EQUITY RESEARCH - Australian Securities Exchange · EQUITY RESEARCH Materials 4th December 2017 DISCLAIMER: Foster Stockbroking Pty Ltd does and seeks to do business with companies

EQUITY RESEARCH

Materials

4th December 2017

DISCLAIMER: Foster Stockbroking Pty Ltd does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Refer full disclosures at the end of this report.

Kidman Resources Ltd (KDR.ASX)

Developing a world class asset

Event:

We initiate research coverage on Kidman Resources Ltd (KDR).

Investment Highlights:

World class asset. KDR owns the Mt Holland lithium project in south Western Australia, which comprises the Earl Grey lithium deposit containing 128Mt at 1.44% Li2O. Additionally there is an exploration target of 75-100Mt at 1.3-1.5% which extends north of Earl Grey. The deposit is relatively flat lying and comes to near surface, making for low mining cost and strip (1.9x post overburden removal).

NPV10 $793M just for base case. We estimate an NPV1o $793M for Earl Grey based on a 25 year mine life at 2Mtpa. We assume all-in-sustaining costs of US$269/t, CFR basis. We assume 60% lithium recovery – as per scoping – but believe this to be conservative.

JV with SQM minimises funding and operating risk. KDR entered into a JV agreement with Chilean lithium giant SQM over Mt Holland whereby KDR will dilute to 50% ownership in return for US$30M of upfront cash payments and US$80M of capital contributions from SQM. We believe this will likely fund KDR to mine commissioning. We forecast first mine production beginning FY20e.

Refinery to be examined in parallel. SQM is proposing a downstream lithium carbonate/hydroxide refinery of 37ktpa LCE capacity, with KDR offered an option to participate up to a 50% interest. While a scoping study has yet to be released, we estimate capex of $500M (100%) and incremental NPV of $390M (100%). KDR intends to take up its option and we factor the refinery in our valuation and forecasts. We forecast first carbonate production beginning FY21e.

Compelling case for expansion. While KDR has not formally announced any expansion of mine at this stage, we believe that the large size of Earl Grey, as well as Exploration Target, means that the case for bringing forward cashflows and significantly increasing NPV is compelling. We have factored in an expansion of mine (to 5Mpa) and refinery (92kt LCE) in our valuation but have aggressively discounted these cases given that it is still early days.

Earnings and Valuation:

We forecast KDR to report NPAT of $29M both in FY18e and FY19e, as a result of upfront cash payments and capital contributions from SQM being booked as profit on selldown of its interest in Mt Holland. However we forecast underlying losses chiefly due to corporate costs. We forecast first earnings from sales of spodumene in FY20e.

We derive a risked valuation of $1.99/share for KDR, and unrisked of $3.85/share. The major component of our risked valuation is the base case 2Mtpa Earl Grey mine, followed by potential plant expansion to 5Mtpa, the proposed 37ktpa LCE refinery, and refinery expansion.

Recommendation:

We initiate with a Buy recommendation and price target of $1.99/share, based on our risked valuation. Catalysts include execution of JV; Refinery study; Resource upgrade; and Decision to mine.

Recommendation Buy

Previous n/a

Risk High

Price Target $1.99

Previous n/a

Share Price (A$) 1.65$

ASX Code KDR

52 week low - high (A$)

Valuation (A$/share) - risked $1.99

Methodology DCF

Capital structure

Shares on Issue (M) 350

Market Cap (A$M) 578

Net Cash/(Debt) (A$M) -2

EV (A$M) 579

Options (M) 50

Fully diluted EV ($M) 661

12mth Ave Daily Volume ('000) 8,936

Y/e Jun (A$M) 2017a 2018e 2019e 2020e

Sales 0.0 0.0 0.0 68.4

Adj EBITDA -6.7 -13.5 -10.0 37.4

Adj NPAT underlying -7.2 -14.1 -9.5 19.5

Reported NPAT -31.3 29.4 29.1 19.5

Adj EPS diluted $ -0.02 -0.04 -0.02 0.04

PER x diluted nm nm nm 43.3

EV/EBITDA x nm nm nm 16.5

*Adj = underlying FSB estimate

Board

Martin Donohue Managing Director

David Southam Non-Executive Director

Brad Evans Non-Executive Chairman

Substantial shareholders

EDM Nominees Pty Ltd 9.3%

Share Price Graph

Analyst: Mark Fichera

[email protected]

The analyst owns no securities in KDR.

Foster Stockbroking and associated entities (excluding

Carnport Pty Ltd) hold 185,000 KDR shares.

Cranport Pty Ltd does not own secutities in KDR.

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4th December 2017 Level 25, 52 Martin Place, Sydney, NSW 2000 | +61 2 9993 8100 | www.fostock.com.au 2


Kidman Resources (KDR)Ful l Year Ended 30 June

Profit and Loss A$M 2017a 2018e 2019e 2020e Financial Metrics 2017a 2018e 2019e 2020eSales 0.8 0.0 0.0 68.4 Sales growth % nm nm nm nmOther revenue 0.0 40.0 0.0 0.0 EPS growth % nm nm nm nm

Operating Costs 7.5 13.5 10.0 37.4 EBITDA margin nm nm nm 45%

Underlying EBITDA -6.7 -13.5 -10.0 31.0 EBIT margin nm nm nm 41%

D&A 0.0 0.2 0.2 3.2 Gearing (ND/ND+E) 27% -685% -4% 19%

Underlying EBIT -6.7 -13.7 -10.2 27.8 Interest Cover (EBIT/net int) nm nm 14x -521x

Net Interest exp / (income) 0.5 0.4 -0.8 -0.1 Average ROE % nm nm -16% 12%

Profit before tax adj -7.2 -14.1 -9.5 27.9 Average ROA % nm nm -14% 12%

Tax exp / (benefit) 0.0 0.0 0.0 8.4 Wtd ave shares (M) 307 333 350 462

Underlying NPAT -7.2 -14.1 -9.5 19.5 Wtd ave share diluted (M) 307 385 400 512

Non-recurring gain/(loss) -24.1 43.5 38.6 0.0

Reported NPAT -31.3 29.4 29.1 19.5 Sales and earnings multiples 2017a 2018e 2019e 2020eP/E x nm nm nm 43.3

Underlying EPS diluted ($) -0.02 -0.04 -0.02 0.04 EV/EBITDA x nm nm nm 16.5EV/EBIT x nm nm nm 18.4

Cashflow A$M 2017a 2018e 2019e 2020eUnderlying EBITDA -6.7 -5.4 -5.0 31.0 Company Valuation A$M A$/sh A$M A$/shChange in WC -3.2 0.0 -3.4 -3.0 Unrisked Unrisked Risked Risked

