Capricorn Metals
CMM AU
5 October, 2017
Last price: A$0.085 Target price: A$0.15
Prepared by Tamesis Partners LLP See final two pages for important disclosures
1
Initiating Coverage: Imminent DFS to herald robust project
Capricorn is on the cusp of completing a DFS for its wholly-owned Karlawinda
gold project in WA. The project is a straightforward, low-cost open pit operation,
with favourable metallurgy and Capricorn is fully funded through to a decision to
mine. The Karlawinda exploration tenements are underexplored and show
potential to become a new gold camp, with multi-million-ounce potential.
Clear path. Capricorn is aiming to complete the DFS on Bibra, the main deposit at
Karlawinda, imminently. WA is a low-risk jurisdiction and the project has a granted Mining
Lease and Native Title Agreement. Capricorn aims to finalise debt and equity funding in Q1-
Q2 2018, and with a short 12-month build, Bibra could be pouring its first gold in mid-2019.
Simple, low strip pit. Bibra has a 1.1Moz resource (92% Indicated) and 713koz reserve
at 1.1g/t Au. Mining is a refreshingly simple proposition with a low strip, large scale, multi-
staged open pit. Geotechnical conditions are good, and significant optionality around
equipment and scheduling is likely to keep mining costs very low. No pre-strip is required
and the higher-grade laterite ore will boost production and cash flow in the early years of
mine life. Mineralisation is exceptionally continuous, and the scope for expansion is excellent.
Bibra’s metallurgical advantage. Bibra is not high-grade and it doesn’t need to be, as
along with favourable geology for mining, the ore has excellent metallurgy - with no nasties.
Testwork indicates 92.6% LOM recoveries utilising standard, low risk CIL. The real hook
though is that around 45% of the gold should fall out in the gravity circuit. The latest DFS
testwork also coarsened the grind size, without recovery loss, and further optimisation work
will be undertaken post-DFS.
Robust base case. We forecast first production in H2 2019, ramping up to 95koz pa over
the 7 full years of mine-life. We see LOM average C1 cash costs at A$900/oz, and AISC of
A$1,030/oz including an industry-competitive A$800/oz for the first two full years of
production due to the higher grade and low strip ratio of the Stage 1 pit. We forecast capex
at A$130m. Our NPV8% for Bibra is A$120m at US$1,300/oz gold (A$1,630/oz), with a
compelling 30% IRR and we see significant leverage to higher grades, gold price, and LOM
extensions, whilst remaining robust at lower gold prices.
Exploration upside. The exploration potential is impressive, with a full spectrum of targets
ranging from upside opportunities inside the resource shell (Portrush), near-mine satellites
and greenfield regional targets in an emerging, underexplored greenstone province.
Valuation. Our target price is A$0.15/sh on a fully funded/ fully diluted basis, based on a
Net Asset Value (P/NAV) multiple of 0.8x, a return of 1.75x the current share price, or 2.4x
from our unfunded valuation of A$0.21/sh. Once the DFS de-risks key metrics, we see
Capricorn has an attractive M&A target for both cashed-up Australian mid-tiers, or global
golds looking to diversify portfolio risk and add low-cost base-load production to the growth
profile.
We initiate with near term target price of A$0.15/sh. We see considerable scope
for price appreciation as Capricorn continues to de-risk development by
completing the DFS and progressing funding. The company is trading at a deep
discount to its NAV and gold development peers. With a 1.1Moz resource, a
refreshingly simple production scenario, and both near-mine and district
exploration potential, Capricorn will not stay under the radar for much longer.
Analyst: Phil Swinfen
Summary
Last price (A$) 0.085
Target price (A$) 0.15
Projected return (%) 75%
Karlawinda Project
Commodity Gold
Status DFS pending
Avg. LOM Production (koz) 85
Avg. Prod - 7 years (koz) 95
LOM C1 cash costs (A$/oz) 900
LOM AISC (A$/oz) 1,030
Tamesis NPV8% A$120m
Post tax IRR 30%
Share Data
Shares o/s (mm, b/ f.d) 572/628
52-week high/low (A$) 0.15/0.07
3-mth avg. daily vol (‘000) 335
Market cap (basic) (A$m) A$49.0m
Net cash (debt) (A$m) A$5.5m
Enterprise value (A$m) A$43.5m
Share Price Performance
Contact Details
Phil Swinfen
David Butler
Charlie Bendon
Charles Vaughan
Richard Greenfield
Mitch Limb
Prepared by Tamesis Partners LLP See final two pages for important disclosures
2
Contents Capricorn Metals – low-risk gold development in Western Australia ....................... 3
Snapshot of Capricorn – DFS imminent, construction next year, gold in 2019 ..... 3
Summary of main project parameters .......................................................... 3
Key catalysts and newsflow ............................................................................ 5
Capital Structure ........................................................................................... 6
Valuation ......................................................................................................... 8
Sensitivity Analysis ........................................................................................... 13
Upside scenarios and sensitivity ........................................................................ 15
Key Risks ........................................................................................................ 17
Putting Capricorn into context; comps and charts ............................................... 18
Karlawinda Overview ....................................................................................... 30
Location. ..................................................................................................... 30
Infrastructure .............................................................................................. 31
Licences and Permitting ............................................................................... 31
Next Development Steps: DFS imminent ........................................................ 31
Exploration and ownership history ................................................................. 32
Geology and mineralisation ........................................................................... 33
Resources .................................................................................................. 37
Reserves ..................................................................................................... 40
Mining ........................................................................................................ 42
Processing ................................................................................................... 43
Environmental – a relatively benign landscape ................................................ 46
Expansion opportunities – large scale system ready for growth ............................ 47
Appendix 1: Shareholders ............................................................................. 51
Appendix 2: Board and Management.............................................................. 52
Appendix 2: Capricorn Metals Ltd, Financials .................................................. 54
Prepared by Tamesis Partners LLP See final two pages for important disclosures
3
Capricorn Metals – low-risk gold development in Western Australia
Snapshot of Capricorn – DFS imminent, construction next year, gold in 2019
Capricorn is focused on bringing the Karlawinda gold project into production. The company plans to commence construction at Bibra,
the main deposit at Karlawinda in Q1-Q2 2018 and commission the plant by the mid-2019, subject to funding. Bibra has a robustly
drilled-out 1.1Moz resource, and a maiden 713koz reserve, with multiple opportunities for growth.
Bibra is permitted with the grant of Mining Lease valid for 21 years and a Land Access Agreement with the local Native Title holders.
Bibra will be a simple low strip, low-cost open-pit operation, and due to the favourable metallurgy of the ore, requires only a
conventional, off-the-shelf 3Mtpa CIL plant. High upfront gravity recovery and a coarse grind size feeds through to low operating
costs. The higher-grade laterite resource front-ends the cashflows over the initial years of mine life. Previous wide-spaced drilling
has demonstrated that the Bibra system remains open, with significant untested potential, particularly to the south, with excellent
potential to delineate satellite orebodies. Capricorn is fully funded through to a decision to mine.
Figure 1 - Location of the Bibra deposit and other near-mine prospects
Source: Capricorn
Summary of main project parameters
Figure 2 - Bibra main project parameters
*Tamesis forecasts/estimates Source: Capricorn, Tamesis
Karlawinda (Bibra deposit)
Ownership 100%
Country Western Australia
Main deposit Bibra
Stage DFS
Permits Mining Lease granted, a few ancilliary permits required
Resource 31Mt at 1.1g/t Au for 1.1Moz (92% Indicated), 0.5g/t cut-off
Reserve 21Mt at 1.06g/t Au for 713koz
Mine type Open pit
LOM* 8
Strip ratio 4.7 LOM (2.9 Stage 1 pit)
Processing Conventional CIL, high gravity recovery
Anticipated plant capacity 3.75Mtpa (oxide), 3Mtpa (fresh)
Metallurgical recovery 92.60%
LOM average gold production* 85koz pa LOM, 95koz pa main 7 years of operation
LOM production* 730koz
Capex* A$130m
Cash cost* A$900/oz
AISC* A$1030/oz
Start of Construction* Q2 2018
Start of Production Ramp-Up* Q2-Q3 2019
Prepared by Tamesis Partners LLP See final two pages for important disclosures
4
Summary production profile
Our model forecasts LOM production of 730koz, LOM average of 80kozpa, or 95kozpa over the 7 full years of mine life, and indicates
LOM average C1 cash costs at A$900/oz, total cash costs of A$975/oz and AISC of $1,030/oz.
Figure 3 - Bibra production and cost profile – Tamesis forecasts
Source: Tamesis estimates
Summary sensitivity analysis
Our NPV8% for Capricorn’s wholly-owned Bibra deposit (the main focus within the broader Karlawinda tenement area) is A$120m
with a project IRR of 30%, using spot gold at US$1,300/oz (A$1,630/oz). The sensitivity of our base-case NPV to various changes
in major parameters is shown below.
Figure 4 - Sensitivity - % change to base-case Bibra NPV to corresponding change in major parameter – Tamesis estimates
Source: Tamesis estimates
500
600
700
800
900
1,000
1,100
1,200
0
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2019 2020 2021 2022 2023 2024 2025 2026 2027
Op
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osts (
A$
/o
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Go
ld p
rod
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(k
oz)
Gold production C1 AISC
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
+10%gold price
+10%grade
-10%opex
+1 year toLOM
+2% Metrecovery
% change to base-case NPV
Prepared by Tamesis Partners LLP See final two pages for important disclosures
5
Key catalysts and newsflow
Capricorn has set out a clear development path that should see Karlawinda transitioning into the construction phase before mid-
2018, if everything goes to plan. The main catalyst to watch for is the completion of the DFS in early Q4 2017. We believe this could
drive a considerable re-rating in the company’s shares as the DFS will be the first time that key operational and economic parameters
are released to the market. Due to ASX disclosure rules, the scoping study outcomes were highly redacted in the company’s July
2016 Scoping Study ASX release. Thus, forthcoming newsflow will offer the market opportunities to evaluate the economics and
development potential fully, for the first time.
Figure 5 - Key news catalysts and events
Source: Capricorn, Tamesis estimates
A clear, low-risk pathway to production
Capricorn has set out a clear pathway to production at Karlawinda. The company is fully funded up to a decision to mine and the
project only has minor permitting steps remaining. The main outstanding item on the critical path is the completion of the DFS. The
deposit is robustly drilled out and the ore reserve statement demonstrates considerable confidence in the main project parameters.
As such, we view the path to production as more of a process driven timeline. Karlawinda is a simple project, being a straightforward
shallow open pit operation with simple metallurgy and early access to higher-grade ore. Coupled with the location in Western Australia
we view the project as low-risk build.
