New supply alternative to China. Valuation upside highly leveraged

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1 AUSTRALIA LYC AU Price 9 Nov 11 Outperform A$1.19 Volatility index 12-month target A$ month TSR % Valuation - DCF (WACC 12.%) A$ 2.3 GICS sector Materials Market cap A$m 2,4 3-day avg turnover A$m 37.9 Number shares on issue m 1,714 Investment fundamentals Year end 3 Jun 211A 212E 213E 214E Revenue m ,53.2 1,75.2 EBIT m ,26.9 Reported profit m ,8.8 Adjusted profit m ,8.8 Gross cashflow m ,168.3 CFPS CFPS growth % nmf 73.1 PGCFPS x nmf nmf PGCFPS rel x nmf nmf EPS adj EPS adj growth % nmf 8.4 PER adj x nmf nmf PER rel x nmf nmf.35.2 Total DPS Total div yield % Franking % nmf nmf nmf ROA % ROE % EV/EBITDA x Net debt/equity % P/BV x LYC 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, November 211 (all figures in AUD unless noted) 1 November 211 Macquarie Securities (Australia) Limited Breaking the stranglehold Outperform, A$2.3 price target We initiate coverage with an Outperform recommendation. New supply alternative to China Lynas is close to first production from its Mount Weld Rare Earth Project. Commissioning of the Concentration Plant in Western Australia is on track, Lynas is now stockpiling concentrate onsite in preparation for start-up of the Lynas Advanced Materials Plant (LAMP). Construction of the LAMP in Malaysia is slightly behind schedule but nearing completion. The main hurdle now is the permit required to begin operations in Malaysia. While the decision for the permit will have a binary impact on the project, Macquarie believes it is unlikely it will be denied, as Lynas has satisfied international safety requirements, which were brought into question resulting in a review of the plant. The company expects to begin commercial production during 2HFY12, we forecast modest production in FY12 of 825 t rare earth oxide (REO). Valuation upside highly leveraged We value the Mount Weld Rare Earth Project including Phase 1 output of 11, t/a and the Phase 2 expansion to 22, t/a REO at A$2.42/sh, using a long-term REO basket price of US$4.58/kg and a conservative operating cost of US$15./kg. Using the spot basket price from the 7/11/11 of US$125.34/kg and exchange rate of US$1.4/A$ in perpetuity results in a NPV of A$7.7/sh. Market is focused on approvals IAEA standards met Following the review of the LAMP by the International Atomic Energy Agency (IAEA), Lynas has submitted the documentation to the Malaysian Atomic Energy Licensing Board (AELB) required for the approval of the LAMP pre-operational license. As it stands, the Malaysian Government has stated that no preoperational license will be issued to Lynas and Lynas will not be allowed to import raw materials for the plant from Australia until it is satisfied the recommendations have been implemented. Macquarie views the risk as potential further delay to start-up rather than not receiving a license at all. The IAEA reported that Lynas had met all radiation safety standards imposed on them at the plant by the regulatory authorities and these standards meet internationally recognised IAEA safety standards. China remains dominant partnerships key for Lynas As with the majority of commodity markets, China s role is key. However, compared to the better understood markets such as copper, coal or iron ore, where Chinese consumption is a significant driver of demand, the rare earth market is heavily dominated by China on both the supply and demand side. China s dominance in all areas of the rare earth market presents risk to any new market entrant. Lynas off-take agreements and alliances put the company in a good position in this context, with a spread of non-chinese end users likely to support diversification of supply. Changes to China s rare earth export policy will continue to impact the global market and pricing. For more information please refer to our full report, : Breaking the stranglehold, available at Please refer to the important disclosures and analyst certification on inside back cover of this document, or on our website

