BUY SHARE PRICE CHART NYANZAGA PRODUCTION & COSTS COMPANY DATA & RATIOS. koz - FY18 FY19 FY20 FY21 FY22. Nyanzaga (100%) (koz)

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1 ORECORP LIMITED (ORR) INITIATION: All the right ingredients for success Analyst Phone Date Steuart McIntyre August 2016 We say Price Target Strategic Target BUY OreCorp is a gold developer through its flagship Nyanzaga project in Tanzania and is characterised by its large scale, above average grade deposit 3.5g/t) and its high quality team. OreCorp may earn up to 51% of Nyanzaga, and longer term we believe it will probably move to 100%, given the project is likely to be non-core to its much larger JV partner, Acacia Mining. We also see significant regional exploration potential which we believe could further boost the already robust project economics. SHARE PRICE CHART NYANZAGA PRODUCTION & COSTS COMPANY DATA & RATIOS $0.80 $0.60 $0.40 $0.20 $0.00 Aug15 Feb16 Aug16 ORR ASX 200 (relative) ASX Gold Index (relative) koz FY18 FY19 FY20 FY21 FY22 Nyanzaga (100%) (koz) US$/oz All-in Sustaining Cost (US$/oz) 1,250 1,000 - Enterprise value $83m Diluted market cap* $100m Diluted shares* 182m Free float 100% 12 month price range $ GICS sector Management & associates hold 26% *Diluted for 8.5m options IMPLIED RETURN Materials Implied all-in return 64% THE RIGHT INGREDIENTS FOR SUCCESS In our view OreCorp has all the right ingredients for success: A large scale gold deposit at above average grade In a prolific gold district, with strong exploration potential Based in one of the best jurisdictions in Africa (Tanzania) And most importantly, run by a high calibre team with strong African development experience. BLUE OCEAN EQUITIES PTY. LTD. L29, 88 PHILLIP ST S YDNEY NSW 2000 AFSL ABN SCOPING STUDY RELEASED THIS MONTH The Nyanzaga Scoping Study outlined a 4mtpa project producing 220ktpa over the first 5 years, at a life of mine All-in Sustaining Cost of US$798/oz. Initial capex is expected to be US$248m +/-35%. We expect the company to complete a PFS in Q1 CY17 and a DFS by end CY17 with construction to commence shortly thereafter. VALUATION Using the Scoping Study numbers, we estimate an NPV for 100% of Nyanzaga of US$277m using a US$1,400/oz gold price and 8% nominal discount rate. Our 90c Price Target assumes OreCorp moves to 51% of Nyanzaga initially and includes a 20% discount to NPV for development risk. Our $1.40 Strategic Target assumes OreCorp moves to 100% of Nyanzaga longer term, post completion of the DFS. 1

2 CONTENTS INVESTMENT SNAPSHOT 3 Macro: Why Gold? 3 Stock Specific: Why OreCorp? 3 COMPANY OVERVIEW 4 THE NYANZAGA GOLD PROJECT, TANZANIA 5 Scoping Study 5 Farm-In Terms 6 Farm-In Flowsheet 7 Resource 8 Mining 9 Processing 10 Infrastructure 11 Permitting 11 Breakdown of Capex & Opex 12 Outstanding Ounces Per Vertical Metre & Upside at Depth 13 Development Timetable 14 Regional Exploration An Important Part of the Story 14 AKJOUJT SOUTH NI-CU PROJECT, MAURITANIA 15 TANZANIA: A PREFERRED JURISDICTION IN AFRICA 16 INVESTMENT PROPOSITION 17 Valuation Assumptions 17 Valuation Sensitivity 18 Funding Assumptions 18 Peer Comparison 19 Price Target & Rating 20 Strategic Target 20 Near-term Catalysts 20 Key Risks 20 Model Summary: Financials & Valuation (A$m) 21 Model Summary: Operational Inputs & Free Cash Flow (US$m) 22 BOARD & MANAGEMENT 23 2