Tax paid 0.0 0.0 0.0 -8.4 Segment A$M A$/sh A$M A$/sh

Other 0.2 0.0 0.0 0.0 Mine & concentrator:

Net interest 0.1 -0.4 0.8 0.1 Earl Grey - base case 25 yr l ife 396 $0.77 317 $0.67

Share based payments 0.7 0.0 0.0 0.0 Earl Grey - ex-scoping Resources and expl target 58 $0.11 23 $0.05

Operating Cashflow -8.9 -5.8 -7.6 19.7 Potential 5Mtpa plant expansion - incremental value 510 $0.99 153 $0.32 Potential higher Li recovery - incremental value 389 $0.75 78 $0.16

Purchase of PP&E -0.2 0.0 -27.5 -251.2 Refinery:

Acquisitions -2.4 0.0 0.0 0.0 Refinery 37kt LCE - incremental value 195 $0.38 136 $0.29

Exploration -8.4 0.0 0.0 0.0 Potential refinery expansion - incremental value 219 $0.42 66 $0.14

Development -3.1 0.0 0.0 0.0 Corporate -26 -$0.05 -21 -$0.04

Investments 0.1 0.0 0.0 0.0 Cash:

Other 0.0 39.5 0.0 0.0 Balance of SQM earn-in payments 88 $0.17 70 $0.15

Investing Cashflow -14.0 39.5 -27.5 -251.2 Cash from options exercise 8 $0.02 7 $0.02 Cash from future equity raise 167 $0.32 133 $0.28

Equity issue 21.0 0.9 0.0 166.8 Net cash (debt) at end Sep 17 -19 -$0.04 -19 -$0.04

Debt proceeds 2.1 5.7 0.0 83.3 Company Valuation 1,984 $3.85 944 $1.99

Debt repayments -1.0 -5.1 0.0 0.0Other -1.4 0.0 0.0 0.0 Ordinary shares now 350 350

Financing Cashflow 20.7 1.5 0.0 250.0 In-money-options 49 45 Shares from future equity raise 116 81

Net Cashflow -2.2 35.2 -35.2 18.5 Pro-forma diluted shares M 515 476

Balance Sheet A$M 2017a 2018e 2019e 2020e Commodity Assumptions 2017a 2018e 2019e 2020eCash 2.6 37.8 2.7 21.2 PricesReceivables 1.8 0.0 0.0 5.6 Spodumene 6% Li2O CFR, US$/t 695 791 768 712

PPE 0.1 -0.1 73.0 321.0 Lithium carbonate min 99.5% , US$/t 10,000 15,531 17,501 15,117

Capitalised exploration 22.1 16.2 16.2 16.2 A$:US$ 0.75 0.76 0.76 0.75

Other 0.1 0.1 0.0 0.0Total Assets 26.8 54.1 91.9 364.1 Production

Spodumene 6.0% - external sales, kt 0 0 0 144.1

Accounts payable 2.0 0.3 0.5 2.2 Lithium carbonate 99.5%, kt 0 0 0 0.0

Provisions 0.2 0.2 0.8 3.1

Debt 8.4 0.0 0.0 83.3 Costs Other 0.0 10.3 18.1 16.7 Costs - AISC, US$/t 0 0 0 297

Total Liabilities 10.7 10.8 19.4 105.3

JORC Resources - LithiumReserves and capital 62.9 60.8 60.8 227.6 Earl Grey Ore Mt Li2O % Li2O kt LCE Mt

Retained earnings -46.8 -17.5 11.7 31.2 Measured 0 0.00% 0 0

Total Equity 16.1 43.4 72.5 258.8 Indicated 78.5 1.44% 1,130 2.8Inferred 49.5 1.43% 709 1.8

Capital structure Total Resources 128 1.44% 1,839 4.5

Ordinary shares 350.1 Options 49.5

Fully diluted equity 399.6 Source: Foster Stockbroking estimates.

http://www.fostock.com.au/



KIDMAN RESOURCES – OWNER OF WORLD CLASS MT HOLLAND LITHIUM PROJECT

Kidman Resources Ltd (KDR) is an ASX listed company headquartered in Melbourne. Its main

asset is the Mt Holland lithium project in Western Australia, which it acquired for only $3.5M

in July 2016, and originally only known for its gold and nickel exploration. The project is located

110km from Southern Cross, about four hours’ drive east of Perth.

Figure 1: Mt Holland Lithium Project Location in South Western Australia

Source: Company.

Mt Holland Joint Venture structure with SQM

In July 2017 KDR announced an agreement to form a 50:50 JV with Sociedad Quimica y Minera

de Chile Sa (SQM) to develop and operate the Mt Holland lithium project as well as a proposed

downstream lithium refinery operation in WA. The JV agreement was signed September 2017

and is expected to be executed by no later than end December 2017 once conditions precedent

(CPs) are satisfied.

To earn its 50% share in the JV, SQM will make payments of US$110M comprising staged

payments of US$30M cash to KDR and US$80M in funding initial costs of the project’s

development, including KDR’s share (US$40M). Development costs will comprise:

1. Completion of feasibility studies including exploration;

2. Development of mine, plant, and associated infrastructure; and

3. Design and study of phase of the refinery plant.

After SQM has fully contributed the US$110M, both parties will then contribute on 50:50 basis,

unless either take an option to dilute down. Each party will possess marketing rights to their

respective share of production.




Mt Holland geology – Spodumene bearing pegmatites in fertile belt

In 2016 KDR reviewed Mt Holland’s historical drill and geological data - which had targeted gold

and nickel – and found that the holes confirmed spodumene bearing pegmatites with lithium

mineralisation around Mt Holland’s historic Bounty gold mine, as well as at other Mt Holland

deposits such as Texas, Earl Grey, Prince of Wales, Van Uden North, and Tasman. The review

also uncovered multiple near surface and shallow pegmatite occurrences over 25km of strike,

as well as down to 400m below surface. This prompted KDR to bias the focus of project

exploration and development towards lithium.

Mt Holland lies within a north-south trending Archaean greenstone belt comprised of mafic and

ultramafic rocks, which has long been prospective for gold and base metals. On a regional scale,

the Southern Cross-Forrestania Belt extends for 300km and Mt Holland covers the southern

sections of this area, comprising over 50km of prospective Forrestania Greenbelt strike with

geology that is specific to a group of pegmatites comprising LCT (lithium – caesium – tantalum).

The pegmatites appear to be abundant on the eastern margin of the Forrestania Greenstone

belt, where several of KDR’s tenements occur. Among those known are the Earl Grey lithium

bearing pegmatites and the voluminous but untested Texas pegmatites.