Capricorn is fully-funded through to the production decision, meaning that subject to the DFS, the last remaining hurdle will be
securing project funding. Capricorn’s current schedule envisages construction commencing in late Q1 2018 / early Q2 2018, with an
11-month construction period, translating to first commissioning in early Q2 2019 and production ramp up from mid-late 2019.
Prepared by Tamesis Partners LLP See final two pages for important disclosures
6
Corporate Structure
Capricorn is quoted on the Australian Stock Exchange (ASX) under the ticker CMM. The company originally traded as Malagasy
Minerals Ltd (ASX: MGY). Subsequent to the acquisition of Greenmount Resources Pty Ltd initiated in late 2015, Malagasy changed
its name to Capricorn and the ticker to CMM in February 2016. This change reflected the primary focus of the company on the
Karlawinda gold project.
The corporate structure is very simple, with Capricorn Metals Ltd holding a 100% interest in the Karlawinda project, through wholly-
owned subsidiary; Greenmount Resources. The company has various non-core graphite assets in Madagascar held through various
subsidiaries which are currently going through a disposal process.
Figure 6 - Simplified Corporate/Project Structure
Source: CMM, Tamesis
Clawback and royalties
In addition to a 2% NSR royalty South32 retains a clawback option on the project (IGO acquired the project from BHPB), whereby
South32 can elect to buy back a 70% interest. However, we deem this as highly unlikely as the clawback can only be triggered if the
Karlawinda resource exceeds 5Moz gold. Even if this was achieved the buy-back would be at 3x costs, which would almost certainly
be post any mine build, meaning the buyback cost would include costs to date, plus capex, which could easily run to c.A$500m+,
versus the current market capitalisation of A$49m. The present value of the 2% NSR at an 8% discount rate is A$15m. There is
potentially scope for Capricorn to buy back the royalty, either partially for fully, or negotiate a royalty holiday. Discussions are
underway, prior to the completion of the DFS.
Capital Structure
Capricorn has 572.4m ordinary shares on issue as of the end of September 2017. Directors and Officers hold approximately 25% of
the company, institutional holdings are 27%, and retail holdings 48%. The company currently has c.55.7m unlisted options
outstanding. The Hawke’s Point options are represented by: 28.49m options (A$0.15 exercise, May 2021 expiry). The remaining
management, employee and other options are 7m (A$0.20, May 2020), 9.4m (A$0.15, May 2021) and 10.8m (A$0.10, May 2020).
Prepared by Tamesis Partners LLP See final two pages for important disclosures
7
Rapid progress from acquisition to development
Since acquiring the Karlawinda project in 2016, Capricorn has made rapid progress in moving the project into production. The
company has made significant in-roads in de-risking the project with large focus on improving the continuity and expanding the
resource base through considerable drilling (75,000m in-fill and extensional drilling) and completing a positive scoping study. Major
permitting items such as the grant of the mining lease and the Native Title Access Agreement have also been completed.
Figure 7 - CMM potted history
CMM.AX share price vs. major Karlawinda milestones
Source: CMM, Company reports, Tamesis, ASX
Oct-2015
Dec-2015
Feb-2016
Mar-2016
Apr-2016
Apr-2016
May-2016
May-2016
Jun-2016
Jul-2016
Jul-2016
Jul-2016
Aug-2016
Oct-2016
Nov-2016
Dec-2016
Dec-2016
Jan-2017
Feb-2017
Feb-2017
Mar-2017
Mar-2017
Apr-2017
Jun-2017 Improved metallurgical testwork - recoveries up to 92.6% and 45% gravity recovery
Aug-2017 Drill results expand Bibra system and maiden 713koz Ore Reserve statement
Final results from maiden drill programme inc 13m at 1.63g/t Au
Drilling commences at Karlawinda, 48 hole 8,000m RC programme to expand the 650koz resource, work starts on scoping study
1st results from drilling inc. 9m at 5.1g/t, 21m at 1.33g/t, 19m at 1.37g/t and 9m at 3.32g/t
$12.6m equity raise at 13c/sh. Funds used to fast-track Karlawinda
First-stage asset sale process commenced for Molo graphite desposit in Madagascar, with sale of 1.5% NSR for C$3m cash plus C$1m on 1st production
New shallow zone of broad gold mineralisation intersected 20m below surface at the Bibra Gold Deposit, 19 metres at 1.33g/t Au from 20m
Resource / drilling
Resource upgrade: 25.5Mt at 1.1g/t Au for 914koz gold, within optimised pit-shell using A$1,750/oz to a dpeth of 240m. 40% increase in gold content
Series of high-potential exploration targets defined in close proximity to the Bibra Inferred Resource, 60,000m in-fill drilling planned
Scoping Study completed and Feasibility study commences
Final acquisition payment for Karlawinda, project now 100%-owned
Exploration drilling immediately south of the Bibra Gold Deposit intersects thick near-surface mineralisation at Southern Corridor Target
Native Title land access agreement completed and Mining Lease granted for a term of 21 years
Jonathan Shelabear appointed as NED
RC drill results from Esky prospect, Consistent shallow oxide mineralisation delineated 500m west of Bibra. In-fill drilling reveal significant down-dip extension at Bibra
Further in-fill drilling results. High-grade component of HW lode confirmed at the souithern end of the Bibra deposit
Near-surface laterite mineralisation delineated over 1.1km strike and 500m width, from 1-5m from surface
Board/management restructure - Heath Hellewell - Executive Chairman, Stuart Pether - NED. Board Step-downs: Peter Thompson moves to COO, Peter Langworthy moves
to Exec GM, Jonathan Shellabear moves to CFO
Lithium Australia NL’s (ASX: LIT) subsidiary, BlackEarth Minerals NL acquires the exploration rights to Capricorn's Madagascan graphite assets
Resource upgrade. 31Mt at 1.1g/t Au for 1.114 Moz
Corporate / other
$10m cornerstone investment with Hawke's Point at 11.7c/sh.
Acquisition approved, Malagasy announce plans to fast-track Karlawinda. Malagasy Minerals changes name to Capricorn Metals Ltd, new ticker ASX: CMM
A$1.5m placing at 3.3c/sh. Regis Resources comes on board as new shareholder (9.9%).
Malagasy Minerals (ASX:MGY) announces HOA with Greenmont Resources to acquire the Karlawinda project
0.00
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Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17
CMM.AX (A$/sh)
Malagasy changes name
to C apricorn Metals
Resource
upgrade25.5Mt at 1.1g/t for 914koz
Drilling commences
at Karlaw inda
48 hole, 8,000m RC
Malagasy announces
Greenmount acquisition
"rights to Karlaw inda"
Malagasy closes
Greenmount
acquisition
F irst results from
maiden drill programme
inc 9m at 5.1g/t$12.6m share
placement
Madagascar
asset sale
process started
New shallow
mineralisation zone
discov ered
New exploration
targets
Scoping study
completed
F inal acquisition
pay ment
New discov ery
at Southern C orridior
prospect
Nativ e Title agreement
Mining lease
granted
High grade
results from
in-fill drilling
Easky intercepts
suggest satellite
potential
$10m share
placement
Board &
Management
restructure
BlackEarth acquires
rights to Madagascar
graphite assets
Resource
upgrade31Mt at 1.1g/t for 1.1Moz
Maiden Reserves21Mt at 1.06g/t for 713koz
Improv ed met
test work
Prepared by Tamesis Partners LLP See final two pages for important disclosures
8
Valuation
Fully-funded Valuation at spot - A$0.15/sh target
We initiate with a A$0.15/sh target price based on a 0.8x NAV multiple of our base-case Bibra (Karlawinda) operating NAV driven by
our Bibra DCF, in addition to a sum-of-the parts valuation. This represents an uplift of 1.75x the current share price. We see significant
scope for further value accretion as Capricorn transitions into a producer. Being a single asset pure gold company, the future value
of the company is highly leveraged to the gold price, in addition to small incremental changes in key operating parameters such as
grade and metallurgical recovery.
Our NPV8% for Capricorn’s wholly-owned Bibra deposit (the main focus within the broader Karlawinda tenement area) is A$120m
with a project IRR of 30%, using spot gold at US$1,300/oz (A$1,630/oz). We set our base-case valuation using an 8% discount rate,
in line with the Australian junior gold space. We provide a full sensitivity at various discount rates which demonstrates the robust
nature of our base-case valuation. Our NPV5% (Some peers such as Regis Resources use 5%) increases to A$155m.
Figure 8 - Sum of the parts – fully funded NAV valuation
Source: Tamesis estimates
Our forward-looking, rolled-over NPV and NAV valuation assumes that Capricorn will trade as a producer at a 1x multiple.
Figure 9 - Bibra NPV, CMM NAV progression as the company transitions into a producer
Source: Tamesis estimates
Tamesis Fully-funded Valuation
Unrisked NAV Disc Rate NAV (%) A$m A$/sh
Bibra NPV 8% 82% 120 0.11
Resources ex-mine plan - 15% 21 0.02
Exploration - 5 0.00
Subtotal 146 0.13
Risked NAV NAV multiple NAV (%) A$m A$/sh
Bibra NPV 0.80x 96 0.08
Resources ex-mine plan - 17 0.02
Exploation - 4 0.00
Sub-total 117 0.10
Cash B/S + funding 146 0.13
Cash from option exercise 8 0.01
Debt -90 (0.08)
Forward Corporate G&A / Other (12) (0.01)
NAV VALUATION A$168m A$0.15
Shares on issue (basic) 572.4m
Shares on issue (diluted) 628.1m
Shares (basic) post-financing 1,077.4m
Shares (diluted) post-financing 1,133.1m
A$0.05
A$0.10
A$0.15
A$0.20
A$0.25
A$0.30
0
50
100
150
200
250
300
2018E 2019E 2020E 2021E
A$
m
Bibra Risked NPV (A$m) CMM NAV (A$/sh)
0.8x NAV 1.0x NAV 1.0x NAV 1.0x NAV
Prepared by Tamesis Partners LLP See final two pages for important disclosures
9
Our base-case DCF assumptions
In deriving our base-case NAV for Bibra, we use a combination of assumptions based on the 2016 scoping study, the 2017 resource
and reserve statements, the DFS preliminaries released in the maiden reserve statement, discussions with management, and our
own assumptions.
• 3Mtpa operation, 8-year LOM. Based on Capricorn’s aim to finalise financing in Q1 2018, and with a projected 12-month
construction period, this equates to first gold in March/April 2019. However, we push out first production in our model to
H2 2019 (calendar), with mining of only the stage 1A pit (mainly laterite/oxide) in 2019, followed by full ramp-up in 2020.
• We model our production profile on the grade, tonnes and strip ratio of the Bibra reserve staged open pit ore profile. We
model 23Mt of ore being mined at an average grade of 1.05g/t Au over LOM. Recoveries are based on the latest metallurgical
testwork, dependent on ore type but averaging 92.6% over LOM.