3 INVESTMENT SNAPSHOT MACRO: WHY GOLD? We believe gold is in the early stages of a new bull market, driven by: Increased geopolitical uncertainty and weak global growth rowth: On the back of the UK s decision to leave the EU in June, we continue to see an elevated probability of further macro shocks in Europe. In our view, the potential for a Donald Trump presidency also represents a Black Swan possibility. Global growth continues to be relatively weak compared to historic levels and with interest rates at historic lows, most Central Banks have relatively limited options available to stimulate growth. Further central bank stimulus timulus: If the Fed confirms a weak outlook for global growth, it has relatively limited options to stimulate growth. It will almost certainly need to slow the rate hiking cycle, but may also need to consider further stimulus or quantitative easing. In layman s terms, this means increasing the money supply. Low real i nterest rates l ikely to persist ersist: We see an elevated probably that low real interest rates are more likely to persist a clear positive for gold prices and gold equities. STOCK SPECIFIC: WHY ORECORP? In our view OreCorp has all the right ingredients for success: A large scale gold deposit at above average grade - Nyanzaga has a resource of 3.5g/t importantly in a single deposit Located i n a prolific gold district with strong exploration potential - The Lake Victoria Goldfields in Tanzania is an Archaean Greenstone belt host to a number of very large gold deposits. Nyanzaga is located: ~40km from the 17.3moz Bulyanhulu gold mine (Acacia) ~60km from the 21.3moz Geita gold mine (AngloGold Ashanti) - We see strong potential from the Nyanzaga regional exploration targets (<10km), which have potential to sweeten the mill feed and boost project economics: Bululu: 9.1g/t from 27m, 2.2g/t from 21m Kasubuya: 5.1g/t from 8m, 9.2g/t from 9m, 3.2g/t from surface, 6.0g/t from 22m, 5.8g/t from 25m Ifugandi: 22m@3.4g/t from 27m, 8m@3.9g/t from 30m, 6m@2.7g/t from 32m Based in one of the best jurisdictions in Africa (Tanzania) - According to the Belgian export credit agency, Tanzania is one of the lowest risk countries in Africa and carries comparable sovereign risk to Zambia (see p16) A high calibre team with strong African development experience (full bios p23) - Craig Williams (Chairman) co-founded Equinox which developed the Lumwana copper project in Zambia. Equinox was sold to Barrick Gold for ~$7bn. - Matthew Yates (CEO & MD) formerly the joint MD of Mantra which owned a number of African uranium projects. Mantra was ultimately sold to Rosatom Corp for ~$1bn. 3

4 COMPANY OVERVIEW OreCorp Limited is a ~A$100m market cap gold developer through its flagship Nyanzaga gold project in northwest Tanzania. Nyanzaga is located ~60km southwest of Mwanza and 40km northeast of Acacia s 17.3moz Bulyanhulu gold mine. OreCorp also owns the Akjoujt South nickelcopper exploration project in Mauritania. OreCorp has a JV on Nyanzaga with Acacia Mining Plc (formerly African Barrick) and may earn up to 51% of the project as detailed in the farm-in terms on p6 of this report. Acacia is a ~US$3.2bn gold producer listed on the LSE (ASA) and in our view it is highly likely that a 49% share in a Nyanzaga would be non-core i.e. if OreCorp successfully moves to 51% of Nyanzaga we believe it is highly likely the remaining 49% will be available for sale. A Scoping Study for Nyanzaga was completed on 10 August 2016 and the company is now focused on completing a PFS in Q1 CY17. Nyanzaga Location in northwest Tanzania The Lake Victoria Goldfields in Tanzania is a major gold producing district. Historic gold production from the region is ~20moz There are also >45moz of gold resources within 100km of the Nyanzaga project. OreCorp was listed on the ASX in August 2011 as Silver Stone Resources (SSZ) and renamed OreCorp Limited (ORR) in January At the end of June, OreCorp had ~A$ A$ m in cash and no debt. 4

5 THE NYANZAGA GOLD PROJECT, TANZANIA SCOPING STUDY A Scoping Study was completed for Nyanzaga on 10 August 2016 and was managed by Lycopodium in Perth with a team of well recognised industry experts. The company s Scoping Study release provided much more detail than many ASX listed companies do for a Bankable Feasibility Study, and thus in our view the company s assumptions are considerably more transparent than many of their peers. The key outcomes are outlined below: Nyanzaga Scoping Study Capex US$ m +/-35% Open pit mining Open pit for 5 years Strip ratio 2.5:1 life of pit. Ranges from 3:1 to 1.5:1 Underground mining Underground commencing from year 4 Initial mine life 13 years Plant size 4mtpa Head grade 1.9g/t average life of mine, 3.7g/t from UG Recovery 85% Production 220kozpa first 5 years, 182kozpa life of mine AISC US$798/oz life of mine AIC (incl UG development) US$874/oz life of mine The chart below provides a useful overview of the production and AISC profile of Nyanzaga: Nyanzaga Gold Production and AISC The Scoping Study did not include an NPV or an IRR, however, using the metrics above and a US$1,400/oz gold price, we have estimated the robust financial outcomes below: Robust Financial Outcomes Gold Price US$1,400/oz NPV (8% nominal, 100% basis) US$277m Post Tax IRR 25% Source: Blue Ocean estimates 5

6 FARM-IN TERMS OreCorp is farming into the Nyanzaga project and responsible for management until completion of the DFS (and potentially thereafter). OreCorp may earn up to 51% by: Paying US$1m (paid October 2015) Sole funding a DFS and regional exploration up to US$14m to earn a 25% interest On completion of DFS: o If NPV is <US$200m, or Acacia elects not to retain its participating interest, then OreCorp may elect to increase to 51% by making staged payments: US$3m on election US$2m on commencement of construction US$10m in the form of a 2% capped net smelter royalty o If NPV is >US$200m, Acacia may resume management and retain a 75% interest by paying OreCorp a multiple of expenditure (3x to +6x, depending on NPV, based on the table below) Applicable multiple paid to OreCorp if Acacia elects to retain 75% release 22 September 2015 To simplify the farm in terms for Nyanzaga, we have put together an illustrative example on the next page. 6

