya Birla for A$72m (net of cash). The project had a poor operational history, which culminated in a severe failure of the underground and the subsequent suspension of the mining licence. Nifty averaged 36ktpa of copper in concentrate production over the past five years at an AISC of ~US$2.80/lb. We recently attended a site tour to Nifty which confirmed most of the previous operational issues were attributable to a chronic undercapitalisation of the mine. MLX has a clear plan to boost production at Nifty and extend the mine life, both of which look eminently achievable through simply injecting capital underground. Our production forecasts for Nifty assume that the rise in underground capital development expenditure delivers a material increase in mine output. Copper production is expected to rise from the current rate of 31.6ktpa to over 42ktpa, an increase of just over 30%. MLX has indicated it expects AISC to be lower from US$2.15/lb to US$1.75/lb. We note our cost forecasts remain above the guidance given the poor operational track record of the mine. Fig 7 We expect Nifty production to rise to +40ktpa Fig 8 Our cost forecasts above guidance (real terms) 45.0 Nifty (kt) AISC (US$/lb) AISC (US$/lb) - Macquarie AISC (US$/lb) - Target FY17e FY18e FY19e FY20e FY21e Source: Company data, Macquarie Research, March 2017 Source: Company data, Macquarie Research, March 2017 Renison growing beyond its age MLX s sole source of cash flow from 2008 to 2013 The Renison Bell tin mine in Tasmania was MLX s sole source of cash flow from 2008 to Renison boasts a long history, having first commenced production in MLX is the operator of the project which is a 50/50 JV between Yunnan Tin Corporation of China and MLX. Fig 9 Renison production and cost history (100% basis) Tin production (kt) AISC (US$/lb) Tin Price (US$/lb) March

5 A simple upgrading progress that could lift output by ~25% Renison has averaged ~6.0ktpa (100% basis) of tin in concentrate production over the past five years at an AISC of US$8.80/lb. MLX has identified a simple upgrading process that could lift production by 20-25% by adding in an ore sorter at the front of the process plant. The project is now underway and should drive solid production growth at Renison over the next 2-3 years. Organic growth options in tin and nickel In addition to the improvements at Nifty and Renison, MLX has the potential to add further revenue streams organically. The Rentails project could boost group tin production by ~5ktpa by processing previously mined tailings from Renison. A definitive feasibility study is due to be released in the next few months. On our estimates Rentails generates a 22% IRR, and we have included a development of the project in our estimates. Wingellina scenario generates an IRR <10% In the medium to long-term MLX has the potential to add nickel and cobalt production through the development of the Central Musgrave Nickel Project. Our development scenario generates an IRR <10% and as a result we have not included the project in our base case forecasts for MLX. We believe pursuing growth through acquisitions will remain a core part of MLX s strategy, although we see limited options in Australia as this point. Fig 10 Rentails to boost tin production (MLX share) Fig 11 MLX NPV by project Renison Bell (kt) Rentails (kt) Resources 12% Other 7% Renison Bell 24% Wingellina 7% Rentails 9% 1.0 Nifty 41% Brainchip Holdings legacy position MLX owns two legacy positions in Brainchip Holdings and RNL. We note that the BRN holding is more significant with a current market value of ~$14m. We do not believe either investment is core and expect MLX to dispose of both stakes in due course. Fig 12 MLX s material investments Company Code Price Shares (m) (A$m) Brainchip Holdings BRN RNI NL RNI Closing prices as of 23 March March

6 Dec May 17 Oct 17 Mar 18 Aug 18 Jan 19 Jun 19 Nov 19 Apr 20 Sep 20 Feb 21 Jul 21 Dec 21 May 22 Oct 22 Mar 23 Aug 23 Jan 24 Jun 24 Nov 24 Macquarie Wealth Management Fig 13 Renison Bell production and costs Fig 14 Nifty production and costs 9.0 Tin production (kt) AISC (US$/lb) 1 6 Copper production (kt) AISC (US$/lb) Fig 15 Rentails production and costs Fig MLX Ebitda by commodity next five years 6.0 Tin production (kt) AISC (US$/lb) Copper production (kt) Copper (A$m) 56% Tin (A$m) 44% Fig 17 MLX net cash build Fig 18 MLX NPV breakdown 700 Net cash (A$m) Market Cap (A$m) Other 7% Resources 12% Renison Bell 24% Wingellina 7% Rentails 9% Nifty 41% 24 March

7 Fig 19 summary financials ASX: MLX Price: (A$ps) 0.74 Year end: Jun Rating: Outperform Up/dn TSR Mkt cap: (A$m) 451 Diluted shares (m) Target: % 37% Mkt cap: (US$m) 340 ASSUMPTIONS FY15 FY FY17e FY18e FY19e FY20e FY21e PRODUCTION DATA FY15 FY FY17e FY18e FY19e FY20e FY21e Exchange Rate A$/US$ Renison Bell/Rentails (MLX share) Spot Gold (US$/oz) 1,223 1,7 1,236 1,331 1,375 1,394 1,388 Renison Bell (kt) Spot Tin (US$/lb) Rentails (kt) RATIO ANALYSIS FY15 FY FY17e FY18e FY19e FY20e FY21e Total Tin (kt) Diluted share capital m Cash costs (US$/lb) EPS (diluted and pre sig. items) A AISC (US$/lb) P/E x 6.7x -14.0x 21.0x 14.2x 6.3x 5.7x 5.7x Nifty CFPS A Copper produced (kt) P/CF x 4.3x 7.0x 8.7x 7.2x 4.3x 3.8x 3.3x Cash costs (US$/lb) DPS A AISC (US$/lb) Dividend yield % 4.0% % % 1.6% 4.7% 5.2% 5.3% RENISON BELL PRODUCTION OUTLOOK NIFTY PRODUCTION OUTLOOK Franking Level % 26% 0% 0% 0% 0% 0% 100% Book value per share x P/Book value x 0.9x 0.8x 1.8x 1.7x 1.4x 1.2x 1.0x R.O.E. (pre sig items) % 13% -6% 8% 12% 22% 21% 18% R.O.A. (pre sig items) % 9% -5% 6% 8% % 18% % Interest Cover x -15.9x 150.8x -12.7x -11.1x -26.4x -31.9x -19.2x EBITDA per share A$ps EV/EBITDA x 4.4x 12.7x 6.5x 5.1x 3.2x 2.3x 1.6x Free cash flow yield % 4% (13%) (15%) 2% 6% 14% 22% Renison Bell/Rentails (kt) - MLX share ASIC (US$/lb) Nifty (kt) AISC (US$/lb) EARNINGS FY15 FY FY17e FY18e FY19e FY20e FY21e RESERVES AND RESOURCES (ATTRIBUTABLE) Sales Revenue A$m Tin Reserves Other Revenue A$m Project Mt Sn (%) (kt) Cu (%) (kt) Total Revenue A$m Renison Bell % % 15 Treatment & payability A$m (32) (55) (46) (61) (73) (76) (81) Rentails % % 49 Operating Costs A$m (173) (224) (180) (223) (245) (259) (290) Total Tin Reserves % % 64 Operational EBITDA A$m Tin Resources Exploration Expense/Write-offs A$m (6) (27) (1) (1) (0) (0) (0) Project Mt Sn (%) (kt) Cu (%) (kt) Corporate & Other Costs A$m () (12) (10) (8) (8) (9) (9) Renison Bell % % 33 EBITDA A$m Rentails % % 51 D&A A$m (44) (64) (38) (44) (45) (52) (64) Mt Bischoff % 9 EBIT A$m 43 (28) Total Tin Reserves % % 84 Net Interest A$m Copper Reserves Profit Before Tax A$m 46 (28) Project Mt Cu (%) (kt) Tax Expense A$m 0 4 (2) 0 0 (14) (14) Nifty % 97 Minorities A$m Total Copper Reserves % 97 Adjusted NPAT A$m 46 (24) Copper Resources Significant Items (post tax) A$m (5) Project Mt Cu (%) (Cu kt) Co (%) Co (kt) Reported NPAT A$m 41 (24) Nifty - Sulphide % 477 Nifty - Oxide % 38 CASHFLOW FY15 FY FY17e FY18e FY19e FY20e FY21e Nifty - Heap Leach % 25 Net Profit A$m 41 (24) Maroochydore - Oxide % 394 4% 17 Interest/Tax/D&A A$m Maroochydore - Sulphide % 90 4% 2 Working Capital/other A$m 3 11 (128) (6) (7) (9) (4) Total Copper Resources % 1,023 2% 19 Net Operating Cashflow A$m Nickel Reserves Capex A$m (52) (102) (54) (54) (79) (54) (34) Project Mt Ni (%) Ni (kt) Co (%) Co (kt) Investments A$m 0 (4) (66) Wingellina % 1,561 7% 123 Sale of PPE and Other A$m Total Nickel Reserves % 1,561 7% 123 Free cash flow A$m 20 (58) (68) Nickel Resources Dividends Paid A$m (21) (22) (0) 0 (17) (23) (24) Project Mt Ni (%) Ni (kt) Co (%) Co (kt) Debt A$m (2) 0 0 (10) 0 Wingellina % 1,684 7% 131 Equity Issuance A$m 0 (0) Claude Hills % 270 7% 23 Other A$m Total Nickel Resources % 1,953 7% 154 Net Financing Cashflow A$m 22 (2) (17) (33) (24) Net change in cash A$m 42 (60) EQUITY DCF VALUATION Spot prices Macquarie forecasts Projects A$m A$ps A$m A$ps Renison Bell BALANCE SHEET FY15 FY FY17e FY18e FY19e FY20e FY21e Rentails Cash A$m Nifty PP&E & Mine Development A$m Wingellina Nickel 46 7 Exploration A$m Resources Total Assets A$m Investments Debt A$m Unpaid capital Total Liabilities A$m Corporate (45) (7) (45) (7) Total Net Assets / Equity A$m Cash Net Debt / (Cash) A$m (69) 5 (69) (77) (86) (128) (205) Debt (10) (2) (10) (2) Gearing (net debt/(nd + equity)) % (25%) 1% (39%) (40%) (36%) (50%) (87%) Net Equity Value 9%) Gearing (net debt/equity) % (20%) 1% (28%) (28%) (26%) (33%) (46%) Price Target (50/50 Blend of 6x Ebitda and NPV) March