2 Valuation A$2.3 per share We initiate coverage of (LYC) with an Outperform recommendation and A$2.3/sh price target. Our DCF valuation is based on the Mount Weld Rare Earth Project including the Lynas Advanced Materials Plant (LAMP). Phase 1 of the project is designed to produce 11, t/a of rare earth oxide (REO) equivalent material with first production expected toward the end of FY12. Lynas has started work on the Phase 2 expansion, which will double production to 22, t/a REO; first production is targeted for 213. Lynas is currently commissioning Phase 1 of the concentration plant at Mount Weld and is building inventory of bagged concentrate onsite in preparation for commissioning of Phase 1 of the LAMP, which is nearing construction completion. The valuation is clearly dependent on Lynas receiving the necessary approvals required in Malaysia to allow it to operate the LAMP. Lynas has submitted to the Malaysian Atomic Energy Licensing Board (AELB) the documents requested following the recommendations made by the International Atomic Energy Agency (IAEA) required for the approval of the LAMP pre-operational license. Fig 1 shows the major project assumptions used to develop Macquarie s financial model for the rare earth project. Note our operating cost assumption of US$15./kg is markedly higher than Lynas guidance of A$1./kg. Our DCF base case valuation for the Lynas rare earth project is A$4,14M, or A$2.42/sh. Fig 1 Mount Weld Project Assumptions Project Mount Weld Status Construction/Commissioning Interest in Project % 1% Geology Carbonatite Mining Method Campaign Open cut, truck & shovel Project Location Mine Western Australia Concentration Plant Western Australia Advanced Materials Plant Malaysia Resources (I, I & M) Mt 17.5 Mt Head Grade REO % 8.1% Capital Expenditure Phase 1 A$M 6 Capital Expenditure Phase 2 A$M 4 First Production 212 Life of Mine Yrs 2+ Ore Production Phase 1 Mt.12 Ore Production Phase 2 Mt.24 Recovery Concentration Plant % 63% Recovery Advanced Materials Plant % 85% REO Production Phase 1 t/a 11, t/a REO Production Phase 2 t/a 22, t/a Operating Expenditure US$/kg US$15./kg REO Product Long Term Exchange Rate A$:US$.82 Long Term REO Basket Price US$/kg US$4.58/kg Discount Rate % 12.% Corporate Tax Rate Year 1 12 % 11.% Corporate Tax Rate Year 13+ % 3.% Source: Macquarie Research, November 211 Using the 7/11/11 Mount Weld Rare Earth Basket spot price of US$125.34/kg and exchange rate of US$1.4/A$ in perpetuity results in a NPV of A$7.7/sh. Changing the base case discount rate from 12.% to 1.% and 14.% changes the valuation to A$2.69/sh and A$2.19/sh, respectively. We have not attributed any value to Lynas exploration portfolio as it is generally early stage, nor potential joint venture investments. 1 November 211 2

3 Fig 2 shows the impact of the REO basket price, exchange rates and operating costs on the valuation. Fig 2 Valuation Sensitivity Analysis Base case 1% -1% REO price % change 17% -17% Exchange rate % change -1% 12% OPEX % change -6% 6% Source: Macquarie Research, November 211 The Lynas valuation is most sensitive to the REO basket price: a +1% increase results in a corresponding 17% increase in the DCF valuation. Exchange rate movements also impact the DCF valuation: a 1% decline in the A$: US$ exchange rate increases the valuation by 12%. The valuation is less leveraged to operating costs: a ±1% change in operating costs results in a ±6% change to the valuation. Fig 3 shows Macquarie s forecast revenue for Lynas and REO basket price assumptions. Our longterm basket price assumption for Lynas is US$4.58/kg REO. Fig 3 FY Revenue and REO Basket Price Forecasts Revenue A$M REO Price US$/kg 1,8 1,6 1,4 1,2 1, Revenue (lhs) REO Price (rhs) Source: Macquarie Research, November 211 Lynas currently has A$247.7m available to complete Phase 1 of the project (cash A$122.7m + debt A$125m), at least A$143.5m will be spent on construction and other capital costs. Early estimates from Lynas identified production ramp-up costs in addition to construction costs of A$68.6m until the end of December 211. After total construction and working capital costs (A$212.1m of the A$247.7m available), Lynas will have A$35.6m headroom post December 211. Production and administration cash burn is currently running around A$16m per quarter, meaning Lynas requires cash receipts from sales by June 212 to avoid a working capital issue. Phase 2 capital cost estimates of A$263.4m exceed funds available by A$15.8m. The shortfall should be covered by sales from Phase 1 assuming production starts on time. 1 November 211 3

