Catatysing interestback to miningThe condiiions we are seeing now are

the early stages of the nexl boom and we

expect to see growing market interest in

miners albeit only gradually. Whitst market

weight of miners is at cycticat lows, juniors

are abLe to raise money again, IY&A tooks

to be gaining pace and there is a war chest

of PE funds watching from the sidelines,

so il seems there is a shared common

betief by both miners and some seasoned

investors that current valuations present an

opportunity.

lnstitutions that manage large amounts of

money are presentty weighted away from

mining, and this is the tide that needs to

turn before ihere witl be an improvement in

miners trading vatuations and mining equity

indices. A number of conditions are expected

to encourage institutions to begin increasing

wei ghting towards miners:

. Sustained cost improvements /profrtability by miners.

. A [arge rash acquisition by private equity

buyers would be a strong signat to the

market.. Cyctical move out of tech (a competing

risk space).. ln the broader market, an increase in

interest rates would decrease the appeat

of yietd stocks.

The short term chatlenge for institutions,

given many are ctose to futty invested, is

determining what to sett to provide the funds

to invest in mining. The tatter presents the

greater challenge, whitst the broader market

is performing welt there may be a sense of

inertia towards exiting successfut positions.

Large cash takeovers such as the A$58 bid

for Tott Holdings (announced 18 February

20'1 5) may begin this task for portfotio

managers. Any outperformance of miners

coutd be setf-perpetuating, as institutions

look to cover their peers performance.

The improvement in sentiment is stilt

young, and possibly fragile so there remains

risk on the outtook. Recent mining equity

performance has been closely related to

falting commodity prices, many of which

have fatlen through their perceived marginal

cost resistance levels, so further faLls cannol

be discounted. However, having now

come wett off of highs, any f urther falts in

commodities cannot be as [arge and given

the setling of the last three years, mining

equities are now arguabty pricing a degree

of commodity price pessimism. No doubt

there witl be volatility due to commodities

but the growing abundance of value oriented

buyers may limit downside.

The bust that started in 201'l did n0t have

as ctear a catatyst as previous busts, and as

described eartier previous busts have also

been much more rapid - it may be possible

that this bear markei dies of exhaustion and

extreme old age. [ycles turn more gradually

from bust to boom than from boom into

bust. lt's tikely for the upswing catatyst to be

a combination of many smalter factors and

one by one investors decide the worst has

passed, assets are cheap, so they buy again.

The swallows are on the move.

Sentiment has improved since IYay 2014

when the Lion ctock was moved to 4 o'clock.

ln recognition of this progression, the ctock

is now at 4:30. lt is worth noting that s0me

sectors of the market may be out of synch

with the clock which represents the market

as a whole. For example - smatl iron ore

miners are at more tike 1 or 2 o'clock.

Likewise though, PE buyers coutd be the

frrst to think the market requires a cash deaI

(5 o'ctock).

ryilhisll'#pfiflLt,7 Papetlakeouets /,

CRASHCompany liquidations

Peoole leave biocompanies (top $ smaTl

companies short careers)

Rising exploration

BCDOM

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