8 Valuation, recommendation, risks Initiating coverage with an Outperform Initiating coverage with an Outperform rating and $1.00 price target MLX is expected to deliver a four-year Ebitda CAGR of 27% Ebitda split for tin and copper is 45%/55% We are initiating coverage on MLX with an Outperform rating and set a $1.00 price target. MLX offers unique exposure to copper and tin through its operating mines at Nifty in Western Australia and Renison in Tasmania. Post the demerger of its gold assets, we believe a leaner MLX is in a stronger position and is more focused to unlock the significant organic growth potential within its asset portfolio. Both Nifty and Renison offer strong production growth potential. We believe MLX can boost copper production at Nifty by 30% and tin production at Renison Bell by 25% within the next 2-3 years. The strong organic production growth should also see cash costs falling, driving material earnings appreciation over the same period. The strong organic growth potential at Nifty and Renison Bell should see MLX deliver a four-year Ebitda CAGR of 27% on our forecasts and 32% using spot prices, compared with an average CAGR of 17% and 13% of its ASX peer group on Macquarie estimates and spot prices, respectively. A unique commodity mix MLX offers unique exposure to tin and copper revenue with longer-term potential to add nickel and cobalt should the Wingellina project be developed. Over the next five years we expect the copper / tin revenue split to be around 70% / 30%, but the Ebitda split is expected to be closer to 45% / 55%, with the improved mixed reflecting the superior Ebitda margin generated by Renison compared to Nifty. Fig 20 MLX revenue by commodity Fig 21 MLX Ebitda by commodity 70 Tin (A$m) Copper (A$m) Gold / other (A$m) Tin (A$m) Copper (A$m) Gold / other (A$m) (5) Peer group comparison Peer group focused on ASX-listed base metal stocks We have included two copper producers and two nickel producers in our peer group analysis for MLX. OZL and SFR offer exposure to copper with modest gold by-product credits while WSA is a pure play nickel producer. IGO is a diversified producer with exposure to nickel, gold, zinc and copper with modest levels of cobalt. We also include CLQ but as a nickel/cobalt development play, has no earnings before FY20. Fig 22 MLX peer group consists of copper and nickel producers Company Code Market Cap (A$m) Rating Share price Price target TSR OZ Minerals OZL 2,470 Outperform A$8.27 A$ % Independence Group IGO 2,130 Neutral A$3.63 A$ % Sandfire Resources SFR 1,024 Outperform A$6.49 A$ % Western Areas WSA 653 Outperform A$2.40 A$ % Clean TeQ Holdings CLQ 520 Outperform A$0.91 A$ % MLX 336 Outperform A$0.74 A$ % Source: IRESS, Macquarie Research, March Closing prices as of 23 March March

9 MLX s FY18 EV/Ebitda multiples are broadly in line with peers We note that MLX s FY18 EV/Ebitda multiple is broadly in line with most of the peer group with the exception of SFR, which has a much shorter mine life. Interestingly MLX looks cheaper using a spot price analysis which incorporates higher copper prices which benefits MLX more than SFR and OZL as lower gold prices largely offset the higher copper price under a spot price scenario. Fig 23 EV/Ebitda multiples Macquarie forecasts Fig 24 EV/Ebitda multiples spot prices FY18e FY19e FY18e FY19e 7.0x 7.0x 6.0x 6.0x 5.0x 5.0x 4.0x 4.0x 3.0x 3.0x 2.0x 2.0x 1.0x 1.0x x OZ Minerals Sandfire Resources Independence Group Western Areas x OZ Minerals Sandfire Resources Independence Group Western Areas Source: IRESS, Macquarie Research, March 2017 Source: IRESS, Macquarie Research, March 2017 We look to FY19 as a better indication of MLX s medium-term earnings potential The improved earnings outlook under a spot price scenario translates to lower earnings multiples using spot prices. We look to FY19 as a better indication of MLX s medium-term earnings potential, as the company should have achieved higher operating rates at Nifty and have started to produce increased levels of tin at Renison. Fig 25 MLX EV/Ebitda multiples look attractive on our forecasts and spot prices Macquarie forecasts Spot prices Multiples FY17e FY18e FY19e Multiples FY17e FY18e FY19e P/E P/E EV/EBITDA EV/EBITDA Dividend yield nm 1.6% 4.7% Dividend yield nm 2.1% 5.2% Free cash flow yield (20%) 3% 8% Free cash flow yield (21%) 3% 10% MLX earnings more sensitive to copper MLX s earnings are more sensitive to copper than tin by a factor of 2:1 Running a sensitivity analysis demonstrates that MLX s earnings are more sensitive to copper than tin by a factor of 2:1 in the medium term but closer to 3:1 in the near term. We attribute the greater sensitivity to copper to Nifty s higher production rate and lower Ebitda margins compared to Renison Bell and Rentails. With both operations located in Australia, the sensitivity to earnings and valuation for movements in the A$/US$ exchange rate is high. Fig 26 MLX earnings highly sensitive to copper and tin prices Earnings Sensitivity FY17e FY18e FY19e FY20e FY21e NPV 10% change in copper (US$/lb) 57% 81% 26% 35% 36% 21% 10% change in tin (US$/lb) 19% 24% 11% 14% 18% 12% 10% change in A$/US$ (63%) (87%) (47%) (31%) (40%) (36%) 24 March