• Our model forecasts LOM production of 730koz, LOM average of 80kozpa, or 95kozpa over the 7 full years of mine life.
• We incorporate construction capex of A$130m, benchmarked against the capital intensity of similar operations and process
plants. Our opex is based on a mining cost of $2.40/t material, oxide processing $11.50/t, fresh processing $14/t, and G&A
at $2/t. We model closure costs of A$5m.
• We model a flat-forward spot gold price of US$1,300/oz, or A$1,630/oz using flat USD:AUD FX rate of 1.254.
Sum-of-the-parts assumptions
Operating NAV
Our sum-of-the-parts valuation starts with our A$120m NPV8% for Bibra. We also incorporate value for the portion of Indicated
Reserves that did not make it into the final reserve mine plan, largely due to the lower gold price used for the reserve pit shell
(A$1,500/oz vs resource A$1,750/oz). This amounts to 309koz, which we assign a conservative A$69/oz placeholder value based on
our calculated EV/oz for Australian developers, equating to A$21m. We also incorporate a nominal $5m to reflect the value of
Capricorn’s exploration tenements. This is likely a gross underestimate of the option value of the Karlawinda tenements, but we
retain our conservative view, as the focus remains on financing and building Bibra. Note that we include no value for Capricorn’s
Madagascar assets which are undergoing a disposal process.
We risk adjust our Bibra NPV and operational NAV by using a 0.8x P/NAV multiple. We generally value advanced exploration and
development companies in the range of 0.25-1.0x NAV, in line with industry averages. We believe that Capricorn deserves to trade
towards the upper-end of this range with an advanced, low-risk, low-cost, feasibility level-project, with significant growth potential.
This is off-set by risks around development, financing, timelines, and project execution. Our overall NAV valuation on the same fully
funded, fully diluted basis at 1x NAV would be A$0.17/sh.
Funding and other adjustments
Corporately, we adjust for current cash and cash from option exercise and adjust for forward corporate G&A (DCF basis) and related
costs. As this represents an all-in funded valuation we include funds coming in from equity and debt, and adjust for the assumed
debt liability and equity dilution.
We model equity being raised at a level of A$0.10, similar to current share price which adds 505m shares, based on our 65% debt,
35% equity base-case, from a $50m equity financing. We assume a peak funding requirement of A$140m, comprised of our A$130m
capex assumption, plus allowance for a A$10m overrun. We include $3m in ongoing development costs to complete the DFS and
through to a construction decision.
Given that we expect the company’s shares to gain traction on the back of the DFS and debt funding, we realistically view this
punitive dilution scenario as the floor. We provide sensitivity to equity dilution levels and pricing, later in our note.
Our all-in risk-adjusted, post-financing NAV is $168m, or A$0.15/sh, based on the total diluted share capital of 1.13bn shares,
including exercise of out of the money options (which would be in the money at our target price). This implies an uplift of 1.75x the
current share price of A$0.085/sh. Put another way, this suggests Capricorn shares are currently trading at a 0.57x multiple to our
risked NAV at spot gold prices.
Prepared by Tamesis Partners LLP See final two pages for important disclosures
10
Our equity and debt targets are achievable
Notwithstanding Capricorn’s relatively weak share price over the last 12 months, we have a reasonably high level of confidence that
an equity financing of A$50m magnitude could be achieved, given that Bibra is a quality, low-risk project, Capricorn has a top-rate
management team with a solid track record, and the company has good cornerstone support. Post DFS, the project will be further
de-risked and the full suite of cost and production metrics will be available to the market, and we believe that the mine-build fund
raise will be of interest to both existing and new institutional shareholders.
Gascoyne Resources Ltd (ASX: GCY), one of Capricorn’s closest peer companies, successfully completed a A$55m equity financing in
February 2017, which was apparently heavily oversubscribed. GCY’s Dalaranga project is a close comparator to Bibra having a
1.32Moz resource, 6-year LOM, LOM average production of 100kozpa, AISC A$1,000/oz. Note that GCY has not secured a debt
package yet, as post-feasibility drilling necessitated a revision to the mine plan and schedule which has prompted a delay, however
the company reported on 18th September that two Australian banks had been mandated to arrange a debt facility of up to A$60m.
Dacian Gold (ASX: DCN) secured a A$150m project debt facility for its Mount Morgans Gold Project, which based on the A$220m
capex implies 68% debt funding.
Prepared by Tamesis Partners LLP See final two pages for important disclosures
11
Unfunded Valuation NAV valuation at spot – A$0.21/sh
On a current, unfunded basis, our sum-of-the-parts valuation starts with our A$120m NPV8% for Bibra. The operating assumptions
are the same as the funded valuation described previously, and uses spot gold at US1,300/oz (A$1,630/oz).
We adjust for current cash on the balance sheet and cash from option exercise and adjust for forward corporate G&A (DCF basis)
and related costs. As the valuation is on an unfunded basis, we exclude cash from debt/equity funding, and exclude the debt liability
and equity dilution. We apply the same 0.8x NAV multiple to our Bibra NPV and value for the Indicated Resources not in the mine
plan, plus exploration.
Our unfunded NAV is A$118m or A$0.21/sh based on the current fully diluted share capital of 628.1m shares (572.4m shares on
issue, plus 55.7m options). This represents an uplift of 2.4x the current share price. At a 1x NAV multiple, our unfunded NAV would
be A$0.26/sh.
Figure 10 - Sum of the parts risked NAV valuation – unfunded
Source: Tamesis estimates
Valuation sense-checks
• Forward CF. If we apply an average sector cashflow multiple of 5x to Capricorn’s first full year of normalised cash flow
and production in FY20, this implies a forward CF valuation of A$0.20/sh.
• Sector - EV/oz resource. If we apply the average EV/oz resource of A$69/oz from Australian developers, this implies an
indicative value of A$77m (A$0.135/sh). Applying the producer average of A$125/oz would value CMM's EV at A$139m
(A$0.24/sh).
• Sector - EV/oz reserve. Applying the average EV/oz reserve metric we calculate for developers at A$220/oz, would value
CMM's EV at A$157m (A$0.27/sh). Applying the producer average of A$400/oz would value CMM's EV at A$285m
(A$0.49/sh).
• Close comparators - EV/oz. If we apply the average EV/oz from close development comparators (DCN, GOR, GCY) at
A$85/oz, this values CMM’s EV at A$94m (A$0.165) and EV/Reserve at A$238/oz values CMM’s EV at $169m (A$0.29/sh).
Tamesis Unfunded Valuation
Unrisked NAV Disc Rate NAV (%) A$m A$/sh
Bibra 8% 82% 120 0.19
Resources ex-mine plan - 15% 21 0.03
Exploration 5 0.01
Subtotal 146 0.23
Risked NAV NAV multiple NAV (%) A$m A$/sh
Bibra 0.80x 96 0.15
Resources ex-mine plan 17 0.03
Exploration - 4 0.01
Sub-total 117 0.19
Cash B/S 6 0.01
Cash from option exercise 8 0.01
Debt 0 0.00
Forward Corporate G&A / Other (12) (0.02)
NAV VALUATION A$118m A$0.21
Shares on issue (basic) 572.4m
Shares on issue (diluted) 628.1m
Prepared by Tamesis Partners LLP See final two pages for important disclosures
12
Forecast Bibra LOM production and financials - Tamesis modelled forecasts
Production. We model first gold in H2 2019 (calendar year) and conservatively assume that only c.550kt of ore is mined,
corresponding to the Stage 1A pit. For the main 7 years of mine life, we model annual average production of 95kozpa. Peak production
of 100kozpa is in 2020 due to the higher grade (1.2g/t) of pit Stage 1B.
Costs. We incorporate various unit costs as outlined earlier, depending on the type of ore being processed through the plant. Our
model indicates LOM average C1 cash costs at A$900/oz, total cash costs of A$975/oz and AISC of A$1,030/oz. However, we forecast
average AISC of A$800/oz for the first two full years of production due to the higher grade and low strip ratio of the Stage 1A and
1B pit. This implies an AISC margin over LOM of A$620/oz, and A$850/oz over the first two full production years, based at current
spot and FX.
Financial outputs. We forecast annual average revenue of A$132m over LOM and A$155m over the main 7 years of operation. We
forecast annual average EBITDA of A$53m, and A$63m over the main 7 years. Similarly, we forecast LOM average FCF at A$36m
and A$48m over the 7 years.
Figure 11 - Bibra LOM production profile, Calendar year (Tamesis estimates)
Source: Tamesis estimates
Figure 12 - Bibra LOM financial outputs, Calendar year, (Tamesis estimates)
Source: Tamesis estimates
500
600
700
800
900
1,000
1,100
1,200
0
20
40
60
80
100
120
2019 2020 2021 2022 2023 2024 2025 2026 2027
Op
era
tin
g c
osts (
A$
/o
z)
Go
ld p
rod
ucti
on
(k
oz)
Gold production C1 AISC
-100.0
-50.0
0.0
50.0
100.0
150.0
2018 2019 2020 2021 2022 2023 2024 2025 2026 2027
AU
D $
m
Revenue EBITDA FCF Total capex Total Opex
Prepared by Tamesis Partners LLP See final two pages for important disclosures
13
Sensitivity Analysis
Bibra NPV sensitivity
Our sensitivity analysis suggests that Bibra is extremely robust over a wide range of inputs. Being a relatively low-grade deposit,
Bibra shows very high sensitivity to the gold price and metallurgical recovery. Our NPV for Bibra increases by 42% for a 10% increase
in our long-term gold price assumption.
Figure 13 - Sensitivity analysis – Bibra NPV (in A$m)
Source: Tamesis estimates
Figure 14 - Bibra NPV (A$m) – Discount rate vs Gold price
Source: Tamesis estimates
Figure 15 - CMM.AX share price vs Gold price (A$/oz), YTD 2017
Source: Tamesis, WGC, ASX
0
50
100
150
200
250
-20% -10% Base 10% 20%
NPV (
A$m
)
Gold Price Discount Rate Opex Capex Metallurgical recovery Forex
Discount rate Equity raise price (A$/sh)
1 5% 8% 10% 12% 15%
1,000 19 4 -5 -12 -20
1,100 64 42 30 20 7
1,200 110 81 65 51 34
1,300 155 120 100 83 61
1,400 201 158 135 114 88
1,500 246 197 169 146 116
1,600 292 236 204 177 143
1,700 338 274 239 209 170
1,800 383 313 274 240 197
Gold
Price
(US$/o
z)
1,400
1,450
1,500
1,550
1,600
1,650
1,700
1,750
1,800
0.05
0.07
0.09
0.11
0.13
0.15
0.17
0.19
Gold
Price
(A
$/o
z)
CM
M.A
X (A
$/s
h)
CMM.AX Gold Price (A$/oz)
Prepared by Tamesis Partners LLP See final two pages for important disclosures
14
Valuation sensitivity – Fully-funded scenario
The tables below set out the sensitivity to our A$0.15/sh fully-funded valuation, using a range input discount rates and gold prices.
