Australian Lithium Miners - macquarie.com.au · Altura Mining AJM Andrew Hodge Underperform 0.17 0.20 0.16 -3% Source: Company data, Macquarie Research, August 2016 Orocobre remains

Please refer to page 15 for important disclosures and analyst certification, or on our website

www.macquarie.com/research/disclosures.

AUSTRALIA

Macquarie Lithium Sector Coverage

Orocobre (ORE.ASX)

Market cap ($Am) 905 Recommendation OPF Target price 5.00

Pilbara Minerals (PLS.ASX) Market cap 615 Recommendation UPF Target price 0.50

Galaxy Resources (GXY.ASX) Market cap 605 Recommendation UPF Target price 0.41

Neometals (NMT.ASX) Market cap 222 Recommendation OPF Target price 0.45

Altura Mining (AJM.ASX) Market cap 203 Recommendation UPF Target price 0.16

Source: Company data, FactSet, Macquarie Research, July 2016

9 August 2016

Australian Lithium Miners Tomorrow’s supply today Near-term supply wave in lithium

As we highlighted in our recent Commodities Comment we see a near-term

lithium supply wave building. Supply response from existing brine producers is

already accelerating and Australian hard rock exports have bounced back.

Off-contract LCE pricing in China has pulled back from its peak and contract

prices are showing early signs of weakening.

Australia’s two new mines at Mt Marion and Mt Cattlin are about to begin

production and are now targeting immediate expansions. Assuming a smooth

ramp-up at both mines, we expect Australian spodumene production to

double over the next 12 months.

That being said, global EV sales growth, driven by China, has surprised to the

upside. However, at current lithium intensities and battery sizes, global EV

production needs further ~1.6m pure electric vehicles to be sold to absorb the

supply increase. Global pure EV sales in 2015 were <450k, with Chinese

sales at 247k. Even in the context of China’s rapid EV growth, it seems

unlikely this required growth will materialise so quickly, and this sensitivity

doesn’t factor in production increases from elsewhere.

Outlook

We are entering an interesting phase for the Australian hard rock lithium

sector. It seems that incumbent producers might be more agile, and more

motivated to keep new supply out of the market than expected. In our view,

how pricing plays out in the near term will be dependent on the success of

MIN/NEO and GXY. Should things go smoothly, then the turning point for

lithium pricing could arrive earlier than previously expected. In the medium

term, we expect the higher production from the two new mines to now satisfy

demand to 2021, previously 2019.

Longer term, we remain positive on the outlook for both EVs and the LiB

sector more broadly. We understand that significant conversion capacity is

being built in China, and continue to believe that China will be the key driver

of demand. But the low barriers to entry for hard rock mines and the apparent

ability of existing producers to ramp up suggest to us that supply will always

be able to meet or even outstrip demand.

Orocobre (ORE AU, A$4.32, Outperform, TP: A$5.00, Andrew Hodge)

remains our preferred pick in the lithium sector as it is already in production

and has been able to realise current off-contract pricing. We view MIN/NMT’s

Mt Marion project as the largest and lowest-risk new addition to hard rock

lithium supply. We remain positive on GXY’s Mt Cattlin project, which we

expect to be in production before the end of the year, but we believe the stock

is still factoring in a premium to our long-term price forecasts. In light of the

significant and near-term expansion plans for Mt Marion and Mt Cattlin, we

think the outlook for PLS and AJM looks more challenging.

The key risk to near-term price expectations is the potential for delays in the

commissioning of Mt Cattlin or Mt Marion, which is likely to see a resumption

of stronger pricing. We’d expect this to be a short-term phenomenon as we

believe technical issues are likely to be resolved quickly. Given the rapid

response we’ve already seen from incumbent producers, the race to

production has now become a sprint.

http://www.macquarie.com/research/disclosures

Macquarie Wealth Management Australian Lithium Miners

9 August 2016 2

Tomorrow’s supply today Near-term supply wave in lithium

As we highlighted in our recent Commodities Comment we see a near-term lithium supply wave

building. Supply response from existing brine producers is already accelerating and Australian

hard rock exports have bounced back. Off-contract LCE pricing in China has pulled back from its

peak and contract prices are showing early signs of weakening.

Fig 1 Chinese lithium import prices had a strong 2Q, in line with expectations…

Fig 2 …however, the Chinese spot market has lost steam since May/June

Source: China Customs, Macquarie Research, August 2016 Source: SMM, Macquarie Research, August 2016

Australia’s two new mines at Mt Marion and Mt Cattlin are about to begin production and are now

targeting immediate expansions. Assuming a smooth ramp-up at both mines, we expect Australian

spodumene production to double over the next 12 months.

Fig 3 Assuming a smooth ramp-up, Mt Marion and Mt Cattlin will double Australian spodumene production

Fig 4 PLS’s Pilgangoora could add a further 330ktpa of spodumene capacity from 2018

Source: Port data, Company data, Macquarie Research, August 2016 Source: Port data, Company data, Macquarie Research, August 2016

That being said, global EV sales growth, driven by China, has surprised to the upside. However, at

current lithium intensities and battery sizes, global EV production needs further ~1.6m pure

electric vehicles to be sold to absorb the supply increase. Global pure EV sales in 2015 were

<450k, with Chinese sales at 247k. Even in the context of China’s rapid EV growth, it seems

unlikely this required growth will materialise so quickly, and this sensitivity doesn’t factor in

production increases from elsewhere. We currently assume only a 675k global increase in pure

EV sales over this period.

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9 August 2016 3

Hard rock lithium outlook – over before it started?

We are entering an interesting phase for the aspirant Australian lithium sector. It seems that

incumbent producers might be more agile, and more motivated to keep new supply out of the

market than expected. In our view, how pricing plays out in the near term will be dependent on the

success of MIN/NEO and GXY. Should things go smoothly, then the turning point for lithium

pricing could arrive earlier than previously expected. In the medium term we expect the higher

production from the two new mines to satisfy demand to 2021.

Fig 5 We expect Mt Marion to ramp up quickly…

Fig 6 …and expect Mt Cattlin to be a nameplate in CY17

Source: NMT, Macquarie Research, August 2016 Source: GXY, Macquarie Research, August 2016

Longer term, we remain positive on the outlook for both EVs and the LiB sector more broadly. We

understand that significant conversion capacity is being built in China, and continue to believe that

China will be the key driver of demand. But the low barriers to entry for hard rock mines and the

apparent ability of existing producers to ramp-up suggests to us that supply will always meet or

even outstrip demand.

Fig 7 The market now looks oversupplied from 2017

Fig 8 Once MIN and GXY are online, the market no longer needs new projects

Source: Customs Data, Company Data, Macquarie Research, August 2016

Source: Customs Data, Company Data, Macquarie Research, August 2016

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9 August 2016 4

Changes to our forecasts, valuation and target prices

Company share prices already appear to be factoring in lower prices compared to when we

launched our lithium coverage in May. In light of the hardening of our view that oversupply is

already a structural feature of the lithium market, we have removed the premium from our pricing

assumptions for the Australian hard rock miners and now value them at 1x NPV using our price

deck. We have not made any changes to our recommendations, changes to our target prices are

detailed below.

Fig 9 Changes in target prices

Company Code Analyst Recommendation Share price TP Old TP New Up/down

Galaxy Resources GXY Ben Crowley Underperform 0.47 0.42 0.41 -13% Neometals NMT Ben Crowley Outperform 0.40 0.55 0.45 18% Pilbara Minerals PLS Ben Crowley Underperform 0.55 0.65 0.50 -9% Altura Mining AJM Andrew Hodge Underperform 0.17 0.20 0.16 -3%

Source: Company data, Macquarie Research, August 2016

Orocobre remains our preferred pick in the lithium sector as it is already in production and has

been able to realise current off-contract pricing.