10 Jan 15 Jul 15 Jan Jul Jan 17 Jul 17 Jan 18 Jul 18 Jan 19 Jul 19 Jan 20 Jul 20 Jan 15 Jul 15 Jan Jul Jan 17 Jul 17 Jan 18 Jul 18 Jan 19 Jul 19 Jan 20 Jul 20 Macquarie Wealth Management MLX s share price historically tracked the tin price and now tracks copper We note that MLX s share price tracked the tin price from 2008 through However, a decision to focus on building and growing its gold business resulted in this relationship starting to break down in With the gold assets now spun out into a separate vehicle we would expect MLX s share price to more closely track copper and tin prices. We note that in 2017 the company s share price appears to be trading more in line with both copper and tin. Fig 27 MLX s share price had more closely tracked the tin price in the past Fig 28 MLX s share price is starting to more closely track the copper price 1.00 MLX share price Tin (US$/lb) - Spot MLX share price Copper (US$/lb) - Spot Source: IRESS, Macquarie Research, March 2017 Source: IRESS, Macquarie Research, March Jan 15 Mar 15 May 15 Jul 15 Sep 15 Nov 15 Jan Mar May Jul Sep Nov Jan 17 Mar A mixed outlook for MLX s core commodities We forecast copper prices to fall then rise Outlook for tin prices is more bullish Our forecasts for MLX s core commodities is mixed. Spot copper prices are currently around US$2.65/lb, and we expect prices to fall back towards US$2.50/lb for CY18 before recovering as the supply/demand deficit begins to widen. Our long-term copper price assumption is US$2.68/lb. Macquarie s copper outlook is summarised later in this report. The outlook for tin prices is more bullish. We expect tin prices to rise progressively over the next two years, peaking at over US$10/lb with the tin market expected to remain in deficit through Our long-term tin price assumption is US$8.17/lb. Macquarie s tin outlook is summarised later in this report. Fig 29 We expect copper prices to weaken Fig 30 Outlook for tin prices is more bullish Copper (US$/lb) - Spot Copper (US$/lb) - Forecast Tin (US$/lb) - Spot Tin (US$/lb) - Forecast Source: IRESS, Macquarie Research, March 2017 Source: IRESS, Macquarie Research, March March

11 Valuation based on a sum-of-parts NPV NPV includes production scenarios for Renison Bell, Nifty and Rentails Our sum-of-the-parts NPV for MLX incorporates discounted cash flow valuations of our production forecasts for Renison Bell and Nifty as well as the Rentails development project. Our valuation for Wingellina reflects our NPV of the large scale development scenario, which we believe is unlikely to be the final base case. We also include option value for the copper and tin resources at Nifty and Renison not currently in our production forecasts. Our NPV also incorporates corporate overhead costs, net cash and MLX s listed investments. Our $1.00 price target is derived using a 50/50 blend of our NPV and a 6.0x Ebitda multiple on the average Ebitda for FY18 and FY19. Fig 31 MLX sum-of-parts NPV Projects A$m A$/share Renison Bell Rentails 58 9 Nifty Wingellina Nickel 46 7 Resources Investments 13 2 Unpaid capital 7 1 Corporate (45) (7) Cash Debt (10) (2) Net Equity Value 9%) Price Target (50/50 Blend of 6x Ebitda and NPV) 1.00 Key risks relate to underground mine stability Aside from movements in copper and tin prices, MLX is exposed to normal operating risks associated with underground mining. We address some of these risks later in the report but it is fair to say that MLX s risks are higher than average given the chequered operational history at Nifty. We assume mining rates at Nifty rise significantly Mining rates a key risk: Our base case development scenario for Nifty assumes mine production is ramped up from 1.5mtpa to 2.5mtpa, enabling the process plant to return to constant operation. We believe there is sufficient underground infrastructure to achieve this rate, with the ability to develop and open up enough operating stopes without impacting ground stability the key risk to our ramp-up assumptions. Upside risks to costs: MLX has indicated it expects to get AISC at Nifty back towards US$1.75/lb once production is ramped up. We have been more conservative on costs, assuming AISC only fall back to ~US$2.10/lb, due to the poor operational history of the project. Fig 32 Our forecasts assume mining rates rise Fig 33 Our cost estimate above guidance (real terms) 4,000 3,500 Renison ore mined (kt) Nifty ore mined (kt) 2.50 AISC (US$/lb) - Macquarie AISC (US$/lb) - Target 3,000 2,500 2, , , FY14 FY15 FY FY17e FY18e FY19e FY20e FY17e FY18e FY19e FY20e FY21e Source: IRESS, Macquarie Research, March 2017 Source: IRESS, Macquarie Research, March March

12 Getting Nifty back to full fitness A chequered history Nifty had a poor operational history MLX acquired the Nifty copper mine in mid-20 from Aditya Birla for A$71.8m net of cash. The project had a poor operational history, which culminated in a severe failure of the underground and the subsequent suspension of the mining licence. Nifty averaged 36ktpa of copper in concentrate production over the past five years at an AISC of US$2.82/lb. We recently attended a site tour to Nifty which confirmed most of the previous operational issues were attributable to a chronic undercapitalisation of the mine. MLX has a clear plan to boost production at Nifty and extend the mine life, both of which look eminently achievable through simply injecting capital underground. Our development scenario for Nifty assumes a step up to 2.5mtpa Our development scenario for Nifty assumes a step-up in development capital underground enables MLX to lift the mining rate to 2.5mtpa. This will enable the process plant to shift back to full operation boosting annual production to around 45ktpa and reducing AISC back towards US$2.10/lb. We assume an eight-year mine life in our estimates. Background The Nifty copper mine is located in Western Australia, 65km west of Telfer. The deposit was discovered by Western Mining Corporation in 1981 which developed an open pit project focused on processing the oxide copper mineralisation through a heap leach and SX-EW circuit which commenced operations in In 1998 the project was sold to Straits Resources, which then on sold the asset to Aditya Birla Minerals. Aditya Birla Minerals invested significant capital on the project, developing an underground mine to extract the large sulphide resources and constructing a copper concentrate process plant. Development work commenced in early 2004 and the first copper concentrate was produced in March Mining of the open pit ceased in June 2006 and the heap leach operation ceased in January Takeover of ABY to secure Nifty in August 20 MLX acquired the Nifty copper mine in mid-20 from Aditya Birla for A$71.8m MLX first announced a 1-for-5 all scrip takeover offer for Aditya Birla Minerals on 15 October The offer was rejected by ABY and its major shareholder Hindalco Industries (HNDL IN, Rs193.35, Outperform, TP: Rs250, Sumangal Nevatia), but was subsequently accepted after MLX lifted the offer to 1-for-5 all scrip plus $8 in cash. The transaction was formally completed on 28 August 20 with the final acquisition cost set at $135.9m, although we note that net of cash the cost was only $71.8m. Fig 34 Nifty acquisition costs only $71.8m Aditya Birla acquisition details A$m ABY 1 for 5 all share offer ABY $8 cash portion.9 Total Net cash acquired 64.1 Net cost March

13 Only a three-year reserve life Ore reserve is unchanged from the original 2006 estimate Total ore reserves at Nifty are modest at just 1.85% Cu and imply a mine life of just three years based on the current production rate. We note that the reserve is essentially unchanged from the original 2006 estimate, with ABY investing little capital in drilling. Fig 35 Modest reserve life reflects a lack of drilling Reserve Ore (mt) Cu (%) Cu (kt) Proved % 68.0 Probable % 29.0 Total % 97.0 Resources underpin a 10-year life Resource underpins a 10 year mine life at 2.5mtpa run rate The resource at Nifty is significant and dwarfs the reserve and is equivalent to a 15-year mine life at current production rates and ten years assuming MLX is able to ramp production back to 2.5mtpa theoretical mill capacity. We note that our development scenario for Nifty does not incorporate any value for the oxide or heap leach resources. Fig 36 Significant resource could be expended Reserve Ore (mt) Cu (%) Cu (kt) Nifty - Sulphide % Nifty - Oxide % 37.5 Nifty - Heap Leach % 24.5 Total Resources % We believe there is material upside to both the reserves and resources We recently visited the Nifty mine and believe there is material upside to both the reserves and resources. Mineralisation remains open at depth and also along strike with potential for geological repeat structures. We note that ABY had spent limited time focused on drilling out either the current resource testing for extensions or infill drilling to increase the reserve. Our development scenario for Nifty assumes a mineable inventory of 1.92% Cu containing 363kt. We note that our inventory is triple the current reserve and accounts for ~80% of resource tonnes and 76% of contained copper. We note that mineralisation extends to the east of the open pit towards the airport and while no material drilling has been undertaken we view this as the most likely source of additional resource discoveries. Fig 37 Mineable inventory is 76% of contained copper in resource Nifty inventory assumption Ore (mt) Cu (%) Cu (kt) Mineable inventory % 363 Nifty - Sulphide % % of resource 81% 94% 76% Source: MLX Macquarie Research, March March