Figure 16 - Funded Valuation – Sensitivity – gold price vs. discount rate
Source: Tamesis estimates
Figure 17 - Funded Valuation – Sensitivity – debt mix (%) vs. equity raise price (A$/sh)
Source: Tamesis estimates
Valuation sensitivity – Unfunded scenario
The tables below set out the sensitivity to our A$0.21/sh unfunded valuation, using a range input discount rates and gold prices.
Figure 18 - Unfunded Valuation – Sensitivity – gold price vs. discount rate
Source: Tamesis estimates
CMM - Funded valuation (A$/sh) Uplift vs.current share price
Discount rate Discount rate
1 5% 8% 10% 12% 15% 1 5% 8% 10% 12% 15%
1,000 0.08 0.07 0.06 0.05 0.05 1,000 0.9x 0.8x 0.7x 0.6x 0.6x
1,100 0.11 0.09 0.08 0.08 0.07 1,100 1.3x 1.1x 1.0x 0.9x 0.8x
1,200 0.14 0.12 0.11 0.10 0.09 1,200 1.7x 1.4x 1.3x 1.2x 1.0x
1,300 0.17 0.15 0.13 0.12 0.11 1,300 2.0x 1.7x 1.6x 1.4x 1.3x
1,400 0.21 0.18 0.16 0.14 0.13 1,400 2.4x 2.1x 1.9x 1.7x 1.5x
1,500 0.24 0.20 0.18 0.17 0.15 1,500 2.8x 2.4x 2.2x 2.0x 1.7x
1,600 0.27 0.23 0.21 0.19 0.16 1,600 3.2x 2.7x 2.4x 2.2x 1.9x
1,700 0.30 0.26 0.23 0.21 0.18 1,700 3.6x 3.0x 2.7x 2.5x 2.2x
1,800 0.34 0.29 0.26 0.23 0.20 1,800 3.9x 3.4x 3.0x 2.7x 2.4x
Gold
Price
(US$/o
z)
Gold
Price
(US$/o
z)
Equity raise price (A$/sh) Discount rate
416 0.08 0.10 0.12 0.14 0.16 0.18 0.20
45% 0.12 0.14 0.15 0.16 0.18 0.18 0.19
50% 0.12 0.14 0.15 0.17 0.18 0.18 0.19
55% 0.13 0.14 0.16 0.17 0.18 0.18 0.19
60% 0.13 0.15 0.16 0.17 0.18 0.18 0.19
65% 0.13 0.15 0.16 0.17 0.18 0.18 0.19
70% 0.14 0.15 0.16 0.17 0.18 0.19 0.19
75% 0.14 0.15 0.16 0.17 0.18 0.19 0.19
80% 0.15 0.16 0.17 0.17 0.18 0.19 0.19
85% 0.15 0.16 0.17 0.18 0.18 0.19 0.19
%debt
fundin
g
CMM - Unfunded valuation (A$/sh) Uplift vs.current share price
Discount rate Discount rate
1 5% 8% 10% 12% 15% 1 5% 8% 10% 12% 15%
1,000 0.07 0.04 0.03 0.02 0.01 1,000 0.8x 0.5x 0.4x 0.3x 0.1x
1,100 0.13 0.10 0.08 0.07 0.05 1,100 1.5x 1.2x 1.0x 0.8x 0.6x
1,200 0.19 0.15 0.13 0.11 0.09 1,200 2.3x 1.8x 1.5x 1.3x 1.0x
1,300 0.26 0.21 0.18 0.15 0.12 1,300 3.0x 2.4x 2.1x 1.8x 1.5x
1,400 0.32 0.26 0.23 0.20 0.16 1,400 3.8x 3.1x 2.7x 2.3x 1.9x
1,500 0.38 0.31 0.28 0.24 0.20 1,500 4.5x 3.7x 3.2x 2.9x 2.4x
1,600 0.45 0.37 0.32 0.29 0.24 1,600 5.3x 4.3x 3.8x 3.4x 2.8x
1,700 0.51 0.42 0.37 0.33 0.28 1,700 6.0x 5.0x 4.4x 3.9x 3.3x
1,800 0.57 0.48 0.42 0.37 0.31 1,800 6.8x 5.6x 5.0x 4.4x 3.7x
Gold
Price
(US$/o
z)
Gold
Price
(US$/o
z)
Prepared by Tamesis Partners LLP See final two pages for important disclosures
15
Upside scenarios and sensitivity
Summary
Figure 19 - Sensitivity - % change to base-case Bibra NPV to corresponding change in parameter
Source: Tamesis estimates
Highly leveraged to grade
Bibra is a relatively low-grade deposit, and has a moderately short mine life. Our NPV for the project is thus highly sensitive to
increases in grade. Whilst in reality we would not expect a 20% or 25% increase in grade once mining commences, our chart below
illustrates the point that even relatively small grade increases over LOM (5-10%) produce a significant increase in NPV. This means
that a sustained positive reconciliation between ore to the mill and the reserve grade could be potentially very lucrative.
Figure 20 - Bibra NPV upside to higher grades
Source: Tamesis estimates
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
+10%gold price
+10%grade
-10%opex
+1 year toLOM
+2% Metrecovery
% change to base-case NPV
100
120
140
160
180
200
220
Base case(LOM 1.06g/t Au)
+5%(LOM 1.1g/t Au)
+10%(LOM 1.15g/t Au)
+15%(LOM 1.21g/t Au)
+20%(LOM 1.26g/t Au)
+25%(LOM 1.31g/t Au)
NPV A
$m
at
8%
dis
c. r
ate
LOM grade increase (%)
30% IRR
32% IRR 34% IRR 36% IRR 38% IRR 40% IRR
NPV +$15m
NPV +$34m
NPV +$56m
NPV +$75m
NPV +$94m
A mere 10% increase in LOM gradeadds $34m to NPV
Prepared by Tamesis Partners LLP See final two pages for important disclosures
16
LOM additions are also beneficial
Adding extra years to the LOM, most likely through the process of pushing the pit deeper also has a significant impact on Bibra’s
NPV. Even adding a conservative three years, by assuming the c.300koz balance of Indicated resources at the base of pit is moved
into the mine plan and incorporating the cost of the pushback, increases our modelled NPV by A$31m. We believe these additional
ounces will be economic to extract at a future juncture.
Figure 21 - NPV upside from adding extra years to the mine life
Source: Tamesis estimates
Metallurgical Recovery – plenty of scope for further optimisation
Small increases in metallurgical recovery will naturally boost the NPV. However, we believe the real value-add would be gained from
any realised increase in the gravity gold recovery. This has important flow-through benefits for the overall circuit including lower
residence time and reagent consumption (lime, cyanide), increased throughput and ultimately lower operating costs.
Recent optimisation work has confirmed the potential to increase the primary ore grind size to 120μm, from 106μm, without recovery
loss. This is important, considering that 72% of LOM ore is represented by primary.
Small incremental gains in various areas will have a considerable impact on the economics of the operation. Once mining
commences at Bibra, tight focus on grade control combined with small improvements in gravity recovery, or coarsening of the grind,
will flow straight through to the bottom line, given that the head-grade is a modest c.1g/t Au.
Figure 22 - NPV upside from higher metallurgical recovery
Source: Tamesis estimates
100
125
150
Base case +1 year LOM +2 year LOM +3 year LOM
NP
V A
$m
at
8%
dis
c. r
ate
NPV +$13m
NPV +$24m
NPV +$31m
825koz
920koz
1,015koz
731koz
100
110
120
130
Base case 92.6% Recovery 93% 94% 95%
NP
V A
$m
at
8%
dis
c. r
ate
NPV +$7m
NPV +$12m
NPV +$2m
Prepared by Tamesis Partners LLP See final two pages for important disclosures
17
Feeding a hungry mill
Given that the maximum throughput of the planned processing plant at Karlawinda is 3Mtpa for primary fresh ore, but up to 3.75Mtpa
for oxide ore, it raises the possibility that Capricorn could supplement the mill feed with additional oxides once the plant is up running
at steady-state and has moved on to fresh ore. The company has several near-mine satellite targets which may satisfy this
requirement. E.g. the recent drilling at Portrush which has been targeting a broad shoot of near-surface oxide mineralisation.
WA Royalty Changes
In September 2017, The Western Australian Government unveiled proposed changes to the tax regime which includes a proposed
increase to gold royalties to 3.75% from the current 2.5% from January 2018. The changes have not been implemented yet, and
could potentially be blocked in the Upper House of State Parliament. We retain 2.5% government royalty in our model, for the time
being. The increase in royalties would have a negative impact on our valuation of Bibra, reducing our base-case NPV by 5.8% from
A$120m to A$113m (and our fully-funded valuation from A$0.15/sh to A$0.14/sh).
Key Risks
Gold Price
Large fluctuations in gold prices may materially affect revenues and returns. Gold prices have seen significant volatility in recent
years. A change in forecast gold prices could materially affect our valuation, either positively or negatively.
Financing
Financing is a key risk for all resource development companies. Capricorn has a significant funding requirement to develop Bibra. We
believe the project is economically and technically attractive, the company has supportive cornerstone investors, and discussions
with various financing institutions have been initiated. However, assumptions on funding mix and the level of equity funding and
resultant equity dilution are preliminary at this stage. There is no certainty that Capricorn will be able to secure sufficient funding to
satisfy its capex requirements.
Accuracy
Bibra has been subject to a scoping study, although ASX disclosure requirements resulted in only minimal information being disclosed
to the market. The recent maiden reserve statement provided more information on production scale, but detailed information will
not be available until the publication of the DFS during early Q4 2017.
Execution
A standard risk in building any mining project. Although unforeseen technical challenges could materially affect development
timelines, we see little scope for this given the straightforward, shallow open pit, good geotechnical conditions and a favourable
project location. We see little process risk due to the favourable non-refractory, high-gravity recovery nature of the Bibra ore.
Permitting Risk
There is low permitting risk at Bibra as the project already has a granted Mining Lease and a signed Native Title Agreement.
Geological risk, Resources and Reserves
Overall, we see little geological and mining risk, with a shallow, open pit, and predictably dipping orebody. Whilst the majority of
Bibra’s resource is classified in the Indicated Category, the mineralisation is nuggety and poor repeatability of assays stopped the
resource being classified into the Measured Category. We believe the risk here is largely to the upside, and Capricorn is planning a
5,000m grade control drilling programme to close the spacing on the variography.