We view MIN/NMT’s Mt Marion project as the largest and lowest risk new addition to hard rock

lithium supply. We remain positive on GXY’s Mt Cattlin project which we expect to be in production

before the end of the year but we believe the stock is still factoring in a premium to our price

forecasts. Similarly we have not changed our view that medium-term demand does not support

the development of the company’s Sal de Vida brine project.

In light of the significant and near-term expansion plans for Mt Marion and Mt Cattlin, we think the

outlook of PLS’s Pilgangoora project looks more challenging. We note that the company has

signed a binding off-take agreement for 140kt of 6% spodumene and signed a MoU for a

downstream processing facility, both with General Lithium Corporation. In our view the project is

the most likely of the medium-term developments to get up but demand will need to surprise to the

upside to secure its development as currently planned.

In June, AJM completed a capital raising at a ~9% discount to the 30-day VWAP, and we

anticipate similar, if not larger, discounts would be required for the necessary capital to develop

their own Pilgangoora project. These capital raisings would more than double shares currently on

issue. AJM are still targeting first production in Q4CY17, but their much larger and better funded

neighbour PLS expect a longer time to market, higher costs and lower recoveries. As AJM are

projecting to mine essentially the same deposit, we query the achievability of this target.

The key risk to near-term price forecasts is the potential for delays in the commissioning of Mt

Cattlin or Mt Marion is likely to see a resumption of stronger pricing. We’d expect this to be a

short-term phenomenon as we believe technical issues are likely to be resolved quickly, with the

spectre of higher production from incumbent producers is already growing. Given the rapid

response we’ve already seen, the race to production has now become a sprint.


9 August 2016 5

Recent company updates

Galaxy Resources (GXY AU) UPF TP

Progress at GXY’s Mt Cattlin appears to be gathering pace ahead of the company’s September

target for its first concentrate shipment. Following initial results from the commissioning of the

fines circuit the company has decided to expand processing capacity to 1.6Mtpa, double its initial

capacity and 400ktpa more than the 1.2Mtpa expansion case that we modelled. Annual

spodumene production is now expected to be in the range of 160kt-240kt, or ~18kt-28kt LCE.

GXY’s takeover offer for its Mt Cattlin development partner General Mining (GMM.AU, Not rated)

has been completed giving GXY 100% ownership of the Mt Cattlin project. The offer of 1.65 GXY

shares for one GMM share valued GMM at ~$240m.

Fig 10 Modelled Mt Cattlin production (LCE)

Source: GXY, Macquarie Research, August 2016

GXY updated the market on its off-take contracts. The second of its two contacts has now been

signed, although for half the tonnage originally planned. GXY will sell 15,000t of 5.5% Lithia

spodumene concentrate into the off-take at US$600/t against the original 30,000t. GXY now has

45,000t of concentrate contracted and has received a total of US$13.5m, 50% of the off-take

value, in pre-payments.

With the signing of the second contract GXY now has a total of 120,000t of concentrate contracted

in FY17. Prices are subject to negotiations expected to be completed in late CY16.

The company also provided an update on recent exploration drilling at Mt Cattlin. Drilling was

successful in intersecting spodumene bearing pegmatite at a depth of 376m. Whilst academically

interesting, we do not believe this in any way enhances the economics of Mt Cattlin.

Work at the Sal de Vida project continues with the build-out of an owner’s team underway and

plans for a pilot plant progressing. Whilst we acknowledge that Sal de Vida is more advanced than

many other brine development projects, we are still of the view that increased utilisation of existing

capacity or expansion of currently producing projects is likely to occur ahead of the projects

commercialisation.

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9 August 2016 6

Neometals

NEO and the Mt Marion operator Mineral Resources (MIN AU, A$9.74, Underperform, TP:

A$8.30) announced a doubling of the planned capacity at the mine. Mt Marion is now expected to

produce 400kt of spodumene concentrate annually. The increase has come from a 120ktpa

expansion of the fines circuit, lifting fines capacity from 80ktpa to 200ktpa. The project’s off-take

partner and 43.1% equity owner has already agreed to take all the additional fines production.

Fig 11 Forecast Mt Marion production (100% basis)


Ganfeng has now committed to a 100% life of mine take-or-pay off take for 200kt of coarse 6%

Lithia chemical grade spodumene concentrate and 200kt of 4-6% Lithia fines concentrate from Mt

Marion.

In an interesting development with potential ramifications for the shape of the spodumene market

MIN has entering into an agreement with Global Advanced Metals Pty Ltd (GAM) to purchase the

Wodgina mine and all the surrounding exploration tenements. Production at the mine has focused

on tantalum but the area is rich in pegmatites. We understand that there is also a substantial

quantity of spodumene bearing tailings at the mine.

Potentially more significantly MIN will also purchase GAM’s right of first refusal over off-take from

PLS’s Pilgangoora project. There is currently some legal uncertainty over the situation but we

believe there is potential for Ganfeng to access a further ~40kt LCE from 2018.

The JV also announced a 160% increase in resources at the Mt Marion deposit. The increase

largely sits in the Inferred category with drilling upgrading the original 23.2Mt Indicated and

Inferred resource to Indicated. No reserves have been declared as yet and we leave our overall

10-year mine life assumption unchanged but note that this could be extended significantly.

Fig 12 Mt Marion Lithium resource

Resources Category Mt LiO2 LiO2 (kt)

Mt Marion Lithium Measured - - - Mt Marion Lithium Indicated 26.4 1.33% 351.1 Mt Marion Lithium Inferred 34.1 1.39% 474.0

Mt Marion Lithium Total 60.5 1.36% 825.1

Source: NMT, Macquarie Research, July 2016

Separately NEO and MIN announced a positive study outcome for their proposed downstream

lithium processing ELi process. The study concluded that it is feasible to construct a plant to

produce 14,000t of lithium hydroxide and 5,600t of lithium carbonate annually for a notional 20

years.

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9 August 2016 7

Fig 13 The ELi process is a variation on the existing Chlor Alkali process

Source: NMT, Macquarie Research, August 2016

Capex for the proposed plant is estimated at US$158m with operating costs of US$4,630/t of

lithium hydroxide and US$5,345/t lithium carbonate. We note the assumptions in the FS are

somewhat different from the PFS which assumed higher production, lower cost and substantially

lower capex of US$83m.

Fig 14 ELi feasibility study estimates

Element Estimate

Annual production 14kt LiOH.H2O and 5.6kt LiCo3 Life of Plant 20 years Li hydroxide process cost (excl spod) US$1,532/t Li carbonate process cost (excl spod) US$1,825/t Capex US$158


The plant would source spodumene concentrate from Mt Marion at a notional market price of

~$437.5/t. We see something of a disconnect in the study assumptions in that a sale price of

US$11,000/t is assumed for LiOH and US$10,000/t for LCE. This implies a prevailing spodumene

price of between ~US$800/t and US$930/t. On our estimate of Lithium carbonate incentive pricing

we believe the project is likely to be marginal.


9 August 2016 8

Pilbara Minerals

PLS recently announced the signing of a binding off-take agreement and downstream processing

MoU with Chinese lithium carbonate converter, General Lithium Corporation. The off-take is for

140kt of 6% spodumene, approximately 40% of PLS’s planned 330ktpa production.

PLS also reported a significant increase in the resource at its Pilgangoora project. Total resources

have increased to 3.98Mt of LCE, equivalent to 22 years of global FY15 demand. The company

now reports 128.6Mt tonnes of which 83.6Mt is classified as M&I. Five separate deposits make up

the resource with the bulk of the tonnage at the Central and Eastern deposits.

Fig 15 Pilgangoora resources

Category Mt Li2O Li2O (tt) Ta2O5 (ppm) Ta2O5 (Mlbs)

Measured 18.0 1.36% 245 150 5.9 Indicated 65.6 1.24% 813 131 19.0 Inferred 45.0 1.15% 518 144 14.2 Total 128.6 1.23% 1,576 138 15.5

Source: PLS, Macquarie Research, July 2016

The global resource is estimated on geological domains and no cut-off grade has been applied.

