Focus Minerals Limitedfocusminerals.com.au/wp-content/uploads/2011/01/FML... · 2011-01-10 · Total Measured, Indicated & Inferred 24.4 2.6 2.1 Source: Focus Minerals Note. Estimates

Wednesday, November 24, 2010 Page 1

Ord Minnett Research

Focus Minerals Limited Unlocking Coolgardie’s rich gold endowment Against the backdrop of a strongly performing gold price over the past three years - which has seen the price rise to an all time high in nominal terms of just over US$ 1,400 per ounce - gold shares have continued to perform well. Ord Minnett Ltd (OML) forecasts that the gold price will remain firm but volatile over the next few years, principally from its role as a store of wealth and increasingly preferred alternative to paper currencies and especially the weakened US dollar.

Focus Minerals Limited (Focus) operates gold mines in the famous historical gold district of Coolgardie in WA where the company has built up the largest ground holding and embarked on a program of renewal and expansion that OML forecasts will lift annual output towards 130,000 ounces over the course of 2011.

OML initiates coverage of Focus with a “Buy ” recommendation with high risk. We regard the company as having significant long term upside from:

� Improving its operations with modernised infrastructure comprising the company’s various mines and recently refurbished large treatment plant at Coolgardie and potentially important new mine nearby called The Mount.

� Improving financial returns by lowering unit costs and boosting gold output. � Increasing its gold resource base of over 2M ounces.

� Broadening its exploration activities to include regional projects such as its exciting Treasure Island gold prospect on Lake Cowan.

Focus has been a modestly profitable gold producer from operations that have relied on external ore processing in the past. OML forecasts that the company will significantly improve its profitability and operating cash flows from FY11 onwards from higher ore grades and ore processing at its own treatment plant.

OML’s base case valuation of Focus is $0.07 per share with an upside valuation of $0.11 per share. OML’s 12-month price target is $0.08.

Key Financials

Year to June FY09A FY10A FY11E FY12E FY13E Gold Price (US$/oz) 876 1,093 1,339 1,425 1,263 Gold Production (koz) 41 62 83 120 162 Sales Revenue ($M) 44.5 72.1 116.9 173.7 219.1 Mining Profit before tax ($M) 17.1 19.0 41.3 74.4 95.9 Reported NPAT ($M) 3.1 10.9 18.7 36.6 47.1 Reported EPS (¢) 0.2 0.4 0.6 1.2 1.6 Normalised EPS (¢) 0.2 0.4 0.6 1.2 1.6 Op. Cash Flow Per Shr (¢) 0.8 1.0 1.4 2.3 2.8 Dividend (¢) 0.0 0.0 0.0 0.0 0.0 EPS Growth (%) na nm 62% 95% 29% Normalised P/E (x) nm 12.8 8.0 4.1 3.2 Price/Op. Cash Flow (x) 5.9 5.0 3.5 2.2 1.8 Normalised ROE (%) 2% 12% 17% 27% 26%

Source: Iress, Company Data, Ord Minnett Estimates. Share price: $ 0.05 Nov. 24, 2010.

Note 1. Mining Profit Before Tax is the contribution from mining operations after admin & royalties

Wednesday, November 24, 2010

FML A$0.05

Recommendation Buy

Risk Assessment High

Gold Peter Arden Senior Research Analyst

[email protected]

Focus Minerals Limited

ASX Code FML 52 week range $0.04 - $0.08 Market Cap ($M) 144 Shares Outstanding (M) 2,865.5 Av Daily Turnover ($M) 1.6 ASX All Ordinaries 4673.2 ASX Gold Index 7784.8 Net Cash FY10 ($M) 7.1

Relative price performance

Source: Iress

Consensus Estimates

FY11F FY12F

NPAT* ($M) na na EPS* (¢) na na

No of estimates 0 0

Source: Iress


Executive Summary � Focus has established a strong and substantial gold production presence at

Coolgardie that is very favourably located near existing infrastructure and OML forecasts gold production could rise towards a rate of 160,000 ozs per annum in FY13.

� OML believes Focus has attractive growth characteristics from the Coolgardie Project itself augmented by its regional exploration effort that has given it access to exciting new areas such as The Mount project and the Treasure Island prospect.

� OML regards Focus as being competently managed and having a core gold production capability that gives the company a very strong base from which it can develop further to become a major mid cap gold producer.

� Whilst not exactly another Kalgoorlie, Coolgardie has many of its geological characteristics and shares many similarities, yet it remains largely disregarded because of erratic output in the past but OML believes this is set to change as Focus consistently delivers strong low cost production there from FY11.

� OML believes the historical doubt over Coolgardie’s gold potential will be replaced by a rightful reputation as a major gold field that supports long mine lives and generates attractive returns for the shareholders of Focus.

� OML initiates coverage of Focus with a “Buy” recommend ation with high risk.

OML’s valuations of Focus are based on the Mineral Resource summary given in Table 1 below and on the assumptions given in Table 2 and Table 3 below.

Table 1. Focus Mineral Resource Summary

Mineralisation Type Resource Category Ore

(Mt) Average Grade Contained Gold Gold (g/t) (M ozs)

Tindals Project Measured, Indicated & Inferred 10.9 2.8 1.0

Mount Project Inferred 2.1 5.5 0.4

Lindsays Project Indicated & Inferred 7.9 1.8 0.5

Three Mile Hill Project Indicated & Inferred 1.5 2.0 0.1

Norris Project Inferred 1.9 2.1 0.1

Total Measured, Indicated & Inferred 24.4 2.6 2.1 Source: Focus Minerals Note. Estimates are as at September 2010

As described in detail in subsequent sections, OML has derived base case and upside valuations for Focus based on the assumptions in Tables 2 and 3 below. The explanations behind these valuations are detailed in the Valuations section on page 17.

Table 2. Key Commodity Price and $US/$A Assumptions

Assumptions FY09A FY10A FY11E FY12E FY13E

Gold Price (US$/oz) 876 1,093 1,339 1,425 1,263

US$/A$ 0.75 0.88 0.94 0.99 0.94

Gold Price (A$/oz) 1,175 1,238 1,420 1,447 1,350

Source: Ord Minnett forecasts

The production assumptions in Table 3 below are based on OML’s forecasts for increasing amounts of ore to be mined from Coolgardie and The Mount.

As those mines continue to ramp up their production, the company will reduce the amount of low grade stockpiled ore treated and OML is forecasting that treatment of stockpiled ore will cease in FY12.

OML forecasts that Focus has the ability to increase its annual gold production towards 160,000 ozs by FY13 based on its Coolgardie mines and exciting new areas at The Mount and Treasure Island


OML is forecasting that Focus will define at least a small gold deposit at its Treasure Island prospect and will go on to develop at least a modest scale mining operation there by the end of FY12

Table 3. Key Production Assumptions

Assumptions FY09A FY10A FY11E FY12E FY13E

Equity Gold Production (000 ozs)

Coolgardie 41 62 71 80 85

The Mount 12 38 58

Treasure Island 2 19

Total 41 62 83 120 162

Cash cost1 (A$/oz) 612 857 898 812 747

(US$/oz) 456 757 846 800 699

Source: Ord Minnett forecasts Note1. Includes royalties

Gold Market: Summary Points (Refer Appendix 1) OML regards the following are the main drivers of gold:

� It is a financial safe haven and store of wealth against weakening currencies and paper money

� It is an inflation hedge

OML believes the following are the main features of the gold market:

� Speculative interest has been variable but reduced recently, suggesting the gold price is likely to be more sustainable at current levels.

� Gold Exchange Traded Funds (ETFs) continue to grow, reflecting a deep-seated ongoing desire by investors to move away from paper money and major currencies like the US dollar that are perceived to have further weakness

� Gold leasing rates have fallen significantly and are now slightly negative after spiking in late 2008 in response to the global financial crisis

� Gold supply has been dominated by generally flat to falling mine output and slumping official sector sales while demand has been dominated by falling fabrication that has been more than offset by strengthening retail investment

� The US dollar is likely to remain weak while that country continues to run very large twin deficits (Current Account and US Government Budget Balance) , which OML believes will lead to continued high gold prices

� Liquidations of gold ETFs are unlikely given the main alternative for investors is bonds which have extremely low interest rates in the USA and elsewhere

� Central Bank selling of gold is unlikely as many Central Banks have already sold all their gold and there has been generally growing net buying by Central Banks for the past eighteen months

� After selling about 254t of the 403.3t of gold it has approval to sell, the International Monetary Fund only has about 150t still to sell and it is now likely to sell that gradually under similar terms to the Central Bank Gold Agreement

OML regards the ability of gold to act as a store of wealth as the principal driver of the gold price


Background and Strategy Focus is a gold mining and exploration company. The forerunner to the current company, Austminex Resources NL, listed on the ASX in September 2000. The present company was formed from the reorganisation of that company in which it disposed of its base metals projects in Eastern Australia and acquired interests in the main Coolgardie tenements from Herald Resources and Coolgardie Gold.

Coolgardie is a well known gold mining area containing the famous Bayley’s Reward mine that dates from the discovery of gold at Coolgardie, where total gold production is estimated to have been over 2.6 million (M) ounces from operations spanning over 100 years of continuous mining. Focus successfully brought the high grade Perseverance mine into production in 2008. The mine has produced over 100,000 ounces of gold since then, marking the start of what OML believes will be a major phase of operations on the famous field.

The company aims to become a substantial Australian gold mining company and is now in a strong financial position with no debt or hedging and a fully refurbished treatment plant that enables it to generate growing operating cash flow.