7 FARM-IN FLOWSHEET While the released farm in terms for Nyanzaga do not specifically stipulate a gold price or a discount rate for the calculation of NPV, in the illustrative example below, using the Scoping Study figures we assume: a gold price of US$1,400/oz a nominal discount rate of 8% our estimated NPV of US$277m OreCorp pays initial US$1m (paid) and sole funds US$14m on DFS & exploration to earn initial 25% DFS NPV <US$200m OreCorp pays staged US$15m to move to 51% DFS NPV >US$200m & Acacia elects not to retain OreCorp pays staged US$15m to move to 51% DFS NPV >US$200m but Acacia elects to retain 75% Acacia pays OreCorp a multiple of US$15m based on NPV Does not apply as our NPV is >US$200m The likely scenario in our view 51% of US$277m less staged US$15m is US$128m or ~A$168m* The downside scenario: 25% of US$277m plus 3.5xUS$15m is US$119m or ~A$157m* If OreCorp successfully moves to 51%, we believe the remaining 49% will be non-core for Acacia and is highly likely to be available for sale. i.e. We see a good chance OreCorp moves to 100% of Nyanzaga *Note: Based on A$/US$ of Source: Blue Ocean estimates Interestingly, while the 51% case yields the higher valuation in A$m terms, in the 25% case the Acacia payment is sufficiently large to remove the need for OreCorp to raise further equity to fund its share of initial capex. i.e. Somewhat counterintuitively the 25% case actually leads to a higher valuation per share. Under this downside scenario on our gold price and other assumptions our Price Target would actually be a little higher closer to $1.00. Where this analysis falls down, is that it overlooks the fact that at 51%, OreCorp is likely to move to 100% of the project, and in doing so would increase its market cap, liquidity and relevance to investors. Given the high calibre team in place, under this scenario we believe it is also likely OreCorp would also begin to trade at a premium to NPV. 7

8 RESOURCE The Scoping Study identified the opportunity to incorporate lower grade mineralisation, represented by the halo of low grade mineralisation in the picture below. This change in approach resulted in a 19% increase in the resource to 3.3moz, an increase of ~566koz. Nyanzaga Resource with conceptual open pit The Nyanzaga underground resource consists of a series of very large panels of mineralisation which are likely to be amenable to bulk underground mining techniques. There are 7 high grade zones with impressive true widths of up to 20m. The new mineral resource estimate for Nyanzaga was provided in the Scoping Study release and is set out below: The Nyanzaga resource is well understood with 448 holes within the resource and 83% in M+I This resource is reported at a 1.5g/t gold cut-off grade. At a 2g/t cut-off the resource is 4.1g/t At a 1g/t cut-off the resource is 2.65g/t 8

9 MINING The Scoping Study assumes contract mining for both the open pit and underground mines. Open pit: Runs for 5 years at elevated mining rates. We estimate material movements of up to ~35-40mtpa in years 2 & 4, based on ore mined of 9.6mt and 12mt respectively and an average life of mine strip of 2.5:1 (ranging from 3:1 to 1.5:1 over the life of the open pit) o o o Conventional drill, blast, truck and shovel operation (250t excavators + 136t trucks) Direct feeding ore to the mill at an average feed grade of 1.8g/t for 5 years Stockpiling low grade ore for processing later. We estimate the average grade of this stockpiled ore at 0.9g/t over the life of mine. Stockpiled ore represents >70% of the mill feed in years Underground mine: The primary mining method will be retreat sub level open stoping with paste fill with panels up to 75m high (made up of 3 sub levels spaced 25m apart) o o Development of the underground mine begins in year 3, with a portal at 160m below the crest of the open pit. Underground mining costs are estimated at ~US$52/t. The first underground ore is processed in year 4, ramping up to 1.1mtpa of underground ore feed at an average LOM grade of 3.7g/t as per the graph below Ore Movements Life L of Mine An open pit mine followed by an Underground mine from year 4 9

10 PROCESSING The planned processing flowsheet is a conventional crush, grind, gravity, CIL circuit as set out below. The grinding circuit will include a SAG mill and pebble crusher and will produce a very standard grind size of 80% passing 106 micron. It is pleasing to see a pebble crusher included at the early stage level of study we have seen a number of mines exclude this important component in the initial capex, only for it to be added shortly after commissioning in the form of additional capex to optimise processing performance. Conceptual Flow Sheet Mill Feed by Ore Source and Material Type 1 0