Applying a 1% cut-off reduces tonnage to 91Mt but grade increases to 1.43% Li2O with

approximately 30Mt grading above 2% Li2O.

Fig 16 Pilgangoora global grade tonnage curve

Source: PLS, Macquarie Research, August 2016

PLS’s reserve estimate of 29.5Mt at 1.3% Li2O is unchanged although the company expects to

update this in its DFS in August.

Fig 17 Pilgangoora reserves

Category Tonnes Li2O Li2O (kt)

Proved - - - Probable 29.5 1.31% 386 Total 29.5 1.31% 386

Source: PLS, Macquarie Research, August 2016


9 August 2016 9

Orocobre

ORE reported average pricing for the quarter of ~US$7,500/t FOB, in line with their prior guidance

for Q2. However, it is the trend shown from customs data of six straight months of rising average

prices from Argentina, despite some slight differences from ORE’s figures. With average pricing of

~US$8,400/t for June, including one sale of greater than US$17,000/t, we remain positive for ORE

to continue to capture off-contract pricing and be the beneficiary of any operational missteps by

hard-rock producers.

Fig 18 Average pricing since inception has more than doubled in a year

Source: ORE, Customs data, Macquarie Research, August 2016

In July, ORE announced a two-month delay in achieving their nameplate capacity of 17,500tpa

from September to November 2016, due to a need to increase thickener capacity. This delay is

not unusual as the ramp-up of processing plants generally involves a more conservative S-curve

than ORE had targeting. We have maintained our assumption of ORE achieving nameplate in

Q1CY18.

Following the initial timeline provided at the lithium conference in Las Vegas earlier this year, ORE

have indicated the results of the Phase 2 expansion scoping study will be completed in Sept and a

feasibility study to start thereafter. Furthermore, an update regarding the Bateman hydroxide

proposal is expected imminently. We expect Phase 2 to commence in 2020 but do not incorporate

the hydroxide plant proposal.

Fig 19 The price rise over 2016 has been impressive

Source: ORE, Customs data, Macquarie Research, August 2016

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9 August 2016 10

Fig 20 ORE summary model


Orocobre

ASX: ORE Price: (A$ps) 4.33 Year end: Jun Rating: Outperform Up/dn TSR

Mkt cap: (A$m) 907 Diluted shares (m) 209.5 Target: 5.00 15% 15%

ASSUMPTIONS FY13 FY14 FY15 FY16e FY17e FY18e FY19e FY20e ATTRIBUTABLE MINE OUTPUT FY13 FY14 FY15 FY16e FY17e FY18e FY19e FY20e

Exchange Rate A$/US$ 1.01 0.91 0.84 0.73 0.68 0.65 0.66 0.71 Lithium Production (ORE equity share)

Lithium Carbonate US$/t 4784 5020 4919 6099 8263 8000 7100 6875 Olaroz Phase 1 t 0 0 82 4,487 9,490 10,400 10,400 10,400

Lithium Hydroxide US$/t 7348 7206 7213 8395 9502 9200 8165 7906 Olaroz Phase 2 t 0 0 0 0 0 0 3,413 9,425

Borax US$/t 713 609 652 611 664 715 765 807 Lithium Hydroxide t 0 0 0 0 0 0 0 0

Total lithium sales t 0.0 0.0 82 4,487 9,490 10,400 13,813 19,825

RATIO ANALYSIS FY13 FY14 FY15 FY16e FY17e FY18e FY19e FY20e

Diluted share capital m 118 132 152 209 231 231 231 231 Unit Cash Cost US$/t n/a n/a 3,868 4,228 3,673 3,087 3,070 2,939

EPS (diluted and pre sig. items) A¢ 76.8 -3.8 -7.4 -17.5 38.3 39.3 40.0 48.5 FOB Cash Cost US$/t n/a n/a 3,868 3,471 3,089 2,507 2,435 2,445

P/E x 5.6x -113.3x -58.5x -24.7x 11.3x 11.0x 10.8x 8.9x Notional Cash Margin US$/t na n/a 2,015 4,899 9,072 9,800 5,649 2,662

CFPS A¢ (21.9) (3.9) (6.6) (11.2) 36.4 42.8 41.4 50.5 AISC cash cost US$/t na n/a 3,875 3,477 3,095 2,514 2,442 2,451

P/CF x -19.8x -111.7x -66.1x -38.7x 11.9x 10.1x 10.5x 8.6x

DPS A¢ 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Dividend yield % 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% OPERATIONAL OUTLOOK (ORE share)

Franking Level % 100% 100% 100% 100% 100% 100% 100% 100%

Book value per share x 1.56 1.21 1.07 1.03 1.61 1.75 2.14 2.64

P/Book value x 2.8x 3.6x 4.0x 4.2x 2.7x 2.5x 2.0x 1.6x

R.O.E. (pre sig items) % 50% -3% -7% -13% 23% 23% 19% 19%

R.O.A. (pre sig items) % -5% -3% -4% -6% -3% -2% -2% -2%

Interest Cover x 110.6x 42.4x -6.0x -9.9x 2.8x 1.1x 0.9x 0.7x

EBITDA per share A$ps -0.09 -0.03 -0.05 -0.05 -0.05 -0.03 -0.03 -0.04

EV/EBITDA x -85.9x -247.6x -126.2x -73.9x -64.7x -100.6x -104.6x -53.0x

P&L FY13 FY14 FY15 FY16e FY17e FY18e FY19e FY20e

Sales Revenue A$m 19 27 27 32 43 51 54 53

Other Revenue A$m 0 0 0 0 0 0 0 0

Total Revenue A$m 19 27 27 32 43 51 54 53

Operating Costs A$m (19) (19) (19) (28) (37) (41) (43) (43)

Operational EBITDA A$m 0 8 8 5 6 10 12 10

Exploration Expense/Write-offs A$m 0 0 0 (0) (1) (1) (1) (1)

Corporate & Other Costs A$m (11) (12) (15) (16) (16) (16) (17) (17) RESERVES AND RESOURCES (ATTRIBUTABLE)

EBITDA A$m (10) (4) (7) (11) (11) (7) (6) (8) Lithium Resources Measured Indicated Inferred Total

D&A A$m (1) (1) (2) (2) (3) (3) (3) (3) Project Mt Mt Mt Mt

EBIT A$m (11) (5) (9) (14) (14) (11) (9) (11) Olaroz 1.44 5.00 0.00 6.4

Net finance expense A$m 0 0 (1) (1) 5 9 10 16 Cauchari 0.00 0.00 0.47 0.5

SDJ JV profit/loss A$m 102 (0) (0) (17) 92 93 92 109 Salinas Grandes 0.00 0.00 0.24 0.2

Profit Before Tax A$m 91 (5) (10) (32) 83 91 93 115 Total 1 5 1 7.2

Tax Expense (excl abn'ls) A$m 1 (0) (1) 3 3 0 (0) (2)

Minorities A$m 0 0 0 0 0 0 0 0 Borax Resources Measured Indicated Inferred Total

Adjusted NPAT A$m 92 (5) (11) (29) 86 92 93 113 Project Mt Mt Mt Mt

Significant Items (post tax) A$m 4 (0) 10 7 0 0 0 0 Borax Argentina 0.0 6.9 13.8 20.7

Reported NPAT A$m 96 (6) (1) (22) 86 92 93 113 Total 0 7 14 21

CASHFLOW FY13 FY14 FY15 FY16e FY17e FY18e FY19e FY20e

Net Profit A$m 92 (5) (11) (29) 86 92 93 113 EQUITY DCF VALUATION

Interest/Tax/D&A A$m (7) 3 5 0 4 6 4 5 Projects A$m A$ps

Working Capital/other A$m (111) (3) (3) 5 (6) 2 (1) (1) Olaroz 473 2.26

Net Operating Cashflow A$m (26) (5) (10) (23) 84 99 96 117 Olaroz Phase 2 152 0.72