14 We attended a site tour to MLX s Nifty operations in February Operational overview and site tour highlights We attended a site tour to MLX s Nifty operations in February. Our key takeaway from the tour was the significant amount of surface infrastructure at the project. Nifty s site infrastructure includes a copper concentrator, mothballed SX/EW plant and significant underground infrastructure including an underground crusher and conveyor system. Fig 38 Nifty layout with heap leach in the background Source: Macquarie Research, March 2017 Concentrator operating on a campaign basis The Nifty copper concentrate plant has a rated capacity of 2.5mtpa, although MLX is currently operating the plant on a two weeks on-one week off basis due to a lack of ore feed from the underground. Even running the plant at full capacity on a campaign basis, we believe there is scope to expand throughput beyond the stated capacity of 2.5mtpa. We note that the twostage grinding circuit also has a spare pebble crusher and regrind mill. Power is generated using on-site gas-fired turbines as the project is connected to the Telfer gas pipeline. Fig 39 Nifty process plant Source: Macquarie Research, March 2017 Ore at Nifty is extracted using primarily open stoping methods Ore at Nifty is extracted using primarily open stoping methods, with the bulk of ore extracted to date from ore blocks defined within the original 2006 reserve estimate. Mined stopes, which can range from kt in size, are generally paste-filled on completion of stope extraction. Mined ore is trucked to the underground crusher which then sends crushed ore to surface via a conveyor. 24 March

15 Fig 40 Majority of reserve extracted over just 600m of 1.2km mining front 200m 200m 650m 1,000m 18 Project has had a chequered history In 2014 the mine suffered a major operational disaster MLX has taken a number of precautions to ensure this event is not repeated In 2014 the mine suffered a major operational disaster when an open stope propagated to surface causing a sink hole to appear in the open pit. The mine was suspended in March 2014 under instruction from the Department and Mines and Petroleum and was only granted a restart in July We understand that the failure was largely due to a delay in paste filling a large previously mined open stope. The sand paste at Nifty that was used at the time can collapse and with mining occurring close to this stope, a decision was made to delay the paste fill and extract the nearby stope. This delay resulted in a caving effect occurring in the open stope, and once this occurred propagation to surface was inevitable. MLX has taken a number of precautions to ensure this event is not repeated with the focus on improving the quality and stability of the paste feed. We note that 120m between the pit and underground is now essentially sterilised. Fig 41 Nifty ore mined and grade profile history Fig 42 Nifty copper production and cost history 2,500 Ore Mined (kt) Grade (Cu (%) 3.50% 6 Copper production (kt) AISC (US$/lb) , % ,500 1, % % % % FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY 0 24 March

16 Concentrate production commenced in 2006 and Nifty was able to maintain a steady production rate around 50ktpa of copper in concentrate. The flat production for the FY08- FY11 period reflected rising mining and milling rates, which offset a declining head grade, which fell from 3.0% Cu to 2.5% Cu over that period. Copper production fell to 47ktpa in FY12 and FY13 despite a record throughput rate being achieved in FY13 due to declining grades. The material decline in output in FY15 was due to the aforementioned sinkhole issue. We expect production to rise 30% MLX took over operational control of Nifty in August 20 MLX took over operational control of Nifty in August 20. Since that time the company has been able to step up throughput rates and delivered a modest increase in production. We believe MLX can lift production by around 30% from the 2QFY17 run rate through ramping up underground development rates and boosting mine production as a result. Fig 43 We expect production to rise to over 40ktpa by FY19 Y/E June FY17e FY18e FY19e FY20e FY21e FY22e FY23e FY24e FY25e Nifty (kt) AISC (US$/lb) We assume production ramps up to 2.5mtpa We assume the average head grade declines to 1.8% Cu Our development scenario assumes underground mine production is ramped up over the next year, achieving a 1.7mtpa run rate in the 2HCY17 and 2.5mtpa by early The increased production rate is expected to see capital expenditure rise to $25mpa, the bulk of which we expect will be spent on extending the underground footprint, opening up new stoping areas. However, we expect it to take some time to get development far enough ahead of production to lift overall mine output. As a result we have assumed a flat mining rate for the next three quarters and only a modest step-up in the December 2017 quarter. Given the increased mining rate to 2.5mtpa, we assume the average head grade declines to 1.8% Cu as the operation will have to be less selective on targeting higher grade stopes at the higher operating rate. Fig 44 We expect a staged ramp-up to 2.5mtpa Fig 45 Nifty copper production and cost outlook 700 Ore Mined (kt) Grade (Cu (%) 2.20% 12.0 Copper production (kt) AISC (US$/lb) % % 1.90% 1.80% 1.70% % Sep Dec Mar 17 Jun 17 Sep 17 Dec 17 Mar 18 Jun 18 Sep 18 Dec 18 Mar 19 Jun % Sep Dec Mar 17 Jun 17 Sep 17 Dec 17 Mar 18 Jun 18 Sep 18 Dec 18 Mar 19 Jun March 2017

17 We note that our cost scenario assumes only a ~5% reduction in the site operating costs Our development scenario for Nifty assumes production stabilises around 2.5mtpa, translating to copper in concentrate production of 42ktpa. We note that our cost scenario assumes only a ~5% reduction in the site operating costs on a $/tonne basis, which we believe is conservative given the largely fixed cost nature of the mining operation. At a 2.5mtpa mining rate, our mining inventory assumption is equivalent to a 7-8 year mine life including the 12-month ramp-up forecast. We note that Nifty will benefit from MLX s significant tax shelter, which should reduce the average tax rate to ~15%pa over the life of the project, with the next two years expected to be tax free. Fig 46 Nifty copper production expected to stabilise around 42ktpa 6 Copper production (kt) AISC (US$/lb) (costs in nominal terms) 24 March

18 Exploration upside is significant The region is highly prospective for copper and also lead/zinc mineralisation There appears to have been very little money allocated to regional exploration expenditure by Aditya Birla over the past 10 years. Surface sampling over the Nifty tenements suggest the region is highly prospective for copper and also lead/zinc mineralisation. We have not ascribed any value to the regional exploration potential at Nifty. Fig 47 Large number of surface targets along strike from Nifty Maroochydore a potential source for SX-EW Maroochydore has a significant oxide copper resource with some sulphide potential One of the most prospective regional targets is Maroochydore, which already has a significant oxide copper resource with some sulphide potential. The grade is probably too low to justify a standalone development, but a small processing plant and piping oxide slurry to the current SX-EW could provide a path to unlocking the Maroochydore resource in the medium term. We note that we have not included a development of Maroochydore in our base case forecasts for MLX. Fig 48 Maroochydore oxide resource offers upside Project Mt Cu (%) (Cu kt) Co (%) Co (kt) Maroochydore - Oxide % 394 4% 17 Maroochydore - Sulphide % 90 4% 2 Total Resources % 484 4% 19 Source: Macquarie Research, March March

