Specialty Minerals and Metals. Lithium sector set to charge. Initiation of Coverage. Australian Equity Research 16 December 2015

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1 Australian Equity Research 16 December 2015 Reg Spencer Canaccord Genuity (Australia) Ltd Tim McCormack Canaccord Genuity (Australia) Ltd Larry Hill (Associate Analyst) Canaccord Genuity (Australia) Ltd Company Rating Price Target Specialty Minerals and Metals GMM-ASX Spec Buy A$0.20 A$0.40 GXY-ASX Spec Buy A$0.09 A$0.16 Share price data as of Dec 16, 2015 Lithium sector set to charge Lithium-ion (Li-ion) batteries represent the largest and highest-growth segment of the lithium market. They are currently considered the preeminent battery technology in highgrowth industries, such as portable electronic devices, hybrid/electric vehicles, and storage batteries. We expect strong lithium demand growth in the coming years based on the positive outlook in these industries. Demand growth is compounded by tight supply side conditions. Production issues from existing brine producers (poor capacity utilisation, expansion issues, new entrants still in ramp-up phase, and the changing dynamics of the lithium mineral (spodumene) market support the potential for significant lithium price increases in the near-medium term, in our view. Initiating coverage: Galaxy Resources Ltd (GXY:ASX) GXY is a globally diverse lithium development company. Primary assets include the Mt Cattlin spodumene project in WA (subject to 50% earn in by GMM), the Sal de Vida lithium brine project in Argentina (100%) and the James Bay spodumene exploration project (subject to 50% earn in by GMM) in Canada. GXY recently re-structured its business, having recently sold its underperforming lithium carbonate (Li 2 CO 3 ) plant, reduced/re-structured its corporate debt, and established a JV with GMM to re-start production at Mt Cattlin in early In addition, GXY's Sal de Vida brine project offers optionality and potential strategic value in our view, with options to reduce capex and fund a potential staged development now being assessed. We value GXY on a NAV basis comprising 50% of our base case NPV10% for Mt Cattlin, our blended DCF/market based value for Sal de Vida, and exploration, net of corporate and other adjustments. We initiate coverage with a SPECULATIVE BUY rating and A $0.16/sh target price. Initiating coverage: General Mining Corporation (GMM:ASX) Canaccord Genuity (Australia) Limited was the Lead Manager to the Placement of ~40.3 million shares at $0.18 per share to raise ~A$7.3 million in December GMM's primary asset is a right to earn 50% of the +15 year, ~110ktpa Mt Cattlin spodumene project through sole funding a re-start of production (expected early 2016) and cash payments to GXY. GMM is also earning a 50% interest in the James Bay exploration project. Previous production issues at Mt Cattlin are being addressed through upgrades of the process plant, while project economics benefit from existing infrastructure, low initial start-up capex (<A$10m), a lower A$ and improved spodumene product pricing. We value GMM on a NAV basis, consisting of 50% of our base case NPV10% for Mt Cattlin, exploration (James Bay), net of corporate and other adjustments. We initiate coverage with a SPECULATIVE BUY rating and A$0.40/sh target price. Canaccord Genuity is the global capital markets group of Canaccord Genuity Group Inc. (CF : TSX CF. : LSE) The recommendations and opinions expressed in this research report accurately reflect the research analyst's personal, independent and objective views about any and all the companies and securities that are the subject of this report discussed herein. For important information, please see the Important Disclosures beginning on page 44 of this document.

2 Contents Investment Summary: Galaxy Resources Ltd (GXY:ASX) 3 Initiating coverage with a SPECUALTIVE BUY rating & A$0.16 target price 3 Investment Summary: General Mining Corporation Ltd (GMM:ASX) 5 Initiating coverage with a SPECUALTIVE BUY rating & A$0.40 target price 5 Product Market Overview 7 LITHIUM 7 TANTALUM 10 Peer Comparison 12 Company overview: Galaxy Resources Ltd 14 KEY COMPANY MILESTONES 14 VALUATION 16 CORPORATE & FINANCE 17 Company overview: General Mining Corporation Ltd 19 KEY DEVELOPMENTS 19 VALUATION 20 CORPORATE & FINANCE 21 Asset Overview 22 MT CATTLIN SPODUMENE/TANTALUM PROJECT (GXY 100%, GMM EARNING 50%) 22 SAL DE VIDA LITHIUM BRINE PROJECT (GXY 100%) 31 JAMES BAY LITHIUM PROJECT (GXY 100%; GMM EARNING 50%) 39 Appendix I Investment risks December

3 Investment summary: Galaxy Resources Ltd (GXY:ASX) Figure 1: Asset summary & location map Initiating coverage with a SPECULATIVE BUY rating & A$0.16 target price Globally diverse lithium-development company: GXY is an Australian-based lithium development company. Its primary assets are the near-term production, Mt Cattlin spodumene/tantalum project in Western Australia (100% subject to 50% earn in by GMM), the Sal de Vida lithium brine development project in Argentina (100%) and the James Bay spodumene exploration project (100% subject to 50% earn in by GMM) in Canada. Source: Company reports Business re-structure to focus on up-stream lithium production: Over the course of the last 24 months, GXY has undergone a significant transformation of its business to now focus on the development of its primary lithium production assets. This has included the sale of its previously troublesome Jiangsu lithium carbonate plant in China, completion of a corporate debt reduction and restructure program, and the establishment of a joint venture with General Mining Corporation to fund the re-start of the Mt Cattlin spodumene operation in Western Australia in 1H CY16. Well positioned to capitalise on a favourable outlook for lithium: We consider the company is now well positioned as a diversified, lithium asset development company at a time when lithium prices are starting to rise on the back favourable supply and demand dynamics. In our view, GXY provides diverse exposure to expectations of increasing lithium demand for use in lithium-ion batteries in the portable electronic device, hybrid and electric vehicle (EV) and storage battery industries. Valuation: We value GXY on a net asset valuation basis, comprising a 50% interest in our base case Mt Cattlin NPV10%, an average of our DCF and market based valuations for Sal de Vida, 50% of our nominal valuation for James Bay, net of corporate and other adjustments. While our initial target price of A$0.16/share offers ~75% upside from current levels, we highlight the potential for further upside to our valuation due to the potential for increased lithium/spodumene prices, production expansions at Mt Cattlin, and any firm development pathway and funding solution for Sal de Vida December

4 Source: Company reports, Canaccord Genuity estimates 4 16 December

5 Investment summary: General Mining Corporation Ltd (GMM:ASX) Initiating coverage with a SPECULATIVE BUY rating & A$0.40 target price Low capex, near-term lithium (spodumene) production: GMM is a lithium exploration and development company focused on the development and re-start of production at the Mt Cattlin spodumene/tantalum operation in Western Australia. GMM has the right to earn a 50% interest in Mt Cattlin through A$18m in cash payments to GXY, and by sole funding a restart of operations with initial start-up capex of <A$10m. Mt Cattlin re-start expected in MarQ 16: Mt Cattlin was previously placed on care and maintenance in 2013 due to low lithium prices, a high AUD, poor product quality and an uneconomic operating cost base. GMM s planned re-start of Mt Cattlin is expected to see annual spodumene concentrate production of ~110ktpa over an initial +15- year mine life, with previous product quality issues planned to be addressed through upgrades of the current process flow sheet. The project benefits from significant existing infrastructure (+A$100m in sunk capital), and we see the low capex and short lead time to re-start operations as a distinct advantage over many other hard rock lithium development companies. Improved pricing and costs lead to improved economics: We anticipate project economics should now benefit from higher spodumene prices (based on a favourable outlook in both the refined lithium and spodumene markets) and an A$ which is now ~20% lower than when the asset was last in operation. We estimate average costs of US$340/t of spodumene concentrate product, and based on expectations of further increases in spodumene prices, we see the potential for solid operating margins once at targeted production rates. Valuation: We value GMM on a net asset valuation basis, comprising a 50% interest in our base case Mt Cattlin NPV10%, 50% of our nominal valuation for James Bay, net of corporate and other adjustments. We set an initial target price of A$0.40/share (representing a P/NAV of 0.50x), but note that there is potential for upside in our valuation through higher spodumene prices, and a potential expansion of production at Mt Cattlin December