PP&E A$m (2) (7) (2) (3) (2) (2) (2) (2) Borax 32 0.15

Investments A$m 0 0 0 0 0 0 0 0 Undeveloped Resources 26 0.12

Sale of PPE and Other A$m 8 2 1 (15) (47) (106) (7) 100 Corporate (94) (0.45)

Free cash flow A$m (19) (10) (11) (41) 36 (9) 87 215 Unpaid Capital 2 0.01

Dividends Paid A$m 0 0 0 0 0 0 0 0 Cash 93 0.45

Debt A$m (10) (3) (52) (19) 0 0 0 0 Debt (3) (0.01)

Equity Issuance A$m 24 28 46 113 90 0 0 0 Net equity value at 10% WACC 680 3.25

Other A$m 0 0 0 0 0 0 0 0 Target price (1x NPV @ 12 month spot $10,000/t LCE) 5.00

Net Financing Cashflow A$m 14 26 (6) 94 90 0 0 0

Net change in cash A$m (6) 16 (17) 53 126 (9) 87 215

BALANCE SHEET FY13 FY14 FY15 FY16e FY17e FY18e FY19e FY20e

Cash A$m 11 26 9 63 189 180 267 482

PP&E & Mine Development A$m 9 13 17 18 17 15 13 12

Exploration A$m 14 10 11 9 9 9 9 9

Total Assets A$m 214 187 203 247 423 443 538 744

Debt A$m 4 4 4 3 4 5 5 5

Total Liabilities A$m 30 28 40 32 51 39 43 134

Total Net Assets / Equity A$m 184 160 163 215 372 404 494 610

Net Debt / (Cash) A$m (7) (22) (5) (60) (184) (175) (262) (477)

Gearing (net debt/(nd + equity)) % (4%) (16%) (3%) (38%) (98%) (76%) (113%) (359%)

Gearing (net debt/equity) % (4%) (14%) (3%) (28%) (50%) (43%) (53%) (78%)

0

5,000

10,000

15,000

20,000

25,000

FY13 FY14 FY15 FY16e FY17e FY18e FY19e FY20e FY21e FY22e FY23e FY24e FY25e

Olaroz Phase 1 Olaroz Phase 2Mt


9 August 2016 11

Fig 21 PLS summary model


Pilbara Minerals

ASX: PLS Price: (A$ps) 0.55 Year end: Jun Rating: Underperform Up/dn TSR

Mkt cap: (A$m) 631 Diluted shares (m) 1,148 Target: 0.50 -9% -9%

ASSUMPTIONS FY14 FY15 FY16e FY17e FY18e FY19e ATTRIBUTABLE MINE OUTPUT FY14 FY15 FY16e FY17e FY18e FY19e

Exchange Rate A$/US$ 0.92 0.84 0.73 0.74 0.72 0.73 Spodumene (kt)

Lithium Carbonate Equivalent US$/t 5,020 4,919 6,086 7,875 7,875 7,250 Pilgangoora kt - - - - 60 231

Spodumene (6% CIF) US$/t 361 357 445 651 701 673 Tabba Tabba kt - - - - - -

RATIO ANALYSIS FY14 FY15 FY16e FY17e FY18e FY19e Total kt - - - - - 231

Diluted share capital m 278.2 589.3 1,244.5 1,494.5 1,494.5 1,494.5 Tantalite (k lb)

EPS (diluted and pre sig. items) A¢ -1.1 -0.9 -1.0 -0.5 0.8 4.4 Pilgangoora k lb - - - - - 0

P/E x -48.0x -58.8x -53.7x -112.3x 69.3x 12.5x Tabba Tabba k lb - - - - - -

CFPS A¢ (0.3) (0.3) (0.9) (1.0) 0.0 4.2 Total k lb - - - - - 0

P/CF x -167.3x -181.8x -60.9x -54.3x 1702.1x 13.1x Sales

DPS A¢ 0.0 0.0 0.0 0.0 0.0 0.0 Spodumene kt - - - - - 222

Dividend yield % 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Tantalite k lb - - - - - 0

Franking Level % 0% 0% 0% 0% 0% 0% Total kt - - - - - 222

Book value per share x 0.01 0.01 0.10 0.18 0.18 0.23 Total LCE porduction kt 6.7 25.7

P/Book value x 64.3x 59.5x 5.7x 3.1x 3.0x 2.4x FOB cash costs (A$/wmt) 511 446

R.O.E. (pre sig items) % -134% -101% -8% -2% 4% 19% AISC (A$/wmt) 3,481 471

R.O.A. (pre sig items) % -68% -63% -8% -4% 5% 25% FOB cash costs LCE (US$/t LCE) 3,925 3,873

Interest Cover x nmf nmf -90.8x 4.1x -4.1x -61.9x AISC LCE (US$/t LCE) 4,065 4,008

EBITDA per share A$ps -0.01 -0.01 -0.01 -0.01 0.01 0.07 OPERATIONAL OUTLOOK

EV/EBITDA x -198.2x -113.8x -50.5x -34.8x 38.3x 5.0x

EARNINGS FY14 FY15 FY16e FY17e FY18e FY19e

Sales Revenue A$m 0 0 0 0 55 215

Other Revenue A$m 0 0 0 0 0 0

Total Revenue A$m 0 0 0 0 55 215

Operating Costs A$m 0 0 0 0 (27) (98)

Operational EBITDA A$m 0 0 0 0 27 117

Exploration Expense/Write-offs A$m 0 0 0 0 0 0

Corporate & Other Costs A$m (4) (6) (10) (12) (12) (13)

EBITDA A$m (3) (6) (10) (12) 15 104

D&A A$m 0 (0) (0) 0 (1) (11)

EBIT A$m (3) (6) (10) (12) 14 93

Net Interest A$m 0 0 (0) 3 3 1

Profit Before Tax A$m (3) (6) (11) (9) 17 94

Tax Expense A$m 0 0 1 3 (5) (28)

Minorities A$m 0 0 0 0 0 0 RESERVES AND RESOURCES (ATTRIBUTABLE)

Adjusted NPAT A$m (3) (6) (9) (6) 12 66 Reserves

Significant Items (post tax) A$m 0 0 0 0 0 0 Pilgangoora Mt

Reported NPAT A$m (3) (6) (9) (6) 12 66 Proved 0.0 0.0% 0.0 0 0.0 0.0

Probable 29.5 1.31% 386.5 134 1.9 4.1

Total 29.5 1.31% 386.5 134.0 1.9 4.1

CASHFLOW FY14 FY15 FY16e FY17e FY18e FY19e Tabba Tabba

Net Profit A$m (3) (6) (9) (6) 12 66 Probable 32.0 0.0% 0.0 1420 0.5 278.1

Interest/Tax/D&A A$m (2) (0) (7) (9) 0 27 Total 101.0 0.0% 0.0 1249 1.3 378.3

Working Capital/other A$m 4 4 5 0 (12) (30) Proved 133.0 0.0% 0.0 1290.0 1.1 0.0

Net Operating Cashflow A$m (1) (2) (11) (15) 0 63 Resources

Capex A$m 0 (1) (6) (30) (159) (7) Pilgangoora Lithium

Investments A$m 0 0 (2) 0 0 0 Measured 18.0 1.4% 245

Sale of PPE and Other A$m (2) (2) 0 0 0 0 Indicated 65.6 1.24% 813

Free cash flow A$m (3) (5) (19) (45) (159) 56 Inferred 45.0 1.15% 518

Dividends Paid A$m 0 0 0 0 0 0 Total 128.6 1.23% 1,576

Debt A$m 2 2 4 0 0 0

Equity Issuance A$m 2 6 120 150 0 0 Pilgangoora Tantalum Mt

Other A$m 0 0 0 0 0 0 Measured 0.0 0 0.0 0.00

Net Financing Cashflow A$m 3 8 124 150 0 0 Indicated 17.9 182 3.3 7.18

Net change in cash A$m 1 3 104 105 (159) 56 Inferred 24.3 205 5.0 10.98

Total 42.2 195.2 8.2 18.2

BALANCE SHEET FY14 FY15 FY16e FY17e FY18e FY19e EQUITY DCF VALUATION

Cash A$m 1 3 108 212 53 109 Projects A$m A$ps

PP&E & Mine Development A$m 0 0 12 42 200 195 Pilgangoora 396 0.26

Exploration A$m 3 2 8 14 20 26 Tabba Tabba 4 0.00

Total Assets A$m 5 9 129 270 293 373 Undeveloped Resources 121 0.08

Debt A$m 1 3 0 0 0 0 Other Projects & Investments 0 0.00

Total Liabilities A$m 2 3 9 6 17 31 Corporate (59) (0.04)