EARL GREY DEPOSIT - JORC RESOURCES OF 128Mt @ 1.44% Li2O

Tier 1 size resource

In late 2016 KDR announced a maiden lithium JORC Resource for Mt Holland, centred on the

Earl Grey deposit which lay under the historical Earl Grey pit. The JORC Resource is 128Mt at

1.44% Li2O for 1.84Mt contained lithia (Li2O), or 4.54Mt LCE. 61% of the Resource is in the

Indicated category (Figure 2). Given both the large size and attractive grade, we believe the

JORC resource places Earl Grey in the ranks of tier 1 spodumene resources.

Figure 2: Earl Grey Lithium JORC Resource

Lode Indicated Inferred Total

Ore Mt

Li2O %

Li2O kt

Ore Mt

Li2O %

Li2O kt

Ore Mt

Li2O %

Li2O kt

HW Lode - - - 7.7 1.40% 108 7.7 1.40% 108 Main Lode 78.5 1.44% 1,130 35.0 1.46% 512 113.5 1.45% 1,642 FW Lode - - - 6.8 1.32% 90 6.8 1.32% 90

Total 78.5 1.44% 1,130 49.5 1.43% 709 128.0 1.44% 1,839

Li2O cut/off grade 0.5%.

Source: Company.

1.4km of strike and 900m wide and flattish-lying

The Earl Grey JORC Resource is based on a drilled area of 1.4km strike by 900m width, with the

pegmatite possessing average thickness of 70mm. Most of the pegmatite resource is flat lying,

making it amenable to a low strip ratio (cf. 1.9x post pre-strip in scoping study). The resource

outcrops to near surface at south, and gradually dips 15o over the strike down to 300m depth.

The thickness and resource size highlights the potential for large scale mining.




Figure 3: Earl Grey cross-section

Source: Company

The JORC Resource is broken into three pegmatite lodes – Hanging Wall (HW), Main, and Foot

Wall (FW) lodes. The hanging wall and main pegmatites outcrop at surface from where all three

lodes display geological continuity to 300m depth at the northern end of the deposit, with the

main pegmatite varying in thickness from 15m to 50m over the deposit length. Pit optimisation

parameters used in delineating the Resource are conservative including:

o Mining recovery 95%;

o Mining dilution 5%;

o Mining cost A$3/t ore;

o Processing cost A$36/t ore;

o Transport cost A$90/t ore;

o Li2O price A$464/t; and

o Li2O recovery of 70%. No assumptions were made for recovery of any by-products.

Figure 4: Earl Grey Resource

Source: Company.




EARL GREY PROPOSED MINE

25 year mine life at 2Mtpa

KDR released a Scoping Study on the Earl Grey project in October 2017, based on a 25 year mine

life at 2Mtpa ore mine rate and average production of 288ktpa spodumene. We have used the

study as a basis for our base case valuation of Earl Grey. Details of the scoping study results are

summarised in Figure 5.

Figure 5: Scoping Study Select Assumptions

Parameter Unit Value

Construction start date August 2018 Construction duration months 10 to 12 Production start date 1Q FY20 Life of mine (LOM) years 25 LOM ore mined Mt 47 Annual ore throughput Mtpa 2 LOM strip ratio x 2.3x pre-strip, 1.9x thereafter Average feed grade % 1.40% Plant recovery % 60% Annual production of 6% Li2O ktpa 288 Pre-production capex US$M 111 Royalty % 5% Average C1 cash costs US$/t 205 Long-term concentrate price US$/t 685 LCE produced Mt 1 NPV post-tax A$M 754 IRR % 57% A$ exchange rate US$ 0.75

Source: Company.

Conventional mining

The scoping study focussed on an initial mining area in the shallower southern end of the

Resource The Resource blocks inside the pit design representing the production targets

comprise 76% spodumene, 13% mixed (spodumene plus petalite) and 11% petalite. Some

zones comprising >90% spodumene are in the first stage pit targeted for the first ten years of

production. Petalite is restricted to the far western margin of the orebody, and is assumed to

be mined and stockpiled and processing deferred to end of mine life.

Given the Resource is shallow dipping and large, it is amenable to bulk open pit mining using

truck and excavator fleet and the ore-waste boundary is clearly defined.

Life of mine strip of 1.9x post pre-strip

Base case optimisation of the entire JORC Resource resulted in 109Mt of mill feed and life-of-

mine (LOM) strip of 3 to 3.2:1 and shells optimised at 45o angle. The Scoping Study focussed

on a 25 year mine life and production target of 2Mtpa at 1.4% Li2O for total of 47Mt. This

resulted in a lower strip of 2.3:1, reducing to 1.9 after pre-strip.

This production rate is based on mining 85% Indicated:15% Inferred of Resources, with the first

twenty years sourced from Indicated. The pit would be developed in multiple stages over 25

years, with first stage to provide feed for years 1-6. Pit development would be employ drill and

blast. After Stage 1 pit is mined, mining will be panel based with mined out earlier panels

progressively backfilled with waste from advancing panels.




Processing – Gravity and flotation for 60% recovery seems conservative

Processing was based on prior met work undertaken. Mineralisation responded to both gravity

(heavy liquid separation, or HLS) and flotation. However recovery was poor for material where

the greater source of lithium was petalite as opposed to spodumene, hence deferral of its

processing in the Scoping Study. Recoveries across the three pegmatite zones were similar.

Processing will be by a 2.0Mtpa concentrator containing three stage crushing circuit, primary

dense media separation (DMS) with coarse and fine circuits; a secondary fines DMS circuit; and

a flotation plant. The scoping study assumed an overall plant availability of 85% and ore head

grade of 1.4% Li2O, and targeting concentrate produced of 5.8% to 6.0% Li2O. Details of flow

sheet include:

Crushing. ROM ore is fed to three stage crushing operation comprising a primary jaw

crusher, dry triple deck sizing screen, secondary and tertiary crushers, and fine ore storage

bin. Ore is crushed to P80 10mm. Pegmatite is moderately hard, tough and abrasive, and

will be factored in the design of the comminution circuit;

DMS Circuit. 10mm crushed ore is fed to DMS circuit and materials separated based on

specific gravity. The circuit consists of washing screen, primary coarse and fine DMS circuit,

and fines crushers which reduce the size of both the coarse and fines concentrates to 2mm.

this is then fed to a secondary DMS circuit;

Fine grinding circuit. This reduces the primary washing screen fines and secondary DMS

cyclone floats to final product size of P80 =180 microns (or 0.2mm), suitable for flotation

using a single staged closed circuit rod mill; and

Flotation circuit. Milled ore will be subjected to a conventional three stage flotation to

recover a spodumene concentrate which is then thickened, filtered, and stored.