11 INFRASTRUCTURE In this section we briefly discuss the key infrastructure elements of Nyanzaga. It is worth noting that additional definition will be provided in the PFS, which is due for completion in Q1 CY17. Power: Total project power is estimated at 25MW excluding the UG which is expected to draw a further 3-4MW from year 4 for ventilation and pumping. The mine will be connected to grid power via the construction of 35km transmission line using Tanesco (a state utility) which will provide power to the project at a very competitive supply cost of US12c/kWhr. Water: The company plans to use water from Lake Victoria for its processing needs. The lake is located 7km east of Nyanzaga. The nearby 17.3moz Bulyanhulu mine (Acacia) uses water from Lake Victoria and the company does not expect water permits to be an issue. Tailings: The budget for tailings is US$16m plus an additional US$4m p.a. over the life of mine which is included in the US$7m p.a. in above ground sustaining capital. The company is exploring the option of using tailings as a suitable paste fill. Access: Site access is good with a well-established regional sealed road network. The initial capital estimate includes provision for construction of an all-weather access road. Labour: Employees will be predominately sourced from the local community and elsewhere within Tanzania, which has two decades of mining experience. The OreCorp team has highlighted the importance of strong community engagement during the other projects they have developed in Africa, and plans to replicate this approach at Nyanzaga. OreCorp has indicated the local community at Nyanzaga has been very supportive to date. PERMITTING Permitting in Tanzania is relatively straight forward compared to other jurisdictions and at this stage we don t expect permitting to become a critical path item for the project. Environmental and Social baseline studies have commenced and the JV recently registered an ESIA application with the relevant authorities in Tanzania. This application is a precursor to applying for a special Mining Licence (SML) to cover the project area which the company expects to lodge during CY17. An Environmental Certificate is also required as a prerequisite to the grant of the SML. 1 1

12 BREAKDOWN OF CAPEX & OPEX The tables below provide a breakdown of the capex and opex for Nyanzaga, to an accuracy of +/- 35%. The initial capex estimate of US$248m includes 21% contingency or US$43m. The only capital item which looks a little low to us is US$65m for a 4mtpa process plant, although there are significant costs included in other categories like Infrastructure, Management costs and Owners costs which many companies would probably include in the Plant cost. In addition, there is significant buffer in the US$43m contingency figure, thus holistically we think the capital estimate appears comparable to other projects. This assessment is further supported by the capital intensity compared to other projects on p19 of this report. Nyanzaga Initial Capex The opex figures in the company s Scoping Study also look defensible to us. The assumed open pit mining cost of US$3.40/t is comparable to other projects of this scale and in our view should be achievable, and if anything these costs could even be a little high based on prevailing diesel prices. Nyanzaga Life of Mine Opex 1 2

13 OUTSTANDING OUNCES PER VERTICAL METRE & UPSIDE AT DEPTH One of the most notable features of the Nyanzaga deposit, is its ounces per vertical metre, shown below. Many of the WA-based underground gold miners make good margins out of mines which are only 1,500-2,000 ounces per vertical metre, compared to Nyanzaga which is much higher with an average of 4,200 ounces per vertical metre. The reason this is important for an underground mine is it means the capital cost of the decline is spread over more ounces of production in essence this means you get more revenue per unit capital outlay which is clearly an important driver of return on capital. The open pit will be mined to a depth of 340m The current resource extends to a depth of 800m Upside potential at d epth Interestingly, the ounces per metre only falls away at depth due to lack of drilling. The company believes the mineralisation is likely to extend at depth. The nearby 17.3moz Bulyanhulu mine is only ~40km from Nyanzaga, and is mining at depths ~1,500m below surface and has a resource down to over 2,000m below surface. Thus, longer term, we see upside potential at depth for Nyanzaga, which could extend mine life and further improve project economics. 1 3

14 DEVELOPMENT TIMETABLE Our forecasts assume the following development timetable for Nyanzaga: PFS complete in Q1 CY17 DFS complete by end CY17 Finance in place by end Q2 CY18 (both debt and equity) o there is potentially some buffer in this 6-month period, although in our experience documenting project finance loan agreements can take up to ~6 months from completion of final studies 18 month construction period from Q3 CY18 to end CY19 First Production in Q1 CY20 REGIONAL EXPLORATION AN IMPORTANT PART OF THE STORY In our view the regional exploration looks very promising and has potential to add significant value near term. The JV holds 27 licences and applications covering 271km 2. Regional Exploration Targets within 10km of Nyanzaga Promising historic hits Bululu: 9.1g/t from 27m 2.2g/t from 21m Kasubuya: 5.1g/t from 8m 9.2g/t from 9m 3.2g/t from surface 6.0g/t from 22m 5.8g/t from 25m Ifugandi: 3.4g/t from 27m 3.9g/t from 30m Potential to add significant value Given lower grade stockpiled ore (average grade ~0.9g/t) is expected to make up >70% of the mill feed for the second half of the mine life, there is potential for a significant improvement in project economics with regional exploration success. To i llustrate: Replacing 2.9mt of 0.9g/t ore with 2g/t ore in year 7*:. *Note: We assume same US$3.40/t mining costs and 2.5:1 strip. 2g/t would be a regional discovery of ~185koz - increases production by ~90koz - reduces AISC by ~US$100/oz - increases FCF by ~US$20m 1 4