6 Change in Target Price Specialty Minerals and Metals FINANCIAL SUMMARY General Mining Corporation Ltd ASX:GMM Analyst: Reg Spencer Rating: SPEC BUY Date: 16/12/2015 Target Price: $0.40 Year End: June Market Information Company Description Share Price A$ 0.20 General Mining (ASX:GMM) is operator of the Mt Cattlin spodumene operation in a 50%:50% JV Galaxy Market Capitalisation A$m 60.6 Resources Limited (ASX:GXY). Initial production from the facility will be for ~100ktpa of spodumene 12 Month Hi A$ 0.22 concentrate grading ~6% Li2O with additoinal tantalum credits. GMM also have 50% earn in on the James 12 Month Lo A$ 0.00 Bay hard rock lithium project in Canada. Issued Capital m ITM Options m 0.00 Fully Diluted m Profit & Loss (A$m) 2015a 2016e 2017e 2018e Revenue Valuation A$m A$/share Operating Costs Mt Cattlin NPV 10% Corporate & O'heads Exploration & Other (James Bay) Estimate Exploration (Expensed) Corporate (14.3) (0.04) EBITDA Cash Dep'n Debt - - EBIT Unpaid capital Net Interest TOTAL Tax Target Price 0.40 NPAT P/NAV 0.49x Abnormals NPAT (reported) Assumptions 2016e 2017e 2018e Lithium Carbonate (US$/t) 6,100 6,250 6,400 Cash Flow (A$m) 2015a 2016e 2017e 2018e Spodumene Concentrate (US$/t) Cash Receipts Tantalum (US$/lb) Cash paid to suppliers & employees AUD:USD Tax Paid Net Interest Valuation Sensitivity Operating Cash Flow Exploration and Evaluation $0.60 Capex Other $0.50 Investing Cash Flow Debt Drawdown (repayment) $0.40 Share capital Dividends Financing Expenses $0.30 Financing Cash Flow Opening Cash $0.20 Increase / (Decrease) in cash FX Impact $0.10 Closing Cash % -20% -10% 0% 10% 20% 30% Spodumene Price (US$/t) Exchange Rate (A$:US$) Balance Sheet (A$m) 2015a 2016e 2017e 2018e Cash + S/Term Deposits Tantalum Price (US$/lb) Discount Rate (@10%) Other current assets Current Assets Property, Plant & Equip Production Metrics 2016e 2017e 2018e Mining, Expl'n & Develop Mt Cattlin (50%) Other Non-current Assets Spodumene concentrate (kt) Payables LCE production (kt) Short Term debt Tantalum concentrate (Mlb) Long Term Debt AISC (A$/tonne) Other Liabilities Net Assets Shareholders Funds Reserves & Resources Mt Grade (Li2O) Mt LCE Ta 2 O 5 Reserves Mt Cattlin (50%) Retained Earnings Resources % Total Equity Reserves % Ratios & Multiples 2015a 2016e 2017e 2018e James Bay (50%) EBITDA Margin nm 76% 60% 57% Resources % EV/EBITDA nm 3.7x 1.6x 1.0x Op. Cashflow/Share $0.00 $0.00 $0.05 $0.06 P/CF x x 4.2x 3.4x Directors & Management EPS $0.01 $0.04 $0.04 $0.05 Name Position EPS Growth -307% 290% 10% 8% Michael Fotios Executive Chairman PER 19.2x 4.9x 4.5x 4.1x Alan Still Non-exec Director Dividend Per Share $0.00 $0.00 $0.00 $0.00 Michael Kitney Non-exec Director Dividend Yield 0% 0% 0% 0% ROE -218% 101% 69% 39% ROIC -4% 47% 59% 52% Substantial Shareholders Shares (m) % Debt/Equity 0% 0% 0% 0% Investmet % Net Interest Cover nm nm nm nm Book Value/share $0.00 $0.04 $0.07 $0.11 Price/Book Value 341.4x 4.9x 2.7x 1.7x Source: Company reports, Canaccord Genuity estimates 6 16 December

7 Product market overview LITHIUM Lithium is a soft, silver-white metal which under normal conditions is the lightest of all metals and the least dense solid element. It has a wide range of industrial applications including ceramics, lubricants and glass, but the largest (and highestgrowth segment) of the global lithium market is its use in the manufacture of lithium-ion batteries (29% 2014 estimates, Figure 2). Based on expectations for ongoing high growth rates in the use of lithium-ion batteries in the portable electronic device, hybrid /electric vehicle and storage battery industries, we expect the demand for lithium to continue to grow markedly over the coming years. Figure 2: Lithium applications 2% 5% 5% 6% 8% 9% 9% 12% 29% 14% Rechargeable batteries Ceramics Glass ceramics Greases Metallurgical powers Polymers Air purification Primary battery Aluminium Other Source: Roskill, 2014 Lithium is produced from two main mineral sources: Supply Brines: lithium brine deposits are formed through the leaching of volcanic rocks and basin depositional environments. Lithium is produced from brines (most often in the form of lithium carbonate (Li2CO3)) via a process involving the pumping of brine from the sediment basin, concentration via evaporation, and purification through solvent extraction, filtration and ionic exchange. Lithium is unusually more soluble at lower temperatures than similar alkali metals such as sodium and potassium and it is this property that provides the design basis for most of the processing steps. Hard rock spodumene deposits: Spodumene is a lithium-bearing aluminium silicate mineral that mostly occurs in lithium-rich pegmatites (granite-like igneous rock composed of quartz, feldspar and mica). Spodumene is usually recovered through conventional open pit mining methods and beneficiated via conventional gravity techniques where the ore is typically concentrated from 1-2% Li2O to a grade of ~6% Li2O. This concentrate product is then converted to battery grade lithium carbonate (>99.5% purity) through intensive thermal and hydrometallurgical processing (roasting, leaching, ion exchange) conducted at plants mostly located within China. It is estimated that global production in 2014 totaled 190kt lithium carbonate equivalent, or LCE (Figure 3), with global production dominated by several large producers. Significant consolidation has taken place in the sector in the last several years, with notable transactions including the acquisition of Tailson Lithium (operator of Greenbushes) by Sichuan Tianqi ( SHE Not rated) for 7 16 December

8 C$848m in Mar 13. Subsequently in May 14 Rockwood obtained a 49% ownership of Greenbushes for US$475m. Finally in Jan 15 Rockwood was acquired by Albemarle (ALB-USA Not rated) as part of a US$6.2B company takeover. Figure 3: 2013 Lithium production by company Figure 4: 2014 global LCE production by operation (ex China) Source: Roskill, 2013 *Acquired by Rockwood in 2014, ** Acquired by Albemarle in Jan 15; 51% of Talison s Greenbushes mine subsequently sold to Sichuan Tianqi Source: Company reports, Roskill, signumbox, USGS, Canaccord Genuity estimates *49% owned by Albemarle, 51% Sichuan Tinaqi 2014 global production was split approximately 50% (Figure 4) from hard rock sources (primarily Greenbushes and Kings Mountain in the USA), with the balance from brine production in Chile and Argentina (Salar de Atacama and Salar de Hombre Muerto). Global production capacity is estimated at ~270kt of LCE (Source: signumbox 2014), which indicates that the industry is operating at only ~60% of capacity. In terms of new supply, outside of China, only Orocobre (ORE : ASX : A$1.76 BUY) is likely to provide new brine-based supply into the market over the next 12 months. We note that SQM (largest producer at ~48ktpa LCE) in Chile is currently having environmental and government issues (these are not likely to be resolved anytime soon and has the operation running at only 50% of capacity). Meanwhile, FMC in Argentina (capacity of 23ktpa carbonate and hydroxide) is running at ~60% capacity (14Ktpa), being constrained by technical issues related to un-lined evaporation ponds and stressed relations with the local government which saw water supply cut off during Lastly Albemarle s La Negra lithium hydroxide (LiOH) conversion plant in Chile (~15ktpa LCE) remains on standby due to the hold up in approvals to increase brine pumping from 80,000m 3 /year to 170,000m 3 /year at the Salar De Atacama. Spodumene market The supply of spodumene is dominated by Albemarle and Tianqi s Greenbushes (formally Talison Lithium) operation located in Western Australia. This facility is estimated to produce ~650ktpa of spodumene concentrate which supplies ~100ktpa (or 92%) of ex. China hard rock derived LCE. The only other meaningful producers are Albemarle s Kings Mountain spodumene operation (~8ktpa of LCE) and the Jiajika project (unknown production) in China. Spodumene concentrate pricing is more or less benchmarked against prevailing market prices for the Greenbushes product, given its dominant position in the market. We note recent tightness in the spodumene market which has resulted 8 16 December

9 from Li2CO3 demand pressure which has arisen due to the supply issues from the incumbent brine producers. Furthermore, we understand that Albemarle are assessing the construction of a ~50ktpa Li2CO3 and LiOH conversion plant, fed from its share of Greenbushes spodumene production, to be online by 2020 (Source Albemarle Corporate Presentation). Given an expectation that supply issues from brine producers are not likely to be resolved in the near term (poor capacity utilisation from existing producers, new entrants still in ramp up phase), and that a large proportion of Greenbushes spodumene production could be re-directed from the market to its own conversion facility, we anticipate that current tight spodumene market conditions could persist for the near future. Demand As illustrated in Figure 2, the rechargeable battery (lithium and lithium-ion) is currently the greatest source of demand for lithium with ~29% of the total market in Figure 5 below shows that Li2CO3 represented ~45% of the market in 2014, with the other dominant form being LiOH. It should be noted that while LiOH can attract up to a ~40% price premium over L2CO3 (due to its superior lattice structure), L2CO3 is currently the dominant lithium source for battery applications. Figure 5: Lithium demand by compound Figure 6: Projected LCE demand Source: signumbox 2014 estimates Source: Albemarle company presentation While demand for lithium in industrial applications could be expected to show modest growth (in line with global industrial activity, or GDP growth), we anticipate that growth in demand for battery applications will continue to increase in the coming years (Figure 6). This growth is expected to be driven by increasing demand for: Portable electronic devices Hybrid and electric vehicles Renewable energy storage batteries Companies such as Tesla, Foxconn, BYD and LG Chem have all announced the development of large Li-ion battery manufacturing facilities to meet the expected rise in demand for Li-ion batteries from the above industries. In our view, this is likely to support a significant increase in the demand for lithium in the coming years December