60% Li recovery – conservative in our view

The scoping study assumed 60% recovery, including the deferred processing of lower recovery

petalite. However we still believe this is conservative as some areas may recover up to 85%,

and further work is being undertake to optimise recovery, including input from SQM. Some

prior metwork results showed HLS alone could achieve up to 73-75% recoveries for weathered

(shallow) and fresh (deeper 58 to 81m), which could be further increased to 89% with flotation.

PRE-PRODUCTION CAPEX A$146M

Existing roads, airstrip, substation and borefield reduce capex

Pre-production capex is US$111M (A$146M @ $0.76), with life of mine capex US$154M

(A$205M) including all infrastructure, roads, camp, water, TSF, and sustaining capex. The

largest component is the plant at US$68M (A$91M). Since Mt Holland both contains and

accesses a range of infrastructure already, this mitigated some of the capex. Key items are:

Haulage and public roads. The project is accessed via the sealed National Highway 1 (Great

Eastern Highway) from Perth to Southern Cross, Parker Range Rd, and the gravel Marvel Loch-

Forrestania Rd. Alternative access is via sealed secondary roads from Perth to Hyde and then

Marvel Loch. Spodumene concentrate will be trucked in bulk to Port Esperance, 400km by road.

Some purpose built roads may be required on site.

Air strip. The existing airstrip is expected to be refurbed at minimal cost.




Historic tailings storage facility. Likely to be used as waste rock dump, with progressive

backfilling of pit in mining sequence.

Site office and staff accommodation. Accommodation village is planned for a 200 person

workforce. There is access to existing mining workforce from Marvel Loch/Southern Cross, as

well as Kalgoorlie and Perth.

Western Power substation. The site is currently connected to a Western Power grid via a

132kv line which supplies the exploration camp. Power for process plant will be supplied from

diesel generators with load expected to be up to 7 MW.

Cleared ROM pad areas. These can be used for stockpile and loading.

Existing water sources. These comprise flooded pits and an existing borefield. The operation

will require 1.0-1.5 GL water p.a., to be sourced from dewatering of historical gold pits and

borefields. Existing historical borefield water located 8km from Earl Grey will be used for

proposed accommodation village.

Tailings storage facility. Pulp discharged by slurry pipeline from tailings thickener to TSF, with

decant to be recycled for use in plant. Gravel rejects could be use as construction material for

TSF.

Figure 6: Proposed Earl Grey mine Layout

Source: Company.




OPERATING COSTS LOW

We estimate all-in-sustaining costs of US$269/t

We forecast that all-in-sustaining costs (AISC) of US$269/t per concentrate on CFR basis for Earl

Grey (Figure 7). This is approximately based on the scoping study’s estimate of US$205/t

operating costs (which excluded royalties, CFR, and sustaining capex).

Comparable to Pilgangoora

Earl Grey’s AISC is almost in-line with what we estimate for Pilbara Minerals’ (PLS) Pilgangoora

2Mtpa case (US$259/t), the latter mostly benefiting from its tantalum credits.

Figure 7: Forecast Earl Grey Cash Costs

Item US$/t concentrate

Mining 40 Processing 92 Site admin 19 Transport & marketing 59 Royalties 33 Sustaining capex 6 CFR 20

All-in-sustaining costs 269

Source: Foster Stockbroking estimates.

PERMITTING UNDERWAY

EIS submitted

Mt Holland, including the Earl Grey resource, already contains a number of granted mining

leases. Together with the EIS documentation already submitted by KDR, it will be used to

support a Mining Proposal application to Western Australia (WA) Department of Mines and

Petroleum. Approval timeframe is expect to be one year. KDR has stated no cultural heritage

issues have been reported, while acid mine drainage characterisation work suggests little or no

problematic waste material is likely to be encountered.




EARL GREY BASE CASE VALUATION – OUR ESTIMATE IS $793M (100%)

KDR’s scoping study derived an NPV10 post tax of A$754M for the Earl Grey. To cross check

the consistency of our own 25-year DCF model, we initially inputted all the major scoping

study assumptions and which resulted in our model yielding a similar NPV in real terms.

Assumptions – similar to Scoping except for price forecasts

We then varied some of the inputs to reflect our own views – namely our own lithium price

and A$ forecasts (refer Figure 8 for estimates over FY18e to FY23). Given our spodumene

price forecast are on a CFR basis, we adjusted the cash costs for Earl Grey on this basis as well.

All other assumptions remain mostly in-line with that of the scoping study.

As a result we derived an NPV of A$793M, about 5% higher than that of the scoping estimate.

This was mostly due to our NPV being in nominal terms (with a 2% inflator from FY23e) vs that

of the scoping NPV being in real terms (which we believe to be conservative given 10%

discount rate used).

Figure 8: Mt Holland Lithium – Nominal Cashflows FY18e to FY23e (100%)

Y/e June Unit 2018e 2019e 2020e 2021e 2022e 2023e

Commodity assumptions Spodumene conc. 6% Li2O, CFR US$/t 791 768 712 667 658 671 A$ US$ 0.76 0.76 0.75 0.75 0.75 0.75

Ore mined Mt 0.0 0.0 1.0 2.0 2.0 2.0 Spodumene 6% Li2O produced kt 0 0 144 288 288 288 LCE produced Mt 0 0 21 42 42 42

Cashflow: Spodumene 6% Li2O sales (A) A$M 0 0 137 256 253 258 Total cash costs (B) A$M 0 0 55 101 101 103 EBITDA A$M 0 0 82 155 152 155

Capex (C) A$M 0 146 2 2 2 2 Chng In Working Capital ( D) A$M 0 0 -7 -6 0 0 Tax (E ) A$M 0 0 23 44 43 44 Net Free Cashflow (A-B-C-D-E) A$M 0 -146 50 103 107 108

Unit costs: C1 costs, CFR US$/t 0 0 249 230 230 234 All-in-sustaining, CFR US$/t 0 0 297 269 269 274

NPV Post-Rax (10% WACC)* A$M 793*

Source: Foster Stockbroking estimates. *Based on 25 year cashflows to FY44e.

EXPLORATION – PLENTIFUL OPPORTUNITIES TO EXPAND RESOURCES

Additional exploration target of 75-100Mt for Earl Grey

Given the resource remains open down dip to north and east, KDR announced an additional

exploration target of 75-100Mt at 1.3-1.5% Li2O it has identified in a zone of pegmatites

extending for at least 600m north of the existing resource’s boundary. The KDR-SQM JV

continues to drill, focused on testing this down dip extent, and is continuing to intercept

mineralisation in this zone. This would imply a strike of 2000m and underpins the exploration

target. The company expects a material upgrade to the current JORC Resource in the 3Q FY18e

and we are confident given drill results to date.