Total Net Assets / Equity A$m 2 5 121 264 276 342 Unpaid capital 180 0.12

Net Debt / (Cash) A$m 0 (1) (108) (212) (53) (109) Net cash (debt) 100 0.07

Gearing (net debt/(nd + equity)) % 11% (12%) (819%) (406%) (24%) (47%) Net Equity Value (@ 12% WACC) 743 0.50

Gearing (net debt/equity) % 12% (11%) (89%) (80%) (19%) (32%) Price Target (1x NPV @ 24 month spot $9,000/t LCE) 0.50

Total asset/debt (x) 3.4 3.4 nm nm nm nm

Ta2O5

(Mlbs)Li2O (%)

Li2O

(kt)Li2O (%)

Ta2O5

(kt)

Ta2O5

(ppm)

Ta2O5

(kt)

Ta2O5

(Mlbs)

Li2O

(kt)

Ta2O5

(ppm)

Mt

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Spodumene (kt) Tantalite (k lb) FOB cash costs (A$/t)


9 August 2016 12

Fig 22 GXY summary model


Galaxy Resources

ASX: GXY Price: (A$ps) 0.47 Year end: Jun Rating: Underperform Up/dn TSR


ASSUMPTIONS FY14 FY15 FY16e FY17e FY18e FY19e ATTRIBUTABLE MINE OUTPUT FY16e FY17e FY18e FY19e FY20e FY21e

Exchange Rate A$/US$ 0.90 0.75 0.74 0.73 0.73 0.74 LCE (kt)

Lithium Carbonate Equivalent US$/t 4850 5228 7125 8250 7500 7000 Mt Cattlin kt 4.4 28.2 28.2 28.2 28.2 28.2

Spoumene US$/t 386 420 575 716 695 646 Sal De Vida kt 0.0 0.0 0.0 0.0 0.0 0.0

Potash US$/t 303 247 245 245 256 274 Total kt 4.4 28.2 28.2 28.2 28.2 28.2

Tnatalum US$/lb 60 60 60 61 62 64 By-products (k lb/kt)

RATIO ANALYSIS FY14 FY15 FY16e FY17e FY18e FY19e Mt Cattlin Tantalite k lb 0.0 0.0 0.0 0.0 0.0 0.0

Diluted share capital m 1,287.8 1,287.8 1,860.0 1,860.0 1,860.0 1,860.0 Sal De Vida KCl k lb 0.0 0.0 0.0 0.0 0.0 0.0

EPS (diluted and pre sig. items) A¢ -2.3 -1.2 0.2 6.8 6.2 5.4 Total k lb 0.0 0.0 0.0 0.0 0.0 0.0

P/E x -20.7x -38.8x 189.8x 6.9x 7.6x 8.7x Sales

CFPS A¢ (0.8) (0.6) (0.2) 8.7 8.6 7.7 LCE kt 2.3 15.0 15.0 15.0 15.0 15.0

P/CF x -61.6x -84.1x -247.9x 5.4x 5.4x 6.1x Tantalite k lb 13.5 86.4 86.4 86.4 86.4 86.4

DPS A¢ 0.0 0.0 0.0 0.0 0.0 0.0 KCl kt 0.0 0.0 0.0 0.0 0.0 0.0

Dividend yield % 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Total kt 2.3 15.0 15.0 15.0 15.0 15.0

Franking Level % 0% 0% 0% 0% 0% 0% Production cost

Book value per share x 0.04 0.08 0.06 0.13 0.19 0.24 FOB Costs (A$/t) 329 255 250 247 245 245

P/Book value x 12.1x 5.9x 8.1x 3.7x 2.5x 1.9x All in Cash Costs (A$/t) 393 332 321 313 309 308

R.O.E. (pre sig items) % -58% -15% 4% 54% 33% 22% FOB Costs (LCE) (US$/t) 5,160 4,227 3,643 3,561 3,543 3,550

R.O.A. (pre sig items) % -6% -6% 7% 57% 33% 21% All in Cash Costs (LCE) (US$/t) 5,708 4,859 4,239 4,118 4,084 4,090

Interest Cover x -2.4x -1.2x 3.0x 112.3x -46.7x -16.9x OPERATIONAL OUTLOOK

EBITDA per share A$ps -0.02 -0.01 0.01 0.10 0.09 0.07

EV/EBITDA x -46.8x -109.1x 88.9x 4.0x 3.5x 3.2x


Sales Revenue A$m 0 0 32 265 240 213


Total Revenue A$m 0 0 32 265 240 213

Operating Costs A$m (0) (0) (16) (75) (72) (70)

Operational EBITDA A$m (0) (0) 16 190 168 143

Exploration Expense/Write-offs A$m (7) (0) (0) 0 0 (1)


EBITDA A$m (21) (8) 10 184 161 136

D&A A$m (0) (0) (0) (0) (0) (0)

EBIT A$m (21) (8) 10 183 161 136

Net Interest A$m (9) (7) (3) (2) 3 8

Profit Before Tax A$m (29) (16) 7 182 165 144 RESERVES AND RESOURCES (ATTRIBUTABLE)

Tax Expense A$m 0 0 (2) (55) (49) (43) Reserves

Minorities A$m 0 0 0 0 0 0 Mt Cattlin Mt

Adjusted NPAT A$m (29) (16) 5 127 115 101 Proved 2.4 1.1% 27.0 0 0.3 0.8

Significant Items (post tax) A$m (25) 70 0 0 0 0 Probable 7.5 1.02% 76.9 152 1.1 2.5

Reported NPAT A$m (55) 55 5 127 115 101 Total 10.0 1.04% 103.9 152.0 1.0 2.1

Sal De Vida

CASHFLOW FY14 FY15 FY16e FY17e FY18e FY19e Probable 1-6 34.0 181.0 32.2 633.0

Net Profit A$m (55) 55 5 127 115 101 Total 7-40 180.0 985.0 1,869.0 3,564.0

Interest/Tax/D&A A$m 8 (2) (4) 49 43 40 Proved 40.0 214.0 1166.0 1901.2 4197.0

Working Capital/other A$m 37 (60) (4) (14) 2 2 Resources

Net Operating Cashflow A$m (10) (7) (4) 162 161 143 Mt Cattlin Lithium Mt

Capex A$m (7) (2) 0 (4) (5) (5) Measured 2.5 1.2% 30 152 0.4 0.9

Investments A$m 13 47 6 6 6 0 Indicated 9.5 1.06% 101 170 1.6 3.6

Sale of PPE and Other A$m 0 0 0 0 0 0 Inferred 4.3 1.07% 46 132 0.6 1.3

Free cash flow A$m (4) 38 3 164 162 138 Total 16.4 1.08% 178 157 3 6

Dividends Paid A$m 0 0 0 0 0 0

Debt A$m 10 (50) 0 0 0 (0)