15 ORECORP LIMITED (ORR) AKJOUJT SOUTH NI-CU PROJECT, MAURITANIA OreCorp also has some very interesting exploration ground in Mauritania and the company believes it could be on the cusp of a significant greenfields discovery. The company s maiden drill program recently intersected nickel-copper mineralisation over broad widths and a meaningful strike length of ~1km. N icke l- co pper m ine ra lisa t ion in te r sect e d ove r a 1km s t r ike len gt h a ve r y e nc ou ra g in g re su lt for th e fir s t ro un d o f dr illin g. M ine ra lisat ion o ccu r s a s a s e r ie s o f s u b- pa ra lle l g o s sa n /s u lph ide z on es in div idu a lly u p t o 3 5 0m in s t r ike len gt h F o llow u p w ork is un derw ay. S o u rce: C om pa ny T he c om pa ny in it ia lly e nc ou nte re d an oma lism du r ing t ren ch in g M ine ra lise d w idt h s o f u p to 1 6 0m int er se cte d in a n a no ma ly w it h a st r ike len gt h o f ove r 1. 6km T he c om pa ny ha s a ls o ide nt ifie d tw o s ig n ifica nt g r o un d m ag ne t ic a n oma lie s ( M 1 & M2 ) w h ic h it ex pect s t o fo llow u p s o on. S o u rce: C om pa ny 15

16 TANZANIA: A PREFERRED JURISDICTION IN AFRICA Tanzania is a stable east-african country which achieved independence in It is a presidential constitutional republic, and has held democratic multi-party elections since The most recent election was held in October Tanzania has a population of 52 million (2014) and is one of the poorest countries in the world with a GDP in 2014 of US$44bn. Tanzania reformed its mining policy in 1998 and has attracted significant capital investment and is the 3rd largest gold producing country in Africa. SOVEREIGN RISK The pictures below show a comparison of country risk according to Delcredere Ducroire, the world s second largest credit insurer. As Belgium s public credit insurer, it provides cover for companies and banks against political and commercial risks relating to international transactions. According to Delcredere Ducroire: Tanzania is of comparable risk to Zambia on most measures, and is one of the more favourable jurisdictions in Africa Mauritania carries relatively higher political and transfer risk than both Zambia and Tanzania Comparing Sovereign Risk in Africa Source: Delcredere Ducroire 1 6

17 INVESTMENT PROPOSITION This section provides an in-depth look at our valuation assumptions for OreCorp. VALUATION ASSUMPTIONS The table below summarises our key valuation assumptions based on the Nyanzaga Scoping Study. Bottom line, we endorse the company s Scoping Study assumptions. Project Metric Scoping Study (100% basis) Commentary Initial Capex US$248m +/-35%, includes US$43m contingency Plant size Average head grade 4mtpa 1.9g/t 3.7g/t from underground (post 10% dilution) 1.8g/t from open pit direct feed 0.9g/t from stockpile feed (BOEQ estimate) Recoveries 85% We see scope for improvement with further met testing. Testwork suggests: 92% recovery from oxides and 86% from sulphides Average gold production 182kozpa 220kozpa for the first 5 years Average Operating Costs US$761/oz excludes sustaining capex All-in Sustaining Costs All-in Cost US$804/oz US$880/oz includes surface sustaining capex of US$7.7mpa (including US$4m p.a. for tailings lifts) but excludes UG development capex US$6/oz higher than the Scoping Study due to higher royalties at higher gold prices Includes all sustaining capex including UG development capex of US$18m in year 3 and US$16/t in UG development capex thereafter Royalties 4.3% 4% Govt royalties + 0.3% local Govt levy Mine Life 13 years IRR Post Tax 25% including 5% Govt free carry Discount Rate 8% 8% nominal, 6% real NPV Post Tax US$277m including 5% Govt free carry data, Blue Ocean Equities Our valuation of OreCorp is predominately based on a DCF for Nyanzaga using a US$1,400/oz gold price and a nominal discount rate of 8%. Our base case assumes Orecorp moves to 51% of Nyanzaga post completion of the DFS, which is due by end CY

18 VALUATION SENSITIVITY Based on the valuation assumptions outlined on the previous page, our valuation for 100% of Nyanzaga is US$277m at a gold price of US$1,400/oz and a nominal discount rate of 8%. The sensitivity table below provides our estimate of NPV for 100% of Nyanzaga at a range of gold prices and discount rates: NPV (US$m, 100%) Gold Price (US$/oz) 1,200 1,300 1,400 1,500 1,600 Discount 6% Rate 8% (nominal) 10% % Source: Blue Ocean estimates The sensitivity table below provides our estimate of Post Tax IRR for 100% of Nyanzaga at a range of gold prices. In our view this analysis demonstrates the economics for Nyanzaga are very robust in the current gold price environment. Post Tax IRR Gold Price (US$/oz) (100%) 1,200 1,300 1,400 1,500 1,600 12% 19% 25% 31% 36% Source: Blue Ocean estimates FUNDING ASSUMPTIONS We assume the company develops Nyanzaga using traditional project finance with 60% debt and 40% equity once the DFS is completed in Dec CY17. Funding Uses US$m Funding Sources US$m Initial capex (100%) 248 Debt 60% 168 Working capital 32 Equity 40% 112 Total 280 Total 280, Blue Ocean Equities Regardless of the ownership structure for Nyanzaga, it is likely the project debt would be arranged with the JV rather than OreCorp and Acacia separately. Assuming OreCorp moves to 51% of Nyanzaga, based on our assumed debt/equity split, OreCorp would need to raise its share of equity to fund development, being 51% of US$112m, or ~US$57m. It is worth noting OreCorp is currently well capitalised with A$17.3m in cash. 1 8