Figure 1. Map showing location of the Focus’ Coolga rdie areas in Western Australia

Source: Focus Minerals

Focus accumulated its Coolgardie gold interests in WA from various sources and recently began trial mining at the high grade Mount deposit.


Operations Coolgardie

Focus has the major tenement holding in the Coolgardie district, which is located about 558km east of Perth in Western Australia, (Figure 1 above).

The consolidation of the majority of the Coolgardie goldfield by Focus is the first time in history that the goldfield has been consolidated by a single company.

The assets acquired by Focus initially comprised three gold mining operations at Coolgardie with total gold resources of 0.6M ounces that included remaining reserves of 160,000 ounces. Most of the resources at Coolgardie were in the inaccessible underground deposits but most of the reserves were in remnants in various open pits and surface stockpiles but Focus did not have an operating treatment plant that was capable of economically treating any of that material.

The majority of the resource inventory in the Coolgardie Gold Project that was acquired by Focus was in the Lindsays/Bayleys and Tindals areas. Just prior to the acquisition of the assets, the Coolgardie operations, which had been based on low grade open pit mining and stockpiles, ceased with the exhaustion of reserves.

Prior to that, underground mining of shallower parts of the Coolgardie deposit stopped. In September 2003 reserves were exhausted and the Coolgardie treatment plant was subsequently put on care and maintenance in December 2004.

Coolgardie is a well known gold area from having previous gold production of over 2.6M ounces, the bulk of which (over 2M ounces) has come from the Tindals and Lindsays Mining Centres.

OML regards the Coolgardie deposits as the key driver of earnings and operating cash flow for Focus over at least the next few years.

Tindals Mining Centre

Gold was discovered in the Tindals Mining centre (TMC) in about 1892 with and is estimated to have yielded over 1 million (M) ounces of gold from operations encompassing two main periods – small scale alluvial mining by the original prospectors closely followed by high grade underground mining between about 1896 to 1914, after which the area went into decline although there was intermittent production form time to time.

The second major phase of mining effectively started in about 1989, which involved lower grade open pit and then mostly limited and relatively shallow underground mining to 2003. The area recently entered what is expected to be its third major period of production with resumption of underground mining from the Perseverance and other deposits (Figure 3 below).

The Tindals Mining Centre is the major production area for Focus. It occurs in the central part of the Coolgardie goldfield (figure 1 above) and now comprises a number of deposits of which the principal ones are Perseverance Tindals, Empress, Countess and Cyanide (Figure 13 over page). The TMC is characterised by larger underground deposits but it also contains some open pit opportunities and has supported open pit operations in the past. Currently it is being developed by two declines that are only at the relatively shallow depth of 300m below the surface.

The Tindals Project continues to provide by far the major source of ore that Focus is mining. Recent operations at the TMC continued the strong performance that has been increasingly evident for some time, with mining in 1Q11 delivering 115,681t of ore averaging 3.45g/t along with 1.400m of development.

Focus has a strong commitment to exploration in the Coolgardie region as the company believes there are many high grade deposits that remain undiscovered because there has been very little historical drilling below a depth of about 200m.

Focus has the dominant landholding in the Coolgardie gold belt.

The Coolgardie area has yielded over 2.6M ounces of gold but has just entered what OML expects to be its most sustained production period.


Focus has progressively increased its exploration effort in Coolgardie over the past year or so, with a strong focus on the TMC, where it has successfully expanded the resource and reserve base so that the area now contains almost half the company’s gold resources, being 986,000 ounces (Table 6 on page 12). Electrical geophysical methods, particularly electromagnetics (EM), have been particularly helpful in the delineation of new deposits and extensions to existing ones. Notable successes from the EM work are Perseverance North, Big Blow and Happy Jack.

Focus is currently preparing for open pit mining at the Tindals Project, having recently lodged submissions for environmental approvals with the objective of commencing mining the current reserve of 389,000t averaging 2.1g/t for 24,400 ounces of gold in the March quarter of 2011. Figure 2. Simplified long sections of the Empress a nd Perseverance deposits in the

Tindals Mining Centre at Coolgardie.


As shown in Figure 2 above, the major orebodies in the TMC area such as Perseverance and Empress, exhibit strong structural controls and have strong plunges, reflecting the fact that their formation was related to major structural events, which is the case for all the major gold deposits in the Kalgoorlie region.

The significant feature of this is that the orebodies have significant down plunge extent. As shown in Figure 2, both orebodies have only been mined and defined for a relatively small part of their likely extent, indicating that they have significant potential for resource extension at depth.

OML understands that Focus has an ongoing drilling program directed towards orebody delineation and resource and reserve definition.

Geophysics has aided gold discovery at the Tindals Mining Centre


Figure 3. Plan view and cross sections of the Tinda ls Mining Centre at Coolgardie


Lindsays

While the grade of lodes and deposits in the Lindsays area is generally lower than for the TMC, and Lindsays currently has predominantly open pit deposits, it also contains a number of deposits that are quite large and may become suitable for underground development and mining (Figure 4 below).


Currently Focus is targeting a number of larger deposits at Lindsays. The company believes there are preliminary underground opportunities in a number of places and its attention is being directed towards large shallower targets (down to a depth of about 150m in the first instance) that display evidence of repeat mineralisation. The size of target being sought by focus is circa 10Mt averaging 3g/t.

Figure 4. Schematic view looking up from below the deposits in the Lindsays area of Coolgardie


Other Coolgardie Deposits

Other gold deposits held by Focus in the Coolgardie district that could potentially develop into viable open pit and/or underground mines over the next few years include Baileys underground, Prices, Kings Cross, King Solomon, Hillside and Ashes, the location of all of which are in close proximity to the Coolgardie treatment plant as shown earlier in Figure 1 above.

Focus has shown by its performance to date in the Coolgardie orebodies that it can successfully mine this very significant gold deposit. Initial results indicate that the ore can be mined with reasonable operating costs. OML expects annual gold output from the Coolgardie mine to build up to at least 80,000 ounces over a mine life of at least nine years and average direct cash cost (including royalties) of about $750 per ounce.

Upgraded Ore Treatment And Associated Infrastructur e

Focus has spent about $22M on refurbishing the company’s Three Mile Hill treatment plant at Coolgardie. The plant became fully operational in January 2010. The treatment plant consists of a CIP processing plant with a nameplate capacity of 1.2M tonnes per annum (tpa) of hard rock ore although the plant has successfully operated at rates above its nameplate capacity after considering that it has been used for toll milling, which necessitates a complete shut down and clean-out after each campaign. OML understands that all toll milling arrangements have been concluded now and the plant will be solely dedicated to processing Focus’ ore.


The treatment plant gives Focus reduced operating costs (compared to the previous external treatment arrangements) and a more consistent production profile. The recent performance of the plant has been most impressive, achieving recoveries of around 94.5% treating different ore types from various mines with an average head grade estimated at only 2.03g/t in 1Q11.

OML believes the company’s refurbished treatment plant and associated new infrastructure facilities at Coolgardie place Focus in a strong position to not only develop its own deposits but to potentially be involved in the development of other gold projects in the district. While OML believes the high grade Coolgardie mine underpins a substantial period of significant and profitable gold output, appropriate development of its substantial gold resource base and additional discoveries from its ongoing exploration will underpin Focus’s long term operations at Coolgardie.

The Mount

Focus has a small but very significant tenement called The Mount, which is located about 80km to the south of Coolgardie, near Widgiemooltha, which is a well known gold and nickel district near Kambalda. The company’s tenement is 900ha and it contains an Inferred Resource of 2.1Mt averaging 5.5g/t for 370,000 ounces of contained gold and a Probable Reserve of 69,000t averaging 8g/t for just under 18,000 ozs, (Table 5 on page 11 and Table 6 on page 12). The reserves only extend to a depth of 90m and the resource is only down to a depth of about 200m.

The gold deposits at The Mount occur as a series of sheeted vein structures, which have been partially mined by mostly small scale miners in the past by means of a shallow open pit and limited underground workings (Figure 5 below).

Figure 5. Map of Focus’ Mount project


Although the deposits occur at very shallow depths, they do not lend themselves to efficient or effective open pit mining so the company is in the process of expanding the existing box cut and commencing to strip the old adit/decline so that focus can operate the project with larger ore trucks even though it will retain the current narrow vein mining equipment (such as the single boom jumbo).

At The Mount, Focus is potentially moving quite rapidly from trial mining to annual gold production of around 60,000 ozs.

Focus’s refurbished treatment plant has performed well since it began operating in January 2010 and has given strong indications of being able to exceed nameplate capacity with high gold recovery rates when operated continuously.

The Mount is potentially moving rapidly from trial mining to annual gold output of 60,000 ozs


Focus’ Near Term Gold Production Targets

As shown in Figure 6 below, the company’s latest forecast for gold production from Coolgardie in FY11 is around 100,000 ounces.

Focus is forecasting gold output rising to about 130,000 ounces in FY12, which should result in strong profit and operating cash flows at OML’s forecast gold prices.

Figure 6. Focus’ recent and forecast gold producti on


Gold Production Summary and Forecasts Following commissioning of the refurbished treatment plant at Coolgardie at the end of 2009, the first gold production from the plant was derived from treatment of lower grade surface stockpiles to condition the mill prior to higher grade underground ore being processed over the later part of FY10. Treatment of low grade stockpiles has continued into FY11, which explains the lower average head grade of ore treated in 2H10 and in FY11. The grade of some of this low grade material is not accurately known, but it is becoming apparent that it is generally about 1g/t gold although some is quite a bit higher than previously expected, grading up to 2g/t.

OML is forecasting that Focus will continue to ramp-up production from Coolgardie over FY11 and FY12 with full operational capacity being achieved in FY11, giving rise to increasing gold output over following years as shown in Table 4 below.