19 Renison growing despite its age Renison boasts a long history, having first commenced production in 1968 The Renison Bell tin mine in Tasmania was MLX s sole source of cash flow from 2008 to Renison boasts a long history, having first commenced production in MLX is the operator of the project which is a 50/50 JV between Yunnan Tin Corporation of China and MLX. Renison has consistently produced 6ktpa (100% basis) of tin concentrate over the past five years at an AISC of US$8.80/lb. MLX has identified a simple upgrading progress that could lift production by ~20% by adding in an ore sorter at the front of the process plant. The project is now underway and should drive solid production growth at Renison over the next two years. A strong production history Renison Bell has produced 225kt of Tin since 1968 The Renison Bell tin mine has been in production since 1968 and the mine has produced 225kt of tin over that period mining 23mt of ore at a grade of 1.4% tin. The mine is located in north western Tasmania close to a number of other operating mines including Rosebery and Savage River. Historically alluvial tin was first mined from 1890 to Small scale hard rock mining commenced in 1936 and a major expansion commenced in Given the long production history, Renison boasts significant underground mine infrastructure. MLX has estimated the replacement cost to establish a mine of similar scale would be close to A$300m. MLX reached an agreement with Yunnan Tin Corporation of China to redevelop Renison Bell to form a 50/50 joint venture, in which Yunnan Tin paid $50m to acquire a 50% stake in the joint venture. Fig 49 Renison production and cost history (100% basis) Tin production (kt) AISC (US$/lb) Tin Price (US$/lb) FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY Significant resource base underpins a 10+ year mine life Renison Bell boasts a significant reserve and resource base Renison Bell boasts a significant reserve and resource base. Current mining and processing capacity is 700ktpa and translates to a ~8-year mine life on reserves. Our development scenario for Renison Bell of 1.28% Sn and 0.27% Cu assumes 75% of the resource outside the reserve is mined, although we note we assume a similar average grade to the reserve. Our mining inventory assumption underpins an year mine life, due to an increase in the mining rate to 900ktpa. Fig 50 Resource base underpins a 10+ year mine life Project Mt Sn (%) (kt) Cu (%) (kt) Reserves % % 15 Resources % % 33 Mining Inventory % % March

20 Sep 08 May 09 Jan 10 Sep 10 May 11 Jan 12 Sep 12 May 13 Jan 14 Sep 14 May 15 Jan Sep May 17 Jan 18 Sep 18 May 19 Jan 20 Sep 20 May 21 Jan 22 Sep 22 Mar 10 Oct 10 May 11 Dec 11 Jul 12 Feb 13 Sep 13 Apr 14 Nov 14 Jun 15 Jan Aug Mar 17 Oct 17 May 18 Dec 18 Jul 19 Feb 20 Sep 20 Apr 21 Nov 21 Jun 22 Macquarie Wealth Management Site tour highlights historic investment We had previously visited MLX s Renison mine in Tasmania We had previously visited MLX s Renison mine in Tasmania. Similar to Nifty the long operational history of Renison has left the mine well capitalised both with surface infrastructure and also underground development. The bulk of the underground infrastructure was constructed in the 1990s which included a 582m shaft, underground crusher and ore conveyor system to take ore to surface. Fig 51 Renison boasts significant underground mine infrastructure Ore sorter should boost production Ore sorter to boost production Our development scenario for Renison Bell assumes an expansion of the underground mining rate. We believe the surface infrastructure is the key bottleneck to boosting production at Renison Bell given the lack of available space at surface and likely resistance to expanding the surface footprint. Fig 52 Renison quarterly mining history and outlook Fig 53 Renison quarterly production and costs Ore Mined (kt) Grade (Sn %) Tin production (kt) AISC (US$/lb) 25 % % 1.60% % % 1.00% 0.80% % 0.40% 0.20% % March

21 An ore sorter can boost the average head grade by 20% The use of ore sorters has advanced significantly over the past few years due to technological gains in the quality of the x-ray equipment. MLX had previously looked at an ore sorter at Mt Bischoff but the need to effectively hand sort ore made its use unfeasible. Recent test work suggests that an ore sorter can boost the average head grade by 20% for just a 4-5% loss of contained tin mined. Fig 54 We assume ore sorter is implemented in FY19 Ore Mined (kt) Ore Milled (kt) Mined grade (Sn %) Milled grade (Sn%) 1, % % % % % % % FY FY17e FY18e FY19e FY20e FY21e FY22e FY23e FY24e FY25e FY26e FY27e Ore sorter should see production rise by ~20-25%pa Tin in concentrate production forecast to rise to 8.0ktpa The implementation of an ore sorter should see production rise by ~20-25% pa to around 8.0ktpa (100% basis). We note that Renison already has sufficient underground development to lift the mining rate from 720ktpa to 900ktpa hence we have not materially stepped up capital expenditure despite increasing the mining rate. Incorporating the ore sorter should enable tin in concentrate production rise to 8.0ktpa, a level we believe will be sustained for at least 10 years. We note that the lift in the average grade should materially improve the earnings outlook for Renison with the project expected to generate Ebitda margins of 35-40%, nearly double the 20% average achieved over the past five years. Fig 55 Renison Bell production outlook (100% basis) Tin production (kt) AISC (US$/lb) Tin Price (US$/lb) FY15 FY FY17e FY18e FY19e FY20e FY21e FY22e FY23e FY24e FY25e FY26e FY27e FY28e 0 24 March

22 Organic growth in tin and nickel Rentails project could boost group tin production by ~5ktpa Wingellina has nickel and cobalt potential Significant material located within the three historic tailings dams In addition to the improvements at Nifty and Renison, MLX has the potential to add further revenue streams organically. The Rentails project could boost group tin production by ~5ktpa by processing previously mined tailings from Renison. A definitive feasibility study is due to be released in the next few months. On our estimates Rentails generates a 22% IRR and we have included a development of the project in our estimates. In the medium to long term MLX has the potential to add nickel and cobalt production through the development of the Central Musgrave Nickel Project. Our development scenario generates an IRR <10% and as a result we have not included the project in our base case forecasts for MLX. We believe pursuing growth through acquisitions will remain a core part of MLX s strategy, although we see limited base metal opportunities in Australia as this point. Rentails development offers near-term growth The Renison Extension project or Rentails is a proposal to process the significant tailings material located within the three historic tailings dams at the mine. Given the long operational history of the Renison Bell tin mine, which has been processing ore since 1968, and comparatively lower metallurgical recoveries MLX has been able to define a significant tin reserve and resource. We note that the current tails grade at Renison has fallen from over 0.5% Sn to below 0.4% Sn, but based on our assumption that MLX will start using an ore sorter we expect the grade of the tail to start to rise back towards 0.45%. As a result we believe that a further 10mt of tailings at similar grades to the current reserve will be added over the remaining life of the project, although we have only included current reserves in our development scenario. Fig 56 Resource base underpins a 10+ year mine life Project Mt Sn (%) (kt) Cu (%) (kt) Reserves % % 49 Resources % % 51 Mining Inventory % % 28 A definitive feasibility study on the project was completed in June 2009 A definitive feasibility study on the project was completed in June 2009 and indicated that 47kt of tin and 18kt of copper could be recovered over a 10-year life at a capital cost of A$213m. The project will focus on tailing dams A and B, which were decommissioned in A dredge is expected to be used to recover the tailings, which will be sent via a slurry pipeline to a nearby process plant. Fig 57 Rentails project assumes stable output Fig 58 Rentails produces high levels of copper 2.50 Tailings recovered (kt) Grade (Sn %) 1.00% 6.0 Tin production (kt) AISC (US$/lb) Copper production (kt) % % 0.40% % % 0 24 March