Equity Issuance A$m 0 (0) 0 0 0 0 Sal De Vida

Other A$m 0 0 0 0 0 0 Measured 7.2 787.0 565 3,005 6,241 11,902

Net Financing Cashflow A$m 10 (50) 0 0 0 (0) Indicated 2.6 768.0 197 1,048 2,186 4,169

Net change in cash A$m 7 (12) 3 164 162 138 Inferred 8.3 717.0 597 3,180 6,692 12,762

Total 18.1 751 1,359 7,233 15,119 28,833

BALANCE SHEET FY14 FY15 FY16e FY17e FY18e FY19e

Cash A$m 13 5 8 172 333 471 EQUITY DCF VALUATION (post merger)

PP&E & Mine Development A$m 2 2 2 5 10 15 Projects A$m A$ps

Exploration A$m 131 124 130 136 142 145 Mt Cattlin 727 0.39

Total Assets A$m 335 140 148 322 494 640 Sal De Vida 45 0.02

Debt A$m 101 28 31 31 31 31 Undeveloped Resources 32 0.02

Total Liabilities A$m 285 37 41 87 144 189 Corporate (25) (0.01)

Total Net Assets / Equity A$m 50 103 107 235 350 450 Unpaid capital 2 0.00

Net Debt / (Cash) A$m 88 24 23 (141) (302) (440) Net cash (debt) (23) (0.01)

Gearing (net debt/(nd + equity)) % 64% 19% 18% (150%) (637%) nm Net Equity Value (@ 10% WACC) 757 0.41

Gearing (net debt/equity) % 175% 23% 22% (60%) (86%) (98%) Price Target (1x NPV) 0.41

Total asset/debt (x) 3.3 4.9 4.8 10.4 15.9 20.6

Ta2O5

(Mlbs)

KCL eq

(kt)

LiO2

(kt)

Ta2O5

(ppm)

Ta2O5

(kt)LiO2 (%)

K (kt)

Brine

volume

(m3 x

10^8)

Avg Li

(mg/L)

Period

(years)

Tonnes

Li (kt)

LiCo3e

q (kt)

LiO2 (%)Ta2O5

(Mlbs)

In situ Li

(kt)

LiCo3

eq (kt)K (kt)

Tonnes

KCL eq

LiO2

(kt)

Ta2O5

(ppm)

Ta2O5

(kt)

0

1000

2000

3000

4000

5000

6000

0

5

10

15

20

25

30

2016e 2017e 2018e 2019e 2020e 2021e 2022e 2023e 2024e 2025e 2026e

US$/tLCE (kt)Mt Cattlin Mt Catlin FOB (LCE)


9 August 2016 13

Fig 23 NMT summary model


Neometals Limited

ASX: NMT Price: (A$ps) 0.40 Year end: Jun Rating: Outperform Up/dn TSR

Mkt cap: (A$m) 227 Diluted shares (m) 566 Target: 0.45 13% 13%

ASSUMPTIONS FY14 FY15 FY16e FY17e FY18e FY19e ATTRIBUTABLE MINE OUTPUT FY16e FY17e FY18e FY19e FY20e FY21e


Lithium Carbonate Equivalent US$/t 627 615 4378 8237 8453 8675 Mt Marion kt - 31 51 56 56 56

Spodumene (6% CIF) US$/t 28 29 234 477 542 575 Total kt - 31 51 56 56 56

RATIO ANALYSIS FY14 FY15 FY16e FY17e FY18e FY19e Tantalite (k lb) -

Diluted share capital m 563.0 563.0 566.4 566.4 566.4 566.4 Mt Marion k lb - 0 0 0 0 0

EPS (diluted and pre sig. items) A¢ -1.2 -1.6 3.9 1.5 3.9 4.7 Total k lb - 0 0 0 0 0

P/E x -33.1x -24.9x 10.3x 26.2x 10.2x 8.6x Sales -

CFPS A¢ (1.7) (0.5) (0.1) 1.6 5.3 6.5 Spodumene kt - 190 372 403 403 403

P/CF x -23.6x -77.2x -272.4x 25.3x 7.6x 6.1x Tantalite kt - 0 0 0 0 0

DPS A¢ 0.0 0.0 2.0 0.0 0.0 0.0 Total kt - 190 372 403 403 403

Dividend yield % 0.0% 0.0% 5.0% 0.0% 0.0% 0.0% Total LCE produced kt - 3.8 6.4 6.9 6.9 6.9

Franking Level % 0% 0% 0% 0% 0% 0% FOB cash costs (A$/wmt) - 384 275 267 270 274

Book value per share x 0.04 0.02 0.05 0.06 0.10 0.15 AISC (A$/wmt) - 398 283 273 275 278

P/Book value x 9.5x 17.0x 8.8x 6.6x 4.0x 2.7x FOB Costs (LCE) (US$/t) - 4361 3130 2900 2958 3017

R.O.E. (pre sig items) % -29% -69% 84% 25% 39% 32% All in Cash Costs (LCE) (US$/t) - 4447 3179 2937 2986 3036

R.O.A. (pre sig items) % -25% -41% 21% 9% 21% 19% OPERATIONAL OUTLOOK

Interest Cover x #DIV/0! #DIV/0! -31.1x -4.1x -9.8x -8.6x

EBITDA per share A$ps -0.01 -0.02 0.04 0.02 0.05 0.06

EV/EBITDA x -32.6x -24.3x 7.3x 13.5x 3.8x 2.1x






Operational EBITDA A$m (2) 0 25 14 33 39



EBITDA A$m (7) (9) 20 10 29 34

D&A A$m 0 0 0 (0) (0) (0)

EBIT A$m (7) (9) 20 10 29 34

Net Interest A$m 0 0 1 2 3 4

Profit Before Tax A$m (7) (9) 21 12 32 38

Tax Expense A$m 0 0 1 (4) (9) (11)

Minorities A$m 0 0 0 0 0 0

Adjusted NPAT A$m (7) (9) 22 9 22 26

Significant Items (post tax) A$m (10) (1) 0 0 0 0

Reported NPAT A$m (17) (10) 22 9 22 26 RESERVES AND RESOURCES (ATTRIBUTABLE)

Reserves

Mt Marion Mt

CASHFLOW FY14 FY15 FY16e FY17e FY18e FY19e Proved 0.0 0.0% 0.0

Net Profit A$m (17) (10) 22 9 22 26 Probable 0.0 0.00% 0.0

Interest/Tax/D&A A$m 0 (0) (1) 3 9 11 Total 0.0 0.00% 0.0

Working Capital/other A$m 7 8 (22) (3) (1) (0)

Net Operating Cashflow A$m (10) (3) (1) 9 30 37 Resources

Capex A$m (1) (3) (1) (0) (0) (1) Mt Marion Lithium Mt

Investments A$m 0 0 89 0 0 0 Measured 0.0 0.0% 0 0.0%

Sale of PPE and Other A$m 5 0 2 0 0 0 Indicated 26.4 1.33% 351 1.1%

Free cash flow A$m (6) (5) 90 9 29 37 Inferred 34.1 1.39% 474 1.1%

Dividends Paid A$m 0 0 (11) 0 0 0 Total 60.5 1.36% 825 1.08%

Debt A$m 6 (0) (0) 0 0 0

Equity Issuance A$m 0 0 0 0 0 0 Barrambie TiO2 Mt

Other A$m 0 0 0 0 0 0 Measured 0.0 0.0% 0.0 0.00%

Net Financing Cashflow A$m 6 (0) (11) 0 0 0 Indicated 34.7 22.3% 7.7 0.64%

Net change in cash A$m (0) (6) 78 9 29 37 Inferred 12.5 22.0% 2.7 0.58%

Total 47.2 22.2% 10.5 0.62%

BALANCE SHEET FY14 FY15 FY16e FY17e FY18e FY19e EQUITY DCF VALUATION

Cash A$m 7 1 80 88 117 154 Projects A$m A$ps

PP&E & Mine Development A$m 0 0 0 0 0 1 Mt Marion 145 0.26

Exploration A$m 11 11 12 13 14 15 Undeveloped Resources 8 0.01

Total Assets A$m 27 23 99 108 139 176 Other Projects & Investments 40 0.07

Debt A$m 2 2 0 0 0 0 Corporate (18) (0.03)