Table 4. Recent and Forecast Gold Production Data f or Focus

Year to June FY09A 1H10A 2H10A FY10A FY11E FY12E FY13E

Ore Mined (000 tonnes) 332 154 177 330 600 830 1,130

Average Gold Grade (g/t Au) 5.5 5.4 4.2 4.9 3.8 4.4 4.6

Ore Treated (000 tonnes) 257 106 464 575 1,200 1,250 1,300


Metallurgical Recovery 92% 92% 91% 91% 95% 95% 95%

Gold Produced (000 ozs) 41 22 40 62 83 120 162

Total Cash Costs incl. royalty - A$/oz 612 849 862 857 898 812 747

- US$/oz 456 736 805 757 846 800 699

Source: Focus Minerals; Ord Minnett

Realising it would have spare milling capacity in the early stages of operation of its refurbished treatment plant, and to enhance the returns from the plant, Focus agreed to treat several lots of third party ore.


This necessitated complete clean-outs and resulted in disrupted performance. All third party processing commitments have now been fulfilled and the plant is dedicated to treatment of Focus’ ore.

As shown in Table 4 above, OML’s analysis of Focus’ FY10 results indicates that direct mining costs were about $857 per ounce, equivalent to about $90/t including royalties. While these unit costs were slightly higher than expected, the company was still in the ramp-up phase for Coolgardie and has indicated unit operating costs per ounce should reduce as the scale of mining and resultant output from the Coolgardie orebody increases.

The company has already instituted a rigorous technical and financial evaluation process for the evaluation of all open pit opportunities and has strengthened its operations planning processes and improved the controls over plan execution.

Focus is forecast by OML to be likely to enter a sustainable lower cash cost phase of operations over the next few years as the proportion of high grade Coolgardie ore increases and as underground ore grades at The Mount increase slightly. OML believes the likely cash costs for Focus over the next few years will place the company in the mid tier on the cost curve but should ensure the company remains soundly operating cash positive despite OML’s forecast of gradually weakening Australian dollar gold prices.

Reserves and Resources Focus has significantly increased its reserves and resources over the past year and with its active exploration program.

The company’s current reserves are summarised in Table 5 below and its resources are summarised in Table 6 over page.

These reserves and resources were updated in September 2010.

Table 5. Focus’s Reserves And Stocks At Coolgardie At September 2010


Focus has significantly increased its reserves and resources at Coolgardie over the past year


Table 6. Focus’s Mineral Resources At September 201 0


Treasure Island Focus acquired a 75% interest in the Treasure Island prospect, located adjacent to the important Boulder-Lefroy Fault, which is one of the major controlling features for gold mineralisation in the Kalgoorlie region (Figure 7 below) and covering part of Lake Cowan, about 50km southeast of Kambalda in W. A. in June 2010.

Figure 7. Image showing location of Treasure Islan d prospect adjacent to Boulder Lefroy Fault



Consideration for the acquisition of the Treasure Island prospect was the issue of 3M fully paid ordinary shares in Focus to Semro Pty Ltd (Semro) plus expenditure of $0.2M on exploration by June 2011.

Semro’s initial reconnaissance surface sampling was for the purpose of gold exploration, so the initial laboratory analysis had an upper copper threshold of 1% copper, which resulted in two samples from that program recording grades of over 1% copper. Subsequent field visits by Focus including the use of portable analytical equipment established the presence of elevated copper values.

Recent rock chip sampling of an array of quartz veining over a strike length of 300m and overall width of 20m has returned very high gold values including 38.4g/t, 45.7g/t and 55.3g/t. OML understands the gold is extremely fine grained, which may have also been a factor in it remaining unrecognised for so long.

While it seems hard to believe that such an attractive gold prospect could still remain largely unrecognised and inadequately prospected, it is likely that its proximity to Lake Cowan was a major disincentive to its evaluation. Some of the best results by Focus are on an island in Lake Cowan, making evaluation difficult.

OML understands Focus is planning an active exploration program of the prospect, which includes further mapping and sampling, selected geophysical surveys and drilling – an initial diamond drilling program is planned for the high grade zone on the island in mid January 2011 and an initial reverse circulation drilling program on a broader area on the edges of Lake Cowan in early February 2011.

Figure 8. Larger scale image showing location of T reasure Island prospect


Focus has discovered very high grade gold in initial sampling at its recently acquired Treasure Island prospect


Other Exploration Interests

Although Focus’s main exploration focus is clearly on finding additional high grade gold deposits on its Coolgardie and surrounding regional exploration areas, the company has a number of other prospects including the Nepean project, located approximately 40km south of Coolgardie. (Figure 1 on page 4).

Nepean

The Nepean project is centred on a small underground sulphide nickel mine that was operated by Metals Exploration from 1970 to 1987, producing 32,300t of nickel in ore with an average recovered grade of 3.0% nickel from about 1.25Mt of ore. The ore was initially sold to the Agnew joint venture near Leinster and subsequently to WMC at Kambalda.

The mine was sold by Metals Exploration in 1995 and it has subsequently had a number of owners. Focus acquired the mine in 2007 but so far has only conducted limited exploration. The mine currently has an Inferred Resource of 591,300t of ore averaging 2.2% nickel for 13,250t of contained nickel metal. This resource is based on the mine’s remnant, transitional and fresh mineralisation (Figure 9 below).

Figure 9. Long section of Nepean nickel mine showi ng remnant ore in purple and mined areas in grey


In addition to the historical mine, which remains open at depth, the Nepean tenement area incorporates a 30km strike length of Kambalda-style komatiites with significant potential to host nickel sulphide mineralisation. This potential has been established by mapping VTEM geophysical surveys, detailed aeromagnetics and drilling along sections of the strike.

Focus completed a Bankable Feasibility Study comprising grade control infill drilling, mine design and processing in 2008 but due to the decline in nickel prices and desire to focus on its gold activities, the company decided to defer commencement of full-scale operations.

OML understands Focus is planning another drilling program early in 2011 to enable it to determine the most appropriate way to develop the Nepean project in order to realize the best value for its shareholders.


Financials Profit Performance

The company reported a modest but increased profit of $10.9M for FY10 from the combination of higher gold production and average realised gold price and significantly lower unit cash operating costs per ounce.

OML’s analysis of Focus’ 1FY10 results indicates that unit direct mining costs including royalties were about $90/t or $857 per ounce. This represents 11% reduction on a per tonne basis but a 40% increase on a per ounce basis. These unit costs benefited from some higher gold grades in the first half of the year but were very adversely affected by the treatment of lower grade ore in the second half of the year (Table 6 below) as the newly refurbished treatment plant processed lower ore grades while the plant was being run in and fine tuned.

The company is targeting lower unit costs on a per tonne basis at full production rates from Coolgardie using its own Three Mile Hill treatment plant, which is expected to achieve lower unit processing costs as it operates on a continuous basis from now on. With Focus still in the ramp-up phase at Coolgardie, OML is forecasting that although unit operating costs per ounce are likely to increase in FY11, OML expects they will reduce after that as mining rates and grades from the Coolgardie deposits rise toward target levels, as shown in Table 6 below.

Despite its modest profitability in FY10, the company was able to generate an improved positive operating cash flow for the period and OML is forecasting that, with the expected increase in gold output and realised gold price in FY11 and subsequent years, Focus will generate even stronger operating cash flows (Table 7 below). OML believes the strong cash generating ability of its Coolgardie gold deposits in particular will put Focus in an increasingly strong financial position to fund development of additional deposits of its own and, should it choose to do so, to consider the payment of dividends.

Table 7. Recent and Forecast Profit And Operating C ash Flow Performance Year to June FY09A 1H10A 2H10A FY10A FY11E FY12E FY13E

Ore Mined (000 tonnes) 332 154 177 330 600 830 1,130


Ore Treated (000 tonnes) 257 106 464 575 1,200 1,250 1,300


Metallurgical Recovery 92% 92% 91% 91% 95% 95% 95%

Gold Produced (000 ozs) 41 22 40 62 83 120 162

Total Cash Costs incl. royalty - A$/oz 612 849 862 857 898 812 747

- US$/oz 456 736 805 757 846 800 699

Source: Focus Minerals, Ord Minnett forecasts

Cash Flow and Dividends

OML is forecasting that Focus uses its strong operating cash flows (Table 7 below) to fund further development of its Coolgardie mines and deposits and in particular to expand the capacity of its Three Mile Hill treatment plant. Despite forecasting that Focus will be in a strong financial position by the end of FY11, OML is not expecting that the company will start paying even modest dividends then, even though OML is forecasting that Focus could be starting to pay income tax in FY12 as tax losses are likely to be used up by then so small dividends would be at least partly franked.

OML understands the company’s policy on dividends is that the first priorities for Focus’s surplus cash flow are expenditure on exploration and development of additional gold output to generate value from its resource base.

Focus has reported modest but rising profitability over the past two years as it has continued to develop its operations at Coolgardie but OML expects the company to achieve significantly stronger profitability and operating cash flows from now on as lower cost Coolgardie gold output rises to target levels.

OML expects Focus will invest in expanding its gold output and building cash reserves before starting to pay dividends.


Any surplus cash after that is potentially available for dividends and OML believes the company is mindful of investors’ desire for dividends. OML forecasts that the company’s free cash flow will begin to be strongly positive in FY11, (Table 8 below), leading to increasing net cash balances.