Political, Sovereign, Labour Risks
Western Australia is a favourable jurisdiction with a solid fiscal, legal and policy framework, and we see limited scope for risk in this
category. The main risk is the proposed change to the gold royalty rates in WA from 2.5% to 3.75%, which could be implemented
from January 2018.
Foreign Exchange
Variation in the exchange rate may materially affect earnings, especially with local costs in Australian dollars, and gold prices
determined by reference to the US dollar gold price.
Prepared by Tamesis Partners LLP See final two pages for important disclosures
18
Putting Capricorn into context; comps and charts Production
Apart from Gruyere (Gold Road Resources ASX: GOR), Bibra is becoming one of the largest development projects in terms of proposed
production with LOM annual production anticipated to average 85koz pa, and 95koz pa over the main 7-years of the operation. We
model peak production at 100koz in year 2 due to the mining and processing of the higher-grade laterite/oxide portion of the deposit
in the Stage 1 pit.
Figure 23 - ASX - WA gold development peer projects – LOM average annual production
Bibra production main 7 years of LOM. Source: Tamesis
Resources – contained gold – sub 2Moz deposits
Bibra’s 1.1 Moz resource has surpassed the 1Moz critical mass level and we believe the project has potential to move up the curve
as Capricorn drills out the tenement area, which is highly prospective for satellite deposits.
Figure 24 - ASX WA - gold peer’s projects – Resources, contained gold, Sub 2Moz
Developers in gold. Source: Tamesis
0
50
100
150
200
250
LOM
Avg k
oz
pa
Uly
sses
West
Pauls
ens
Turn
er
Riv
er
Cra
cow
Indee
Deflect
or
Leonora
LG
P
Andy W
ell
Edna M
ay
Mt
Carlto
n
Juliu
s (p
hase
1)
Turn
er
Riv
er +
Indee
Gle
nburg
h
Moola
rt w
ell
Bib
ra
Nulla
gin
e
Dalg
ara
nga
Mount
Bundy
Mt
Raw
don
Jundee
Fort
num
Davyhurs
t
Mungari
Gard
en W
ell
McP
hillam
ys
0.0
0.5
1.0
1.5
2.0
Moz
gold
Prepared by Tamesis Partners LLP See final two pages for important disclosures
19
Figure 25 - ASX WA - gold peer’s projects – Resources, contained gold- inc 2Moz +
Developers in gold. Source: Tamesis
Permitting and development status - Bibra one of the next cabs off the rank
Figure 26 - ASX WA gold peer projects, main metrics and development stage
Source: Tamesis
Uly
sses
West
Pauls
ens
Turn
er
Riv
er
Cra
cow
Indee
Deflect
or
Leonora
LG
P
Andy W
ell
Edna M
ay
Mt
Carlto
n
Juliu
s (p
hase
1)
Turn
er
Riv
er +
Indee
Gle
nburg
h
Moola
rt w
ell
Bib
ra
Nulla
gin
e
Dalg
ara
nga
Mount
Bundy
Mt
Raw
don
Jundee
Fort
num
Davyhurs
t
Mungari
Gard
en W
ell
McP
hillam
ys
Hig
gin
sville
Mount
Morg
ans
Kalg
oorlie
Ops
South
Kalg
oorlie
Gw
alia
Ravensw
ood
Cow
al
Matild
a (
Phase
1)
Gru
yere
Centr
al M
urc
his
on
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Moz
gold
Ticker Company Location Project Resource Production Capex Stage Plant Size Type Permitted
Moz Koz p.a. A$m Mtpa
CMM Capricorn Aus (WA) Bibra 1.11 95 130 DFS 3-3.75 OP Mining Lease & Native title agreement
GOR Gold Road Resources Aus (WA) Gruyere 6.61 270 514 Construction (prod Q4 2018) 7.5 OP Mining Lease, Native Title agreement
RRL Regis Resources AUS (NSW) McPhillamys 2.30 192 215 DFS (Prod Q2 2019) 7 OP Exploration Licence
DCN Dacian Gold Aus (WA) Mount Morgans 3.32 150 220 Construction (prod Q1 2018) 2.5 OP/UG Mining Lease , No Native Title claim
GCY Gascoyne Resources Aus (WA) Dalgaranga 1.23 100 86.2 Construction (prod Q2 2018) 2.5 OP Mining Lease
PGO Primary Gold AUS (NT) Mount Bundy 1.24 91.6 155 Scoping 3 OP/UG Mining Lease
DEG De Grey Mining Aus (WA) Turner River + Indee 1.00 90 - Scoping - OP Mining Lease
EGS Eastern Goldfields Aus (WA) Davyhurst 1.75 80 - Commissioning 1.2 OP Mining Lease
GCY Gascoyne Resources Aus (WA) Glenburgh 1.00 73 70.4 PFS 1.2 OP/UG Mining Lease, Native Title finalised
WGX Westgold Aus (WA) Fortnum 1.75 70 15 Commissioning 1 OP Mining Lease
WGX Westgold AUS (NT) Rover 0.38 60 100 PFS - OP Exploration Licence
KIN Kin Mining Aus (WA) Leonora LGP 0.72 48 56.7 DFS 1.2 OP Exploration Licence, ML application
EAR Echo Resources Aus (WA) Julius (phase 1) 0.96 31.95 17.5 BFS 2 OP Mining Lease
Prepared by Tamesis Partners LLP See final two pages for important disclosures
20
Resources grade – Western Australian peers
Bibra’s total resource grade at 1.1g/t is rather low in terms of the peer group. However, the grade of Bibra’s laterite is 1.4g/t and
will contribute plant feed in the first year of operation, front-ending cash flow. It’s also worth noting that evaluating on a grade-only
basis is not very instructive, as Bibra’s relatively low grade is compensated for by the deposit being amenable to a shallow low-cost
open pit with a low-strip ratio, and favourable metallurgy which indicates high gravity and overall recoveries.
Figure 27 - ASX gold peer projects – Total resource grade, g/t Au
Developers in gold. Rover is in NT Source: Tamesis
Resource – Western Australian peers – tonnage/Moz plot
Bibra sits at around the mid-point point on a tonnage basis, and sits firmly within the cluster of 1-2Moz deposits that are typical of
Western Australia.
Figure 28 - ASX WA gold peer projects – Tonnage-Moz plot
Developers in gold. Tonnage axis is logarithmic Source: Tamesis, company reports
Mt
Raw
don
Moola
rt w
ell
Ravensw
ood
Gard
en W
ell
Cow
al
McP
hillam
ys
Bib
ra
Nulla
gin
e
Dalg
ara
nga
Gru
yere
Edna M
ay
Bib
ra (
late
rite
)
Turn
er
Riv
er
Gle
nburg
h
Mount
Bundy
Turn
er
Riv
er +
Indee
Rover
Indee
Juliu
s (p
hase
1)
Fort
num
Leonora
LG
P
Hig
gin
sville
Uly
sses
West
Centr
al M
urc
his
on
Mount
Morg
ans
South
Kalg
oorlie
Mungari
Davyhurs
t
Mt
Carlto
n
Jundee
Matild
a (
Phase
1)
Andy W
ell
Kalg
oorlie
Ops
Pauls
ens
Deflect
or
Cra
cow
Gw
alia
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Reso
urc
e g
rade g
/t
Julius
Fortnum
Dav y hurst
Mount Morgans
Gruy ere
Leonora LGP
Bibra
Dalgaranga
GlenburghPaulsens
C racow
Edna May
Mt C arlton
Moolart well
Mt Rawdon
Jundee
Mungari
Higginsv ille
Kalgoorlie O psSouth KalgoorlieGwalia
Rav enswood
C owal
C entral Murchison
Nullagine
Garden Well
A ndy Well
Deflector
Matilda (Phase 1)
Uly sses West
Turner Riv erIndee
Turner/Indee
Mt.Bundy
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
1 10 100
Mo
z go
ld
Tonnage (Mt)
McPhillamys
Prepared by Tamesis Partners LLP See final two pages for important disclosures
21
Resource confidence
Bibra’s resource is classified as 92% of ounces sitting within the Indicated category, which demonstrates the simply geology and
robust nature of Capricorn’s in-fill drilling. In terms of total M&I resources as a percentage of total resource, Bibra has the highest
percentage of all current Western Australian development projects in our database.
Figure 29 - ASX WA gold peer projects – % of resource classified as Measured and Indicated
Developers in gold. Source: Tamesis, company reports
Reserves
Bibra’s 713koz maiden reserve stacks up well against peers.
Figure 30 - ASX WA gold peer projects – Total Reserves, Moz contained gold
Development projects in gold. Source: Tamesis, company reports
Bib
ra
Leonora
LG
P
Gru
yere
Fort
num
Mount
Bundy
Mount
Morg
ans
Dalg
ara
nga
Indee
Davyhurs
t
Turn
er
Riv
er +
Indee
Juliu
s (p
hase
1)
Turn
er
Riv
er
Gle
nburg
h
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
M&
I R
eso
urc
e a
s a %
of Tota
l Reso
urc
e
Uly
sses
West
Pauls
ens
Juliu
s (p
hase
1)
Baneygo
Andy W
ell
Nulla
gin
e
Cra
cow
Moola
rt w
ell
Glo
ster G
old
Deflect
or
Fort
num
South
Kalg
oorlie
Hig
gin
sville
Edna M
ay
Dalg
ara
nga
Matild
a (
Phase
1)
Mungari
Mt
Carlto
n
Bib
ra
Jundee
Gard
en W
ell
Mt
Raw
don
Kalg
oorlie
Ops
Mount
Morg
ans
Ravensw
ood
Gw
alia
Centr
al M
urc
his
on
McP
hillam
ys
Cow
al
Gru
yere
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
P+
P R
ese
rves
(Moz
Au)
Prepared by Tamesis Partners LLP See final two pages for important disclosures
22
Bibra will be a low strip ratio mine
Due the geometry of the Bibra orebody whereby the pit slope essentially follows the dip of the main footwall lode, the strip ratio is
low in relative terms, being 4.7 over the LOM, but a very low 2.9 during mining of the Stage 1 pit. This has important implications
for Bibra’s economics during the initial years of paying back project capital.
Figure 31 - ASX WA gold peer projects – strip ratio
Developers in gold. Source: Tamesis
Set against a selection of global gold development projects and recent start-ups, Bibra’s low strip ratio stands out.