Total Liabilities A$m 4 9 73 74 82 93 Unpaid capital 0 0.00

Total Net Assets / Equity A$m 24 13 26 34 57 83 Net cash (debt) 80 0.14

Net Debt / (Cash) A$m (5) 1 (80) (88) (117) (154) Net Equity Value (@ 8% WACC) 255 0.45

Gearing (net debt/(nd + equity)) % (28%) 4% 148% 164% 193% nm Price Target (1x NPV) 0.45

Gearing (net debt/equity) % (22%) 4% (308%) (255%) (207%) (185%)

Total asset/debt (x) 14.3 11.4 nm nm nm nm

V2O5

(%)

LiO2

(%)

LiO2

(kt)

Fe2O3

(%)

LiO2

(%)

LiO2

(kt)

TiO2

(%)

TiO2

(Mt)

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

0.0

10.0

20.0

30.0

40.0

50.0

60.0

2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Mt Marion FOB cash costs


9 August 2016 14

Fig 24 AJM summary model


Altura Mining

ASX: AJM Price: (A$ps) 0.17 Year end: Jun Rating: Underperform Up/dn TSR


ASSUMPTIONS FY14 FY15 FY16e FY17e FY18e FY19e ATTRIBUTABLE MINE OUTPUT FY14 FY15 FY16e FY17e FY18e FY19e FY20e


Lithium Carbonate Equivalent US$/t 5020 4919 6099 8301 8226 7485 Pilgangoora kt - - - - 14 182 196

Spodumene (6% CIF) US$/t 230 223 351 587 593 554 Total kt - - - - 14 182 196

RATIO ANALYSIS FY14 FY15 FY16e FY17e FY18e FY19e

Diluted share capital m 454.3 837.7 1,222.5 1,622.5 2,315.5 2,315.5 Sales

EPS (diluted and pre sig. items) A¢ -0.7 -3.6 -0.8 -0.5 -0.1 1.5 Spodumene kt - - - - 14 182 196

P/E x -22.6x -4.6x -21.0x -36.6x -218.6x 10.8x Total kt - - - - 14 182 196

CFPS A¢ (0.3) (0.5) 0.0 (0.6) (0.3) 1.9 Total LCE porduction kt 1.7 22.7 24.5

P/CF x -63.8x -36.3x 563.4x -27.4x -57.5x 8.5x FOB cash costs (A$/wmt) 514 422 393

DPS A¢ 0.0 0.0 0.0 0.0 0.0 0.0 AISC (A$/wmt) 10,766 454 418

Dividend yield % 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% FOB cash costs LCE (US$/t LCE) 4,815 4,759 4,731

Franking Level % 0% 0% 0% 0% 0% 0% AISC LCE (US$/t LCE) 4,992 4,913 4,879

Book value per share x 0.11 0.03 0.03 0.06 0.08 0.10 OPERATIONAL OUTLOOK

P/Book value x 1.4x 5.4x 5.7x 2.9x 1.9x 1.6x

R.O.E. (pre sig items) % -6% -23% -17% -7% -1% 15%

R.O.A. (pre sig items) % -3% -13% -10% -6% -1% 19%

Interest Cover x 45.7x 143.5x -6.7x -5.8x 6.9x 63.5x

EBITDA per share A$ps 0.00 -0.01 0.00 0.00 0.00 0.02

EV/EBITDA x -109.8x -43.1x -33.6x -25.4x -103.1x 3.1x






Operational EBITDA A$m 2 0 (1) (1) 4 61



EBITDA A$m (2) (5) (6) (7) (2) 55 RESERVES AND RESOURCES (ATTRIBUTABLE)

D&A A$m (1) (1) (1) (1) (1) (3) Reserves

EBIT A$m (3) (6) (7) (8) (3) 51 Pilgangoora Mt

Net Interest A$m 0 0 (1) (1) 0 (1) Proved 0.0 0.0% 0.0 0 0.0 0.0

Profit Before Tax A$m (3) (6) (7) (9) (2) 51 Probable 18.4 1.07% 196.9 0 0.0 0.0

Tax Expense A$m (1) (0) 1 3 1 (15) Total 18.4 1.07% 196.9 0.0 0.0 0.0

Minorities A$m 0 0 0 0 0 0

Adjusted NPAT A$m (3) (6) (6) (6) (2) 35 Resources

Significant Items (post tax) A$m (4) (13) 1 0 0 0 Pilgangoora Lithium

Reported NPAT A$m (7) (18) (5) (6) (2) 35 Measured 0.0 0.0% 0

Indicated 26.7 1.05% 280

Inferred 9.0 1.02% 92

CASHFLOW FY14 FY15 FY16e FY17e FY18e FY19e Total 35.7 1.04% 372

Net Profit A$m (7) (31) (6) (6) (2) 35

Interest/Tax/D&A A$m (0) (0) (3) (3) (2) 17 EQUITY DCF VALUATION

Working Capital/other A$m 6 27 10 0 (3) (7) Projects A$m A$ps

Net Operating Cashflow A$m (1) (4) 0 (10) (7) 45 Pilgangoora 252 0.21

Capex A$m (0) 0 (2) (28) (143) (7) Undeveloped Resources 0 0.00

Investments A$m 5 0 (0) 0 0 0 Other Projects & Investments 0 0.00

Sale of PPE and Other A$m (1) (1) (1) 0 0 0 Corporate (38) (0.03)

Free cash flow A$m 2 (5) (3) (38) (150) 38 Unpaid capital 0 0.00

Dividends Paid A$m 0 0 0 0 0 0 Net cash (debt) (14) (0.01)

Debt A$m (0) (0) (0) 0 0 0 Net Equity Value (@ 10% WACC) 200 0.16

Equity Issuance A$m 0 4 23 62 107 0 Price Target (1x NPV) 0.16

Other A$m 0 0 0 0 0 0

Net Financing Cashflow A$m (0) 4 23 62 107 0

Net change in cash A$m 2 (1) 20 24 (43) 38

BALANCE SHEET FY14 FY15 FY16e FY17e FY18e FY19e

Cash A$m 3 2 22 46 3 41

PP&E & Mine Development A$m 32 1 3 30 173 176

Exploration A$m 14 15 17 18 20 22

Total Assets A$m 89 46 69 121 223 266

Debt A$m 32 17 18 18 14 9

Total Liabilities A$m 37 21 33 30 26 34

Total Net Assets / Equity A$m 52 26 36 91 197 232

Net Debt / (Cash) A$m 28 15 (4) (28) 11 (32)

Gearing (net debt/(nd + equity)) % 35% 37% (14%) (45%) 5% (16%)

Gearing (net debt/equity) % 55% 59% (12%) (31%) 5% (14%)

Total asset/debt (x) 2.8 2.7 3.9 6.8 nm nm

Li2O

(kt)

Ta2O5

(ppm)

Mt

Ta2O5

(Mlbs)Li2O (%)

Li2O

(kt)Li2O (%)

Ta2O5

(kt)

4300

4400

4500

4600

4700

4800

4900

5000

5100

5200

5300

5400

0

50

100

150

200

250

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Spodumene (kt) FOB cash costs LCE


9 August 2016 15

Important disclosures:

Recommendation definitions

Macquarie - Australia/New Zealand Outperform – return >3% in excess of benchmark return Neutral – return within 3% of benchmark return Underperform – return >3% below benchmark return Benchmark return is determined by long term nominal GDP growth plus 12 month forward market dividend yield