19 PEER COMPARISON The first chart below highlights that Nyanzaga is a significant project in terms of grade and scale compared to peers. The second chart illustrates the project also has a competitive capital intensity compared to other gold projects in Africa. A standout project on grade and scale compared to peers, Fivemark Partners Competitive Capital Intensity (based on initial capex / oz of production) 3,000 Capital intensity (US$/oz annual production) 2,500 2,000 1,500 1, Haile (OGC.ASX) Black River Kalana (AVK.TSX) Amulsar (LYD.TSX) Moose River (ATV.TSX) Yaoure (PRU.ASX) Wa Gold (AZX.ASX) Coffee (GG.NYSE) Victoria (VIT.TSX) Obotan (AKG.ASX) Natougou (SMF.TSX) Volta Grande (BSX.TSX) Fekola (BTO.ASX) Sissingue (PRU.ASX) Nyanzaga (ORR.ASX) Okvau (EMR.ASX) Gruyere (GOR.ASX) Mako (TORO) Banfora (GRY.ASX) Yanfolilia (HUM.LON) Dalgaranga (GCY.ASX), Fivemark Partners 1 9

20 PRICE TARGET & RATING Our 90c Price Target is for OreCorp based on: An NPV for Nyanzaga using US$1,400/oz gold and an 8% nominal discount rate A 20% discount to NAV for the development risks ahead We rate OreCorp a high conviction Buy and our 90c Price Target represents an implied return of >60%. STRATEGIC TARGET We derive our longer-term $1.40 Strategic Target for OreCorp based on: Removing the 20% discount applied for development risk Assuming the company moves to 100% of Nyanzaga over time, which we believe is likely sometime after the completion of the DFS at the end of CY17. Our analysis assumes the company s acquisition of the remaining 49% of Nyanzaga is neither NAV accretive or dilutive. Assuming the company begins to trade on a 20-30% premium with NAV, in line with comparable peers. In our view this is defensible given the healthy margins and projected return on capital as well as the high quality management team. Our $1.40 Strategic Target represents an implied return of >150%. It is important to note that our Strategic Target does not account for higher gold prices, which we believe is a very real possibility. NEAR-TERM CATALYSTS There are a number of modest near-term catalysts for OreCorp including: Regional exploration at Nyanzaga due in the coming months Exploration in Mauritania due in the coming months Nyanzaga resource update due by end CY16 Nyanzaga PFS in Q1 CY17 Nyanzaga DFS by end Dec CY17 KEY RISKS OreCorp is exposed to all the normal risks associated with developing and operating mining projects, including funding and construction risk. Assuming the company makes the transition into production, the company s revenues will be derived from the sale of gold. Fluctuations in the gold price as well as the Australian dollar could impact the company s reported cash flow (in A$), profitability and share price. As OreCorp s Nyanzaga gold project is based in Tanzania, an investment in OreCorp also carries Tanzanian sovereign risk. 2 0