23 Rentails project is expected to produce higher levels of copper compared to Renison Bell The feasibility study indicated that the preferred processing option is to produce a low grade concentrate using ultra-fine gravity recovery and conventional flotation, with the concentrate fumed using an onsite tin fumer to produce a tin oxide product. We note that as copper recovery has only been a focus in recent years, the Rentails project is expected to produce higher levels of copper compared to Renison Bell. Our development scenario for Rentails assumes a capital cost of $180m, with a two-year construction period and a ten-year operational life. We suspect there is some grade variability within the two main tailings dam, but we have assumed a flat grade profile in our development scenario. AISC for the project is expected to be broadly similar to Renison Bell. Our base case production case for Rentails generates an IRR of 22%. Wingellina development needs refining Central Musgrave Nickel project is located 900km north east of Kalgoorlie The Central Musgrave Nickel project is located 900km north east of Kalgoorlie and 290km west of Ayers Rock and straddles the Western Australian and South Australian border. The project boasts a large laterite nickel resource containing ~2.0mt of nickel and 150kt of cobalt. MLX has owned the project since 2006 and completed a feasibility study in The feasibility study assessed developing a conventional high pressure acid leach (HPAL) project that would produce 40ktpa of nickel and 3.0ktpa of cobalt in a mixed hydroxide product with a mine life of 40 years. The large scale development had a pre-production capital cost of A$2.5bn. Fig 59 Significant reserves at Wingellina Reserves Mt Ni (%) Ni (kt) Co (%) Co (kt) Wingellina reserves % 1,561 7% 123 Resources Mt Ni (%) Ni (kt) Co (%) Co (kt) Wingellina % 1,684 7% 131 Claude Hills % 270 7% 23 Total Resources % 1,953 7% 154 The reserve at Wingellina boasts a higher average grade than the two operating nickel laterite mines The reserve at Wingellina boasts a higher average grade than the two operating nickel laterite mines in Western Australia, Murrin Murrin Glencore (GLEN LN, 3.22, Neutral, TP: 3.40, Alon Olsha) and Ravensthorpe First Quantum Minerals (FM CN, C$13.70, Neutral, TP: C$17.00, Matt Murphy) and also a superior nickel/cobalt ratio. We note that only Clean TeQ Holdings (CLQ AU, A$0.90, Outperform, TP: A$1.50, Hayden Bairstow) Syerston project has a better nickel/cobalt ratio than Wingellina. Fig 60 Wingellina boasts superior grades Fig 61 Nickel/cobalt ratio better than operators 1.60% Ni Eq (Macq) Ni Eq (spot) Ni Eq (US$30/lb) % % % % % % % 7.0 0% Syerston Wingellina Murrin Murrin Ravensthorpe CLQ AU MLX AU GLEN LN FM TSX 5.0 Syerston Wingellina Murrin Murrin Ravensthorpe CLQ AU MLX AU GLEN LN FM TSX Source: Company data, Macquarie Research, March 2017 Source: Company data, Macquarie Research, March March

24 Focus on cobalt zones Focus on producing cobalt in preference to nickel looks possible MLX recently reviewed the Wingellina reserve and has identified a higher grade zone of cobalt containing 0.14% Co. The company did not release the nickel grades within this zone although we believe it could represent a potential lower capex development option for Wingellina, focused on producing cobalt in preference to nickel, similar to Syerston. Fig 62 Higher grade cobalt zone identified Cobalt Zone Cut off (Co) Mt Co (%) Co (kt) Wingellina 0.10% % 41.6 Wingellina 5% % 94.5 We have not included the project in our base case forecasts for MLX We have run a development scenario for Wingellina based on the large scale nickel hydroxide project, assuming a pre-production capital cost of A$2.0bn, below the 2008 feasibility estimate of A$2.5bn. Total site costs are estimated at A$75/t of ore milled, which translates to an AISC of ~US$ /lb after cobalt by-product credits. Our development scenario generates an IRR <10% and as a result we have not included the project in our base case forecasts for MLX. Fig 63 Wingellina development scenario Nickel producted (kt) Cobalt produced (kt) AISC (US$/lb) FY17e FY18e FY19e FY20e FY21e FY22e FY23e FY24e FY25e FY26e FY27e FY28e FY29e FY30e 0 Other assets Brainchip stake worth ~$14m MLX owns two legacy positions in Brainchip Holdings and RNL. We note that the BRN holding is more significant with a current market value of ~$14m. We do not believe either investment is core and expect MLX to dispose of both stakes in due course. Fig 64 MLX s material investments Company Code Price Shares (m) (A$m) Brainchip Holdings BRN RNI NL RNI Closing prices as of 23 March March

25 Company overview Background owns and operates two mines in Australia MLX was founded in July 2004 and listed on the ASX in August 2004 (MLX AU) owns and operates the Nifty underground copper mine in Western Australia and is the operator of the 50/50 Renison joint venture, which owns the Renison Bell underground tin mine and Renison Expansion (Rentails) project. The company also owns the Wingellina nickel/cobalt project in Western Australia. The company was founded in July 2004 and listed on the ASX in August A 50/50 joint venture to re-start the Renison Bell tin mine was signed with Yunnan Tin Group in 2009 and consolidated ownership of Westgold in After restructuring its gold division and undertaking a number of acquisition, MLX spun out Westgold Resources (WGX AU, $2.34, Not Rated) to its shareholders in late 20. Fig 65 MLX core project locations Source: MLX, March 2017 Capital and shareholder structure APAC Resources and Jinchuan longterm shareholders MLX s capital structure is clean with the company having 609.3m ordinary shares and just 7.25m unlisted employee options on issue. The company s shareholder register is dominated by three major holders. APAC Resources and Jinchuan acquired stakes in 2008 of 12% and 15%, respectively, by participating in a major capital raising. APAC participated in a second placement in 2009 lifting its stake to ~28%. Both APAC and Jinchuan have sold down over the past year to current levels. Fig 66 MLX has three major shareholders but an open register Substantial Shareholders Shares (m) % Blackrock APAC Resources Jinchuan Group Peter Cook Top March

26 Board and Management Board of Directors Peter Newton Non-Executive Chairman Peter Newton boasts significant experience in the resources sector, having been involved in stockbroking, investing and as a Director for over 40 years. His career highlights were being Non-Executive Chairman of both Hill 50 and Abelle prior to both companies being acquired by Harmony Gold in 2002 and 2004, respectively. Warren Hallam Managing Director Warren Hallam s background is as a metallurgist and in mineral economics with over 30 years technical and commercial experience in the resources industry. Warren has been with MLX since the company was founded. He was previously a Non-Executive Director of Brainchip Holdings (BRN AU, Not Rated). Simon Heggen Non-Executive Director Simon Heggen holds Economics and Laws degrees from the Australian National University and has around 30 years experience in strategic planning, corporate development, mergers and acquisitions and corporate finance in the resources sector. He is currently a Non- Executive Director of RNI NL (RNI AU, Not Rated). Stephen Robinson Non-Executive Director Stephen Robinson is an experienced mining executive and Rhodes Scholar. He is currently Non-Executive Chairman of Sumatra Copper & Gold (SUM AU, Not Rated) and was previously Director of Business Development & Strategy at Barrick Australia Pacific, Group Manager Planning for Iluka and a Senior Manager in WMC Resources gold division. Yimin Zhang Non-Executive Director Yimin Zhang is the chief representative for Jinchuan Australia and is also an Executive Director of Sino Nickel. He was worked for Jinchuan in various roles since 1981 including time as a Director of Albidon. Yimin Zhang holds a Diploma from the Metallurgical and Architectural Institute of Chung Chan. Senior Management Warren Hallam Managing Director See above Fiona Van Maanen Chief Financial Officer and Company Secretary Fiona Van Maanen is a Certified Practicing Accountant and boasts significant experience in accounting and financial management in the resources industry. Allan King Chief Operations Officer Allan King was previously the General Manager of MLX s Renison Bell Tin Joint Venture. He has over 35 years experience in the mining industry in a number of operational roles and across a range of commodities. The bulk of his experience is within WA having graduated as a Mining Engineer from the WA School of Mines. 24 March