Figure 32 - Global gold development peer projects – strip ratio
Source: Tamesis
Ravensw
ood
Mount
Bundy
Gru
yere
Bib
ra S
tag
e 1
pit
Glo
ster G
old
Moola
rt w
ell
Nulla
gin
e
McP
hillam
ys
Teal
Bib
ra (
LO
M)
Leonora
LG
P
Juliu
s (p
hase
1)
Gard
en W
ell
Baneygo
Dalg
ara
nga
Mount
Morg
ans
Gle
nburg
h
Rose
mont
Matild
a (
Phase
1)
Uly
sses
West
Andy W
ell
0
2
4
6
8
10
12
14
16
LOM
str
ip r
atio
25
BibraLOM
strip 4.7
BibraStage 1 pit
strip 2.9
Casp
iche (oxi
de)
Bom
bore
Rav
ensw
ood
Maricu
nga
Mount
Bundy
Am
uls
ar
Dugbe
Gru
yere
Bib
ra
Sta
ge
1 p
it
Cert
ej
Glo
ster
Gold
Banfo
ra
Moola
rt w
ell
Karm
a
Rain
y R
iver
Nulla
gin
e
Sham
besa
i
Volte G
rande
Teal
Fekola
Bib
ra
(L
OM
)
Leonora
LG
P
Juliu
s (p
hase
1)
Runru
no
Nkra
n
Donlin
Gold
Wa
Coff
ee
Gard
en W
ell
Baney
go
Yaoure
Manic
a
Auro
ra
Dalg
ara
nga
Haile
Mount
Morg
ans
Gle
nburg
h
Baom
ahun
Chaara
t
Rose
mont
Matild
a (P
hase
1)
La I
ndia
Nato
ugou
New
Lib
ert
y
Uly
sses
West
Andy
Well
0
2
4
6
8
10
12
14
16
LOM
str
ip r
atio
25 25
Prepared by Tamesis Partners LLP See final two pages for important disclosures
23
Opex
We model Bibra’s AISC at A$1,030/oz (C1 cash costs A$900/oz), which places the project towards the lower end of WA peer
development projects and operating mines.
Figure 33 - ASX WA gold peer projects – AISC (A$/oz)
Developers in gold. Source: Tamesis
Capital Intensity vs AISC Margin
Taking a slightly different approach to capture both the capital construction costs of development projects and the projected AISC
margin (at A$1,750/oz and assuming LOM average AISC), we demonstrate that Bibra has a significant advantage over the majority
of other Western Australian development projects.
Figure 34 - ASX WA gold peer projects – Capital intensity vs. AISC margin
Source: Tamesis
Mt
Carlto
n
Deflect
or
Dalg
ara
nga
Gru
yere
Cow
al
Moola
rt w
ell
Gle
nburg
h
McP
hillam
ys
Kalg
oorlie
Ops
Mungari
Bib
ra
Mount
Morg
ans
Gard
en W
ell
Mt
Raw
don
Jundee
Mount
Bundy
Glo
ster G
old
Matild
a (
Phase
1)
Gw
alia
Cra
cow
Ravensw
ood
Leonora
LG
P
Juliu
s (p
hase
1)
Nulla
gin
e
Centr
al M
urc
his
on
Edna M
ay
Andy W
ell
Fort
num
Hig
gin
sville
South
Kalg
oorlie
Pauls
ens
500
600
700
800
900
1,000
1,100
1,200
AIS
C (A
$/o
z)
Matilda (Phase 1)
Dalgaranga
Bibra
Gruyere
Mount Morgans
Leonora LGP
Mount Bundy
Nullagine
Glenburgh
Deflector
Julius (phase 1)
400
500
600
700
800
900
1000
50 100 150 200 250 300
AIS
C M
Arg
in (
A$
/o
z)
Capital Intensity ($/oz LOM production)
High A ISC margin
Low C apital intensity
McPhillamy
Prepared by Tamesis Partners LLP See final two pages for important disclosures
24
Capital intensity
Based on our modelled production profile and capex assumption of A$130m, we calculate a capital intensity of A$162/oz, which puts
Bibra in the mid to low position on the curve compared to peer projects. We have benchmarked our development capex assumption
against ASX-peers and global developers, based on throughput, production and plant configuration.
Figure 35 - ASX gold peers - capital intensity A$/annual production
Source: Tamesis
Using a much wider group of global gold development projects and recent start-ups, Bibra stacks up very well, demonstrating the
attractiveness of a low-cost open pit operation in Western Australia.
Figure 36 - Global golds - capital intensity US$/LOM production
Note: Capital intensity in US dollars Source: Tamesis
0
50
100
150
200
250
300
Ca
pit
al i
nte
nsit
y A
$/LO
M p
rod
ucti
on
ASX gold peers - capital intensity A$/LOM production
Fort
num
re-f
urb
Matild
a (
Phase
1)
Kyzy
l
Gro
ss
Ravensw
ood
Manic
a
Volte G
rande
Dugbe
Gard
en W
ell
Curr
aghin
alt
Auro
ra
Hope B
ay
Dalg
ara
nga
Yaoure
Buritica
Yanfo
lila
Esa
ase
Gru
yere
Nkr
an +
Ess
ase
Yara
moko
Tulu
Kapi
Nkr
an
Chaara
t
Coff
ee
Bib
ra
Feko
la
Maricu
nga
Mount
Morg
ans
Leonora
LG
P
Mount
Bundy
Pakr
ut
Nulla
gin
e
Banfo
ra
New
Luik
a
Ench
i
Stu
rec
Karm
a
Phoenix
Gle
nburg
h
La I
ndia
Am
uls
ar
New
Lib
ert
y
Sham
besa
i
Deflect
or
Nato
ugou
Red R
abbit
Cononis
h
Runru
no
Bulla
bulling
Haile
Bom
bore
Angost
ura
Cononis
h
Casp
iche (oxid
e)
Haile
Juliu
s (p
hase
1)
Cert
ej
Donlin
Gold
Bla
ckw
ate
r
Wa
Baom
ahun
Rain
y R
iver
Tim
ok
0
50
100
150
200
250
US$/o
z LO
M P
roduct
ion
Average capital intensity LOM production basis US$160/oz
Bibra US$130/oz
Prepared by Tamesis Partners LLP See final two pages for important disclosures
25
EV/Oz – Capricorn is trading at a considerable discount to peers
On an enterprise value per resource ounce, and reserve ounce, Capricorn appears to be trading at a considerable discount to most
of the other companies in the Australian gold space. Capricorn is currently trading at A$44/oz resources, versus the average of
$69/oz we calculate for comparable development companies. The discount is particularly marked at the EV/Reserve level where
Capricorn is trading at A$68/oz, compared to the average of A$220/oz we calculate for developers.
Whilst, we are not the biggest fan of EV/oz methodology (we view it as a bit of a blunt instrument), it is still useful as a broad-brush
indicator of value, and the value disconnect for CMM shares is striking. We are cognisant that until the DFS is published, Capricorn’s
disclosure of opex and capex is limited. Post-DFS, once metrics are in the market and the project is further de-risked, we anticipate
that this discount will start to unload. Back-calculating EV using peer metrics produces some interesting indicative values:
• If we apply the average A$69/oz EV/oz resource metric for developers to Capricorn, it implies a value CMM’s EV at A$77m
(A$0.135/sh). Applying the producer average of A$125/oz would value CMM’s EV at A$139m (A$0.24/sh).
• Applying the average EV/oz reserve metric we calculate for developers at A$220/oz, would value CMM’s EV at A$157m
(A$0.27/sh). Applying the producer average of A$400/oz would value CMM’s EV at A$285m (A$0.49/sh).
• Using the average EV/oz resource only for Capricorn’s close comparators (DCN, GOR, GCY) at A$85/oz values CMM’s EV at
A$94m (A$0.165) and EV/Reserve at A$238/oz values CMM’s EV at $169m (A$0.29/sh).
Figure 37 - Australian Golds – EV/oz Resource
*Developers in gold, Producers in black Source: Tamesis
Figure 38 - Australian Golds – EV/oz Reserves
*Developers in gold, Producers in black Source: Tamesis
BLK DEG PGO SLR WGX EXGCMM EAR RMS RSG GCY BDR DRM MOY GOR EGS DCN SAR SBM GMD RRL NST EVN
0
50
100
150
200
250
300
EV
/R
eso
urc
es (
A$
/o
z)
Dev eloper A v g. $69/oz
Producer A v g. $125/oz
CMM RSG GOR PGO WGX BDR BLK SLR DRM GCY RMS DCN SBM MOY EVN SAR NST RRL
0
100
200
300
400
500
600
700
800
900
1,000
EV
/R
ese
rve
s (A
$/o
z)
Dev eloper A v g. $220/oz
Producer A v g. $400/oz
Prepared by Tamesis Partners LLP See final two pages for important disclosures
26
Major players in the Australian gold scene are building cash and reducing debt – M&A for growth?
Some of the major Australian based, or Australian gold producers have been building cash and reducing debt over the last couple of
years, which reaffirms that another round of M&A is now achievable. After some challenging years, Australian gold producers have
finally started to capitalise on the shifting macro and operational environment. Depreciation of the Australian dollar against the US
dollar helped drive a divergence between USD and AUD gold prices which started in mid-2013, but gathered pace from 2015 onwards.
Lower input costs as the iron-ore led boom fizzled out also provided opportunities to renegotiate contracts and take advantage of
lower costs for consumables, labour, drilling, oil etc. Combined with a raft of restructuring, Australian producers have been bringing
down AISC with a renewed focus on cost management and sweating assets hard. This naturally has boosted FCF and allowed the
sector to start working down the millstone of debt that hung around the neck of some of the largest producers.
Figure 39 - The senior Australian golds are re-stocking the treasury – cash build and debt reduction
NST=Northern Star, RRL=Regis Resources, SBM=Saint Barbara, RSG=Resolute, WGX=WestGold, OGC=OceanaGold, NCM=Newcrest
Source: Tamesis
Burning a hole?? Our analysis shows that cash balances have improved materially for a selection of the larger Australian gold
companies, and at the same time, sector indebtedness has been reducing. The paucity of quality new development projects, and the
long-lead times from discovery to production, presents a problem for the larger producers. Whilst shareholders are increasingly
demanding dividend growth, resource and production growth is the engine that ultimately drives this. The problem for mid-tier and
senior golds is finding (or acquiring) deposits of sufficient scale to move the needle.
Thus, we believe that companies like Capricorn will increasingly come into play, with a low-risk project, in a low-risk jurisdiction.
Deposits like Bibra, whilst currently only 1.1Moz, provide a useful base-load production, but with the added kicker of highly-
prospective exploration tenements. For a potential acquirer, Capricorn provides a mix of the near-term production growth, plus the
land package to continue greenfields and organic growth.
Also, it is worth pointing out that Capricorn is slightly cash constrained in terms of pure exploration spend, a mid or top tier gold
producer would have a significantly larger budget to step back and revaluate the terrain and unlock the full potential of a new gold
camp at Karlawinda.