Table 8. Cash Flow Analysis

Year to June FY09A 1H10A 2H10A FY10A %Chg on pcp FY11E FY12E FY13E

Operating Cash Flow After Tax 13 9 19 28 108% 42 68 82

%age change on previous corresponding period -47% nm Uc 108% nm 51% 62% 20%

Investing Cash Flow - Capital Expenditure (14) (19) (17) (36) 158% (14) (29) (36)

- Exploration (5) (2) (4) (6) 22% (10) (12) (12)

- Other

nm (4) (4) (6)

- Total (19) (21) (21) (42) 118% (28) (44) (54)

Financing Cash Flow – Share Issues 26 8 8 -68%

- Inc. (Repay) Debt (7) (9) (9) 26%

- Reduce (Inc.) Cash (14) 13 1 14 nm (14) (24) (28)

- Total 6 12 2 14 141% (14) (24) (28)

Free Cash Flow

(10) 2 (8) nm 28 40 46

As %age of Operating Cash Flow -3% -112% 12% -28% nm 67% 58% 56%

Increase (Reduction) in Net Cash 1 5 5 139% 14 24 28

Source: Focus Minerals, Ord Minnett forecasts

Gold Price Hedging and Price Protection

Focus does not have any gold price hedging following the closing out of the last of its hedging arrangements in September 2009. With its stronger financial position that sees it debt free and the Coolgardie mining operations and associated infrastructure now operating on a solid footing, the company believes it has significantly reduced its operational risks and can now operate without price protection. OML also believes that with the expected growing margin between its Coolgardie cash costs and the current gold price and its strongly rising gold output, there is far less need to carry price protection. The company is well placed to benefit from the expected firm gold price over the next few years.

Balance Sheet

The company has no debt, having repaid its remaining debt in 1Q10. Focus has spent $50M on new mine development associated with the Coolgardie and Mount deposits, the refurbishment of the Three Mile Hill treatment plant and associated infrastructure at Coolgardie, and has spent a further $11M on exploration over that time. OML has forecast that the company’s total capital expenditure and exploration expenditure in FY11 will be about $24M. Despite this significant capital expenditure at a time of modest operating cash flows, the company’s balance sheet is moderately strong now as a result of several equity raisings over the past three years, the most recent being $28m in March 2009 and $8M in October 2009.

With slightly lower ongoing Coolgardie capital spending, OML expects net cash to increase modestly over the course of FY11 before increasing more strongly after that under the influence of the company’s improving free cash flow as capital expenditure on the Coolgardie mines plateaus. OML is forecasting that the company could then build up a strong cash position over the following two years that would see it with no debt and net cash of over $70M by end of FY13.

Focus is in a sound financial position with no debt and OML expects operating cash flow over the next few years will put the company in an increasingly strong net cash positive position.


With rising lower cost gold production over the next few years from the Coolgardie operations and based on OML’s expectations of only slightly falling Australian dollar gold prices for all of that time, OML believes Focus will be in a very strong position to undertake a range of growth and capital management strategies while still preserving a strong balance sheet.

Valuation OML’s valuation analysis of Focus, summarised in Table 9 below, has highlighted that the company’s Coolgardie gold mining operations account for by far the major value in the company.

Table 9. Summary Valuation of Focus

Base Case Upside Case

$M Value ($)

per Share1 $M Value ($)

per Share1

Assessed value of Coolgardie gold mines2 212 0.07 316 0.11

Assessed value of exploration assets3 20 0.01 39 0.02

Sub total of mineral assets 232 0.08 356 0.12

Add - Net financial assets4 (34) (0.01) (34) (0.01)

Total net value 199 0.07 322 0.11

Source: Ord Minnett Note: 1. Per share valuation does not add exactly as each component has been done on a diluted basis, for securities that are dilutative, making for duplication when summed individually 2. Based on NPV at 10% discount rate using JORC reserves and resources for base case and estimated deposit extensions for upside case; includes The Mount 3. Estimated value of exploration projects and other assets derived by various methods including NPV 4. Includes corporate costs

The base case valuation of the company’s exploration and development assets reflects the inherent value of the current resource base attributable to those assets. For its upside valuation case, OML has incorporated estimates for extended mine life for the Coolgardie mines (for which the Coolgardie resource base is over 1.6M ounces) and for The Mount, where the current resource base is almost 0.4M ounces.

The company’s shares are currently trading at a 38% discount to OML’s base case valuation of Focus and at a 122% discount to OML’s upside valuation. In OML’s opinion this is mainly due to the market’s residual concerns over the quality of Focus’ asset base and the company’s ability to consistently achieve the planned gold production and operating costs for its Coolgardie operations and to be able to successfully unlock substantial value from its large gold resource base.

Board of Directors and Senior Management The company’s board of directors and senior management has considerable exploration, mining and general business experience.

Don Taig is the Executive Chairman of Focus. He is an accountant with considerable experience in the mining and exploration industry from 11 years within CRA Ltd’s mining businesses and with Metals Exploration Ltd. He also has considerable senior management experience in the food industry, having been Managing Director of Goodman Fielder’s baking division and Chief Executive officer of Bunge Cereal Foods.

The Coolgardie gold mines dominate OML’s valuations of Focus….

….but OML believes the company’s shares are trading at a significant discount to the assessed valuations because of market concerns over the asset base.


Phil Lockyer is a Non-Executive Director of Focus. He is an experienced mining executive as a mining engineer and metallurgist with over 40 years of minerals industry experience which involved senior positions during 20 years with WMC Resources that included General Manager for Western Australia with responsibility for the company’s nickel and gold operations. He was also Director of Operations for Dominion Mining Ltd and Resolute Limited. He is currently a director of St Barbara Limited and Swick Mining Services Limited.

Chris Hendricks is a Non-Executive Director of Focus. He is a Chartered Accountant and is an Associate Director of Azure Capital and has considerable experience in corporate advisory, mergers and acquisitions and equity capital markets through various financing and corporate banking roles.

Focus has an experienced senior management team.

Campbell Baird is the Chief Executive Officer of Focus. He was appointed to that position in February 2009. He is a mining engineer who has had extensive experience of major open pit and underground mining operations, including WMC Ltd at Kambalda, Homestake at the Mt Morgans gold mine, and North Ltd at North Parkes and the Iron Ore Company of Canada. More recently he was the General Manager – Operations with Vulcan Resources Ltd.

Peter Williams is the Chief Operating Officer. He is a very experienced mining operator who has previously worked in senior operating and management positions across a wide range of commodities including with CRA Ltd, North Ltd, and Resolute Ltd. He joined Focus in January 2003 and was Managing Director between 2003 – 2009 after having previously lead the acquisition of key assets and the Coolgardie feasibility study in FY06. He is responsible for all aspects of operations including planning, safety, environment and human resources.

Jon Grygorcewicz is the Company Secretary of Focus. He is a Chartered Accountant and joined Focus in 2006. He has significant accounting, management and administration experience with resource companies across exploration and production and a wide range of commodities.

Dr Garry Adams is the Exploration Manager. He is a geologist and has had over ten years of experience, which has included working on a range of exploration projects in the Norseman-Wiluna Greenstone Belt and the Eastern Goldfields Province. He has also gained experience at various mines including Bronzewing gold mine, Mt Pleasant gold mine and Ora Banda gold mine. Dr Adams' experience also includes project generation, large scale drill programs, deposit modelling, grade control estimation and open pit mining. He has previously worked with Newmont Australia, Normandy Mining, Sons of Gwalia and Centaur Mining and Exploration.

Chuck McKormack is Business Development Manager. He is a very experienced geologist with over 30 years of broad experience in the mining industry in Australia, Canada, USA, the Middle East and Africa. He has extensive experience of the Kalgoorlie region, having discovered the Paddington gold deposit and defined other gold mines in the region including at Coolgardie. He is a founding Director of Focus and has been involved in the formation of other exploration and mining companies.

Brad Valiukus is the Chief Mining Engineer. He is a mining engineer and has extensive operational and project experience, having previously been the Deputy Chief Mining engineer for Mincor Resources Ltd. His primary role it the development of the company’s gold Resource, which requires the prioritisation and optimisation of over 20 deposits at all levels of development.


Major Share Price Risks and Drivers Share Price Risks OML regards the following as the major share price risks for Focus:

� Lower Australian dollar gold price either from a fall in the US dollar gold price and/or a rise in the value of the Australian dollar compared to the US dollar

� Production problems that include changed geological or mining conditions, regulatory changes such as adverse variations to environmental approvals, equipment failures or adverse weather impacts

� Adverse operating costs from either lower ore grades than expected and/or higher operating costs from input costs or changed mining conditions

� Lack of exploration success or ability to convert current resource base into mineable reserves

Share Price Drivers OML sees the following as the major drivers of the Focus share price over the next few years:

� Successful development of The Mount as a reliable, high grade ore source

� Successful exploration and development of Treasure Island as an ore source

� Successful ramp-up of the Coolgardie operations

� Establishment of strongly profitable gold operations with significantly reduced unit operating cost performance across the group

� Ability to unlock significant value from profitable development of large resource base in the Coolgardie and surrounding district

� Building a strong financial position with strong cash balances

OML believes the market is still somewhat cautious about the potential for Focus to meet its production targets and have further exploration success in its Coolgardie operations, let alone prepared to factor in the potential for higher gold production to come from that. OML does not believe the market has fully factored in the extent of financial success that could result from Focus achieving its target levels of gold production and the attractive opportunities that could follow from the company having a strong net cash balance.

Recommendation OML initiates coverage of Focus with a “Buy ” recommendation as OML regards the company as having some of the key ingredients to enable it to generate strong returns over the medium to long term, leading to significant share price upside that is not solely dependent upon commodity price (in this case gold) performance from:

� An improving profit and operating cash flow driven by strong operational performance at the company’s mining operations as the Coolgardie mines and Mount mine reach their target production rates over the next few years.