4 Risks China, Technical, Permit Forecasting REO supply is difficult, given the lack of transparency in the REO market in general and the small number of large producers; China currently produces +95% of global supply. The recent increase in REO prices has seen a number of deposits emerge as potential supply sources. The path from deposit discovery to production is difficult, given the unique mineralogy and the time required to develop an economic flowsheet is considerable. Technological break-throughs for the economic recovery of material from the newly discovered deposits could increase the supply of REO. Demand for REO is highly dependent on demand for high-end technology, which is linked to global growth and has risen due to increased regulation and legislation promoting the use of green technologies. Substitutes are available for some end use applications; however, they are generally less effective than rare earths. The REO price is a critical valuation parameter and any changes in the price of the commodities will have a direct bearing on the profitability of Lynas. The market for REO is relatively opaque. Price data presented has been sourced from a number of industry organisations. China s dominance in all areas of the rare earth market presents significant risk to any new market entrant. Lynas off-take agreements and alliances put the company in a good position in this context with a spread of non-chinese end users likely to support diversification of supply. Changes to China s rare earth export policy will continue to impact the global market and pricing. The price of raw material inputs and energy, in particular the chemicals required for the processing plant, represent a large component of the project s variable cost. Changes in these prices will also directly affect Lynas margin. The technical risks for Lynas can be separated according to the two stages of processing: The mineral processing flowsheet to upgrade the ROM ore is designed to remove the gangue material using flotation. Commissioning of the Concentration Plant has commenced and early results show recovery and grade in-line with design expectations. The LAMP process flowsheet is complex and relatively unique. Lynas has completed detailed engineering for the project however scale-up risk remains. Macquarie considers the LAMP a key area of risk for Lynas. Lynas has not yet secured a pre-operational license for the LAMP. The IAEA completed a review of the health, safety and environmental aspects of the LAMP during the June quarter. The Malaysian Government has directed Lynas to implement the recommendations made by the IAEA as requirements to satisfy the regulatory approvals required for the pre-operational license for the LAMP. Of the eleven recommendations to come out of the IAEA report, three require action by Lynas to receive the LAMP pre-operational license and the remainder relate to the Malaysian Government or Regulatory body actions. Lynas has submitted a long-term waste management plan, submitted a plan for managing waste from the decommissioning and dismantling of the plant, and presented the required safety case work to the AELB. Lynas has also intensified communication with interested and affected parties. The delay to Phase 1 start-up could see Lynas require further working capital outside the A$125m debt facility recently announced. Of the total A$247.7m funds available for Phase 1 of the project (cash A$122.7m + debt A$125m), at least A$143.5m will be spent on construction and other capital costs. In the June quarterly report, Lynas identified production ramp-up costs in addition to construction capital costs of A$68.6m until the end of December 211. Construction and ramp-up costs will account for A$212.1m of the A$247.7m available, leaving A$35.6m headroom post December 211. Production and administration cash burn is currently running around A$16m per quarter, meaning Lynas requires cash receipts from sales by June 212 to avoid a working capital issue. 1 November 211 4