We have illustrated the cash-build of some of the Australian gold miners above to illustrate the general return to health of the
industry, but clearly M&A activity will continue to have global scope – Reference Goldfields’ (JSE:GFI) acquisition of 50% of Gold
Road’s Gruyere project in November 2016, a useful move to dilute down perceived South African and underground mine risk. The
Australian portfolio is Goldfield’s largest cash generator. The A$350m deal valuation metrics for Gruyere translated to A$113/oz
resources and A$200/oz reserves.
-350
-250
-150
-50
50
150
250
350
450
FY15 FY16 Now FY15 FY16 Now FY15 FY16 Now FY15 FY16 Now FY15 FY16 Now FY15 FY16 Now
A$m
Debt Cash
Debt
Cash
NST RRL SBM RSG WGX OGC
+168%
+54% +109%
+437%
+1020%+19%
-3,000
-2,500
-2,000
-1,500
-1,000
-500
0
500
FY15 FY16 Now
A$m
Debt Cash
Debt
Cash
NCM +148%
Prepared by Tamesis Partners LLP See final two pages for important disclosures
27
One-gram ore works in Australia – Capricorn is a start-up analogue to Regis Resources
The adage “Grade is king” is true for some deposits, but in Western Australia it is only a component of the mix. Margins and
profitability, are the key metrics and if executed correctly, a c.1g/t operation can be highly lucrative. The leader in producing gold
from this type of deposit is Regis Resources, in our view. Regis (ASX: RRL) is a A$1.7bn gold company operating the Duketon
operations in Western Australia.
Duketon has numerous similarities to Karlawinda – low strip, low cost open pit operations. Note the head-grade averages around
1g/t Au, similar to Capricorn’s 1.1g/t overall resource grade. Recoveries are also similar at around the 90% mark. Clearly, the overall
magnitude of the projects is larger, but Duketon North is a close analogue to the proposed operation at Karlawinda with 3Mt ROM
throughput- this operation had a A$666/oz AISC margin in 2016.
Figure 40 - Regis Resources – 2016 operating metrics for the Duketon operations in WA
Source: Regis Resources
The satellite and organic growth model has been highly successful
The key point which supports our positive outlook on Karlawinda is that the Duketon operations follow the model of a primary deposit
and central process plant, supported by additional production from a number of satellites. Duketon has two operating centres;
Duketon North where deposits such as Moolart Well and Gloster are processed through the Moolart Well processing plant; and
Duketon South where deposits such as Garden Well and Rosemont are processed through the Garden Well processing plant.
With processing infrastructure place, Regis has been able to bring on new satellite deposits at an exceptionally low incremental
capex. For example, the Gloster satellite adds 3-years of mill feed (total of 226koz) at a very low capex of A$7m, equivalent to a
capital intensity of A$31/oz. The results speak for themselves. Regis has paid out A$205m in dividends since dividend payments
started in 2013. In 2016, EBITDA was A$234m and NPAT was A$112m.
Figure 41 - Regis Resources – 2016 operating metrics for the Duketon operations in WA
Source: Regis Resources, Tamesis
Regis Resources 2016 results Duketon North Duketon South Total Duketon
Ore mined Mt 2.98 7.81 10.79
Strip ratio x 3.9 5.4 4.89
Ore mined Mt 2.92 7.34 10.25
Head grade g/t Au 0.9 1.08 1.03
Recovery % 91% 90% 90%
Gold production koz 76 229 305
Cash cost (inc royalty) A$/oz 778 867 845
AISC A$/oz 934 924 927
AISC margin A$/oz 666 676 673
200
300
400
500
600
2014 2015 2016
Revenue (A$m)
0
20
40
60
80
100
120
2014 2015 2016
NPAT (A$m)
0
50
100
150
200
250
2014 2015 2016
EBITDA (A$m)
0
2
4
6
8
10
12
14
2014 2015 2016
Dividends (c/sh)
Prepared by Tamesis Partners LLP See final two pages for important disclosures
28
Western Australia remains a first-class, low-risk jurisdiction
Investors looking at exposure to gold development assets have a wide variety of choice, with gold deposits located all over the globe.
It’s worth pointing out that Karlawinda is located in Western Australia, which has consistently been ranked in the top 5 global
jurisdictions (out of 122), in terms of investment attractiveness, by the Fraser Institute.
The ranking is based on a variety of detailed rankings with the overall Investment Attractiveness Index constructed by combining
the Best Practices Mineral Potential index, which rates regions based on their geological attractiveness, and the Policy Perception
Index, a composite index that measures the effects of government policy on attitudes toward exploration investment.
Figure 42 - Fraser Institute – Investment attractiveness rankings 2016
Source: Fraser Institute, Tamesis
0 10 20 30 40 50 60 70 80 90 100
Jujuy
Neuquen
Venezuela
Chubut
Afghanistan
La Rioja
Mendoza
India
Zimbabwe
Mozambique
Uruguay
Malaysia
Dominican Republic
Myanmar
Panama
Honduras
Guatemala
Sierra Leone
Kenya
Hungary
Washington
Bolivia
Greece
Mongolia
South Sudan
France
Indonesia
Catamarca
Ecuador
Bulgaria
South Africa
Kazakhstan
Santa Cruz
Nicaragua
Uganda
Romania
Ethiopia
New Zealand
Philippines
Colombia
Tanzania
Turkey
New South Wales
Brazil
Serbia
Papua New Guinea
San Juan
Victoria
Tasmania
Greenland
China
Namibia
Nova Scotia
French Guiana
Mexico
California
Burkina Faso
Alberta
Colorado
Guyana
Russia
Salta
Mali
Fiji
New Brunswick
Chile
Spain
Norway
Portugal
Montana
Poland
Eritrea
Northern Ireland
Nunavut
Zambia
Democratic Republic of Congo
Peru
British Columbia
Minnesota
Michigan
New Mexico
Wyoming
Ghana
Northwest Territories
Northern Territory
Botswana
Ontario
Ivory Coast
Newfoundland & Labrador
Yukon
Alaska
South Australia
Idaho
Utah
Queensland
Ireland, Republic of
Sweden
Arizona
Quebec
Finland
Nevada
Western Australia
Manitoba
Saskatchewan
Investment attractiveness (%)
Increasing investment
attractiveness
Prepared by Tamesis Partners LLP See final two pages for important disclosures
29
One of the marks of a top tier investment destination is stability and consistency of the ranking. Western Australia has placed in the
top 5 of the rankings every year over the last several years. We believe that Western Australia will maintain its high rank, as the
state continues to increase regulatory transparency, and streamline and accelerate its resource licence application timelines. The
state also provides financial incentives for greenfields exploration, where eligible companies can claim back a percentage (c.50%) of
direct drilling costs.
Figure 43 - Fraser Institute – Investment attractiveness rankings – last 5 yeas
Source: Fraser Institute, Tamesis
Western Australia takes the top spot in the Australia/Oceania region in terms of overall investment attractiveness. It is also worth
noting that Western Australia is such a high ranked destination due to the combination of the fiscal, legal and policy framework with
the inherent geological prospectivity of the region.
In terms of mineral potential which ranks the jurisdictions based on which region’s geology “encourages exploration investment”,
Western Australia ranks at the very top globally. The index is composite which combines pure geology prospectivity in the context
of best practice, i.e. world class regulatory environment, competitive taxation, minimal political risk or uncertainty, and a fully stable
mining regime. Western Australia is also deemed by the Fraser Institute and other observers to have the best and most accessible
geological database, globally. However, although the current royalty rate for gold is 2.5%, the WA Government has proposed an
increase to 3.75% from 1st January 2018 (effectively an additional A$20/oz in royalty payments). The changes have not been
implemented as yet, and could still be blocked in the Upper House of State Parliament. Corporation tax for miners in WA is 30%.
Figure 44 - Australia/Oceania – Investment attractiveness (LHS), and overall geological potential (RHS)
Source: Fraser Institute, Tamesis
The track record speaks for itself…
Ultimately, the proof is in the pudding. Western Australia accounts for c.70% of Australia’s gold production, producing 6Moz per
annum. Western Australia hosts an impressive number of world-class gold deposits including Tropicana (450-490koz pa), St Ives
(362 koz pa), Telfer (462koz pa), Jundee (216 koz pa), Boddington (800 koz pa) and Kalgoorlie superpit (750koz pa) to name but a
few. Simply, Western Australia hosts some of the largest, lowest cost mines globally.
WA is also host to some of the most significant deposit discoveries in recent years eg. Gruyere (Gold Road Resources), Tropicana
East (Beadell Resources discovery), Nova-Bollinger Ni-Cu (IGO) amongst others.
…which stems from the inherent prospectivity of the region’s geological terrain
The geology of WA spans the entire spectrum of the geological timescale, with the tectonic setting producing ideal conditions for the
formation of word-class orebodies. WA contains two (Yilgarn and Pilbara) of the three largest Archean cratonic shields in Australia,
forming a highly prospective granite-greenstone terrane. The extensive superficial cover means that further discoveries are likely, in
our view.
2012 2013 2014 2015 2016
1 Yukon Western Australia Finland Western Australia Saskatchewan
2 Finland Nevada Saskatchewan Saskatchewan Manitoba
3 Nevada Newfoundland Nevada Nevada Western Australia
4 Sweden Finland Manitoba Ireland Nevada
5 Western Australia Alaska Western Australia Finland Finland
0 20 40 60 80 100
Malaysia
Indonesia
New Zealand
Philippines
New South Wales
Papua New Guinea
Victoria
Tasmania
Fiji
Northern Territory
South Australia
Queensland
Western Australia
Investment attractiveness (%)
Increasing investment
attractiveness
75.0 77.5 80.0 82.5 85.0 87.5 90.0
Philippines
Ivory Coast
Nevada
Democratic Republic of Congo (DRC)
Arizona
Quebec
Queensland
Saskatchewan
Manitoba
Western Australia
Mineral Potential Index (%)
Increasing mineral potential
Geology
encourages investment
Prepared by Tamesis Partners LLP See final two pages for important disclosures
30
Karlawinda Overview
Location – close to infrastructure and gas pipeline.
The Karlawinda gold project is located in the Pilbara, Western Australia. The nearest major population centre is the town of Newman
located 60km to the north west. Karlawinda is advantageously located close to regional infrastructure, notably the Great Northern
Highway which links south to Perth, and north to Port Hedland. The tenements are also proximal to the Goldfields Gas Pipeline, a
1,380km natural gas transmission pipeline, which transports gas from the Carnarvon Basin in NW Western Australia to the Kalgoorlie
and goldfields region. The pipeline also feeds the Newman 186MW gas-fired power station which supplies the Roy Hill mine amongst
others, 120km north of Newman. Bibra is the main deposit of interest, within the wider Karlawinda tenement project.