Other Mt Holland targets

Figure 9: KDR Tenements - WA

Source: Company.

The KDR-SQM JV has the opportunity to follow up other areas in Mt Holland besides Earl Grey

where thicknesses of pegmatite intersected are greater than 20m. These include:

o Ex-Western Areas (WSA) ground. Preliminary drilling showed the pegmatites of

Earl Grey extended into WSA’s former adjacent ground to the east, implying the

potential to expand the Earl Grey Resource. A 1.5% gross royalty is payable to

WSA on any lithium sales from the acquired tenements, while WSA retain nickel

rights. KDR will also pay WSA A$15/t for every contained tonne of Li2O in any

JORC Reserve declared.

o Bounty. This is the largest and best drilled pegmatite of the potential other target

areas. Target area is 1.7km north-south and 600m east-west. Historic results

include 54m @1.52% Li2O and 38m @ 1.39% Li2O – implying similar grade and

thicknesses to Earl Grey.

o Van Uden North and Tasman. Wide pegmatites occur but deeper than other

targets.

o Texas. A 6.3km pegmatite strike length based on historical drill data and along

strike north of Bounty.




Joint venture with WSA

In addition to the already acquired tenements from WSA, KDR separately entered into a farm-

in JV with WSA for lithium and lithium by-product rights over WSA’s northern Forrestania

tenements, with SQM also to participate with KDR as a JV partner. This ground has potential to

double strike to 100km. Besides having issued 6.3M shares to WSA, KDR will earn in as follows:

i. Stage 1- KDR earns 50% by spending $5.0M over three years with minimum of $1.5M

in first 12 months. At end of Stage 1, WSA has right to co-contribute with further

exploration on a 50/50 basis with KDR.

ii. Stage 2 – Where WSA elects not to contribute at end of Stage 1, KDR can elect to

spend further $4.0M over two years to earn 70% and WSA is free carried to decision

to mine should Stage 2 be completed.

All non-lithium rights on tenements retained by WSA.




REFINERY JV – KDR OPTION TO PARTICIPATE

SQM plans to develop a downstream refinery for Mt Holland concentrate, and as part of earning

into the Mt Holland JV, offered KDR an option to participate in up to a 50% interest. The refinery

will be located in Western Australia and be a dual plant – with capability to produce both lithium

carbonate and hydroxide in variable amount depending on end customer demand. KDR’s

intention at this stage is to take up this option to participate. Each party will be entitled to

market its own share of the refinery offtake.

Refinery to be developed in parallel with mine

SQM expects to advance studies and development of the refinery in parallel with the mine and

concentrator, so as to expedite its development and construction as soon as possible post the

concentrator coming on stream. SQM will be managing feasability studies on the refinery.

Location of the refinery has been shortlisted to three areas:

o Kemerton, an industrial park near Bunbury Port and 500km by road from Mt Holland;

o Mungari, an industrial estate near Kalgoorlie 345km from the project, with Esperance

the port option; and

o Kwinana near Fremantle port, 475km from Mt Holland.

Conceptual flow sheet

The refinery was not contemplated in the Earl grey mine scoping study but its own study will

be released separately at a later stage. However the company has outlined a flowsheet and

some broad metrics. Spodumene concentrate of 220kt-300ktp at 6% Li2O from the Earl Grey

concentrator will be transported and fed to refinery, which will convert it to either 37kt Li2CO3

or 44kt LiOH, or a mix thereof, with Li recovery of 87%.

Figure 10: Downstream Flow Sheet

Source: Company.




REFINERY VALUATION – INCREMENTAL $390M TO NPV (100%)

Additional NPV supports KDR’s intentions

We decided to derive a ball-park estimate of what the incremental NPV impact of the refinery

could be on the Mt Holland lithium project, especially given SQM’s desire to build one and KDR

intention to participate. KDR claimed it can achieve higher margins and higher NPVs by

participating in downstream processing than purely spodumene operations. Our analysis

supports the higher NPV argument.

Assumptions

While SQM is still undertaking studies on the refinery and yet to release any results, we have

made some assumptions using industry estimates and what we already know about some of

the refinery parameters.

We modelled the downstream refinery as an integrated operation, meaning that mine and

concentrator capex is included along with the refinery capex, with spodumene feed inputted

into the refinery at its cost of production less royalty. Other assumptions (100% basis)

include:

o Additional refinery capex of $500M;

o Processing all of 25 year mine life Earl Grey Li2O concentrate in refinery;

o Feed of 288ktpa spodumene 6% Li2O;

o Production of Li2CO3 battery grade 99.5% at 37ktpa for 25 years;

o Li2CO3 99.5% battery grade long-term price US$10,085/t, CFR;

o Conversion cost of US$2,620/t;

o All-in-sustaining cost of US$5,043/t;

o Royalty of 5% on Li2CO3;

o 87% recovery of lithium.

o Transitional period of 12 months where spodumene externally sold as concentrate

prior to refinery coming onstream.

Figure 10: Earl Grey Carbonate and Spodumene production (external sales) kt

Source: Foster stockbroking estimates.

0

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35

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60

80

100

120

140

160

FY18e FY19e FY20e FY21e FY22e FY23eSpodumene 6% kt (LHS) Lithium carbonate 99.% kt (RHS)




Integrated NPV of $1,182M, or incremental downstream NPV of $390M (100%)

Our analysis suggests an NPV for the integrated operation (i.e. mine plus concentrator plus

refinery) of $1,182M over a 25 year mine life, or an incremental NPV of $390M - i.e. the

additional NPV over and above the stand-alone mine ($793M). We also estimate an IRR of

32% for the integrated vs 57% for the mine and concentrator alone. The lower IRR is due to

the relatively higher proportion pre-production capex of the refinery to NPV vs for the mine.

SQM minimizes technical and funding risk

We believe the incremental NPV reinforces KDR’s argument to intend to participate in the

refinery JV, as well as SQM’s desire to create it. The key advantage KDR possesses – unlike

many other aspiring spodumene producers – is that its JV partner SQM minimises the funding

and technical risk associated with brining the refinery onstream.