� Significant expansion and exploration potential for gold production in the Coolgardie district using its existing infrastructure.

� Significant exploration potential in and around the Nepean mine for nickel and other commodities.

� A sound financial position with rising net cash balances.

� Ability to leverage its strong operating position, especially at Coolgardie, to take advantage of attractive corporate opportunities that may arise.

OML assesses the major risks to Focus’ performance as lower A$ gold prices, production problems, and higher operating costs.

OML assesses the major share price drivers for Focus as the successful development of The Mount and subsequently Treasure Island as additional ore sources; the ramp-up of the Coolgardie mine; and establishment of strongly profitable operations.

OML initiates coverage of Focus with a “Buy” recommendation


Appendix 1: Gold Market Strong Gold Price Performance Since August 2007

The gold price has risen strongly over the past 18 months, during which time it has exceeded US$ 1,000 per ounce twice (March 2008 and February 2009).

The current gold price of around US$ 1,400 per ounce (oz) is well above its long-standing all time high (of US$ 850 during intra day trading on the London Metals Exchange and US$ 875 during intra day trading in New York on 21 January 1980) in nominal terms, but is still well below gold’s all time high in real terms of almost US$ 2,200 per ounce (Figure 10 below).

Figure 10. Gold prices in nominal and real terms

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Nominal Gold prices Real (2010) pricesUS$/oz

Source: Iress, Ord Minnett

The higher gold prices over the past 18 months have also been associated with reduced Central Bank selling and major de-hedging by gold producers over the past three years, which has resulted in most gold producers now having only minimal price hedging.

Sector Drivers

The main driver of the gold price and investment interest in gold is its related roles as:

� A “safe haven” and as a store of wealth; and

� An inflation hedge.

These price drivers reflect individual concerns amongst investors about the impact of the global financial crisis and its impact on:

� The falling value of major currencies and monetary system uncertainty;

� Falling values of “hard” assets as a result of the world going into a very major economic downturn;

� The ability of financial organisations (including banks and governments) to service and repay their burgeoning debts, which is made worse by the impact of so called “toxic” assets and high absolute debt levels; and

� The potentially high inflation that is likely to occur from the impact of the enormous amounts of fiscal and monetary stimulus being injected into major economies and the global financial system collectively, particularly when world economic growth begins to pick up over the next few years.

OML also believes that the continued decline in global mine production of gold is also having a positive effect on the gold price. The declining production results from fewer new mine developments and rising operating costs (particularly in the major deep mines in South Africa) and also from the general phenomenon of low-grading.


Low grading causes lower gold production because it is more economic and efficient for gold producers to mine lower grades at times of high gold prices.

Speculative Interest

The rising gold price has unsurprisingly also attracted increased speculative interest over the past two year, giving rise to periods of price volatility although the amount of speculative interest has reduced at times over the past year. This indicates that the gold price is likely to be more sustainable at current levels.

The recent levels of speculative interest in gold are shown below in Figure 11 by the amount of net open positions on Comex (one of two trading divisions of The New York Mercantile Exchange), which is the world’s largest physical commodity futures exchanges, with headquarters and its main trading operations in New York, USA along with major trading operations in other major cities around the world. Comex is one of the world’s major gold trading markets.

Figure 11. Chart of net speculative interest in go ld futures contracts and the gold price

Source: Comex, Bloomberg, World Gold Council

The extent of the speculative interest in gold is also shown by the ratio of long to short open positions on the Commodities Futures Trading Commission (CFTC) as shown below in Figure 12.

Figure 12. Chart of long and short open positions on the CFTC against the gold price

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Source: CFTC

Speculative interest in gold has been volatile but is testing previous peaks over the previous year…..


Gold Exchange Traded Funds

There has been a massive increase in the demand for gold Exchange Traded Funds (ETFs) since they were formed in early 2003 (the ASX-traded gold ETF, GOLD - one of the first ETFs - has grown from a market capitalisation of less than $5M to over $650M currently. The rise in demand for gold held by ETFs is shown below in Figure 13.

Figure 13. Performance of gold ETFs and gold price

Source: Respective ETF issuers; GFMS

The demand for gold ETFs has seen the amount of gold represented by such ETFs rise to a record level of around 2,000 tonnes (t) in August 2010 and is currently estimated by OML to be around 2,200t after recent strong demand for new gold ETFs in India. The holdings of gold ETFs collectively ranks them as the sixth largest gold holding by a Central Bank or institution, after the USA Treasury, Germany, the International Monetary Fund (IMF) and France and Italy , and puts them ahead of the next major holder, China. The largest gold ETF is the SPDR Trust, which has almost 1,300t, well over half the holdings of gold in gold ETFs.

After a period of relative stability until about early 2008, (apart for some relatively isolated spikes), there has been far greater volatility in the weekly change in gold ETF assets under management. Of particular note since early 2008 has been the magnitude of the changes in ETF holdings. Whereas until early 2008 there had been relatively small decreases in the amount of gold under management in ETFs, since then there have been some much larger changes. Apart from some short-lived decreases in gold ETF holdings, generally there have been very large increases (often over very short periods). OML believes that this indicates heightened uncertainty at times but also a stronger net positive view on the gold price.

OML acknowledges the potential for ongoing volatility in gold ETF holdings, including the potential for a major and sustained decrease in such holdings, but believes there is a relatively small risk of that occurring in the short to medium term. Instead, OML believes the amount of gold held by ETFs is likely to continue to rise, (albeit at a slightly reduced overall rate compared to the past few years) over the next few years.

OML also believes that eventually, when there is concerted selling of gold managed by ETFs, it is likely to be more gradual than some analysts have predicted previously because gold will have become a far more stable asset class that investors generally are more comfortable with holding.

…..but demand for gold ETFs has continued to rise strongly and is now estimated to be 2,200t.

Volatility of gold ETF’s has increased dramatically over the past year.


Gold Leasing Rates

Gold leasing rates, being the rates which Central Banks charge to lend their gold, have been at very low negative rates reflecting the low interest rates in major western countries since their dramatic spike in the second half of 2008 in response to the tight physical supply/demand balance for gold that resulted from the decline in world mine supply and the rising demand for gold as discussed above.

Figure 14. Gold leasing rates

Source: GFMS

After rising to almost 2.5% per annum, which compares with rates of less than 0.5% per annum for most of the preceding six years or so, (Figure 14 above), lease rates have continued to decline to below historical levels as the market has reacted to the events in the global economy. While unlikely to see a repeat of the events that saw gold lease rates spike to 7% in early 2001, OML believes gold lease rates are likely to remain more volatile over the next few years, especially while global interest rates are so low, with many major economies having interest rates of less than 1%.

Gold leasing has become an increasingly major contributor to gold supply over the past decade, with some estimates of its impact now being that it is responsible for up to one third of global supply.

Performance of Gold During Previous Periods of Fina ncial Uncertainty

In order to understand the likely behaviour of gold over the next few years, the performance of gold during two previous major periods of financial uncertainty is relevant:

� The Great Depression of the 1930s; and

� The stagflation (stagnant growth with rampant inflation) of the 1970s and early 1980s.

The price of gold during both these periods rose significantly, although during the earlier period the gold price was somewhat constrained by arrangements under the Bretton Woods Agreement. Nevertheless, the market price of gold, such as it was, rose from about $US 21 (£UK 4.25) per ounce to $US 35 (about £UK 7) in the early 1930s. Following a relatively stagnant period until the early 1970s, the gold price then began to rise strongly. The USA abandoned the gold standard (dating from the Bretton Woods Agreement) in August 1971 and the gold price peaked at $US 850 per ounce in January 1980 in response to global tensions such as the Iranian revolution and the Iran-Iraq war, the Russian invasion of Afghanistan, and rampant inflation in the western world after the twin oil shocks of a few years earlier and the expenditure by the USA on the Vietnam War.

Gold leasing rates spiked in the second half of 2008 from a physical shortage of gold in the face of strong demand.

Gold has previously performed very strongly during periods of great financial uncertainty.


The relative attraction of gold during the two previous periods of financial uncertainty described above is shown by the ratio of the Dow Jones Industrial Average Index (Dow Jones) and the gold price (Figure 15 below). During the peak of these two previous major periods of financial uncertainty, the Dow Jones/Gold ratio declined to below 3. Currently the Dow Jones/Gold ratio is about 8.1, having declined from a peak of just over 42 in August 1999 during the height of the “tech” boom and rebounded slightly recently from an 18-year low of around 7. If this ratio behaves in a similar way to during the previous two major periods of financial uncertainty, and gets down to a ratio of 3 - assuming the Dow Jones stays at around current levels - the implied gold price would be about US$ 2,800 or about 100% above the current gold price. Alternatively, if the Dow Jones/Gold ratio were to reach 3 and assuming gold stays at current levels, the implied level of the Dow Jones would be around 2,700 or about 68% below its current level.

Figure 15. Chart of ratio of Dow Jones Industrials Index to gold price over 100 years

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Dow Jones index / Gold price (NY exchange) Average

Source: Datastream/Iress

Important Features And Issues

There are several features and issues of the current global economic situation that investors need to be mindful of when considering investments in gold:

� Central banks generally have relatively small gold holdings, largely having reduced their gold holdings over the past 10 to 15 years (and often at prices near the bottom) in favour of US dollar (bond) holdings;

� Global mine production of gold has experienced a decline for the past 10 years under the influence of rising operating costs and declining grades and relatively few new major discoveries or developments of new mines;

� Gold has suffered as an investment over recent years because of the strength of the US dollar and investors preferences for other assets, such as shares and real estate, but recently the falling value of these assets under the impact of the global financial crisis and concerns over the global financial system in light of the massive borrowings being undertaken by governments to fund huge fiscal stimulus packages has raised doubts about the ability of governments to meet their debt obligations and keep inflation under control.