5 Malaysian Approvals near term catalyst Lynas received approval to commence construction of the LAMP in the Gebeng Industrial Estate, Kuantan, Malaysia in February 28. The approvals received included: Environmental Impact Assessment approval by the State of Pahang Department of Environment; Atomic Energy Licensing Board (AELB) approved Siting and Construction License; Kuantan Local Council approved Development Order Application. The approval to proceed with construction was subject to a number of conditions, in particular, the need to comply with the safety provisions of the Atomic Energy Licensing Act 1984 and the Environmental Quality Act Malaysia s AELB administers the Atomic Energy Licensing Act and set the safety standards Lynas must comply with. The AELB monitors the radiological and environmental impact of all stages of the Lynas project: construction, operations, transportation, waste management, dismantling of the plant when its ends operations, and restoring the environment to normal use. The Department of Environment (DOE) implements Malaysia s Environmental Quality Act. The regulatory standards and compliance imposed by the AELB and DOE are similar or equivalent to internationally recognised standards. Current status Following the Fukushima Daiichi nuclear disaster in March 211, concern from the local Kuantan residents over the design of the LAMP was raised. In April 211 the Malaysian Government responded to the concerns by appointing an independent panel of international experts from the International Atomic Energy Agency (IAEA) to review the health and safety aspects of the project and to make recommendations to the Government. The IAEA review reported that Lynas had met all radiation safety standards imposed on them at the plant by the regulatory authorities (AELB and DOE). These standards meet internationally recognised IAEA safety standards. The Malaysian Government accepted all the recommendations of the IAEA, and has initiated the implementation of them accordingly. The Government has directed Lynas to implement the recommendations made by the IAEA as requirements to satisfy the regulatory approvals required for the pre-operational license for the LAMP. The Government decided that no pre-operational license will be issued to Lynas and Lynas will not be allowed to import raw materials for the plant from Australia until it is satisfied the recommendations have been implemented. Of the eleven recommendations to come out of the IAEA report, three require action by Lynas and the remainder relate to the Malaysian Government or Regulatory body actions. Lynas must satisfy recommendations 1, 2 and 1 to receive the LAMP pre-operational license. Recommendation 1 Lynas has submitted a long-term waste management plan and is compiling a safety case work file to support the plan which was scheduled to be submitted in August 211; Recommendation 2 Lynas submitted a plan for managing waste from the decommissioning and dismantling of the plant on 18 July; Recommendation 1 Lynas has increased communication with interested and affected parties. In addition, the AELB is to be given additional resources to carry out its duties, including undertaking monitoring and enforcement measures to protect public health and safety. Public safety remains the Malaysian Government's highest priority and overrides all other considerations. 1 November 211 5

6 Strategy integrated rare earths supply Lynas strategy is to create a fully integrated source of supply of rare earths from mine through to customers, and provide security of supply and environmental standards in the global rare earths industry. Lynas Mount Weld rare earths deposit is located 35 km south of Laverton in Western Australia. Lynas will beneficiate run of mine ore to produce a concentrate onsite at Mount Weld, which will then be shipped to the LAMP in Kuantan Malaysia. Lynas located the LAMP in Malaysia due to the availability of skilled labour, coupled with cheap water, reagents and energy. Lynas has also been granted the strategic pioneer status by the Malaysian Industrial Development Association (MIDA), which has a number of associated benefits, including a 12-year tax-free period. Fig 4 Lynas Rare Earth Project Source:, August 211 Lynas will develop the project in two stages; Phase 1 is scheduled to produce 11, t/a REO equivalent. The Phase 2 expansion will increase output to 22, t/a REO equivalent. Construction of Phase 1 of the Concentration Plant at Mount Weld is complete and the plant is now being commissioned. Phase 1 of the LAMP is currently under construction; on 3 September 211 construction was 78% complete. Lynas expects first