Figure 12: Earl Grey Integrated (Mine + Refinery) Cashflows (100%)

Y/e June Unit 2018e 2019e 2020e 2021e 2022e 2023e

Commodity assumptions Li2CO3 min 99.5% US$/t 15,531 17,501 15,117 12,769 10,914 11,132 Spodumene SC6.0 US$/t 791 768 712 667 658 671 A$ US$ 0.76 0.76 0.75 0.75 0.75 0.75

Spodumene ext sales kt 0 0 144 144 0 0 Spodumene feed 6% Li2O kt 0 0 0 144 288 288 Li refinery recovery % 0% 0% 0% 87% 87% 87% Li2CO3 min 99.5% produced kt 0 0 0 19 37 37

Cashflow: Spodumene SC6.0 ext sales A$M 0 0 137 128 0 0 Li2CO3 min 99.5% sales A$M 0 0 0 317 541 552 Total sales (A) A$M 0 0 137 445 541 552 Spodumene costs A$M 0 0 55 44 88 90 Conversion costs A$M 0 0 0 66 136 138 Freight A$M 0 0 0 0 1 1 Royalty A$M 0 0 0 16 27 28 Total cash costs (B) A$M 0 0 55 127 252 257 EBITDA A$M 0 0 82 318 289 295

Capex (C) A$M 0 146 503 8 8 8 Chng In Working Capital ( D) A$M 0 0 -3 -28 -8 0 Tax (E) A$M 0 0 16 86 78 79

Net Free Cashflow (A-B-C+D-E) A$M 0 -146 -441 196 195 207

All-in-sustaining costs US$/t - - - 5,443 5,245 5,350

NPV Post-Tax* A$M $1,182*

Source: Foster Stockbroking estimates. *NPV based on 25 year life cashflows to FY44e.




GOLD – MT HOLLAND

Unlikely to be developed as lithium the focus

Mt Holland has JORC Resources containing 1.175Moz of gold and KDR retains exclusive rights

for the metal. However gold was not contemplated in the scoping study and we believe any

pursuit of a gold in parallel is unlikely given the focus on lithium, including exploration across

Mt Holland. Also many of the gold targets and resources lie either on the same ground as

lithium resources, lithium exploration targets, or where mine infrastructure will be situated.

We expect the JV will want to ensure that all tenements are fruitfully explored for lithium over

the next few years. Only when tenements are not found to host lithium mineralisation, then

should they bear gold they may be developed or divested, as long as not interfering with

infrastructure or operation of mine.

Figure 13: Mt Holland gold Resources

Mt Holland deposit

Ore kt

Au g/t

Au koz

Van Uden 5,378 1.4 238 Blue Vein 4,849 2.4 373 Twinings Group (Earl Grey, Darjeeling, Jasmine) 3,623 1.1 128 Bushpig 743 1.2 28 Razorback 282 1.1 10 Victory 382 1.2 15 Bounty South 71 1.4 3 Bounty Main 3,386 2.9 319 Bounty North 855 1.6 43 Bounty East 477 1.2 18

Total 20,046 1,175 Source: Company

Areas which may be explore or developed for gold – should no lithium be proved – and which

at this stage we do not envisage infringing or obstructing mine site layout and logistics include

Blue Vein, Bush Pig, Razorback, Victory, Gold City, Cheriton, and Squealers. The flagship deposit

is Blue Vein which contains 372koz of gold resource at 2.39g/t and possesses an existing mining

lease, and for which a historical PFS was undertaken in 2013.

Gold deposits we do not expect to be developed include:

1. Bounty Main, North and South, and Earl Grey given that these form part of the

proposed Earl Grey lithium mine and infrastructure;

2. Bounty East - geotech issues; and

3. Twinings Group (Jasmine, Darjeeling) and Van Uden which lie on fertile lithium

exploration ground, including the target exploration resource.

Some of the Twinings gold resource may be present in waste generated from mining Earl

Grey’s spodumene ore. This may be commercially exploited in the future but we make no

assumptions at this stage.

OTHER ASSETS

KDR holds a number of NSW and NT gold and base metal exploration projects which it is seeking

to divest. The company also has royalty of $20/oz or the first 55koz of any gold production from

its former Burbanks gold mine (now owned by Barra), as well as $0.5M upon 10koz production

from Gunga West (owned by Metals X), and a further $0.5M upon 30koz produced.




KDR EARNINGS FORECASTS

We assume earnings from mine in FY20e, and from refinery in FY21e.

Our earnings forecasts for KDR are shown in Figure 14. We include KDR’s share of earnings

from the Earl Grey concentrator JV project in our earnings projections, equity accounting the

company’s share of revenues and costs through the P&L. Similarly, we account for KDR’s share

of its cash, assets, and liabilities of the JV on its balance sheet.

We assume earnings from the mine come onstream beginning FY20e, and those from the

refinery in FY21e.

We forecast profits from Mt Holland selldown in FY18e and FY19e

We forecast KDR to report NPAT of $29.4M and $29.1M in FY18e and FY19e as a result of

booking profits from selldown of its Mt Holland interest to SQM for payments and project

contributions, shown as non-recurring gains in Figure 14. However we expect an underlying

NPAT loss due to corporate expenses and still being cum-mine.

We expect KDR to generate maiden underlying profit in FY20e, when we forecast first

production from Mt Holland.

Figure 13: Underlying and report Profit & Loss KDR

Y/e Jun FY17a FY18e FY19e FY20e FY21e

Sales adj. 0.8 0.0 0.0 68.4 222.4 Operating costs 7.5 18.2 10.0 37.4 73.6 EBITDA adj -6.7 -13.5 -10.0 31.0 148.8 D&A 0.1 0.2 0.2 3.2 15.7 EBIT adj. -6.7 -13.7 -10.2 27.8 133.1 Net interest 0.5 0.4 -0.8 -0.1 5.4 Tax 0.0 0.0 0.0 8.4 38.3 NPAT (loss) underlying -7.2 -14.1 -9.5 19.5 89.4 Non-recurring gain/(loss)* -24.1 43.5 38.6 0.0 0.0 NPAT (loss) reported* -31.3 29.4 29.1 19.5 89.4

Company; Source; Foster Stockbroking estimates. *Non-recurring includes FY18e and FY19e profit booked on selldown of project to SQM for payments and contribution.

Structure and timing of SQM payments and contributions

We assume SQM’s payments commence as soon as conditions precedent (CP) are met by end

2QFY18e (mostly pertaining to regulatory foreign investment), upon which SQM will pay:

1. US$5M cash to KDR; and

2. Contribute US$20M in capital contributions to the project JV, including KDR’s share of

this amount (US$10M). As an advance prior to the CPs being met, SQM has already

provided a US$21.5M convertible loan facility to KDR. Once CPs are satisfied the

drawn down amount of the note is repaid to SQM by being offset against capital

contributions.

Upon decision to mine or final investment decision (FID) which we assume to be June 2018,

SQM will pay:

1. US$25M cash to KDR; and

2. Contribute US$60M progressively to the project to finance project towards

production, of which US$30M pertains to KDR’s share.