10 Outlook Figure 7 below shows lithium carbonate (China, min 99% LCE benchmark) pricing over the last 6 months. We highlight a significant increase in prices for L2CO3 in recent weeks, with reports of spot pricing for Li2CO3 of +US$10,000/tonne. In our view, this pricing reflects realisation of downstream lithium consumers of the current tightness in the market. It should be noted however that L2CO3, like most industrial minerals, is priced through negotiations with customers with various influences such as contract terms, review frequency, quantity and product specification on the price received. As we noted above, existing producers are currently experiencing a wide range of issues preventing them from expanding production (technical issues, permitting) and utilising latent capacity, while new market entrants remain in ramp up phase. Furthermore, the tightness in the spodumene market is interpreted to reflect the production issues facing a lot of brine producers, with downstream demand now putting pressure on carbonate conversion plants. Figure 7: Lithium carbonate (+99% Li minimum LCE content) 99% min LCE (US$/t) /15 08/15 09/15 10/15 11/15 12/15 Daily Price 30 Day Moving Average 90 Day Moving Average Source: Asian Metal, Canaccord Genuity estimates Based on expectations for continued supply side tightness (at least in the near term), and the prospects of significant demand growth, we anticipate lithium prices to remain at elevated levels versus recent longer run averages. TANTALUM Tantalum is a rare, highly corrosion-resistant metal that is an excellent conductor of heat and electricity. Its melting point is only exceeded by tungsten and rhenium and it is one of the five major refractory metals. It is primarily found in the mineral tantalite, which is mostly found in pegmatite ore bodies. The use of tantalum can be broadly broken down into four product types: Tantalum powder used in electronics Tantalum metal has applications in chemical processing, medical devices and alloys High-grade tantalum oxide is also used in camera lenses and X-ray equipment Tantalum carbide used in cutting tools December

11 Supply According to the USGS, global tantalum production totaled ~1,200 tonnes in 2014, with a majority of global production (+79%) coming from Rwanda and the DRC. Metal production from these countries is widely known to be associated with illegal mining and conflict minerals. A majority of production is from hard rock mines and the metal is often traded in opaque long-term transactions between producers and end-users. Quoted prices typically refer to spot Ta2O5 (tantalum pentoxide), which over the past decade has been the subject of erratic highs and lows. The reality is that the spot market is very thinly traded and term contracts have remained more stable, albeit trending down over the past couple of years. Figure 8: World share of global tantalum production (2014) Figure 9: Tantalum pentoxide prices over the past 5 years vs CG forward assumptions Tantalum (US$/lb) CGAu estimates Source: US Geological Survey Source: SNL Mining, Canaccord Genuity estimates Demand Tantalum s principal use is in high end capacitors (~60% of consumption), which are found in all electronic devices, however we note that lower-cost ceramic and aluminum capacitors currently dominate the market. The most up-to-date, publically available information suggests that tantalum-based capacitors accounts for ~10% of the total market by value. Given tantalum s association with conflict minerals, the SEC (US Securities and Exchange Commission) instituted new rules in 2012 that required US companies to disclose when they use minerals from conflict zones. This has led number of Western end users to seek supply from legitimate, Western sources. However, despite mine production declining (three legitimate mines have been closed in the last ~6 years including the Wodgina mine in WA), prices for tantalite have actually decreased markedly since 2010 (Figure 9). This suggests that increased demand from non-western end users is being satisfied from undocumented and/or illegal sources. Outlook In our view, the outlook in demand for the metal is subdued and as such we have taken a conservative view on our forward prices, assuming a flat US$75/lb Ta2O5 versus current market prices of ~US$90/lb (Figure 9) December

12 Peer comparison Figure 10: Analysis of current & planned lithium projects Resource Li Grade Company Listed Project Location Equity Status Lithium (Mt) ppm (brine) Notes BRINE PRODUCERS % (h/rock) Albermarle NYSE:ABL Salar de Atacama Chile 100% Production ktpa (doing 25ktpa Li2CO3); Process plant in Antofagasta; Issue: Same as SQM. Have out in 5 applications to Diversified expand. The La Negra plant in Chile (20kt) held up Silver Peak USA 100% Production As of February 2012, Rockwood was completing a $75 million expansion of its lithium production in the United States which included an expansion of its brine pond system at Silver Peak, and construction of a battery grade lithium hydroxide plant at Kings Mountain SQM NYSE:SQM Diversified Salar de Atacama Chile 100% Production Capacity: 48ktpa; Issue: licensing arrangement with Chilean govt for brine pumping to 2030; Govt wont issue permits to pump more brine - permeability issues - salar surrounded by fresh water (could deplete acquifers). Also a pink flamingo habitat FMC Corp. NYSE: FMC Diversified Salar de Hombre Meurto Argentina 100% Production ktpa Li2CO3, 23ktpa LCE, running at 14ktpa; Issue: Recently expanded but having major technical issues (new ponds werent lined); no further expansion plans; Poor govt relations; Have been buying LCE to fulfill sales contracts Orocobre ASX:ORE Pure play Olaroz Argentina 67% Production First production from Olaroz in April Commissioning and plant ramp up delayed. Namplate production of 17.5kt of LCE expected during H2'16. BRINE DEVELOPERS Western Lithium WLC:TSX Pure play Cauchari-Olaroz Argentina 90% Feasibility Using propritary POSCO extraction tech for carbonate and hydroxide production. POSCO finance capex to initial 2500 t rate in late Ramp up to 20kt expected in Sentient Group (Private) n/a Pure play Salar de Rincon Argentina 100% DFS Admiralty sold to Sentient for $22m in Rincon was producing 1000t/month LCE from a pilot plant. Sentient have indicated they have a propriertory process to recover LCE direct from brine. Galaxy ASX:GXY Pure play Sal de Vida Argentina 70% Feasibility DFS completed in 2013; assessing development & funding options. International Lithium TSX: ILC Diversified Mariana Argentina 20% Feasibility Ganfeng hold a 80% stake with TNR Gold Corp a 26% Rodinia Lithium TSX:RM Pure play Diabilillos Argentina >90% Feasibility Pure Energy Minerals TSX:PE Pure play Clayton Valley USA 100% Pilot plant Announced in Feb 2015 test work underway on the application of Tenova Bateman's LiSX and POSCO's RIST technology. Cornerstone supply agreement with Tesla (initially 5 years). HARD ROCK PRODUCERS Albemarle NYSE Diversified King's Mountain USA 100% Production % US$30m epxpansion completed in 2012 to produce ~ 5kt of LiOH product Greenbushes WA 49% Production % 30ktpa LCE feeds into converter plants in China; under-utilised capacity. 50kpta LCE conversion plant proposed HARD ROCK DEVELOPERS Bacanora Minerals TSX:BCN Pure play Sonora Mexico 70% Feasibility % Rare Earth Minerals Plc s(30% owners) aid a new mineral resource estimate for the Sonora lithium project in Mexico, a joint venture majority owned by Bacanora Minerals Ltd., saw the project's indicated and inferred mineral resource increase to 8.8 million tonnes of lithium carbonate equivalent. Galaxy Resources/ ASX:GXY/ Pure play James Bay Canada 100% Exploration % Acquired from Lithium One in In September 2015 GCXY announced a DFS would begin during 2016 General Mining ASX:GMM Mt Catlin Australia 50% Commisioning % Originally placed on care and maintenance Jul'13. Restart of operations (+100ktpa spod conc) planned for 1H'16, A$7-15m capex Rio Tinto ASX: RIO Diversified Jadar Serbia 100% Exploration % Still in early stage development after initial discovery in 200. Will take 6 years to develop according to RIO European Metals ASX: EMH Pure play Cinovec Czech Republic 100% Scoping % Scoping released in 2015, 2mpta, lithium recovery at 70%, 19.4ktpa, opex of US$27/t mined + US$39/t treated. Pre-production capex of US$326m Western Lithium WLC:TSX Pure play Kings Valley USA 98% Feasibility % In June 2015, Western Lithium announced that it was continuing its optimization studies with Tenova Bateman Technologies in order to complete an OoM study using solvent extraction technology. Pilot plant test work in Germany was ongoing Nemaska Lithium TSX: NMX Pure play Whabouchi Canada Feasibility % A feasiblity study indicated a production rate of 5.5Mt of spodumene concentrate per year over 26 years at a capex of $448m. Environmental permitting is complete enabling construction to commence subject to financing. RB Energy Receivership Pure play Quebec Canada 100% Care and Maintenance Source: Company reports, Canaccord Genuity estimates, SNL Mining % In receivership. Plant was designed on a capex of US$200m for 15 year mine life for 20kpta LCE at opex of US$2,600/t. First production shipped to offtake partner Tewoo from July Funding uncertainty and kiln issues placed project on C&M in July Sichuan Tianqi Group :SHE Pure play Jiajika China 100% Feasibility % As of July 2004, Sterling Group reported that the Jiajika lithium deposit could be mined using open pit method. Using gravity and magnetic processing methods, lithium concentrates could be produced at an estimated 84% Li2O recovery. Jiajika's initial capacity was estimated at 240,000 mt/y increasing to 900,000 mt/y. Pilbara Minerals ASX: PLS Diversified Pilgangoora WA 100% Scoping % Worlds second largest hard rock depoist at 52Mt at 1.25% Li2. Capex estiamtes of A$100m for 200ktpa of 6% Li2O spodumene concentrate over 20+ years. Critical Elements TSX: CRE Rose Canada 100% PEA % Offtake signed in June PEA called for 27ktpa of LCE at capex of C$270 over 17 year mine life Neometals ASX:NMM Diversified Mt Marion WA 45% Construction % 30ktpa LCE develpoment approved in 2010 but shelved due to funding. 2015: NMM and Mineral Resources jointly owned subsidiary entered into a conditional MoU Jiangxi Ganfeng Lithium Co. Ltd for a 100% offtake and equity investment of 25%. The offtake deal allowed for a final investment decision, construction started Nov'15 and production is planned for mid-16. Altura Mining ASX: AJM Pilgangoora WA 100% Scoping % Exploration stage Lithium Australia ASX:LIT Pure play Lepidolite Hill WA 80% Exploration % Exploration stage Glen Eagle Resources TSX: GER Authier Canada 100% Feasibility % Drilling since 2010, PEA highlighted a 103kpta 6% Li2O for 15kpta LCE Liontown Resources ASX: LTR Diversified Mohanga Tanzania 100% Exploration Very early stage drilling of similar geology to Greenbushes in quartz-schist 16 December