Central banks have significantly reduced their gold exposure over the past 15 years, having generally sold down their holdings in an orderly fashion under a set of well established ongoing agreements. Gold holdings of the world’s central banks has changed quite dramatically over the past 30 years or so, going from about 37,000t or 67% of the above ground stocks of gold in 1965, to 26,600t or only about 16% of the total amount of gold mined to date (estimated at about 165,000t – equal to the size of a 33m high tennis court) currently.

The ratio of the Dow Jones Index and the gold price has been a useful measure of periods of major financial market uncertainty


Gold Supply/Demand Balance

While there is considerable uncertainty with most gold statistics for various reasons (some of which include the fact that ownership of gold has traditionally been subject to prohibition and government control; its use straddles the investment and industrial categories in an imprecise way; and it has often served as a medium for major commercial transactions that have often been conducted away from the glare of public scrutiny such as oil trading), it is generally accepted that there has been falling mine production (Figures 16 below and Figure 17 over page) since 2002. This has been caused by several factors of which the principal ones are:

� Rising operating costs (particularly in the major mines in South Africa, which operate at great depths and with increasingly severe rock pressures) which have caused mine closures and deterred new mine developments and which, according to Gold Fields Mineral Services (GFMS) has seen the global average direct cash operating cost rise by an annual rate of 31% to US$ 474/oz (approximately A$ 625/0z) in 3Q08 while major gold producers such as Barrick Gold Corporation estimated back in mid 2009 that the average total notional cash expenditure (which includes capital expenditure) on gold production was about US$ 780/oz (A$ 790/oz);

� Falling ore grades as higher grade deposits are worked out and from the effect of low-grading whereby gold output falls since it is more economic and efficient for gold producers to mine lower grade ores at times of high gold prices;

� Relatively fewer discoveries or developments of new gold deposits; and

� Reduced output because of more stringent safety and operational practices or reduced power availability, such as has occurred in South Africa since 2008.

Figure 16. World gold mine production since 1900

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Source: US Geological Survey

The production problems that have been affecting South African gold production and which have led to a steady decline in that country’s gold output since its recent peak of 620t in 1993 look set to continue. China supplanted South Africa as the largest gold producer in 2007, although interestingly China does not have any individually large gold mines but instead has many small ones, with the average output of a gold mine in China being about 16,000 ounces per annum. China’s gold production is expected to continue to increase but OML believes it is likely to do so at a relatively modest pace and will continue to be dominated by a large number of relatively small mines.

Rising gold production costs are contributing to lower mine output, which is one of the causes of the tightening supply/demand balance.

Despite rising gold prices, mine supply has generally been falling since 2002.

China supplanted South Africa as the largest gold producer since 2007 doing so with no large individual mines but with many small ones.


Figure 17. Global gold mine production by major co untry and region since 1991.

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Source: ABARE, GFMS, Gold, London Bullion Market Association Note. * Data not yet available.

Statistics for global supply and demand also generally show that there has been a widening gap between supply and demand over the past few years (Table 3 below). On the supply side, besides flat to falling net mine supply after the effects of significant net producer hedging are included, sales by Central Banks and other official sector sales have also been falling. Central Bank selling under the Central Bank Gold Agreement (CBGA) at only 30t in 2009 was at its lowest level since the CBGA came into force in 1999. Despite rising gold prices over recent years, there has only recently been a marked lift in gold supply from scrap and mine supply.

On the demand side, gold fabrication demand has held up well over the past few years despite significantly higher prices although the increased volatility in gold prices, which has traditionally acted as a dampener on jewellery demand, especially in the important Indian market, appears to have depressed demand significantly so that along with the lower electronics demand for gold because of the difficult economic climate in major Western countries after 2008, industrial demand for gold has been falling. Two areas that have shown very strong growth in gold demand in recent years, and particularly since 2008, are retail investment (mostly of gold bars and coins) and gold ETFs and related holdings (Table 10 below).

Table 10. Estimated Global Gold Supply and Demand Bal ance

2002 2003 2004 2005 2006 2007 2008 2009 2010

(Jan-Sep)

Supply Mine production 2,591 2,593 2,469 2,550 2,486 2,473 2,410 2,579 1,954 Net producer hedging -412 -270 -427 -86 -410 -444 -352 -252 -84

Net mine supply 2,179 2,322 2,042 2,464 2,076 2,029 2,058 2,327 1,869 Official sector sales 545 617 470 662 370 484 232 30 -111 Old gold scrap 835 939 849 886 1,129 982 1,316 1,672 1,235 Total Supply 3,560 3,879 3,361 4,012 3,574 3,494 3,605 4,028 2,993

Demand Fabrication

Jewellery 2,680 2,478 2,613 2,707 2,285 2,417 2,190 1,758 1,522 Industrial & dental 360 380 411 431 459 465 439 373 320

Sub-total above fabrication 3,040 2,858 3,024 3,138 2,744 2,882 2,629 2,132 1,842 Bar & coin retail investment 373 310 397 412 424 447 636 496 569 Other retail investment -18 -57 -26 -19 -10 220 230 127 ETFs & similar 39 133 208 260 253 321 617 334 Total Demand 3,413 3,189 3,497 3,731 3,409 3,572 3,806 3,474 2,872

Inferred investment (disinvestment) 147 690 -136 280 165 -78 -200 554 121

Source: World Gold Council, GFMS, Ord Minnett

Retail investment and gold ETFs have driven recent gold demand.


The net difference between global gold supply and demand was previously classified as the “balancing items” but is now generally referred to as “implied investment” and it had shown a trend of increasing outflows in 2007 and 2008 that is interpreted as being characteristic of hedge fund and other investment institutions selling gold and liquidating gold-related commodity index positions to meet redemptions and as fears of global recession deepened. This was reversed strongly with a big jump in implied investment in 2009 as investors lost confidence in paper currencies, particularly the weakening value of the US dollar.

Gold Price Outlook OML is forecasting that the gold price will remain generally firm over the next few years and at least until the global financial crisis is clearly significantly reduced and there are clear signs that the US economy is beginning to improve significantly. OML is forecasting that the gold price will average US$ 1,438 in 2011 before declining back to a long term average of US$ 950 under the influence of continually rising operating costs and declining mine production and latent inflation concerns.

The major concerns about the ability for the gold price to remain at its current relatively high levels are related to:

� A possible resurgence in the value of the US dollar;

� ETF liquidations, especially if price starts to fall;

� Central Bank selling;

� The lack of any significant global inflation over the next decade or so notwithstanding the stimulus measures by governments around the world; and

� Ongoing volatility in the gold price will act as a major disincentive for Indian jewellery demand, an important source of global gold demand.

Concerns Over the Value of the US Dollar

There has traditionally been a very strong inverse correlation between the value of the US dollar and gold, (and especially since the US dollar has become the global reserve currency). OML regards the weakness of the US dollar as the single most important driver of the value of gold, and expects this situation to continue.

The role of the US dollar as a reserve currency was challenged briefly in the latter half of 2008 as the full impact of the US financial crisis began to unfold. It seemed there may be a move to the Euro in place of the US dollar but then in mid October 2008 as the financial crisis spread to Europe and it quickly became apparent that parts of the European Community (EC) were in far worse financial shape than the USA, the US dollar was seen, somewhat by default, as the preferred currency. It is also important to note that the gold price has also risen significantly since mid October 2008, reflecting growing concerns about the US and global financial systems and value of the US dollar in the face of two bouts of quantitative easing.

While OML expects there will be an ongoing tussle between support for the US dollar and gold over the next few years, on balance OML expects gold to perform relatively strongly because the US dollar is forecast to weaken under the influence of rising twin deficits in the USA (current account and budget), which is expected to take several years to turn around. As a result of the US Federal Government’s various bail-out and massive fiscal stimulus measures, the US Congressional Budget Office (CBO) forecasts that the US budget deficit will increase to about 10% of GDP in 2010 before improving over succeeding years (Figure 18 over page). OML believes such an outcome (if achieved) will still put ongoing pressure on the value of the US dollar and act to support the value of gold during that time.

OML is forecasting that the gold price will be volatile but generally firm over the next few years, averaging US$ 1,438 per ounce in 2011 and then declining gradually for a few years before settling at a long term average of US$ 950 per ounce.

OML regards weakness of the US dollar as the strongest driver of the gold price and forecasts that gold will continue to perform strongly over the next few years in the ongoing tussle with the value of the US dollar.


Figure 18. The USA’s current account and fiscal def icits since 1973.

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Source: Datastream; US Congressional Budget Office

OML is forecasting that the generally consistently declining trend of both the US current account deficit and the US budget deficit over the last 8 years (Figure 10 below) could take a number of years to turn around, let alone reverse quickly as the CBO is forecasting (Figure 10 above), and that the USA is going to have to rely on the continued support of countries with strong foreign reserves and high levels of savings (such as China and Japan) to continue to fund its budget deficits.

Recent concerns raised by China regarding the ability of the US government to repay its financial obligations (namely the US government bonds that China has become the largest single holder of) have been interpreted by OML as indicative of widespread concerns that are likely to continue to make other investors wary of relying solely on the value of the US dollar as a reserve currency while the US economy remains so weak and OML expects that China, which has relatively modest gold holdings in terms of its foreign reserves, may move to increase its gold holdings over the next few years rather than just investing in US government bonds.