Forecast timelines

JV conditions precedent satisfied and SQM payments and contribution to start - End 1HFY18e

Scoping study on refinery – Early 2HFY18e

Earl Grey resource upgrade – 3QFY18e

DFS on mine – End 2HFY18e

Government mine proposal approval – end 2HFY18e

Decision to mine and mine construction commences – Beginning 1HFY19e

First mine production - Beginning 1HFY20e

Refinery construction commences – Beginning 1HFY20e

First carbonate production – Beginning 1HFY21e




KDR VALUATION - $1.99/SHARE RISKED NPV10

We value KDR at $1.99/share risked using DCF. Our unrisked valuation is $3.85/share. We

assume that KDR takes up its option to participate in the refinery JV at a 50% interest.

The main component of our risked valuation is the Earl Grey 2Mtpa mine ($317M, or

$0.67/share), followed by the potential plant expansion to 5Mpta ($0.32), and the proposed

37ktpa LCE refinery ($0.29).

Long mine life and large resources justify consideration of expansion

Our rationale for including an expansion case of the mine to 5Mtpa is simple. Mt Holland – just

by considering current JORC Resources and the Exploration Target – already exhibits significant

size comparable to a Tier 1 asset. This means that bringing forward mining of resources from

the outside the 25 years scoping study, as well as the exploration target, by increasing plant

size will significantly increase the NPV. Similarly, we would expect an expansion of the refinery

to accommodate the increased mine output ability to enhance NPV. An example of a similar

approach is how Pilbara Minerals Ltd (PLS) is unlocking further value from its Pilgangoora

resource by increasing mine capacity.

While KDR and SQM have not formally announced any expansion plans yet, we would be

surprised if they were not being considered. Much will depend on the lithium market which at

the moment remains quite buoyant. To account for the early days, we have aggressively risked

these expansion cases down to 20% to 30%.

Improved Recovery

The other factor that provides upside to base case is improvement in lithium plant recovery.

While base case of the scoping study assume 60%, we factor in recovery improving to 75%.

Again this has been risked aggressively down to 20%.

Figure 15: KDR Valuation

Unrisked Unrisked Risked Risked 1- Risk Segment A$M A$/sh A$M A$/sh factor

Mine and concentrator: Earl Grey 2Mtpa – base case scoping study 396 $0.77 317 $0.67 80% Earl Grey - other resources/expl target 58 $0.11 23 $0.05 40% Potential 5Mtpa plant expansion – incremental value 510 $0.99 153 $0.32 30% Potential higher plant recovery – incremental value 389 $0.75 78 $0.16 20% Refinery: Refinery 37ktpa LCE - incremental value 195 $0.38 136 $0.29 70% Potential refinery expansion – incremental value 219 $0.42 66 $0.14 30% Corporate -26 -$0.05 -21 -$0.04 80% Cash: Balance of SQM earn-in payments 88 $0.17 70 $0.15 80% Cash - options exercise 8 $0.02 7 $0.02 90% Cash - future equity raise 167 $0.32 133 $0.28 80% Net cash (debt) - end Sep 17 -19 -$0.04 -19 -$0.04 100%

Company Valuation 1,984 $3.85 944 $1.99 48% Ordinary shares 350 350 100% Shares - in-money-options exercise 49 45 90% Shares - future equity raise 116 81 70%

Pro-forma diluted shares M 515 476 92%

Source: Foster Stockbroking estimates.




Funded to mine, but further capital required for refinery

With upfront payments and capital contributions, we believe KDR is fully funded to bring in

mine, but only just, with its net cash reaching a trough of $3M prior to mine sales commencing.

Given that we expect the refinery to commence construction soon after the mine is

commissioned, we forecast KDR will need to raise its share of our forecast capex ($500M, or

$250M KDR share) should it elect to participate at a 50% interest. We include the impact of

raising the funds in our valuation, conservatively assuming KDR to fund this amount 67% by

equity and 33% by debt.

We assume any funding of the mine and refinery expansions to be from cashflows, as we

assume any expansions will commence after three years from first production for both mine

and refinery. However should any expansion occur sooner, KDR may need to raise further

funds.

RECOMMENDATION – BUY, 12-MONTH PRICE TARGET $1.99/SHARE

We initiate on KDR with a 12-month price target of $1.99/share, based on our risked valuation.

We believe a number of catalysts lie ahead including potential for expanding, which provide

upside to our valuation.

Catalysts over the next 12 months for the share price include:

o Formal execution of JV;

o Earl Grey resource upgrade;

o Mining approval;

o Decision to mine; and

o Study on refinery.




JV MANAGEMENT

The Mt Holland JV includes a Management Committee comprising two representatives from

KDR and two from SQM which will oversee the development of both mine and concentrator

and the refinery. No casting vote is afforded to the Chairman, with the Chairmanship rotated

on a bi-annual basis. KDR will have the initial Chair. Protection against dilution is provided via

any decision for expansion requiring unaminous decision of the committee. The agreement

also contains appropriate deadlock procedures so that no partner can unreasonably withhold

approval to decision to mine where there is a positive feasability study.

BOARD

Martin Donohue. Managing Director. Founder of KDR. Has had over 15 years’ experience in

equity capital markets and natural resources involved in evaluating mineral projects at various

stages of development and raising capital. A director of several private and public companies

focused on base and precious metal projects in Australia and Africa. Also Principal of Penstock

Advisory, a private consulting and investment company in Melbourne specialising in identifying,

managing, and developing mineral projects in Australia and offshore.

Brad Evans. Non-Executive chairman. Mining Engineer with 17 years’ experience within the

mining industry and currently General Manager of Mining Plus, an international mining

consultancy with offices in five countries. Experience ranges from mine production, planning

and management on sites.

David Southam. Non Executive Director. An Executive Director of WSA, with extensive industry

experience in capital markets, joint ventures, commodity offtake agreements and background

in base and precious metals, bulk materials, contracting and logistics. Mr Southam is Certified

Practicing Accountant, a member of Audit and Compliance Committee of Curtin University

Council, and member of WA Advisory Board of Starlight Children Foundation.




RISKS

The following risks may negatively impact the KDR share price:

Resource risk. Errors and redeterminations can cause negative revision to resources, which can

negatively impact size, quality, economic and valuations. Exploration targets may not convert to

JORC Resources.

Sovereign risk. Any change in government, legislation, or fiscal regimes of Australia may

markedly impact the ownership, financing, permitting, or economics of KDR’s projects.

Commodity price risk. Declines in lithium prices - whether spodumene, lithium carbonate, or

lithium hydroxide, may negatively impact the revenues and profitability of KDR’s projects.

Partner risk. KDR may fall out with joint venture partner SQM over aspect or aspects of the joint

venture, and be unable to reach satisfactory conclusion. This may delay the projects’ progress or

lower profitability, or undermine KDR’s position and share of profitability from the JV.

Currency risk. The KDR share price is denominated in A$ and yet the company’s main asset is a

commodity priced in US$. Any rise in the A$ may reduce translational impact of US$ into A$.