21 MODEL SUMMARY: FINANCIALS & VALUATION (A$M) Stock Details Enterprise Value $83m Recommendation: BUY Diluted MCap $100m Target $0.90 Share Price $0.55 Strategic Target (ST) $1.40 Diluted Shares 182m NAV $ Week High $0.74 Implied Return to ST 155% Free Float 100% Implied Return 64% 52 Week Low $0.05 Avg Daily Value $0.1m Macro Assumptions FY17E FY18E FY19E FY20E FY21E Ratio Analysis FY17E FY18E FY19E FY20E FY21E Gold Price (US$/oz) 1,400 1,400 1,400 1,400 1,400 Diluted Shares m Exchange Rate (A$/US$) EPS - Diluted Ac (3.5) (4.3) (1.1) P/E x n.m. n.m. n.m. 10.1x 5.4x Profit & Loss (A$m) FY17E FY18E FY19E FY20E FY20E CFPS - Diluted Ac (0.9) (0.8) (0.6) Revenue P/CF x n.m. n.m. n.m. 6.0x 3.2x Operating Costs (65) (141) FCF - Diluted Ac (1.1) (0.6) (37.1) (9.3) 17.8 Operating Profit P/FCF x n.m. n.m. n.m. n.m. 3.1x Corporate & Other (2) (2) (2) (3) (4) Exploration Expense (4) (8) (1) (3) (4) Dividends Ac EBITDA (6) (10) (3) Dividend yield % D&A (0) (0) (0) (8) (17) Payout Ratio % EBIT (7) (10) (4) Franking % Net Interest Expense (6) (8) Pre-Tax Profit (6) (10) (4) Enterprise Value A$m Tax Expense (9) (15) EV/EBITDA x n.m. n.m. (39.7x) 4.2x 1.7x Minorities (5% Govt) (1) (2) ROE % (46%) (9%) (4%) 15% 22% Underlying Profit (6) (10) (4) ROA % (45%) (9%) (2%) 8% 16% Signficant Items (post tax) Reported Profit (6) (10) (4) Net Debt or (Cash) A$m (7) (86) Gearing (ND/(ND+E)) % n.m. (586%) 26% 39% 17% Cash Flow (A$m) FY17E FY18E FY19E FY20E FY21E Gearing (ND/E) % n.m. (85%) 35% 63% 21% Operating Cashflow (2) (2) (2) Tax (9) (15) Gold Reserves & Resources Net Interest (6) (8) Resource mt g/t moz Net Operating Cash Flow (2) (2) (2) Nyanzaga Measured Exploration (9) (15) (3) (5) (7) Indicated Capex - - (119) (66) (6) Inferred Acquisitions / Disposals M+I+I Other Net Investing Cash Flow (9) (15) (122) (71) (13) Reserve mt g/t moz Equity Issue Nyanzaga Proved Borrowing / Repayments (19) (38) Probable Dividends P+P Other Net Financing Cash Flow (18) (38) Earnings Sensitivity FY20E FY21E FY20E FY21E Change in Cash Position (11) 79 (7) (59) 5 A$m A$m % % FX Adjustments Gold Price US$/oz +10% % 42% Cash Balance FX Translation A$/US$ -10% % 12% Balance Sheet (A$m) FY17E FY18E FY19E FY20E FY21E Valuation Discount Stake A$m A$/sh Cash Nyanzaga - 51% Other Current Assets PP&E 0 (0) Nyanzaga (risk-adjusted) 20% 51% Exploration & Development Nyanzaga farm-in payments (33) (0.18) Other Non Current Assets Exploration Total Assets Corporate & Other (37) (0.21) Debt Debt - - Other Liabilities Cash Net Assets Risk adjusted NAV data, Blue Ocean Equities 2 1

22 MODEL SUMMARY: OPERATIONAL INPUTS & FREE CASH FLOW (US$M) Macro Assumptions FY18E FY19E FY20E FY21E FY22E Gold Price US$/oz 1,400 1,400 1,400 1,400 1,400 Australia Dollar A$/US$ Operational Summary FY18E FY19E FY20E FY21E FY22E FCF Contribution US$m FY18E FY19E FY20E FY21E FY22E Nyanzaga (100% basis) Nyanzaga (based on OreCorp moving to 51%) Ore Milled mt Head Grade g/t Recovery % % 85% 85% Gold Produced koz Revenue US$m Mining Costs US$/oz Processing Costs US$/oz G&A US$/oz C1 Cash Costs US$/oz Royalties US$/oz Operating Cost US$/oz Operating Costs US$m Sustaining Capex US$/oz Sustaining Capex US$m All-in Sustaining Cost US$/oz All-in Sustaining Cost US$m UG Development US$/oz UG Development US$m All-in Cost US$/oz All-in Cost US$m % AIC Margin % % 35% 48% All-in Margin Initial Capex Farm-in Payments Corporate US$m FY18E FY19E FY20E FY21E FY22E Cash Tax Other Items FCF pre Debt Service (12) (88) (25) Net Interest (0) Debt Drawdown / (Repayment) - 81 (13) (27) (27) FCF post Debt Service (12) (7) (42) 4 14 New Equity/Dividends US$m FY17E FY18E FY20E FY21E FY22E Proceeds from Shares/Options Dividends Paid Change in Cash 57 (5) (41) 4 14 Cash Balance data, Blue Ocean Equities 2 2