feed to the LAMP kiln to occur in CY1Q12, subject to receiving the necessary approvals. Lynas announced the award of the engineering, procurement and construction management contract for Phase 2 of the LAMP in July 211. The company anticipates Phase 2 construction to be complete by December 212, subject to receiving all necessary approvals. Rare Earths Direct (RED) is Lynas marketing platform. All rare earths product marketed by the company will be sold through this brand and the aim is to make the brand a global benchmark for quality and demonstrated continuity of supply. The RED brand presents three key value propositions: Building a fully integrated supply system from mine to customer; Producing Rare Earths that meet the world s environmental standards; Marketing an international brand of guaranteed quality. 1 November 211 6

7 Adjusted earnings (A$m) Macquarie Private Wealth Share price: $ 1.19 Target price: $ 2.3 PROFIT AND LOSS FY1a FY11a FY12e FY13e FY14e FY15e RATIO ANALYSIS FY1a FY11a FY12e FY13e FY14e FY15e Sales Revenue A$m 91 1,53 1,75 1,231 Net Debt $M A$m Total Other Income A$m Net Debt / Equity A$m Total Operating Revenue A$m 91 1,53 1,75 1,231 Interest Cover - EBIT x Cost of Sales A$m Interest Cover - GFCF x Corporate Expenses A$m EBITDA A$m , EBITDA Margin % % % 16% 74% 76% 69% Depreciation & Amortisation A$m EBIT Margin % % % % 66% 71% 62% EBIT A$m , EV/EBITDA (prospective) x Net Interest A$m EV/resource tonne A$/t Income Tax Expemse A$m NPAT (pre exceptional) A$m , PER (adjusted) x nmf nmf nmf nmf Exceptional items (post tax) A$m PGCFPS x nmf nmf Reported profit A$m , ROE (NPAT/Equity) % nmf -8% -2% 49% 56% 33% ROCE (EBIT/Debt + Equity) % nmf -9% % 59% 123% 85% EPS adjusted cps EPS growth (adjusted) % nm 16% nm nm 8% -33% VOLUME ASSUMPTIONS (1%) FY1a FY11a FY12e FY13e FY14e FY15e DPS cps Mount Weld ROM t - - 1,22 123,6 252, ,244 Mount Weld Product t ,175 2,763 22, CASHFLOW FY1a FY11a FY12e FY13e FY14e FY15e Total saleable production t ,175 2,763 22, Cash Receipts A$m 91 1,53 1,75 1,231 Payments A$m Mount Weld Product t ,175 2,763 22, Net Interest A$m Total sales t ,175 2,763 22, Income Taxes Paid A$m Dividends from Associates A$m Light Rare Earths Oxides t ,591 19,571 2,737 Other A$m Heavy Rare Earths Oxides t ,192 1,263 Net Operating Cashflows A$m , Maintenance Capex A$m -3-4 Expansion Capex A$m Exploration & Evaluation A$m - - Free Cash Flow A$m Net Investing Cash Flows A$m kt 25, Light Rare Earths Oxides Heavy Rare Earths Oxides 2, Proceeds from Borrowings A$m Repayment of Borrowings A$m Issue of Shares, Options, etc. A$m Dividends Paid A$m Net Financing Cash Flows A$m , 1, Net Cash Flows A$m Free Cash flow (pre div.) A$m , CFPS cps , BALANCE SHEET FY1a FY11a FY12e FY13e FY14e FY15e FY1a FY11a FY12e FY13e FY14e FY15e Cash & Equivalents A$m ,277 1,617 Total Current Assets A$m ,924 2,118 Net Property, Plant & Equipment A$m Exploration and Evaluation A$m mt Resources Total Mine life Total Non Current Assets A$m Mount Weld mt yrs Total Assets A$m ,28 1,925 2,82 2,937 Total mt Total Current Liabilities A$m Total borrowings A$m Total Non Current Liabilities A$m VALUATION A$m A$ps Total Liabilities A$m Mount Weld 4, Corporate Total Shareholders Equity A$m ,213 1,921 2,29 Sub-total 3, Current interest bearing liabilities. Share Capital m 1,655 1,714 1,714 1,714 1,714 1,714 Non-current interest bearing liabilities Cash (and cash equivalents) 57.3 KEY ASSUMPTIONS & SENSITIVITIES FY1a FY11a FY12e FY13e FY14e FY15e NPV 3, Exchange Rate (A$/US$) x Premium/(discount) to price target -48% Rare Earth Basket Price US$/kg Operating Costs US$/kg month price target 2.3 1,2 1, EBITDA Margin ROCE (EBIT/Debt + Equity) 8 14% 12% 6 1% 4 8% 2 6% 4% 2% (2) FY1a FY11a FY12e FY13e FY14e FY15e % -2% FY1a FY11a FY12e FY13e FY14e FY15e EV/resource tonne A$/t A$m 1,8 Cash & Equivalents Interest Cover - EBIT , , , FY1a FY11a FY12e FY13e FY14e FY15e 1, FY1a FY11a FY12e FY13e FY14e FY15e Source: Company data, Macquarie Research, November November 211 7