Macquarie – Asia/Europe Outperform – expected return >+10% Neutral – expected return from -10% to +10% Underperform – expected return <-10%

Macquarie – South Africa Outperform – expected return >+10% Neutral – expected return from -10% to +10% Underperform – expected return <-10%

Macquarie - Canada Outperform – return >5% in excess of benchmark return Neutral – return within 5% of benchmark return Underperform – return >5% below benchmark return

Macquarie - USA Outperform (Buy) – return >5% in excess of Russell 3000 index return

Neutral (Hold) – return within 5% of Russell 3000 index return Underperform (Sell)– return >5% below Russell 3000 index return

Volatility index definition*

This is calculated from the volatility of historical price movements. Very high–highest risk – Stock should be expected to move up or down 60–100% in a year – investors should be aware this stock is highly speculative. High – stock should be expected to move up or down at least 40–60% in a year – investors should be aware this stock could be speculative. Medium – stock should be expected to move up or down at least 30–40% in a year. Low–medium – stock should be expected to move up or down at least 25–30% in a year. Low – stock should be expected to move up or down at least 15–25% in a year. * Applicable to Asia/Australian/NZ/Canada stocks only

Recommendations – 12 months Note: Quant recommendations may differ from

Fundamental Analyst recommendations

Financial definitions

All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards).

Recommendation proportions – For quarter ending 30 June 2016

AU/NZ Asia RSA USA CA EUR Outperform 45.17% 56.00% 36.36% 43.16% 63.39% 45.91% (for global coverage by Macquarie, 6.27% of stocks followed are investment banking clients)

Neutral 36.21% 28.59% 40.26% 50.38% 29.46% 36.96% (for global coverage by Macquarie, 6.33% of stocks followed are investment banking clients)

Underperform 18.62% 15.41% 23.38% 6.46% 7.14% 17.12% (for global coverage by Macquarie, 5.38% of stocks followed are investment banking clients)

ORE AU vs Small Ordinaries, & rec history

(all figures in AUD currency unless noted)

PLS AU vs Small Ordinaries, & rec history


GXY AU vs Small Ordinaries, & rec history


NMT AU vs Small Ordinaries, & rec history


AJM 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, August 2016

12-month target price methodology

ORE AU: A$5.00 based on a DCF methodology

PLS AU: A$0.65 based on a DCF methodology

GXY AU: A$0.42 based on a DCF methodology

NMT AU: A$0.55 based on a DCF methodology

AJM AU: A$0.20 based on a DCF methodology

Company-specific disclosures: ORE AU: Macquarie Group Limited together with its affiliates beneficially owns 1% or more of the equity securities of Orocobre Ltd. PLS AU: Macquarie and its affiliates collectively and beneficially own or control 1% or more of any class of Pilbara Minerals Ltd's equity securities. Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/research/disclosures.

Target price risk disclosures: ORE AU: Any inability to compete successfully in their markets may harm the business. This could be a result of many factors which may include geographic mix and introduction of improved products or service offerings by competitors. The results of operations may be materially affected by global economic conditions generally, including conditions in financial markets. The company is exposed to market risks, such as changes in interest rates, foreign exchange rates and input prices. From time to time, the company will enter into transactions, including transactions in derivative instruments, to manage certain of these exposures.


9 August 2016 16

PLS AU: Any inability to compete successfully in their markets may harm the business. This could be a result of many factors which may include geographic mix and introduction of improved products or service offerings by competitors. The results of operations may be materially affected by global economic conditions generally, including conditions in financial markets. The company is exposed to market risks, such as changes in interest rates, foreign exchange rates and input prices. From time to time, the company will enter into transactions, including transactions in derivative instruments, to manage certain of these exposures. GXY AU: Any inability to compete successfully in their markets may harm the business. This could be a result of many factors which may include geographic mix and introduction of improved products or service offerings by competitors. The results of operations may be materially affected by global economic conditions generally, including conditions in financial markets. The company is exposed to market risks, such as changes in interest rates, foreign exchange rates and input prices. From time to time, the company will enter into transactions, including transactions in derivative instruments, to manage certain of these exposures. NMT AU: Any inability to compete successfully in their markets may harm the business. This could be a result of many factors which may include geographic mix and introduction of improved products or service offerings by competitors. The results of operations may be materially affected by global economic conditions generally, including conditions in financial markets. The company is exposed to market risks, such as changes in interest rates, foreign exchange rates and input prices. From time to time, the company will enter into transactions, including transactions in derivative instruments, to manage certain of these exposures. AJM AU: Any inability to compete successfully in their markets may harm the business. This could be a result of many factors which may include geographic mix and introduction of improved products or service offerings by competitors. The results of operations may be materially affected by global economic conditions generally, including conditions in financial markets. The company is exposed to market risks, such as changes in interest rates, foreign exchange rates and input prices. From time to time, the company will enter into transactions, including transactions in derivative instruments, to manage certain of these exposures.

Analyst certification: We hereby certify that all of the views expressed in this report accurately reflect our personal views about the subject company or companies and its or their securities. We also certify that no part of our compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in this report. The Analysts responsible for preparing this report receive compensation from Macquarie that is based upon various factors including Macquarie Group Limited (MGL) total revenues, a portion of which are generated by Macquarie Group’s Investment Banking activities. General disclosure: This research has been issued by Macquarie Securities (Australia) Limited ABN 58 002 832 126, AFSL 238947, a Participant of the ASX and Chi-X Australia Pty Limited. This research is distributed in Australia by Macquarie Wealth Management, a division of Macquarie Equities Limited ABN 41 002 574 923 AFSL 237504 ("MEL"), a Participant of the ASX, and in New Zealand by Macquarie Equities New Zealand Limited (“MENZ”) an NZX Firm. Macquarie Private Wealth’s services in New Zealand are provided by MENZ. Macquarie Bank Limited (ABN 46 008 583 542, AFSL No. 237502) (“MBL”) is a company incorporated in Australia and authorised under the Banking Act 1959 (Australia) to conduct banking business in Australia. None of MBL, MGL or MENZ is registered as a bank in New Zealand by the Reserve Bank of New Zealand under the Reserve Bank of New Zealand Act 1989. Apart from Macquarie Bank Limited ABN 46 008 583 542 (MBL), any MGL subsidiary noted in this research, , is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Australia) and that subsidiary’s obligations do not represent deposits or other liabilities of MBL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of that subsidiary, unless noted otherwise. This research contains general advice and does not take account of your objectives, financial situation or needs. Before acting on this general advice, you should consider the appropriateness of the advice having regard to your situation. We recommend you obtain financial, legal and taxation advice before making any financial investment decision. This research has been prepared for the use of the clients of the Macquarie Group and must not be copied, either in whole or in part, or distributed to any other person. If you are not the intended recipient, you must not use or disclose this research in any way. If you received it in error, please tell us immediately by return e-mail and delete the document. We do not guarantee the integrity of any e-mails or attached files and are not responsible for any changes made to them by any other person. 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 based on information obtained from sources believed to be reliable, but the Macquarie Group does 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. The Macquarie Group accepts no 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 produces a variety of research products, recommendations contained in one type of research product may differ from recommendations contained in other types of research. The Macquarie Group has established and implemented a conflicts policy at group level, which may be revised and updated from time to time, pursuant to regulatory requirements; which sets out how we must seek to identify and manage all material conflicts of interest. The Macquarie Group, its officers and employees may have conflicting roles in the financial products referred to in this research and, as such, may effect transactions which are not consistent with the recommendations (if any) in this research. The Macquarie Group may receive fees, brokerage or commissions for acting in those capacities and the reader should assume that this is the case. The Macquarie Group‘s employees or officers may provide oral or written opinions to its clients which are contrary to the opinions expressed in this research. Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/disclosures © Macquarie Group

This publication was disseminated on 09 August 2016 at 10:31 UTC.

Documents

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