23 BOARD & MANAGEMENT Craig Williams,, Chairman: Mr Williams is a geologist with over 35 years experience in mineral exploration and mine development. He was the President and CEO of Equinox Minerals Limited, which he co-founded in He was instrumental in the financing and development of the major Lumwana Copper mine in Zambia which resulted in Equinox being one of the world s top 20 copper producers. Following the ramp up of Lumwana, Equinox embarked on an acquisition program that resulted in the takeover of the Citadel Resource Group for $1.2 billion, targeting development of the Jabal Sayid Mine in Saudi Arabia. Equinox was taken over in mid-2011 by Barrick Gold Corporation for $7 billion, bringing to an end a challenging and exciting 18 year history at Equinox. Matthew Yates, CEO & MD: Mr Yates is a geologist with over 20 years industry experience, covering most facets of exploration from generative work to project development. Most recently, he was the Joint MD of Mantra Resources Limited and was instrumental in the acquisition of a number of uranium projects, including Mkuju River (Tanzania), Kariba (Zambia) and Mavuzi (Mozambique). He has worked in Australia and southern, east and west Africa, Central Asia and the Gulf Region. Mr Yates has an applied technical background and has held senior positions for over fifteen years, including resident Exploration Manager in Tanzania for Tanganyika Gold Limited. Alastair Morrison, Non-Executive Director: Mr Morrison is a geologist with more than 20 years experience in mineral exploration and investment. From he worked in Tanzania for East African Gold Mines Limited at the North Mara Gold Project in Tanzania. He was responsible for the management of exploration, overseeing the delineation of more than 5 million ounces of resources, including the discovery of the high-grade Gokona gold deposit. In later years, he had additional responsibilities for all in-country development activities, through feasibility and permitting until the commencement of construction. Since 2004, he has worked as an investment analyst for a private, resource-oriented investment fund evaluating and investing in mining projects around the world. Michael Klessens, Non-Executive Director: Mr Klessens is a CPA with over 22 years practical financial and management experience, particularly within the resources industry. This experience has involved all areas of corporate and treasury management, project financing, capital raisings, mergers and acquisitions, dual listings, feasibility studies and establishment of systems and procedures for new mining operations. From , Mr Klessens was CFO of Equinox Minerals Limited. Robert Rigo, Non-Executive Director: An engineer with over 35 years' experience, Mr Rigo has previously held a number of executive and senior management positions with publicly listed mining companies. He was Vice President - Project Development at Equinox Minerals Limited (Equinox), where he managed the feasibility study, related technical studies and engineering design and construction contracts for the Lumwana Copper Mine in Zambia. Amongst Mr Rigo's earlier job roles, he was the Mill Manager at Boddington Gold Mine, at the time Australia's largest gold mine. He then became General Manager - Technical Services for Newcrest Mining Ltd, Australia's major gold producer. His particular expertise lies in the management of mining operations, feasibility studies and construction of mining and mineral processing projects. Luke Watson, CFO & Company Secretary: Mr Watson is a Chartered Accountant, Chartered Secretary and a Fellow of FINSIA. He has significant corporate experience including mergers & acquisitions, capital raisings, IPOs and dual listings on the TSX. Since 2005, Mr Watson has held senior corporate and finance positions with a number of African-focused resources companies, including Mantra Resources Limited ( Mantra ) and OmegaCorp Limited. Mr Watson was the CFO & Company Secretary of Mantra from its $6 million IPO in October 2006 until its acquisition by ARMZ (JSC Atomredmetzoloto) for approximately $1 billion in mid

24 CONTACTS ANALYST AUTHORITY Steuart McIntyre Peter Gray Senior Resource Analyst Executive Director P P E steuartmcintyre@boeq.com.au E petergray@boeq.com.au Gregg Taylor Senior Industrials Analyst P E greggtaylor@boeq.com.au Neon Shariful Investment Analyst P E neonshariful@boeq.com.au Adam Stratton Institutional Dealing P E adamstratton@boeq.com.au Nic van Vliet Institutional Dealing P E nvv@boeq.com.au HEAD OFFICE Blue Ocean Equities Pty. Ltd. AFSL No ABN Philip Pepe Senior Industrials Analyst P E philpepe@boeq.com.au Emily Mohan Investment Analyst P E emilymohan@boeq.com.au Scott Calcraft Institutional Dealing P E scottcalcraft@boeq.com.au James McIntosh Institutional Dealing P E james@boeq.com.au P E info@boeq.com.au W blueoceanequities.com.au Stuart Turner Senior Industrials Analyst P E stuartturner@boeq.com.au Josie Nicol Dealing Associate P E josienicol@boeq.com.au Doc Cromme Institutional Dealing P E doccromme@boeq.com.au Tim Potts Institutional/HNW Dealing P E timpotts@boeq.com.au Level 29, 88 Phillip Street Sydney NSW 2000 Australia DISCLAIMER This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Blue Ocean Equities Pty Limited. This is general investment advice for Institutional and Sophisticated Investors only and does not constitute personal advice to any person. Because this document has been prepared without consideration of any specific client s financial situation, particular needs and investment objectives you should consult your own investment adviser before any investment decision is made on the basis of this document. While this document is based on information from sources which are considered reliable, Blue Ocean Equities Pty Limited has not verified independently the information contained in the document and Blue Ocean Equities Limited and its directors, employees and consultants do not represent, warrant or guarantee, expressly or by implication, that the information contained in this document is complete or accurate. Nor does Blue Ocean Equities Limited accept any responsibility for updating any advice, views opinions, or recommendations contained in this document or for correcting any error or omission which may become apparent after the document has been issued. Except insofar as liability under any statute cannot be excluded. Blue Ocean Equities Pty Limited and its directors, employees and consultants do not accept any liability (whether arising in contract, in tort or negligence or otherwise) for any error or omission in this document or for any resulting loss or damage (whether direct, indirect, consequential or otherwise) suffered by the recipient of this document or any other person. DISCLOSURE Blue Ocean Equities Pty Limited, its employees, consultants and its associates within the meaning of Chapter 7 of the Corporations Law may receive commissions, underwriting and management fees from transactions involving securities referred to in this document, and may from time to time hold interests in the securities referred to in this document. Blue Ocean Equities Pty Limited and associates hold no shares in OreCorp Resources at the date of this report and this position may change at any time without notice. 2 4