Concerns Over Potential ETF Liquidations

The rapid and sustained increase in gold purchased in the form of gold ETFs and related instruments over the past six years has seen total gold holdings in this form rise to a total that is currently estimated by OML to be over 2,200t, representing the sixth largest gold holding by a Central Bank or institution. As the amount of gold in ETFs has risen in sympathy with the rise in the gold price (Figure 5 earlier), OML expects that once the gold price has clearly stopped rising and has established a clearly declining trend (as opposed to just going through another volatile period), there may be modest selling by gold ETF holders, depending on the global financial outlook.

OML believes, however, that given the depth of the global financial crisis and its deep-seated impact on investment markets and economies, there is likely to be ongoing uncertainty about financial markets even after the world economy starts to recover, so there is most unlikely to be a flood of liquidations by gold ETF holders at the first sign of the gold price starting to fall.

OML believes that any such gold ETF selling at that time will be relatively modest and could be counteracted by renewed buying interest as has been observed on a number of occasions in recent months. This is because many investors are still underweight in gold and are still attracted by its potential gains that seem relatively attractive compared to buying low yielding fixed interest alternatives when US interest rates are at their lowest level since the Second World War.

OML sees the twin deficits of the US Government as likely to contribute to ongoing weakness in the value of the US dollar, leading to ongoing support for gold.

Major liquidations of gold ETFs are not seen as likely by OML for some years, even if gold prices weaken, as investors will remain wary of financial markets and low yielding fixed interest alternatives.


Concerns Over Potential Central Bank Selling

Concerns over Central Bank selling of gold are regarded by OML as being generally misplaced given that most Central Banks that wanted to sell their gold holdings have already done so with the exception of the IMF and there has now been six quarters of net Central Bank buying (Figure 19 below). Central Bank gold sales in 2009 were the lowest since the introduction of the CBGA in September 1999.

Figure 19. Quarterly changes in Central Bank gold holdings since 2002

-200-150-100-50

050

100150200250300

1Q02 1Q03 1Q04 1Q05 1Q06 1Q07 1Q08 1Q09 1Q10

India puchased 200t from the IMF in Oct 09

Source: IMF

The IMF is not a participant in the CBGA and has been expressing a desire to sell some of its gold holdings for a number of years to fund economic development in the poor, undeveloped nations (principally in Africa).

The IMF has the third largest Central Bank gold holdings at 2,907 tonnes (behind the USA with 8,133 tonnes and Germany with 3,402 tonnes). There are several categories of gold held by the IMF. Most of the IMF's gold was contributed by member nations and is apparently only available for sale if approved by an 85% majority of the 185 members of the IMF. The US has always held a potential veto over such approval because the US holds a 17% voting power. Previous US administrations have been against IMF gold sales but the Obama administration seems more supportive. US approval for IMF gold sales still requires the approval of the US Congress, which is now controlled by the Republicans, so it is not likely to approve such a move. Only a small portion of the IMF’s gold holdings can be sold without explicit approval of its members. An amount of 403.3 tonnes of the IMF’s gold comes from off-market transactions in 1999 and 2000, representing gold acquired after the Second Amendment of the Articles of Agreement in April 1978 and it is this amount that is available for sale.

In September 2009, the Executive Board of the IMF approved the strictly limited sale of those 403.3t. The IMF has subsequently sold a total of about 253t of that gold (most of which was the sale of 212t to the Reserve Bank of India, the Bank of Mauritius, and the Central Bank of Sri Lanka in October and November 2009).

After initially selling the gold off-market to central banks, the IMF is now planning to sell the remaining part of that gold, estimated at about 150t, on-market in a phased manner over time in a similar way to that adopted by central banks under the CBGA. Under the current CBGA, there is a ceiling on sales of 400t annually and of 2,000t during the five years of the Agreement, which expires in September 2014.

Much of the Central Bank gold selling over the previous 11 years was done at relatively low prices.

OML believes any further sales by the IMF or central banks are likely to be very modest in the overall supply/demand context with flat to falling global supply.

OML also believes that any gold sales by the IMF are likely to be more than offset by gold buying by some of the countries with large foreign reserves that also have relatively low gold holdings (such as China, India and Japan).

Central Bank gold sales in 2009 were the lowest since the introduction of the CBGA in 1999 and OML does not expect significant Central Bank sales to impact the gold price in coming years.

Any further gold sales by the IMF are expected to be relatively modest and are not expected to unduly disrupt the market…..


China’s State Administration of Foreign Exchange disclosed in April 2009 that China had lifted its gold holdings by 76% to 1,054t (up from the 600t it had declared it had held since 2003), which would place it at about the sixth largest holding in the world. Even at its latest holding, China’s gold holdings are estimated to account for less than about 2% of its holdings of foreign reserves, well below the levels of gold holdings of other major countries. India and Japan are similar to China, holding generally similarly very low proportions of their foreign reserves in gold.

Concerns Over Lack Of Significant Inflation

OML believes it will be a very difficult balancing act for the US government and other Western democratic governments to rein in the potential impact on inflation of the individually large and collectively huge fiscal stimulus packages that have been enacted to lessen the impact of the current major global recession and while acknowledging that central banks are much better equipped to fight inflation now than previously, OML still expects a period of elevated (but not rampant) inflation may ultimately accompany the return of the US and global economies to a period of strong growth.

While OML believes inflation has rightly come to be seen as an economic evil, inflation does offer a partial solution for large debtor nations like the USA to enable them to reduce the burden of the repayment of their liabilities, and accordingly OML thinks there will be a propensity for the USA in particular to permit or at least induce a degree of inflation into their economy over coming years. The rise of deflation is the main argument used by economists proposing that there will be a lack of significant inflation in coming years, but at this stage OML does not ascribe a high probability to deflation occurring in the major Western economies.

Indian Jewellery Market

India’s gold consumption is volatile from year to year. It is estimated to have been about 15% of global demand in 2009 but is on track to be higher in 2010. The Indian jewellery market is disrupted by periods of high volatility in the gold price.

While the absolute gold price is clearly important to the participants in the Indian gold market, OML understands that the actual level of the gold price is far less a concern to the Indian gold market than price volatility. Accordingly OML concedes that recent volatility in the gold price may lead to reduced Indian consumption in the short term after a period of relative price stability. Rising Indian wealth is another factor supporting ongoing Indian consumption.

OML understands that despite the effects of the global financial crisis and gold price volatility, the Indian jewellery market has apparently been much stronger and more resilient than expected in recent years, which was related to a stronger than expected Indian wedding season in 2009 and improved financial conditions since then.

…. and may be offset by gold buying by other countries, such as China, which finally disclosed in 2009 that it had lift its gold reserves by 76%.

OML believes that a period of elevated inflation from the effects of the massive fiscal stimulus packages enacted in major Western economies may eventually follow a return to strong growth.

While gold price volatility and the global financial crisis has curtailed gold buying in the Indian market, there was stronger than expected demand from the Indian wedding season


Appendix 2: Small To Mid Cap Australian Gold Production OML has identified 13 small to mid capitalisation listed predominantly Australian gold companies that are regarded as Australian gold producers. These are companies that predominantly have gold operations in Australia which is where they produce most if not all of their gold and their total gold production is estimated by OML to be at least 50,000 ounces in FY11 on a regular production basis.

OML’s analysis of the latest production data for the 13 companies that fit the above criteria, (Table 11 below), shows that Focus currently has slightly lower than average gold production. On disclosed information on current direct production costs (which includes royalties and some administrative costs) for these 13 companies and OML’s analysis and estimates for any companies which have not disclosed such information in a meaningful way, OML believes Focus has slightly higher than average direct operating costs currently.

As explained in subsequent sections, OML forecasts that Focus will reduce its unit cash costs over the next few years as it ramps up its mine production.

Table 11. Recent and Forecast Gold Production Data for predominantly Australian mid sized gold produce rs

Company And ASX Code

Share Price (¢)

Market Cap. ($M)

Current Annualised Gold Output

(000 ozs)

Current Direct Cash Operating

Costs2 ($A/oz)

Estimated FY11 Gold Output (000

ozs)

Estimated FY11 Direct Cash

Operating Costs2 ($A/oz)

Equity Gold Resources

(M ozs)

Apex Minerals1 (AXM) 1.8 64 77 1,250 81 1,100 3.2

Avoca Resources (AVO) 322 989 259 707 287 718 5.6

BCD Resources1 (BCD) 2.1 9 45 1,650 53 1,335 0.6

Conquest Mining1 (CQT) 64 341 36 967 50 800 2.1

Dominion Mining1 (DOM) 315 326 104 774 105 748 1.0

Focus Minerals (FML) 5 144 61 932 83 898 2.1 Norseman Gold1 (NGX) 111 219 49 1,041 105 730 3.8

Northern Star Resources1 (NST) 25 85 61 351 75 475 0.1

Norton Goldfields1 (NGF) 21 144 166 951 168 950 5.8

Silver Lake Resources1 (SLR) 200 358 64 658 98 600 2.5

St Barbara (SBM) 262 863 254 812 284 898 7.7

Tanami Gold1 (TAM) 78 204 50 960 75 870 1.6

Troy Resources1 (TRY) 347 304 59 630 120 533 1.5 Averages 311 99 848 122 804 2.9

Source: Company Data; Ord Minnett estimates Notes: 1. Not covered by Ord Minnett Limited 2. Includes royalties

Focus has slightly higher cost gold production than the average of the mid cap Australian gold companies.