Operating risk. Problems may occur during the mining, processing, refining, transporting and

selling of spodumene, lithium carbonate, or lithium hydroxide that may negatively impact

revenues, costs, and profit.

Financing risk. KDR may need further capital to progress its project. It may not succeed in raising

this capital, or it may do so via equity that is dilutive for shareholders, or debt that may be make

it vulnerable to bankruptcy.

FORFEITURE CLAIMS

Phoenix Rise Pty Ltd has objected to exemptions granted and applied over certain of Mt

Holland’s lithium exploration licenses. The objections pertain to exemption applications

submitted by previous owners Convergent Minerals which Phoenix claim Convergent did not

comply with expenditure obligations.

As would be expected KDR sees the plaints as opportunistic and expects the exemptions to be

granted and legal action to be concluded in 2018. The Warden will give recommendations to

the WA Mines Minister. Given the sstate Government has declared the project of state

significance and the significant investment to be brought to the project by SQM, we believe the

risk of material impact (e.g. loss of tenements, significant damages) for KDR to be low.




FOSTER STOCKBROKING DIRECTORY

Name Role Phone mail

Stuart Foster Chief Executive Officer +61 2 9993 8131 [email protected]

Chris Francis Executive Director +61 2 9998 8167 [email protected]

Haris Khaliqi Executive Director +61 2 9993 8152 [email protected]

Martin Carolan Executive Director +61 2 9993 8168 [email protected]

Mark Fichera Executive Director +61 2 9993 8162 [email protected]

Mark Hinsley Executive Director +61 2 9993 8166 [email protected]

James Gore Research +61 2 9993 8121 [email protected]

Rob Telford Corporate +61 2 9993 8132 [email protected]

Matthew Chen Research +61 2 9993 8130 [email protected]

George Mourtzouhos Execution & Dealing +61 2 9993 8136 [email protected]

Foster Stockbroking Pty Ltd

A.B.N. 15 088 747 148 AFSL No. 223687

Level 25, 52 Martin Place, Sydney, NSW 2000 Australia

General: +612 9993 8111 Equities: +612 9993 8100 Fax: +612 9993 8181

Email: [email protected]

PARTICIPANT OF ASX GROUP

Foster Stockbroking recommendation ratings: Buy = return >10%; Hold = return between –10% and 10%; Sell = return <-10%. Speculative Buy = return > 50% for stock with very high risk. All other ratings are for stocks with low-to-high risk. Returns quoted are annual.

Disclaimer & Disclosure of Interests. Foster Stockbroking Pty Limited (Foster Stockbroking) has prepared this report by way of general information. This document contains only general securities information. The information contained in this report has been obtained from sources that were accurate at the time of issue. The information has not been independently verified. Foster Stockbroking does not warrant the accuracy or reliability of the information in this report. The report is current as of the date it has been published. In preparing the report, Foster Stockbroking did not take into account the specific investment objectives, financial situation or particular needs of any specific recipient. The report is published only for informational purposes and is not intended to be advice. This report is not a solicitation or an offer to buy or sell any financial product. Foster Stockbroking is not aware whether a recipient intends to rely on this report and is not aware of how it will be used by the recipient. Investors must obtain personal financial advice from their own investment adviser to determine whether the information contained in this report is appropriate to the investor’s financial circumstances. Recipients should not regard the report as a substitute for the exercise of their own judgment. The views expressed in this report are those of the analyst/s named on the cover page. No part of the compensation of the analyst is directly related to inclusion of specific recommendations or views in this report. The analyst/s receives compensation partly based on Foster Stockbroking revenues, including any investment banking and proprietary trading revenues, as well as performance measures such as accuracy and efficacy of both recommendations and research reports. Foster Stockbroking believes that the information contained in this document is correct and that any estimates, opinions, conclusions or recommendations are reasonably held or made at the time of its compilation in an honest and fair manner that is not compromised. However, no representation is made as to the accuracy, completeness or reliability of any estimates, opinions, conclusions or recommendations (which may change without notice) or other information contained in this report. To the maximum extent permitted by law, Foster Stockbroking disclaims all liability and responsibility for any direct or indirect loss that may be suffered by any recipient through relying on anything contained in or omitted from this report. Foster Stockbroking is under no obligation to update or keep current the information contained in this report and has no obligation to tell you when opinions or information in this report change. Foster Stockbroking and its directors, officers and employees or clients may have or had interests in the financial products referred to in this report and may make purchases or sales in those the financial products as principal or agent at any time and may affect transactions which may not be consistent with the opinions, conclusions or recommendations set out in this report. Foster Stockbroking and its Associates may earn brokerage, fees or other benefits


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from financial products referred to in this report. Furthermore, Foster Stockbroking may have or have had a relationship with or may provide or has provided investment banking, capital markets and/or other financial services to the relevant issuer or holder of those financial products. For an overview of the research criteria and methodology adopted by Foster Stockbroking; the spread of research ratings; and disclosure of the cessation of particular stock coverage, refer to our website http://www.fostock.com.au.

Specific disclosure: The analyst does not own KDR shares at the time of this report. Diligent care has been taken care by the analyst to maintain honesty and fairness in writing the report and making the recommendation. Specific disclosure: The analyst has received assistance from the company in preparing the report. Specific disclosures: As of 4th December 2017, Foster Stockbroking and its Executive Directors, held 185,000 KDR shares. Foster Stockbroking’s associated fund Cranport Pty Ltd held no KDR shares. The position may change at any time and without notice, including on the day that this report has been released. Foster Stockbroking and its employees may from time to time own shares in KDR, and trade them in ways different from those discussed in research. Foster Stockbroking may also make a market in securities of KDR, including buying and selling securities on behalf of clients.

Review disclosure: The report was authored by the analyst named on the front page of the report and was reviewed and checked by Matthew Chen, Research Analyst. Specific disclosures: The report was prepared solely by Foster Stockbroking Pty Ltd. ASX did not prepare any part of the report and has not contributed in any way to its content. The role of the ASX in relation to the preparation of the research reports is limited to funding their preparation, by Foster Stockbroking Pty Ltd, in accordance with the ASX Equity Research Scheme. ASX does not provide financial product advice. The views expressed in this research report may not necessarily reflect the views of the ASX. To the maximum extent permitted by law, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by ASX as to the adequacy, accuracy, completeness or reasonableness of the research reports. Disclosure review. All the disclosures in the report have been reviewed and checked by Mark Hinsley, Head of Corporate.


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EQUITY RESEARCH - Australian Securities Exchange · EQUITY RESEARCH Materials 4th December 2017 DISCLAIMER: Foster Stockbroking Pty Ltd does and seeks to do business with companies