8 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 >+1% Neutral expected return from -1% to +1% Underperform expected return <-1% Macquarie First South - South Africa Outperform expected return >+1% Neutral expected return from -1% to +1% Underperform expected return <-1% 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 3 index return Neutral (Hold) return within 5% of Russell 3 index return Underperform (Sell) return >5% below Russell 3 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 6 1% in a year investors should be aware this stock is highly speculative. High stock should be expected to move up or down at least 4 6% in a year investors should be aware this stock could be speculative. Medium stock should be expected to move up or down at least 3 4% in a year. Low medium stock should be expected to move up or down at least 25 3% in a year. Low stock should be expected to move up or down at least 15 25% in a year. * Applicable to 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 3 September 211 AU/NZ Asia RSA USA CA EUR Outperform 57.35% 65.88% 56.94% 46.54% 74.68% 47.85% (for US coverage by MCUSA, 11.63% of stocks covered are investment banking clients) Neutral 31.99% 2.68% 31.94% 5.% 23.42% 34.66% (for US coverage by MCUSA, 9.3% of stocks covered are investment banking clients) Underperform 1.66% 13.45% 11.11% 3.46% 1.9% 17.49% (for US coverage by MCUSA,.47% of stocks covered are investment banking clients) Company Specific Disclosures: Macquarie Bank Limited makes a market in the securities in respect of Limited. Important disclosure information regarding the subject companies covered in this report is available at General Disclaimers: This research has been issued and distributed in Australia by Macquarie Equities Limited ABN ("MEL"). MEL holds Australian Financial Services Licence No and is a Participant of the Australian Securities Exchange Group. MEL is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959 and MEL's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of MEL. This research has been prepared for the use of the clients of Macquarie Group Limited and its related entities (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 the information in this research in any way. Nothing in this research shall be construed as a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction. This research is general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice you should therefore 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. There are risks involved in securities trading. The price of securities can and does fluctuate and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. This research is based on information obtained from sources believed to be reliable but we do not make any representation or warranty that it is accurate, complete or up to date. We accept no obligation to correct or update the information or opinions in it. Opinions expressed are subject to change without notice. No member of the Macquarie Group accepts any liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this research and/or further communication in relation to this research. The Macquarie Group or its associates (including MEL), officers or employees may have interests in the financial products referred to in this report by acting in various roles including as investment banker, underwriter or dealer, holder of principal positions, broker, lender, director or adviser. Further, they may act as market maker or buy or sell those securities as principal or agent and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group or its associates (including MEL) may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The analyst(s) principally responsible for the preparation of this research receives compensation based on overall revenues, including investment banking revenues of Macquarie Group Limited and its related entities. This research has been issued and distributed in New Zealand by Macquarie Equities New Zealand Limited ( MENZ ) an NZX Firm. Macquarie Private Wealth's (MPW) services in New Zealand are provided by MENZ. Macquarie Bank Limited ABN ("MBL") is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. Neither MBL nor any member of the Macquarie Group, including MENZ are registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act Any Macquarie subsidiary noted in this document is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia). 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. Disclosures with respect to issuers, if any, mentioned in this research are available at or can be obtained from your Macquarie representative. Macquarie Group 1 November 211 8