Financial Summary Focus Minerals LimitedYear end June

Profit & Loss Statement ($M) FY09A FY10A FY11E FY12E FY13E Assumptions FY09A FY10A FY11E FY12E FY13E

Sales Revenue 44 72 117 174 219 Gold (US$/oz) 876 1,093 1,339 1,425 1,263

Mining Operating Costs (27) (53) (76) (99) (123) US$/A$ 0.75 0.88 0.94 0.99 0.94

Mining Op. Profit Before Tax 17 19 41 74 96 Gold (A$/oz) 1,175 1,238 1,420 1,447 1,350

Other Expenses and Net Income (2) 4 (2) (2) (3)

EBITDA 15 23 40 72 93 Equity Gold Production (000 ozs) FY09A FY10A FY11E FY12E FY13E

Depreciation & Amortisation (10) (12) (14) (21) (27) Coolgardie 41 62 71 80 85

EBIT 4 11 25 51 65 The Mount 12 38 58

Net Interest (Expense) / Income (1) 1 2 Treasure Island 2 19

Pre-Tax Profit 3 11 26 52 67 Total 41 62 83 120 162

Tax Expense (7) (16) (20) Total cash cost incl royalty (A$/oz) 612 857 898 812 747

Reported NPAT 3 11 19 37 47

Adjustments (after-tax) JORC Resource Estimates Owned Mt g/t Au Au (koz)

Normalised NPAT 3 11 19 37 47 Tindals Project - Open Pits 100% 8.3 2.3 608

- Underground 100% 2.6 4.6 378

EBITDA Margin (%) 33% 32% 34% 41% 42% - Total 100% 10.9 2.8 986

Effective tax Rate (%) 0% 0% 28% 30% 30%

EPS Reported (cps) 0.2 0.4 0.6 1.2 1.6 The Mount 100% 2.1 5.5 370

EPS Normalised (cps) 0.2 0.4 0.6 1.2 1.6

EPS grow th (%) na nm 62% 95% 29% Lindsays Project 100% 7.9 1.8 470

DPS (cps) 0 0 0 0 0 Three Mile Hill Project 100% 1.6 1.9 100

Payout Ratio (%) 0% 0% 0% 0% 0% Norris Project 100% 1.9 2.1 124

Franking (%) 0% 0% 0% 0% 0%

Total 24.4 2.6 2,050

Cash Flow Statement ($M) FY09A FY10A FY11E FY12E FY13E

Pre-Tax Operating Cash Flow 13 28 42 75 98 Leverage FY09A FY10A FY11E FY12E FY13E

Tax Paid (7) (16) Net Debt (Cash)/Equity (15%) (7%) (18%) (29%) (36%)

Operating Cash Flow 13 28 42 68 82 Net Debt/(Cash)/Total Assets (12%) (6%) (15%) (23%) (30%)

Exploration & Development (11) (21) (18) (29) (35) Interest Cover (x) 3.6 na na na na

Property, Plant & Equipment (8) (21) (6) (11) (13)

Other Investing Items (4) (4) (6)

Investing Cash Flow (19) (42) (28) (44) (54) Valuation Ratios (x) FY09A FY10A FY11E FY12E FY13E

Inc/(Dec) in Equity 26 8 Normalised P/E nm 12.8 8.0 4.1 3.2

Inc/(Dec) in Borrow ings (7) (9) Price/Op Cash Flow 5.9 5.0 3.5 2.2 1.8

Dividends Paid EV/EBITDA 9.0 5.9 3.1 1.4 0.8

Financing Cash Flow 20 (1) EV/EBIT 30.5 12.6 4.8 1.9 1.1

Inc/(Dec) in Cash 15 (13) 14 24 28

Balance Sheet ($M) FY09A FY10A FY11E FY12E FY13E Valuation

Cash 21 7 21 45 73

Other Current Assets 9 10 13 22 28 Coolgardie Mines (incl. The Mount) 212 0.07 316 0.11

Property, Plant & Equipment 12 40 44 54 60 Exploration & Oth. Mineral Assets 20 0.01 39 0.01

Exploration & Development 57 58 64 74 85 Total Mineral Assets 232 0.08 356 0.12

Other Non Current Assets 1 1 1 Net Financials2 (34) (0.01) (34) (0.01)

Total Assets 99 115 142 196 247 Total 199 0.07 322 0. 11

Short-term Debt 9

Other Current Liabilities 7 14 22 38 42 Valuation Base: $0.07 Upside : $0.11

Long-term Debt Premium / (Discount) to share price 38% 122%

Other Non Current Liabilities 2 2 3 3 3 Valuation sensitivity to:

Total Liabilities 18 16 24 41 45 +/- 10% move in gold price $0.02 ps $0.03 ps

Total Equity 80 100 118 155 202 +/- 10% move in the $US/$A rate $0.02 ps $0.02 ps

Net Debt (Cash) (12) (7) (21) (45) (73)

Current price $0.05Major Shareholders Million (%) Date Recommendation Buy

ANZ Nominees Limitied 373.1 13.0 13/09/10 Risk rating High

HSBC Custody Nominees 198.9 6.9 13/09/10 12-month price target $0.08

Source: Focus Minerals, Ord Minnett estimates. Notes: 1. May not add because of rounding and dilution effects. 2. Includes corporate costs.

Base Case Upside Case $ M $ per share 1 $ M $ per share 1


Please contact your Ord Minnett Adviser for further information on our document. Research

Stephen Scott Head of Research Sydney [email protected]

Peter Arden Senior Research Analyst Melbourne [email protected]

Richard Ivers Senior Research Analyst Melbourne [email protected]

John Lawlor Senior Research Analyst Brisbane [email protected]

James Lennon Senior Research Analyst Sydney [email protected]

Luke Smith Senior Research Analyst Melbourne [email protected]

Brad Dunn Analyst Sydney [email protected]

David Sakti Assistant Analyst Melbourne [email protected]

Ord Minnett Branches

Sydney (Head office) Level 8 NAB House 255 George Street Sydney NSW 2000 Tel: (02) 8216 6300 Fax: (02) 8216 6311

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Mackay 45 Gordon Street Mackay QLD 4740 Tel: (07) 4969 4888

Wollongong 3/55 Kembla Street Cnr Market and Kembla Streets Wollongong NSW 2520 Tel: (02) 4226 1688 Fax: (02) 4226 1604

Adelaide Level 11 11-19 Grenfell Street Adelaide SA 5000 Tel: (08) 8203 2500 Fax: (08) 8203 2525

Caloundra, Sunshine Coast 79-81 Bulcock Street Caloundra QLD 4551 Tel: (07) 5491 3100 Fax: (07) 5491 3222

Melbourne Level 23 120 Collins Street Melbourne VIC 3000 Tel: (03) 9608 4111 Fax: (03) 9608 4142

Brisbane Level 10, Waterfront Place 1 Eagle St Brisbane QLD 4000 Tel: (07) 3214 5555 Fax: (07) 3214 5550

Canberra 101 Northbourne Avenue Canberra ACT 2600 Tel: (02) 6206 1700 Fax: (02) 6206 1720

Newcastle 41-45 Newcomen Street Newcastle NSW 2300 Tel: (02) 4910 2400 Fax: (02) 4910 2424

Buderim Sunshine Coast 84 Burnett Street Buderim QLD 4556 Tel: (07) 5430 4444 Fax: (07) 5430 4400

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www.ords.com.au


Ord Minnett Limited ABN 86 002 733 048 ASX Market Participant AFS Licence Number 237121

www.ords.com.au Guide to Ord Minnett Recommendations

BUY The stock’s total return (nominal dividend yield plus capital appreciation) is expected to exceed 15% over 12 months.

ACCUMULATE The stock’s total return is expected to be between 5% and 15%. Investors may add to existing holdings, or initiate holdings on share price weakness.

HOLD The stock is fairly priced, and its total return is expected to be between 0% and 5%.

LIGHTEN The stock’s total return is expected to be less than 0% and possibly down 15%. Investors should consider selling into share price strength.

SELL The stock’s total return is expected to lose 15% or more.

RISK ASSESSMENT Classified as High, Medium or Low, denotes the relative assessment of an individual stock’s risk based on an appraisal of its disclosed financial information, volatility, nature of its operations and other relevant quantitative and qualitative criteria.

Disclosure: Ord Minnett is the trading brand of Ord Minnett Limited ABN 86 002 733 048, holder of AFS Licence Number 237121 and an ASX Market Participant. Ord Minnett Limited and/or its associated entities, directors and/or its employees may have a material interest in, and may earn brokerage from, any securities referred to in this document. Further, Ord Minnett and/or its affiliated companies may have acted as manager or co-manager of a public offering of any such securities in the past three years. Ord Minnett and/or its affiliated companies may provide or may have provided corporate finance to the companies referred to in the report. This document is not available for distribution outside Australia and New Zealand and may not be passed on to any third party or person without the prior written consent of Ord Minnett Limited.

Disclaimer: Ord Minnett Limited believes that the information contained in this document has been obtained from sources that are accurate, but has not checked or verified this information. Except to the extent that liability cannot be excluded, Ord Minnett Limited and its associated entities accept no liability for any loss or damage caused by any error in, or omission from, this document. This document is intended to provide general securities advice only, and has been prepared without taking account of your objectives, financial situation or needs, and therefore before acting on advice contained in this document, you should consider its appropriateness having regard to your objectives, financial situation and needs. If any advice in this document relates to the acquisition or possible acquisition of a particular financial product, you should obtain a copy of and consider the Product Disclosure Statement for that product before making any decision.

Analyst Certification: The analyst certifies that: (1) all of the views expressed in this research accurately reflect their personal views about any and all of the subject securities or issuers; and (2) no part of their compensation was, is, or will be directly or indirectly related to the specific recommendations or views expressed herein.

Documents

Focus Minerals Limitedfocusminerals.com.au/wp-content/uploads/2011/01/FML... · 2011-01-10 · Total Measured, Indicated & Inferred 24.4 2.6 2.1 Source: Focus Minerals Note. Estimates