13 Figure 11 below ranks global hard rock lithium development projects according to resource size and contained lithium grade. Resources at these projects are at different levels of definition with both Jadar and Jiajika having only reported to the Inferred level. It should be noted that for most hard rock projects the economic cut-off grade is ~-0.2% Li with Cinovec, King s Valley and Sonora projects considering alternative processing to support project development at lower grade. In Figure 12, we have ranked the same group of companies/assets according to development stage, ultimate annual production and capital expenditure required to develop the project. The chart illustrates that Mt Cattlin is one of the few lowcapex, hard rock projects expected to come on line in the next 12 months. Figure 11: Hard rock lithium development projects Grade vs contained lithium Figure 12: Hard rock development projects Project status vs capex vs LCE production Contained Lithium (Li Mt) Jadar Whabouchi Mt Marion Pilgangoora - Pilbara Lepidolite Hill Jiajika James Bay Pilgangoora - Altura Quebec Salar de Hombre Meurto Sal de Vida Salar de Atacama Olaroz Cauchari- Olaroz Mt Catlin Diabilillos Mariana Salar de Rincon Authier Silver Peak Clayton Valley Salar de Rincon Salar de Atacama Diabilillos Rose Cauchari- Olaroz Sal de Vida Olaroz Mariana Salar de Hombre Meurto Silver Peak Clayton Valley Contained Lithium (Mt) Lithium Grade (ppm) Contained Lithium (Mt) Magnesium to Lithium Ratio Specialty Minerals and Metals Cinovec Kings Valley Sonora Mohanga 0.90% 0.80% 0.70% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00% Lithium Grade (%) Capital Cost (US$m) Lepidolite Hill Mohanga Rose Cinovec Pilgangoora Jadar Kings Valley Sonora Authier Whabouchi Quebec Mt Cattlin Mt Marion Greenbushes King's Mountain Exploration Scoping PFS DFS Dvlpt Operation Source: Company reports, Canaccord Genuity estimates Source: Company reports, Canaccord Genuity estimates *Bubble size relates to LCE production. Note Grey bubbles indicate LCE operating projects Figure 13 and 14 below ranks global lithium brine deposits according to two key considerations, in lithium grades (ppm Li) and magnesium: lithium (Mg:Li) ratios. Higher lithium grades support the potential for lower capex developments and better operating margins while low impurity levels (i.e. Mg:Li ratios) support lower production costs. GXY s Sal de Vida development project ranks well in both metrics, being second to only FMC s Salar de Hombre Muerto in terms of grade, while the project has among the lowest Mg:Li ratios in the peer group. Figure 13: Brine deposits ranked by lithium grade Figure 14: Brine deposits ranked by Mg:Li ratio Source: Company reports, Canaccord Genuity estimates Source: Company reports, Canaccord Genuity estimates 2 16 December

14 Company overview: Galaxy Resources Ltd COMPANY BACKGROUND GXY is an Australian-based lithium development company. Its primary assets are a 100% ownership (subject to 50% earn-in by GMM:ASX) of the Mt Cattlin lithium/tantalum operation in Western Australia, 100% of the Sal de Vida lithium brine project in Argentina, and 100% of the James Bay spodumene project in Canada ((subject to 50% JV earn-in by GMM:ASX; see Asset Overviews) A company history summary is detailed below in Figure 15. Figure15: GXY company history summary Source: Company reports KEY COMPANY MILESTONES Merger with Lithium One Inc Mar 12 GXY completed a merger with TSX-listed Lithium One Inc, in Mar 12. The 1:8 scrip offer valued Lithium One at C$112m at the time of the announcement and represented a 27% premium to Lithium One s previous trading price. The merger delivered to the combined group the Sal de Vida lithium brine project in Argentina, and the James Bay spodumene project in Canada. Sale of Jiangsu lithium carbonate plant Apr 15 GXY completed construction of the US$100m lithium carbonate facility, located in Jiangsu province, China, in The plant at the time was one of the largest lithium carbonate converter plants in SE Asia, and was developed in order to take spodumene concentrate from Mt Cattlin to produce a higher-value lithium carbonate product for sale into Asian markets. In 2012, the plant suffered a major disruption with an explosion killing two workers. Production was halted until December

15 Net debt (A$m) Specialty Minerals and Metals Production at Jiangsu re-commenced in 2013; however, spodumene feed was sourced from Talison s (now Albemarle/Tianqi) Greenbushes operation due to the suspension of spodumene production at Mt Cattlin in In 2014, GXY negotiated a sale of the plant to Sichuan Tianqi Lithium Industries (Tianqi is now a 49% owner of Talison Lithium) for a total value of US$230m (comprising cash of US$122m and assumption of all Chinese debt of US$108m). The consideration for the sale was revised in Feb 15 to US$173m (cash of US$72m and assumption of Chinese debt). The sale process was completed in Q2 15. General Mining Mt Cattlin agreement Sep 15 In Feb 15, GXY executed an agreement with General Mining whereby GMM was granted the right to recommence production and solely operate Mt Cattlin for three years, with an option to purchase the asset for A$30m and a 3% NSR royalty. Under the agreement, GXY was set to receive an annual lease fee of A$2.5m and a 10% production royalty (on tantalum sales). Under the deal, GMM had the right to all revenues from the sale of tantalum from Mt Cattlin, with spodumene sales revenue shared equally. In Jun 15, the terms of the agreement were revised with GMM given the sole and exclusive right to earn a 50% equity interest in Mt Cattlin for total consideration of A$25m (comprising sole funding A$7m of capex to re-start production and three annual instalments of A$6m payable monthly in arrears from the commencement of production). The deal also saw GMM granted the right to earn 50% interest in James Bay through the expenditure of A$5m over three years. Corporate debt reduction & restructure Sep 15 In the last two years, GXY has successfully reduced and re-structured its corporate debt facilities from a peak of +A$210m (comprised US$118m Chinese debt facility associated with the Jiangsu carbonate plant, A$60m in convertible bonds, and +A$30m in other debt) to ~A$35m. This has been achieved through the sale of the Jiangsu plant and associated debt, the re-purchase (at a discount to face value) of half of the convertible bonds, and a terming out of the remaining bonds through a three-year facility. Net debt reduction is illustrated in Figure 16 below. Figure 16: GXY net debt ( ) MarQ'14 JunQ'14 SepQ'14 DecQ'14 MarQ'15 JunQ'15 SepQ'15 Source: Company reports, Canaccord Genuity estimates 4 16 December

16 Change in Target Price Specialty Minerals and Metals VALUATION We have valued GXY using a net asset valuation approach, comprising GXY s 50% interest in Mt Cattlin base case (see Mt Cattlin project valuation), an average of our DCF and market based valuation approaches for Sal de Vida (see Sal de Vida project valuation), 50% of our nominal valuation for James Bay, net of corporate and balance sheet adjustments. As discussed in the Mt Cattlin and SdV project valuation sections of this report, we note the potential for further upside to our valuation which include: Higher spodumene (Mt Cattlin) and Li2CO3 (SdV) prices The potential for an expanded production scenario at Mt Cattlin, which under our modelled expanded case would add a further A$0.045/share to our NAV. A firm development scenario and funding plan for SdV. Figure 17: GXY Net asset valuation estimate Valuation A$m A$/share Mt Cattlin NPV10% Sal de Vida Estimate Exploration & Other (James Bay) Estimate Corporate (53.8) (0.04) Cash Debt (35.5) (0.03) TOTAL Target Price 0.16 P/NAV 0.54x Source: Canaccord Genuity estimates. P/NAV Based on 9/12/2015 price Valuation sensitivity We have run sensitivity analysis on our GXY NAV estimate based on the metrics as shown in Figure 18 below. Our analysis shows our GXY valuation to be most sensitive to the NPV discount rate for Sal de Vida, the prevailing AUD/USD FX rate, and spodumene prices received at Mt Cattlin. Figure 18: GXY NAV sensitivity $0.30 $0.25 $0.20 $0.15 $0.10 $ % -20% -10% 0% 10% 20% 30% Spodumene Price Exchange Rate (A$:US$) Tantalum Price GXY Discount Rate (@10%) Sal de Vida Discount rate (@10%) Source: Canaccord Genuity estimates 5 16 December