27 Tin was a star performer in 20 Indonesian mine production was down 13% YoY in 20 Tin price outlook Two-handle returns Tin was a star performer in 20 second only to zinc in its recovery rally back above $20,000/t, having spent time below $14,000/t early in 20. Aside from the broader commodities rebound driven by better-than-expected Chinese demand levels, some key reasons behind the recovery for this particular metal include the low visible stock levels on the exchanges and reduced export volumes from key producer Indonesia and lower production in China and Myanmar. However, like most metals, demand has been the most decisive factor, as semiconductor shipments have picked up strongly worldwide in recent months. We estimate that Indonesian mine production was down 13% YoY in 20 to 61kt, after pricerelated mine closures at the start of the year, effective export quotas via government regulation relating to illegal mining and reserves depletion. Exports of metal fell 9% YoY to 63.6kt over the year. However, shipments of ores and concentrates rocketed out of Myanmar, up 94% YT November based on Chinese trade data (metal-contained basis), as both volumes and implied tin content rose into year-end. ITRI cautions, but that the increases are chiefly related to stock releases, and that actual mine output is now struggling as exploitation moves underground. We thus have Myanmar production growth slowing from 2017 onwards. As previously noted, Chinese metal output began to be affected from July by environmental shutdowns enforced by the central government, and the data to October implies no real recovery with volumes just above 14ktpm, which implies stocking of Myanmar concentrates. Fig 67 Back over $20k/t; was it all a bad dream? Fig 68 Backwardation persists with low stocks 24,000 LME tin cash price ($/t) 14,000 12,000 Tin LME stocks (LHS, t) vs cash-3 month price spread (RHS, $/t) ,000 10, ,000 8, ,000 6,000 4, ,000 2, ,000 - Jan 15 Mar 15 May 15 Jul 15 Sep 15 Nov 15 Jan Mar May Jul Sep Nov Jan ,000 Jan-13 Aug-13 Mar-14 Oct-14 May-15 Dec-15 Jul- LME stocks Cash-3 month Source: LME, Macquarie Research, March 2017 Source: LME, Macquarie Research, March 2017 Fig Indo export volumes fell again Indonesian tin surveyed for export (ktpa) Tin checked for export YTD monthly average Fig 70 but inventories at key producers rose Timah + Minsur refined tin inventories (t Sn) 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 Q113 Q313 Q114 Q314 Q115 Q315 Q1 Q3 Source: ITRI, Macquarie Research, March 2017 Source: Company Reports, Macquarie Research, March March

28 3MMA, YoY % change Macquarie Wealth Management Backwardations flaring out in the forward LME curve Macquarie s semiconductor analysts are projecting global sales growth of 9% in 2017 Turning to refined inventory, however, we see a more constrained picture, with metal supply issues meaning that LME, SHFE, and the producer stocks we trace are all down to historically low levels. These supply constraints meant stock moved down to historically low levels. LME stocks are ~4kt, while SHFE stocks have tended to oscillate between 2 and 3 kt in 20. This led to extreme backwardations flaring out in the forward LME curve over the last couple of years, as dominant positions emerged amongst the warrants and squeezed the near dates. Tin is particularly susceptible to overextensions like this due to its lack of liquidity, but we must note that the cash-3 month spread has more lately softened to a $11/t back after steady reverse cancellations, plus some muted new inventory inflow, and lending along the near dates allowed the front of the curve to soften. While these stocks and supply developments are interesting they are not very dynamic, and we therefore conclude that the price rally witnessed was mostly driven by the one factor that did change dramatically: demand. Coming off a 3% YoY contraction in 2015 as consumer goods including electronics slumped, 20 did not initially demonstrate promise. However, as Figure 72 shows, a strong turnaround for semiconductors (50% demand) began in mid-year and has continued into year-end, while tinplate production has been boosted by a strongerthan-anticipated Chinese steel sector. Together accounting for 2/3 of demand, these market sector improvements lead us to estimate +1% growth for 20, and an overall deficit of 600t. Moreover, Macquarie s semiconductor analysts are projecting global sales growth of 9% in 2017 and 3% in 2018 on a continued recovery in the sector and wafer fabrication capacity being added to aggressively. China has been the key growth area (as ever), but other Asia including Japan also looks healthy, and so we have lifted demand growth to 2.3% (from flat) in This pushes the market into deeper deficit from 2017 on of ktpa, allowing us to lift our price expectations to $21,000-23,000/t over the next four years. Fig 71 Myanmar ores and concs exports maintained strong levels in 20, but from destocking Fig 72 Solder alloys (~50% tin consumption) have turned very bullish lately China's tin concentrate imports (kt gross) RoW Myanmar 0 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan Volume basis -10% Source: Customs data, Macquarie Research, March 2017 Source: WSTS, Macquarie Research, March % 10% 5% 0% -5% Global semiconductor shipments Value basis Fig 73 Global tin market balance ( 000 tonnes tin contained) '000t tin contained E 2017F 2018F 2019F 2020F 2021F Tin mine production YoY change 3% 4% -9% 1% 1% 0% 0% - 0% Tin metal production YoY change 2% 7% -6% 1% 2% 1% 0% 0% 0% Tin consumption YoY change 3% 3% -3% 1% 2% 1% 0% 0% 0% Tin m arket balance Reported stocks Stocks (w eeks) Source: ITRI, CRU, WBMS, LME, Macquarie Research, March March

29 Chinese shorts had been turning neutral through 20 Consumer products have notably rebounded since a product destocking Copper price outlook A corner turned Copper abruptly shifted from an ever-decreasing trading range in the year to October to massive volatility in Q4, after bullish signals emanating from LME Week suddenly turned into a buying frenzy. The huge lurch upwards was eventually tempered, with two separate exploratory stabs above $6,000/t being firmly sold, and prices settling in the mid $5,000s/t which is where we find ourselves today. We think the key catalyst was the collective acknowledgement in London of copper having been left behind by the price rises which had been seen in other industrial commodities (oil, iron ore, coal and zinc most notably). Chinese shorts had been turning neutral through 20, and this accelerated in the days after LME Week meanwhile enough shorts were still sitting there with option structures putting them deeper in the red the more the price rallied. As they capitulated one by one, copper broke new ground, and later frightened off sellers as it held through Asia CESCO Week in Shanghai (the week following the rally). Chinese demand strength was a key factor as in all commodities 20 surprised to the upside, and with a political transition year ahead we see little chance of a 2015-style slump in demand. Consumer products have notably rebounded since a product destocking left growth in negative territory earlier in the year, while power-driven consumption remains in positive territory, if slowing due to base effects lately. Fig 74 Copper price makes a move upwards! LME copper cash price ($/t) 10,000 9,000 8,000 7,000 6,000 5,000 4,000 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan Jan 17 LME Copper Cash Fig 75 Demand improvement story holds, with consumer now looking up 50% 40% 30% 20% 10% 0% -10% -20% China grid investment, consumer product output & construction starts YoY % MAs Grid investment, 3mma YoY Refrigerator output, 3mma YoY AC generator output, 3mma YoY AC output, 3mma YoY Construction completions, 5mma YoY -30% Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan- Jul- Source: LME, Macquarie Research, March 2017 Source: NBS, CEIC, Macquarie Research, March 2017 Fig 76 Global copper market balance ( 000 tonnes copper contained) Source: LME, Comex, SHFE, ICSG, CRU, Wood Mackenzie, Macquarie Research, March March