17 CORPORATE & FINANCE Capital structure GXY s capital structure is detailed in Figure 19 below: Figure 19: GXY capital structure Price Expiry Issued Shares m $0.09 Options 1 m 4.0 $1.11 Options 2 m 2.9 $1.16 Options 3 m 12.0 $ /09/2016 Options 4 m 25.0 $0.03 1/04/2018 Options 5 m 34.1 Share perf rights Options 6 m 10.0 $0.08 OCP warrants Total Options m 88.0 Fully Diluted m Source: Company reports, Factset, Canaccord Genuity estimates Cashflow & balance sheet We estimate GXY has cash balance of ~A$13m as at the end of DecQ 15, following the re-purchase of A$31m convertible bonds in Nov 15 (completed at a 13% discount to face value). The balance of the convertible bonds (A$31m) were re-financed in late Nov 15 through the establishment of a secured three-year term facility through OCP Asia. Other terms include an 8% p.a. interest rate and the issue of 10m warrants with a floor exercise price of A$0.08. We also note that GXY has A$189m in accumulated tax losses, which may be used to offset income tax payable from any profits from Mt Cattlin. Our forward cashflow and balance sheet forecasts (see Page 4, GXY financial summary) represents our base case forecasts, and excludes any provision for development of the Sal de Vida project. Our cashflow forecasts suggest GXY has sufficient funding to repay current debt but we note that should GXY proceed to develop Sal de Vida, additional capital will be required (see page 37, Sal de Vida Project Development, timetable & funding) Major shareholders GXY s substantial shareholders (+5%) are Acorn Capital (6.9%) and Paradice Investment Management (5.3%). Board of Directors Martin Rowley, Non-Executive Chairman Mr Rowley was a co-founder of TSX and LSE-listed First Quantum Minerals Ltd and is currently that company s Executive Director, Business Development. He was previously non-executive Chairman and director of Lithium One Inc., which was acquired by Galaxy in July Anthony Tse, Managing Director Mr Tse has 20 years of corporate experience in numerous high-growth industries such as technology, internet/mobile, media & entertainment, and resource & commodities primarily in senior management, capital markets and M&A roles across Greater China and Asia Pacific in general. Charles Whitfield, Executive Director Mr Whitfield is the Principal Investment Officer of Drumrock Capital, an investment firm providing capital and advisory services to start-up and early round companies. He 6 16 December

18 was formerly a Managing Director with Citigroup where he held the position of head of the corporate equity solutions group (Asia Pacific). Prior to this, he worked for Deutsche Bank where he was head of the strategic equity transactions group (Asia Pacific) from Jian-Nan Zhang, Non-Executive Director Mr Zhang is the Deputy General Manager of Fengli Group (Australia) Pty Ltd, a subsidiary of the Fengli Group in China, which is a leading private industrial group in China, with diversified interests in iron and steel, commodities trading, shipping and wharf operation related businesses, and is also a shareholder in the company December

19 Company overview: General Mining Corporation Ltd COMPANY BACKGROUND GMM is an Australian based lithium development company. Its primary asset is a right to earn 50% of the Mt Cattlin lithium/tantalum operation in Western Australia, and right to earn 50% of the James Bay spodumene project in Canada (see Asset overview, Mt Cattlin & James Bay) A company history summary is detailed below in Figure 20 Figure 20: GMM company history summary Source: Company reports KEY DEVELOPMENTS Galaxy Resources Mt Cattlin agreement In Feb 15, GXY executed an agreement with GMM whereby GMM was granted the right to recommence production and solely operate Mt Cattlin for three years, with an option to purchase the asset for A$30m and a 3% NSR royalty. Under the agreement, GXY was set to receive an annual lease fee of A$2.5m and a 10% production royalty (on tantalum sales). Under the deal, GMM had the right to all revenues from the sale of tantalum from Mt Cattlin, with spodumene sales revenue shared equally. In Jun 15, the terms of the agreement were revised with GMM given the sole and exclusive right to earn a 50% equity interest in Mt Cattlin for total consideration of A$25m (comprising expending A$7m of capex to commence production and three annual instalments of A$6m payable monthly in arrears from the commencement of production). The deal also saw GMM granted right to earn 50% interest in James Bay through the expenditure of A$5m over 3 years December

20 Change in Target Price Specialty Minerals and Metals VALUATION We have valued GMM using a net asset valuation approach, comprising a 50% equity interest in Mt Cattlin (base case), 50% of our nominal valuation for James Bay, net of corporate and working adjustments. Our per share valuation (Figure 21) is based on a diluted share count of 334m shares, which includes the recent A$7m placement at A$0.18/sh, and 23.7m ITM options at an average exercise price of A$0.10/share. As discussed in the Mt Cattlin project valuation section of this report, we note the potential for further upside to our valuation which includes: Higher spodumene prices at Mt Cattlin The potential for an expanded production scenario at Mt Cattlin which under our expanded case valuation scenario (see page 30) would add a further A$0.20/share to our NAV. Figure 21: GMM net asset valuation estimate Valuation A$m A$/share Mt Cattlin NPV10% Exploration & Other (James Bay) Estimate Corporate (14.3) (0.04) Cash Debt - - Unpaid capital TOTAL Target Price 0.40 P/NAV 0.49x Source: Canaccord Genuity estimates.. P/NAV Based on 9/12/2015 price Valuation sensitivity We have run sensitivity analysis on our GMM NAV estimate based on the metrics as shown in Figure 22 below. Our analysis shows our valuation to be most sensitive to the AUD/USD FX rate, and spodumene prices received at Mt Cattlin. Figure 22: GMM NAV sensitivity $0.60 $0.50 $0.40 $0.30 $0.20 $ % -20% -10% 0% 10% 20% 30% Spodumene Price (US$/t) Tantalum Price (US$/lb) Exchange Rate (A$:US$) Discount Rate (@10%) Source: Canaccord Genuity estimates 9 16 December

21 CORPORATE & FINANCE Capital structure GMM s capital structure is detailed in Figure 23 below. : Figure 23: Capital structure Price Expiry Issued Shares m $0.21 Options 1 m $ /09/2017 Options 2 m $ /09/2018 Total Options m $0.10 Fully Diluted m Source: Company reports, Canaccord Genuity estimates Cashflow & balance sheet GMM had a cash balance of ~A$2.5m as at the end of SepQ 15, and currently has no debt. The company raised A$5m through a placement and rights issue at A$0.05/share in Sep 15, and recently announced the completion of a A$7.2m placement at A$0.18/share. Following the placement, we estimate GMM will have cash reserves of ~A$10m (includes proceeds of rights issue which settled in Oct 15). We estimate that following this raising, GMM has sufficient liquidity to fund initial earn-in payments to GXY and the re-start of operations at Mt Cattlin, but note that a further A$8m in capital is required throughout CY16 to complete process plant upgrades to reach targeted production rates. We expect a majority of this can be funded from existing cash and operating cashflow, with any additional requirements satisfied by the exercise of management options (+A$2m) and offtake related finance/product pre-payment (expected to be finalised in Jan 16) totaling US$10m. Major shareholders GMM s substantial shareholder (+5%) is Investmet, which holds ~14% of the fully diluted capital of the company. Investmet is a company associated with the Executive Chairman Michael Fotios. Board of Directors Michael Fotios, Executive Chairman Mr Fotios is a geologist with 27 years experience in exploration and feasibility for gold, base metals, tin, tantalum and nickel projects. He previously held roles with Homestake Australia and Sons of Gwalia, with prior Directorships including Galaxy Resources ( ). Mr Fotios is also a Director of Northern Star Resources, Horseshoe Metals, and Pegasus Metals. Alan Still, Non-Executive Director Mr. Still is a metallurgist with over 40 years experience in a variety of commodities, including gold and rare earths. Mr Still is also a Director of Horseshoe Metals, Swan Gold Mining and Pegasus Metals. Michael Kitney, Non-Executive Director Mr Kitney is a metallurgist with 40 years of international experience including roles in mine operations, and project feasibility study management. Mr Kitney has experience downstream lithium processing, and is currently COO of Kasbah Resources December

22 Asset overview MT CATTLIN SPODUMENE/TANTALUM PROJECT (GXY 100%, GMM EARNING 50%) Location & access Mt Cattlin is situated in the Phillips River mineral field, which surrounds the township of Ravensthorpe, 450km south east of Perth, Western Australia. The project area (including a number of exploration tenements) covers ~185km 2, and sits on granted mining leases. Access to the property is via sealed highways and/or direct air routes from Perth to Ravensthorpe. The project benefits from infrastructure in the immediate Ravensthorpe area, including roads (potential trucking routes to the ports of Esperance or Bunbury), as well as skilled labour. Water is currently supplied via bore fields, with base load power requirements provided by diesel generators. We note that Mt Cattlin also has real-time solar tracking panels and two wind turbines, providing back-up power to the project. At capacity, the renewable energy systems provide ~15% of the mine sites daily power requirements. Figure 24: Project location Figure 25: Ravensthorpe project plan Source: Google maps Source: Company reports Project history The tenements on which the project is located have been owned by numerous companies since the 1960s, including Western Mining Corp, Pancontinental Mining ( ), Greenstone Resources ( ), Sons of Gwalia (1999 and ) and Haddington Resources ( ). GXY acquired the Mt Cattlin mining lease from Sons of Gwalia in A project milestone summary is shown in Figure 26 below December

23 Figure 26: Mt Cattlin project milestone timeline Source: Company reports In Feb 15, GMM executed an agreement with GXY whereby GMM was granted the right to recommence re-commence production and solely operate Mt Cattlin for three years, with an option to purchase the asset for A$30m and a 3% NSR royalty. Under the agreement, GXY was set to receive an annual lease fee of A$2.5m and a 10% production royalty (on tantalum sales). Under the deal, GMM had the right to all revenues from the sale of tantalum from Mt Cattlin, with spodumene sales revenue shared equally. In Jun 15, the terms of the agreement were revised with GMM given the sole and exclusive right to earn a 50% equity interest in Mt Cattlin for total consideration of A$25m (comprising expending A$7m of capex to re-start production and three annual instalments of A$6m payable monthly in arrears from the commencement of production). Geology & resources The Mt Cattlin project is located within the Phillips River Mineral Field which forms part of the regional Ravensthorpe Greenstone Belt. The central portion of this belt hosts the Mt Cattlin deposit with host rocks comprising of intermediate to mafic volcanoclastic rocks. This sequence comprises approximately 10-20% basalt, 50-70% andesite and 20-30% dacite. Within this host rock, pegmatites dykes occur. The pegmatites dykes display a diverse mineralogy with the deposit categorised on structural and textural grounds as either i) Simple pegmatites, ii) Complex pegmatites or iii) Albite-spodumene pegmatites. The pegmatites are zoned vertically and can be quite variable laterally with a single layer of pegmatite displaying all three lithologies at various locations. Pegmatite mineralization defined to date covers an area of around 1.6 km eastwest and 1 km north-south. The main pegmatite mineralisation lies between 30 m and 60 m below the surface, and outcrops in some locations as indicated in Figure 27 below. However, deeper zones of lithium-mineralised pegmatites occur December

24 over 140m below the surface to the northwest of the main ore body. The ore is flat lying in orientation with vein thickness approaching 20m in some locations. Spodumene-bearing pegmatite is the predominant lithium ore mineral, and several types of spodumene are recognised including light green and white varieties. Tantalum occurs within manganese-rich locations and is considered to occur in a ~1:4 ratio with lithium. Figure 27: Mt Cattlin cross section Source: Company reports A revised Mineral Resource and Ore Reserves estimate for Mt Cattlin was provided by project partner General Mining in August 2015 (Figures 28 & 29). This was updated to meet JORC 2012 requirements and uses a 0.4% Li2O cut-off grade assuming a 10% mining dilution and an additional 5% of revenue from Tantalum sales. We note that the deposit remains open at depth within the main pegmatite (Dowling pit), suggesting the potential for further increases in the resource. GMM are expected to commence resource extension drilling programs later in However, we don t consider the project to be resource constrained with Reserves sufficient to support a ~10 year project life, while further conversion of Inferred resources could see an ultimate mining inventory supporting +15 years of production at the proposed production rate of 800ktpa. Figure 28: Mt Cattlin resources (2015) Figure 29: Mt Cattlin reserves (2015) Resources Mt Grade Mt Li2O Ta2O5 Ta2O5 (Li2O) (ppm) (Mlbs) Mt Cattlin Meas % Indicated % Inferred % TOTAL % Source: Company reports Reserves Mt Grade Mt Li2O Ta2O5 Ta2O5 (Li2O) ppm (Mlbs) Mt Cattlin Proven % Probable % TOTAL % Source: Company reports December

25 Production history Mt Cattlin historically produced 114kt of spodumene concentrate (at a concentrate grade of ~6% Li2O) from 2010 to mid 12 when the operation was suspended. The spodumene product was shipped to China as feed for GXY s Jiangsu lithium carbonate plant. The operation underperformed expectations, with spodumene product recoveries (averaged 53% versus design recoveries of 70%) impacted by poor crushing performance and mica removal. GXY did not report production costs during this period, but lower spodumene prices and a higher AUD also impacted profitability of the operation. Figure 30: Historical Mt Cattlin plant performance Ore Milled (kt) % 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0 0.0% Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Ore milled Li Recovery Grade (Li2O) Source: Company reports Recovery (x100) / Li2O Grade (%) Figure 31: Historical Mt Cattlin spodumene production Spdo Conc (kt) Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Source: Company reports Project development Mt Cattlin has been on care and maintenance since July 2013, and with only limited operation, infrastructure remains in excellent condition. In Oct 15 GMM reported the results of an independent review for a project re-start, based on an 800ktpa project producing 112ktpa of spodumene concentrate and ~500tpa of tantalite concentrate over a mine life of 17 years (Figure 32 & 33). Figure 32: Mt Cattlin scoping study outcomes Figure 33: Mt Cattlin scoping study financial inputs Source: Company reports Source: Company reports December

26 A re-start of operations will clearly benefit from the established plant and infrastructure already on site, as well as open pit pre-strip being already 60% complete (lending itself to a LOM strip ratio of 4:1). While the deposit may not compare as favourably to some other spodumene projects in Australia in terms of grade and tonnes, we consider the +A$100m in sunk capital to be a clear advantage in terms of production lead times. Furthermore, we consider the fact that historical spodumene product was successfully used to produce a Li2CO3 product in GXY s Jiangsu lithium carbonate plant from , suggest a strong likelihood of acceptance among potential convert plants, and presents as a de-risking factor for the project. Figure 34: Mt Cattlin concentrator plant Figure 35: Mt Cattlin open pit Source: Canaccord Genuity Source: Canaccord Genuity Initial capex to re-commence production has been estimated at A$7.5m, with key capital items including refurbishment of the current crushing circuit (~A$3m), upgrade of fines circuit and installation of new equipment to ameliorate past poor metallurgical aspects (A$4.5m). GMM have indicated that new and refurbished equipment within the wet plant will be installed with sufficient redundancy to allow for any potential expansion of production to ~200ktpa of spodumene concentrate. Figure 36 overleaf summarises the existing process flowsheet design, previous plant performance problems, and how GMM plan to resolve these to reach targeted production rates December

27 Figure 36: Mt Cattlin flowsheet description and proposed modifications Crushing and Screening Mica Separation Key Features * The plant previously consisted of a four stage crushing circuit (3 dry and 1 wet stage) to product a -6mm product from ROM ore at a design rate of 1M tpa (420tpoh). *The crushing plant is only operated on day shift with sufficent capacity provided in a fine ore (-18mm) bin. * -6mm crushed ore is pulped and deslimed at 75µm through a cyclone bank. The fines are transferred to the tailings thickener for disposal. * The +75µm ore is fed over to a reflux (cross flow) classifier to remove mica. Reflux classifers use simliar operation principles as other gravity separation (up-current classifier, jigs etc). *The difference in specific gravity of the lighter mica (2.5 g/t) compared to spodumene (3.15g/t) is exploited for effective separation. Previous Limitations *Previously fine material (-25mm) was wet screened over 6.4mm aperture screens with oversize (-18mm +6mm) going to quaternary crushers. This resulted in reduced throughput due to wet feed agglomerating and impacting on the utilisation of the quaternary crushers circuit. * Due to the similar physical properties (specific gravity, size fraction) that mica has with lithium bearing minerals inadequate liberation influenced downstream heavy media separation. M ica content within the lithium concentrate of previous operations was ~20%, above the target grade of 5%. This reduced contained Li2O to 5.2%to 5%. * The overflow product from the reflux classifier was screened at 1.6mm to remove coarse mica flakes. Control of the supension water flowrate and pressure is critcal to maintain effective separation. Proposed modifications *A mobile crusher has been proposed to replace the quaternary crusher. In addition to converting this to a dry application, crush size can be controlled to target the correct size for spodumene recovery via flotation. *The proposed changes along with refurbishment of the current crushing circuit are expected to cost ~A$3m *Crushing circuit to come online within 2-3 months of operations commencing * The reflux classifiers x2 are to be arranged to receive feed from two discrete sizes mm and mm. This is aimed at allowing the reflux classifiers to more selectively remove mica. *The critical variable will be maintaining a product feed size from the crushing circuit that enables effective separation of mica. Recovery from HMS Undersize * Prior to spodumene concentrate recovery by Heavy M edia Separation (HM S), undersize (- 0.5mm) is treated through gravity separation (spirals) to recovery tantalum and residual spodumene. * Tantalum concentrate at ~4.5%Ta2O5 is recovered in the spiral sinks. This product is then dewatered through a thickener and filter prior to stockpiling for product shipment. * Spiral floats contain entrained spodumene which was proposed to be recovered through flotation. *The tailings stream from the spiral and flotation circuit are sent back to a tailings dam for empoundment * Tantalum recovery was negliable due to poor classification within the spiral circuit. This was attributed to a poor control of the feed size due to poor quarternary crusher performance. *Contained Li2O within the tailing stream (~0.8%) suggested very poor recovery and provides the operation with supplmentary plant feed requiring no crushing. It is estimated that ~400kt of tails at a grade of 0.8%L2O is avaiable for use to commision the modified fines circuit. *A series of classifiers (jigs) and gravity shaking (Wilfley) tables will be installed to scalp out coarse tantalum (specific gravity of 8.2g/cc vs Li2O of 2.013) prior to the spiral circuit. It is envisaged to remove 35%of contained Tantalum from this stream. * Additional scavanger stages will be added to the flotation to improved lithium recovery. This design has been based a top size of 0.5mm for the HM S undersize feed. * ~ $4m has been proposed in capital expenditure to upgrade the fines circuit. Recovery from HMS Oversize *The -6mm material from the underflow of the reflux classifier has been seperated from the majority of mica. It is then fed to the HM S prescreen. *The HM S pre-screen separates out the feed into 0.5 to 3mm and 3 to 6mm size fractions. *Ferrosilicon is recovered from product and waste streams by screening ahdn magnetic separation. Source: Canaccord Genuity *Previous operations indicated that very coarse (+0.5mm) Tantalum was affecting the purity of the primary spodumene concentrate. *Overall spodumene recovery of <60%was previously achieved at a concentrate grade of ~5.2%Li2O against a design of 75% *A series of classifiers (jigs) and gravity shaking (Wilfley) tables will be installed to scalp out coarse tantalum (specific gravity of 8.2g/cc vs Li2O of 2.013) prior to the spiral circuit. It is envisaged to remove ~35%of contained Tantalum from this stream. *Is is proposed to install a second series of cyclones to improve the purity of the spodumene concentrate product. *$8m in capital expenditure has been forecast to improve yields and optimse the process. Equipment has been selected with adequete redundancy to accomodate an expansion in throughput of +200kt of spodumene concentrate. This equipment has been based off previous design work from leading Perth firm M SP Engineering and can be fitted into the exisisting plant structure with little modifications December