30 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan- Jul- Macquarie Wealth Management Escondida had an extended strike in 1QCY17 Meanwhile, the supply-side lost its invulnerable H1 glow and reverted to the shaky, flaky copper mining sector we all know and love. While new projects Las Bambas and Cerro Verde continued to impress, a number of older assets began to look weaker including Escondida and Grasberg (together ~10% of global output), with the world #1 mine in particular seeing disappointing output in H2 and an extended strike in 1QCY17. Q4 data is yet to be released, but a glance at Chilean government data in October implies that the problems have continued at the desert behemoth. This shift began to tighten the concentrates market in H2 at exactly the wrong moment for the Chinese smelters, who ended up having to settle for almost $5/5c lower TCRC benchmark of $92.5/9.25c with their suppliers. Meanwhile on the metal side, the opposite took place, with sudden LME warehouse inflows in mid-december increasing total inventories by 62% to 345kt in just over a week. This softer refined market complements our expectation of a surplus in Q1, and prices to fall from the current levels to average ~$5,350/t. In the rest of the year we see a tighter balance, and some recovery in prices In the rest of the year we see a tighter balance, and some recovery in prices. We note that more optimistic sentiment from Chinese speculators has continued into 2017 and steady demand in 2017 is likely to feed into this atmosphere beyond Chinese New Year. However, our numbers (mainly slowing demand growth) indicate a softer balance of >300kt of excess output in 2018, which should act to reduce prices to average ~$5,100/t also represents a surplus year, though by a smaller amount, before we expect to see the market tipping into a deep deficit by 2021 on a lack of new production to offset declines, most particularly in Chile. Fig 77 Escondida begins to struggle Fig 78 LME stocks came up quickly in mid-dec 0 Chile and Escondida combined mined copper output monthly (kt) LME copper stocks (kt) Escondida Total Chile (RHS) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan 17 Source: Cochilco, Macquarie Research March 2017 Source: LME, Macquarie Research, March 2017 Fig 79 Falling output at big mining countries begins to take its toll at the end of the decade Fig 80 Price turnaround seen holding, but 2018 surplus to dent prices before the deficit opens later 2000 Copper mine output*, Chile and Peru (kt) 400 Refined copper supply/demand (kt, LHS) vs LME cash price ($/t, RHS) 8, ,000 7,500 7, ,500 6, , f 2019f 2021f Chile Peru China USA Congo DR Australia Indonesia Zambia Mexico F 2019F 2021F Refined Balance New LME Cash Price ($/t) 5,000 4,500 4,000 Source: *before disruption, WM, CRU, ICSG, Macquarie Research, March 2017 Source: LME, CRU, WM, ICSG, Macquarie Research, March March

31 Macquarie Quant View The quant model currently holds a reasonably negative view on. The strongest style exposure is Price Momentum, indicating this stock has had strong medium to long term returns which often persist into the future. The weakest style exposure is Valuations, indicating this stock is over-priced in the market relative to its peers. 1181/1543 Global rank in Materials % of BUY recommendations 50% (2/4) Number of Price Target downgrades 0 Number of Price Target upgrades 1 Fundamentals Attractive Quant Local market rank Global sector rank Displays where the company s ranked based on the fundamental consensus Price Target and Macquarie s Quantitative Alpha model. Two rankings: Local market (Australia & NZ) and Global sector (Materials) Macquarie Alpha Model ranking A list of comparable companies and their Macquarie Alpha model score (higher is better). Factors driving the Alpha Model For the comparable firms this chart shows the key underlying styles and their contribution to the current overall Alpha score. Oz Minerals 2.0 Oz Minerals Sandfire Resources 1.2 Sandfire Resources Evolution Mining OceanaGold Corporation Western Areas Independence Group NL Evolution Mining OceanaGold Corporation Western Areas Independence Group NL % -80% -60% -40% -20% 0% 20% 40% 60% 80% 100% Valuations Growth Profitability Earnings Momentum Price Momentum Quality Macquarie Earnings Sentiment Indicator The Macquarie Sentiment Indicator is an enhanced earnings revisions signal that favours analysts who have more timely and higher conviction revisions. Current score shown below. Drivers of Stock Return Breakdown of 1 year total return (local currency) into returns from dividends, changes in forward earnings estimates and the resulting change in earnings multiple. Oz Minerals Sandfire Resources Evolution Mining OceanaGold Corporation Western Areas Independence Group NL Oz Minerals Sandfire Resources Evolution Mining OceanaGold Corporation Western Areas Independence Group NL % -50% 0% 50% 100% Dividend Return Multiple Return Earnings Outlook 1Yr Total Return What drove this Company in the last 5 years Which factor score has had the greatest correlation with the company s returns over the last 5 years. Price to Sales NTM Volatility 250 Day 250d Volatility Sales to EV NTM Change in Cash FY0 Return on Assets FY1 Sales Revisions 3 Month CPS Revisions 3 Month -37% Negatives Positives -24% -26% -28% 26% 26% 24% 29% -40% -20% 0% 20% 40% How it looks on the Alpha model A more granular view of the underlying style scores that drive the alpha (higher is better) and the percentile rank relative to the sector and market. Alpha Model Score Valuation Growth Profitability Earnings Momentum Price Momentum Quality Capital & Funding Liquidity Risk Technicals & Trading Normalized Score Percentile relative to sector(/1543) Percentile relative to market(/421) Source (all charts): FactSet, Thomson Reuters, and Macquarie Research. For more details on the Macquarie Alpha model or for more customised analysis and screens, please contact the Macquarie Global Quantitative/Custom Products Group (cpg@macquarie.com) 24 March

32 Important disclosures: Recommendation definitions Macquarie - Australia/New Zealand Outperform return >3% in excess of benchmark return Neutral return within 3% of benchmark return Underperform return >3% below benchmark return Benchmark return is determined by long term nominal GDP growth plus 12 month forward market dividend yield Macquarie Asia/Europe Outperform expected return >+10% Neutral expected return from -10% to +10% Underperform expected return <-10% Macquarie South Africa Outperform expected return >+10% Neutral expected return from -10% to +10% Underperform expected return <-10% Macquarie - Canada Outperform return >5% in excess of benchmark return Neutral return within 5% of benchmark return Underperform return >5% below benchmark return Macquarie - USA Outperform (Buy) return >5% in excess of Russell 3000 index return Neutral (Hold) return within 5% of Russell 3000 index return Underperform (Sell) return >5% below Russell 3000 index return Volatility index definition* This is calculated from the volatility of historical price movements. Very high highest risk Stock should be expected to move up or down % in a year investors should be aware this stock is highly speculative. High stock should be expected to move up or down at least 40 60% in a year investors should be aware this stock could be speculative. Medium stock should be expected to move up or down at least 30 40% in a year. Low medium stock should be expected to move up or down at least 25 30% in a year. Low stock should be expected to move up or down at least 15 25% in a year. * Applicable to Asia/Australian/NZ/Canada stocks only Recommendations 12 months Note: Quant recommendations may differ from Fundamental Analyst recommendations Financial definitions All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards). Recommendation proportions For quarter ending 31 December 20 AU/NZ Asia RSA USA CA EUR Outperform 57.53% 50.72% 45.57% 42.28% 60.58% 52.79% (for global coverage by Macquarie, 8.71% of stocks followed are investment banking clients) Neutral 33.90% 33.97% 43.04% 50.11% 37.23% 35.62% (for global coverage by Macquarie, 8.05% of stocks followed are investment banking clients) Underperform 8.56% 15.30% 11.39% 7.61% 2.19% 11.59% (for global coverage by Macquarie, 4.63% of stocks followed are investment banking clients) MLX AU vs Small Ordinaries, & rec history (all figures in AUD currency unless noted) Note: Recommendation timeline if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period. Source: FactSet, Macquarie Research, March month target price methodology MLX AU: A$1.00 based on a 50/50 Blend NPV / 5.0x EV/Ebitda methodology Company-specific disclosures: MLX AU: Macquarie and its affiliates collectively and beneficially own or control 1% or more of any class of Ltd's equity securities. Important disclosure information regarding the subject companies covered in this report is available at Analyst certification: We hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. The Analysts responsible for preparing this report receive compensation from Macquarie that is based upon various factors including Macquarie Group Limited (MGL) total revenues, a portion of which are generated by Macquarie Group s Investment Banking activities. General disclosure: This research has been issued by Macquarie Securities (Australia) Limited ABN , AFSL , a Participant of the ASX and Chi-X Australia Pty Limited. This research is distributed in Australia by Macquarie Wealth Management, a division of Macquarie Equities Limited ABN AFSL ("MEL"), a Participant of the ASX, and in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth s services in New Zealand are provided by MENZ. Macquarie Bank Limited (ABN , AFSL No ) ( MBL ) is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. None of MBL, MGL or MENZ is registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Apart from Macquarie Bank Limited ABN (MBL), any MGL subsidiary noted in this research,, is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia) and that subsidiary s obligations do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of that subsidiary, unless noted otherwise. This research contains general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice, you should consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. This research has been prepared for the use of the clients of the Macquarie Group and must not be copied, either in whole or in part, or distributed to any other person. If you are not the intended recipient, you must not use or disclose this research in any way. If you received it in error, please tell us 24 March