28 Project timetable GMM s proposed project timetable is shown in Figure 37. It currently envisages first concentrate production is due in MarQ 16, following completion of plant upgrade works. Initial plant feed is expected to be sourced from reclaimed tailings (400kt at ~1% Li2O) and 70kt of ROM ore currently on the ROM pad. Upon the commencement of production it is proposed to initially feed reclaimed tailings exclusively to the wet process plant in order to optimise the circuit, reduce initial unit operating costs (no mining or crushing) and enable refurbishment of the crushing circuit to be completed. Reclaimed tailings are then planned to be blended with crushed ore feed as operations ramp up to steady state. Figure 37: Mt Cattlin project timetable Source: Company reports Offtake, marketing & sales GMM signed a Sales and Distribution Agreement with Mitsubishi Corporation in Oct 15, which covers spodumene concentrate production from Mt Cattlin. The agreement has a term of 4 years (plus an option for a 1 year extension based on mutual agreement), and gives Mitsubishi the exclusive right to sell up to 100% of production into China, South Korea, Taiwan and Vietnam. Mitsubishi will act as principal buyer of the concentrate, and is obligated to use reasonable endeavours to achieve the best price, Furthermore, Mitsubishi has priority over spot buyers for Mt Cattlin concentrate, provided it at least matches the prevailing market price. Quantity and pricing for the agreement is to be agreed on a quarterly basis in line with market conditions. The agreement also features two-way exclusivity in that Mitsubishi cannot distribute spodumene concentrate from any other sources other than Mt Cattlin to the named countries We understand GMM is in discussions with a potential offtake partner for the tantalum production from Mt Cattlin. We expect an update on this front in early December

29 Production We have derived a project valuation for Mt Cattlin based on an NPV10%, based on the following assumptions: Mining inventory of 15Mt at 1.08% Li2O and 150ppm Ta2O5 Total capex of A$15m and annual sustaining capex of A$2.4m 800ktpa open pit mining with an average LOM strip ratio of ~4:1 Recoveries of 72% for spodumene and 65% for tantalite; spodumene concentrate grades of 6% Li2O and tantalite concentrate grades of 4.5% Ta2O5. Based on the above assumptions, we estimate average annual spodumene concentrate production of 108ktpa and tantalite concentrate production of ~1,800tpa. Our production estimates are shown in Figure 38 below. Figure 38: CGe production & cost estimates Spodumene conc prod'n (kt) Production costs (US$/t conc) e 2018e 2020e 2022e 2024e 2026e 2028e 2030e 2032e Spodumene prod'n Cash costs (net of credits) Spod conc 6% Li2O price Source: Canaccord Genuity estimates Key financial assumptions include: Mining costs of A$4.50/t material moved Processing & site G&A costs of A$20/t Product trucking costs (trucking to port of Esperance) A$22/tonne State royalty of 5% and Greenstone Resources production royalty of A$1.50/t on tantalum ore Marketing fees 5% and impurity penalties 5% We estimate average LOM production costs of US$342/tonne of spodumene concentrate, net of tantalite by-product credits of US$137/tonne (assumes tantalite price of US$75/lb and AUDUSD:0.69 from 2020). Project valuation Our valuation is based on spodumene and tantalite pricing assumptions as illustrated in Figure 39 below. Our conservative assumptions see an average annual price increase of 4% for spodumene concentrate, and conservative assumptions for tantalite at US$75/lb flat (versus current market prices of ~US$90/lb) December

30 US$/tonne US$/lb Specialty Minerals and Metals Figure 39: CG spodumene and tantalite pricing assumptions Source: Canaccord Genuity estimates Spodumene 6% Li2O (RHS) Tantalite (RHS) Based on the above assumptions/estimates, we derive a base case, post-tax NPV10% for Mt Cattlin of A$253m. We highlight the optionality offered by the potential to expand plant capacity and production. Noting that the project is not resource constrained (current assumed mine life of 15 years), and with the likelihood of relatively low capital costs to expand the plant, we see clear potential for enhanced value for the operation should production be increased. We note that any expansion would be reliant on sufficient market demand for spodumene concentrate, but noting current and expected tightness in the spodumene market, an expansion could be a distinct possibility in our view. On this basis, we have also modelled an expansion case for Mt Cattlin, whereby plant throughput is increased 60% to 1.6Mtpa, lifting production to 208ktpa of spodumene concentrate. In this scenario, we have assumed expansion capex of A$45m (consisting of upgraded crushing circuit, additional fines recovery capacity and TSF expansion costs), starting 1H 17. An expanded project would lift our project valuation (NPV10%) 44% to A$364m December

31 SAL DE VIDA LITHIUM BRINE PROJECT (GXY 100%) Location & access The Sal de Vida (SdV) project is located on the northern boundary of the Catamarca Province and the southern boundary of Salta Province, in the Salar del Hombre Muerto (Figure 40). The salar is situated ~1,300km NW of Buenos Aries and 175km SW of Salta city, in the Argentinean Altiplano, and lies at an altitude of ~4,000m. The project area covers ~420km 2, and comprises a number of Mining Licences ( Minas ) and Mining Claims ( Cateos ). The Minas and Cateos comprising the project area cover the eastern sub-basin of the salar, proximal to FMC Corporation s (FMC:NYSE Not rated) Fenix lithium brine operation on the western part of the Salar (Figure 43), and Orocobre s Tincalayu borate mining operation to the north west.. Access to the property is via all-weather, sealed and unsealed roads, approximately 390km from the City of Salta. Infrastructure in the region is generally considered limited; however, any development is expected to benefit from a gas pipeline extension running from the town of Pocitos to FMC s Fenix operation (24km from GXY s SdV operations site). Figure 40: Location map Source: Google Maps December

32 Figure 41: Salar de Hombre Meurto & Sal de Vida project area Source: Company reports Ownership & history GXY acquired a 100% ownership of SdV through its merger with Lithium One Inc in Prior to this, Lithium One had acquired the project through an initial purchase and consolidation of a number of smaller claims throughout the eastern part of the Salar in 2009 and In 2010, Lithium One entered into an agreement with Korea Resources (KORES) to acquire an initial 4% equity in the project, with an option to earn an additional 26% through the funding and delivery of a feasibility study to a cost of US$15m. KORES subsequently brought GS Caltex and LG International in as partners in the joint venture, with each able to earn a 10% interest, and Lithium One retaining 70%. KORES eventually let the option lapse in Jun 13, with GXY reverting to 100% ownership in Sep 15 following the purchase of KORES 4% interest for US$2.5m. Geology The SdV project is a lithium-rich salar, situated in the eastern and northern sub basins of the Hombre Muerto basin (Figure 42). The basin itself is similar to other salar basins in Chile, Argentina, and Bolivia, with basin formation related to the volcanogenic origins of the Andes mountain ranges. These mountain ranges act as natural drainages, with lithium (along with other minerals such as boron, potassium, magnesium) in the groundwater derived the alteration and weathering of surrounding volcanic rocks. The mineral rich brines collect in these basins, and subsequently undergo sedimentation. High evaporation rates and limited precipitation then resulting in the concentration of the lithium and other minerals within the brine December

33 Figure 42: Project location relative to other basins in the Andean Altiplano Source: Company reports Resources/reserves Brine deposits differ from hard rock mineral deposits due to fluid mobility brine is a fluid hosted in an aquifer and thus has the ability to move and mix with adjacent fluids once extraction starts. An initial in situ resource estimate is based on knowledge of the geometry of the aquifer, and the variation in drainable porosity and brine grade within the aquifer. Based on this, flow rates and other hydraulic properties of the aquifer material are considered as important as the chemistry and mineral tenor. GXY s resource methodology consisted of two key components: characterisation of the mineral grade dissolved in the brines, and characterisation of the host aquifer drainable porosity that contains the resources. These key parameters were used to estimate the total amount of brine, and therefore contained lithium and potassium that could be theoretically extracted from the concession. GXY last completed a resource estimate for SdV in 2012 (Figure 43). We highlight that Sal de Vida features a number of favourable characteristics for the development of a brine deposit including good lithium grades, low Mg:Li ratios (benefits production costs), elevated Potassium grades (potential by-product credits) and low sulphate levels (low impurities). The resource has been defined to a depth of +200m based on drilling undertaken between 2010 and December

34 Figure 43: Sal de Vida resources (2012) Concentration Contained Resources Vol (km3) Li (mg/l) K (mg/l) Li (t) LCE (Mt) K (t) Sal de Vida Meas , , ,260,400 Indicated , , ,218,840 Inferred , , ,682,330 TOTAL ,377 1,362, ,161,570 Source: Company reports & Canaccord Genuity estimates As a pre-cursor to the completion of a Definitive Feasibility Study, GXY released a maiden Reserve estimate for SdV in Apr 13. The Reserve estimation methodology differs from that used to estimate the resource, instead focussing on the potential for recovery of lithium and potassium via well field pumping in selected areas. Brine pumping tests were completed in Oct 12, with wells drilled to a depth of 160m, and brine pumping rates of 16 L/sec. The tests revealed an average assayed lithium grade of 760mg/L, with potassium grades of 8,800mg/L. The Reserve was based on a numerical groundwater flow model projection, which indicated that the proposed well fields would be able to support an average annual brine extraction rate of 30,000m 3 /day (~350L/sec). Based on this, the Reserve is sufficient to support a +40 year mine life, although we note that the Resource of +7Mt of contained LCE lends scope for a significantly longer operation. Figure 44: Reserves (2013) Concentration Contained Reserves Vol (km3) Yield (%) Li (mg/l) K (mg/l) Li (kt) LCE (Mt) K (Mt) Sal de Vida Proven % 518 5, Probable % 483 5, TOTAL Source: Company reports & Canaccord Genuity estimates; NB: assumes 500mg/L Li cut off Feasibility studies GXY completed a Definitive Feasibility Study (DFS) for SdV in Apr 13. The study was based on the 2013 Reserve estimate, and demonstrated the viability of a +40 year, 25ktpa Li2CO3 and 95ktpa potash project based on the development of evaporation ponds, a lithium carbonate plant and potash production plant. Key outcomes of the DFS are shown in Figure 48. The DFS estimated capital costs totaling US$369m (Figure 47), with direct costs of US$275m. The DFS estimated operating costs of US$2,200/t net of potash byproduct credits (study based on a Li2CO3 price of US$6,395/t and potash price of US$500/tonne) December

35 Figure 45: 2013 DFS capex breakdown Figure 46: 2013 DFS outcomes Source: Company reports Source: Company reports Process flow design The DFS contemplated the production of a refined Li2CO3, product based on the Silver Peak process (Figure 47), comprising the following key processing stages: Brine pumping: Well fields are located in two separate locations on the salar, in the south west and east. Locations were selected based on brine quality, extent of the aquifer and brine pumping rates. A total of 24 well field pumps ( m depth) will then pump the brine to the pond system for initial treatment. Pre-treatment stage: Nearly all magnesium is removed from the brines through the addition of lime in the pre-treatment stage. The low magnesium content of the SdV brines makes removal at an early stage of the process possible, thus benefitting production costs. Evaporation stage: the clarified brine is pumped to a series of evaporation ponds, where initial ponds utilise natural evaporation to concentrate the brine and remove the excess halite (common salt). Subsequent ponds further concentrate the brine, resulting in the crystallisation of potassium, gypsum and borate which are then harvested for the production of potash. Excess calcium and sulphate are removed throughout the system. Recovery stage: The concentrated brine is pumped to the processing plant at a rate of 33m 3 /sec with a minimum Li content of 2% w/w. Processing involves the removal of boron through solvent extraction, with remaining boron, magnesium and calcium removed through ionic exchange. Residual impurities (calcium and magnesium) are further removed through the addition of soda ash, and passed through a filtration system to remove the precipitated solids. Heat treatment and further soda ash treatment precipitates out the Li2CO3 and is extracted via centrifuges before purification. Purification: Purification (targeted purity levels of 99.5% Li) is achieved via through digestion of the Li2CO3 and addition of CO2, with the resultant liquor passed through a further ionic exchange step to remove the entrained impurities. Steam treatment then precipitates out a purified Li2CO3 product which is then micronized (5 micron) and bagged for transport December

36 Figure 47: SdV process flow diagram Source: Company reports The DFS also contemplated the production of a saleable potash product (95ktpa) through the harvesting of potassium chloride (KCl) from the initial evaporation ponds. The potash plant uses comminution, flotation and centrifugation to produce a purified potash product suitable for fertilizer production. Project development, timetable & funding GXY commenced a development optimisation assessment of the project in 2013 with a view to reducing the upfront capital costs. The assessment is centered on the staged development of the asset, utilising a modular project design allowing a subsequent expansion. The current concept could see development split into two stages with parameters potentially comprising: Phase 1: 6-10ktpa Li2CO3, Capex US$ m (versus original US$369m) Phase 2: expansion to 25ktpa Li2CO3 Further options being considered include: Partial development of the evaporation ponds Phase I development only seeing the first stages of the plant being built and producing a lower purity, intermediate product (i.e. deferral of purification circuit) we note that the benefit of higher purity production and the margin it affords is likely to outweigh the benefit of any upfront capital savings. As such, we consider this option unlikely. Deferral of Potash production We note there is currently no defined development timetable for SdV, with development of the project reliant on finalising a lower capex development and December

37 Lithium carbonate (ktpa) US$/tonne Li2CO3 Specialty Minerals and Metals funding plan for the project. However, based on the DFS construction timetable (+18months), it is possible that production could commence in In our view, GXY s 100% ownership of SdV affords it some flexibility as to how any development may be funded. Noting that even if a lower capex staged development is pursued (capex ~US$ m), it would still require a significant equity contribution against GXY s current equity value. As such, funding considerations could include selling down an equity interest in the project to a strategic JV partner (e.g. Orocobre and Toyota Tsusho at Olaroz), as well as increased debt funding. Project valuation In our view, GXY s SdV project holds significant option and strategic value, which is likely to become more evident from 2016 given expectations for continued tightness in the lithium market and the higher quality nature (Li grades, low impurities) of the project. However, given the current uncertainty around the design, capex, development path and funding for the project, we have derived a range of valuations for SdV. These include: 1. DCF based on a staged development 2. Market based valuation 1. DCF valuation Our DCF valuation for SdV is based on the following assumptions: Staged project development comprising 10ktpa Li2CO3 Stage 1, and subsequent expansion to 25ktpa Li2CO3 40 year mine life based on the 2013 Reserve estimate of 1.14 Mt of LCE Stage 1 capex of US$120m (plus additional working capital), with project construction commencing in late 2016, and first Li2CO3 production in late 2018 Stage 2 capex of US$185m to take production to 25ktpa; construction commences in mid-2020 with Stage 2 production commencing in mid-2022 Our assumed project development includes no potash recovery circuit, reducing upfront capital (US$26m in the DFS for the potash circuit) but increasing production costs by virtue of the removal of by-product credits. We estimate Stage 1 production costs of US$3,915/t LCE and expanded Stage 2 total costs of US$3,418/t LCE. Conservative Li2CO3 prices of US$7,100/t from Figure 48: CG modelled production and costs 2019e-2033e Steady state production (25ktpa) 2016e 2017e 2018e 2019e 2020e 2021e 2022e 2023e 2024e 2025e 2026e 2027e 2028e 2029e 2030e 2031e 2032e 2033e Lithium prod'n Total cash costs (RHS) Lithium carbonate price (RHS) 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Source: Canaccord Genuity estimates December

38 Our production and cost estimates are illustrated in Figure 48, and based the above assumptions we derive a post-tax NPV 10% (100%) for SdV of US$98m (A$137m). 2. Market based valuation We have derived an average market based valuation for SdV based on comparable (i.e. lithium brine deposits) asset transactions in Figure 49. Figure 49: Comparable transactions valuation summary Year Asset Acqurier Interest Value (US$m) Implied Project Seller Value (US$m) 2008 Salar de Rincon Sentient Group 100% Admiralty Res* 2012 Salar de Olaroz Toyota Tsusho 25% Orocobre 2015 Sal de Vida Galaxy Resources 4% KORES 2015 Cauchari-Olaroz Western Lithium 100% Lithium Americas** Average 91.9 Source: Company reports, Canaccord Genuity estimates Based on the average value of comparable transactions, we estimate a marketbased value for SdV of US$92m (A$128m) December

39 JAMES BAY LITHIUM PROJECT (GXY 100%; GMM EARNING 50%) Location & Access The James Bay lithium pegmatite project is located in north-west Quebec, Canada. The project is readily accessible by sealed roads and is 381km from the town of Mattagami which provides access to mining infrastructure and a skilled workforce. The nearest airstrip to the James Bay project is ~15kms away. The project is exposed to seasonal extremes common in Canada. Winter (October to April) temperatures range from -45 to 5 degrees generally associated with significant snow cover, whereas summer months are typically characterized by temperatures between 15 to 35 degrees. While not prohibitive to commercial development, we expect the majority of the feasibility work to be completed in the summer months. Figure 50: James Bay location map Source: Google Maps Project History The James Bay deposit was first discovered in 1966 and drill tested by the Canadian government in 1977, where three diamond holes confirmed the presence of spodumene mineralisation. Little modern exploration was completed until Lithium One began drilling in During a two year drilling campaign which followed targets based on extensive surface mapping, the presence of wide pegmatite intersections with several hundred metres of lateral extent and a strike length of >1km was confirmed. Drilling returned consistent grades throughout the deposit of % Li20 which culminated in release of a maiden resource of 22.2Mt at 1.3% Li2O in November Shortly after release of the James Bay maiden resource, GXY signed an agreement with Lithium One to earn up to 70% in the project through C$3m cash payment and completion of DFS. In March 2012, GXY and Lithium One ended up merging and GXY currently has 100% ownership of the project. GXY currently own 100% of the James Bay project. However, in June 2015, the company executed an agreement that will allow GMM to earn a 50% stake by December

40 spending US$5m over a 3 year period. Part of the agreement will require GMM to contribute 50% of the expenditure in the first 2 years which it expects to fund from cashflow from the Mt Cattlin operation. Figure 51: James Bay project milestone summary Source: Company reports Geology & resources James Bay is situated on the north-eastern part of the Superior geological province, within the Eastmain greenstone belt. Lithium mineralisation is concentrated in swarms of pegmatite dykes. The individual pegmatite dykes vary in width from m. Generally outcropping from surface, the pegmatite dykes form a discontinuous corridor with a traced strike length of 4km and width of 300m. Surface mapping has identified 15 different pegmatite swarms within the deposit, each consisting of up to seven dykes. Pegmatites form by the crystallisation of post-magmatic fluids enriched in light elements such as lithium, boron and beryllium inside the crust. Geological investigations on the James Bay dykes have indicated that almost all are spodumene bearing. The mineral spodumene (LiAlSi2O6), in its pure form contains 8.02% Li2O. Spodumene crystals at James Bay are relatively coarse, usually more than 5cm in length although some have been recorded at >80cm December

41 Figure 52: James Bay base line cross section Source: Company reports Figure 53: Pegmatite outcrop at James Bay Source: Company reports In November 2010, Lithium One announced a maiden resource estimate for James Bay comprising 22.2 Mt at 1.28% Li2O. The resource was estimated using a 0.75% Li2O cut off. Figure 54: James Bay resources (2010) Source: Company reports December