Figure 45 - Location of Bibra, the main deposit within the Karlawinda tenement
Source: Capricorn
Prepared by Tamesis Partners LLP See final two pages for important disclosures
31
Infrastructure: Minimal, but no impediment to development
Essentially, there is not much in the way of existing infrastructure at the Karlawinda site, it’s virgin territory, which is a positive aspect
in that the near-surface gold resource has not been mined by historical or artisanal groups. Site infrastructure is limited to exploration
tracks, a water bore and sample storage yard.
Roads. No access by sealed road as yet, however, the project could be connected relatively quickly and easily to the excellent
regional infrastructure. The town of Newman is only 55km to the north-west and is more than capable of supporting local mining
operations, given the extensive iron ore mining activity in the region. As part of the DFS, Capricorn will investigate establishing an
improved, all-weather access road to Newman from the Bibra site by upgrading existing tracks.
Camp. Capricorn envisage that when Bibra is developed, the workforce could be accommodated in a relocated second-hand camp,
of which there are many such camps available for purchase in Western Australia.
Water. It is intended that process water will be sourced from local ground water close to Bibra. Capricorn has made good progress
in this regard and a groundwater source with significant flows of low salinity, sub-potable water has been identified from drilling to
the west and south, within 8km of Bibra. The presence of a major groundwater source will ultimately reduce project capex, with less
emphasis on water recovery in the circuit.
Tailings. A tailings dam will be required to contain waste materials from the process plant. Capricorn has identified potential sites
and expects the capacity of any dam to be enhanced given the evaporation/rainfall ratio for the Newman area.
Power. The total peak site requirement is c.13MW. Power will be generated either on site using diesel or gas (LNG or reticulated
from the GGT). Alternatively, power could be transmitted from the Newman power station which has spare capacity but will require
the construction of a 63km powerline.
Licences and Permitting – Mining Lease granted, Native Title addressed
The Karlawinda project is comprised of seven granted exploration tenements, four exploration tenement applications and a granted
mining lease covering a total area of c. 290km2 along the southern margin of the Sylvania Dome.
Native title: A Land Access Agreement has been executed with the only Native Title claimant (Nyiyaparli People) over the deposit,
which addresses compensation, heritage and environment protocols, and allows the issue of a Mining Lease. Agreement with the
Nyiyaparli people was reached within 6 months and Capricorn had agreed to involve Nyiyaparli people in both cultural heritage and
environmental surveys and studies, and provide access to contracting opportunities.
Mining Lease: Subsequent to the Land Access Agreement, Capricorn was granted the Mining Lease, M52/1070 in November 2016,
which is shown in green in the above map. The Mining Lease is valid for 21 years, and may be renewed for further terms. The holder
of a mining lease is entitled to carry out all activities necessary in order to carry out mining operations. Thus, the grant of the licence
represents a key de-risking milestone for the project.
Next Development Steps: DFS imminent
Now that the maiden reserve statement has been completed, the Karlawinda DFS is scheduled to be released shortly. The main work
stream is focusing on activities to support the DFS such as pump-testing of the process water borehole, completion of metallurgical
optimisation and testwork and process engineering design, and completion of the baseline environmental studies.
With the recent drilling now complete at the Portrush and Easky Prospects, exploration work has now been scaled back to focus
efforts on the completion of the DFS.
By the end of 2017, Capricorn expects to be in a position to appoint its preferred contractor for the EPC contract to build the project.
In early 2018, the company plans to start finalising the debt and equity funding components. With a 12-month construction period,
this would translate to first gold in March/April 2019 contingent on the completion of DFS milestones and funding.
Prepared by Tamesis Partners LLP See final two pages for important disclosures
32
Exploration and ownership history
Gold mineralisation was originally discovered in the area in 2005, by WMC Resources, with the discovery of the Francopan prospect,
which is located 5km south east of the latter Bibra discovery. The project was then acquired in 2008 by Independence Group
(ASX:IGO), a leading mid-tier miner, largely on the strength of the Francopan deposit.
Figure 46 - Exploration / Ownership history
Source: Tamesis estimates, Capricorn, IGO
Broad mineralised envelop combined with discrete high-grade zones were discovered in early exploration
In 2009, IGO made the Bibra discovery as part of an exploration strategy to define potential shallow extensions to the Francopan
mineralised system and repeats to the north, where Archean bedrock is not obscured by cover. Aircore drilling identified large east-
west trending zone of supergene mineralisation (1km x 4mm at +100ppb), which was subsequently followed up by RC drilling which
confirmed the primary source to the supergene mineralisation.
Key primary mineralisation discovery intersections included 8m at 1.9g/t Au from 32m, and 38m at 1.5g/t from 38m downhole
including 10m at 2.2g/t Au. This phase of drilling piqued IGO’s interest, due to the discovery of a broad mineralised zone, in
conjunction with discrete higher-grade zones in lithologies similar to that identified at Francopan. Nevertheless, exploration was not
easy as the geometry and continuity of mineralised zones was initially complicated by a series of late cross-cutting faults.
The work by IGO set Karlawinda on the development path.
After initially defining a 219koz supergene resource in 2011, IGO completed a scoping study on Karlawinda in 2012 which rolled in
an updated inferred resource of 674koz. The scoping study included a trade-off study between CIL and heap leach, from a 2-3Mtpa
operation. However, during the 2014 financial year, IGO made the decision to cease work on Karlawinda taking a A$17m write-down
in exploration and feasibility costs as the project was “unlikely to meet its size and economic thresholds for development”
We think this decision should be viewed in the context of IGO having bigger fish to fry at the time, including the commissioning and
ramp-up of Tropicana and feasibility work on the Stockman project in Victoria. Indeed, by the time of sale in 2015/2016 IGO had
rationalised exploration expenditure, cutting back on regional and greenfields exploration to focus capital allocation on the
development of the Nova deposit (Sirius acquisition announced May 2015) and IGO’s contribution to de-bottlenecking Tropicana.
By late 2015, Greenmount was contracted to acquire Karlawinda, while Malagasy announced the acquisition of Greenmount in October
2015. The acquisition of Karlawinda was completed by Capricorn in August 2016. By the time the project was acquired from IGO,
approximately A$12m had already been spent on resource evaluation work which include RC and diamond drilling and pre-feasibility
work.
It is worth noting that the pre-feasibility activities undertaken by IGO included a wealth of metallurgical test work, conceptual mine
design, process plant design, plus the initiation of the baseline environmental studies. In addition, the project area had been the
subject of a number of heritage surveys, with several agreements in place. The amount of work previously undertaken is one of the
key factors that should allow Capricorn to fast-track project development.
Prepared by Tamesis Partners LLP See final two pages for important disclosures
33
Geology and mineralisation
Geologically, the key element to understand is that Karlawinda is located in what was at the time of discovery in 2009, a previously
unrecognised Archean greenstone belt, occurring under a thin transported cover. The tenements cover a large area of the southern
margin of the Sylvania Dome, an Archean-aged outlier on the margin of the Pilbara Craton. The southern portion of the tenement
area is covered by Neo-Proterozoic aged sediments of the Bangemall Basin.
The mineralisation is typical of an orogenic, shear zone style, with wide zones of alteration and mineralisation associated with multiple
low-angle shear sets within a more competent mafic host rock. Mineralisation is associated with biotite-albite-pyrite-potassium
feldspar-calcite alteration and quartz veining. Visible gold mineralisation occurs in both the quartz veins and veinlets, and the biotite
altered host rock.
Figure 47 - Karlawinda – geological setting
Source: Capricorn
Supergene and primary mineralisation
At Bibra, the resource is hosted within a package of deformed meta-sediments that has developed on at least two parallel, shallow
dipping structures. The Bibra orebody dips shallowly at 30° to the north west. Primary gold mineralisation is stratabound with
lineations identified as controlling higher-grade shoots. The deposit is oxidized to average depths of 50-70m. This is significant as in
addition to the primary mineralisation, shallow supergene, laterite and saprolite zones have been identified, and which host some of
the highest grades at Bibra, particularly within the near-surface laterite zone within 20m of the surface. The laterite grades 1.4g/t
on average, above the global resource grade of 1.1g/t Au.
The presence of the shallow supergene mineralisation zone is clearly beneficial for the project economics, being easily amenable to
low-cost extraction early on in the mine life. Of the total 1.1Moz resource, 27% of the ounces are contained within the laterite,
saprolite and transitional domains. Expansion of the supergene zone would have a considerable impact on the project economics.
Figure 48 - Bibra primary gold mineralisation (LHS) and laterite gold mineralisation (RHS)
Source: Capricorn / IGO
Prepared by Tamesis Partners LLP See final two pages for important disclosures
34
1.1km mineralised strike length and open down-dip
To date, mineralisation at Bibra has been defined over a 1.1km strike length. One of the deposits compelling features is that it is
thick tabular mineralisation is developed over laterally extensive intervals, with a shallow (c. 30°) dipping geometry. This naturally
translates to a low strip ratio. This also means that primary mineralisation is fairly straightforward and predicable which should equate
to easy mining.
Figure 49 - Bibra cross section showing main primary mineralisation lodes and oxide/laterite supergene mineralisation
Source: Capricorn
Multiple stacked lodes with high-grade shoots
Mineralisation is remarkably consistent. The strong stratabound and structural shear-control means that the dip and thickness of the
mineralised zone shows minimal variation. The Bibra shear zones are up to 50m wide and also contain a high-grade component,
typically in the middle or lower portion of the broader lower grade zone. Another key element is the presence of multiple stacked
lodes. This means that Capricorn has been highly successful in expanding the resource by identify and incorporating a parallel lode
at depth which previously sat outside of the previous optimised pit shell. Some of the high-grade zones within the main lode have
returned intercepts of 13m at 3.3g/t, 14m at 3.1g/t and 9m at 3.8g/t Au.
Figure 50 - Bibra – multiple stacked lodes dipping to the north west
Source: Capricorn
Prepared by Tamesis Partners LLP See final two pages for important disclosures
35
The recent confirmation of near-surface mineralisation is what really sets Bibra apart
We view the recent growth and confirmation of near-surface mineralisation at Bibra as a key differentiating factor versus other
development projects. Near-surface mineralisation is hosted in a variety of domains including supergene oxides and saprolites, with
the depth of oxidation typically down to 5-70m. We cover these various domains in the resource section later in this note. However,
it is the laterite domain which is instrumental in boosting Bibra’s economics.
The laterite domain is an extensive near-surface blanket of gold mineralisation that Capricorn has now demonstrated, extends over
at least 1.1km and 500m wide on the eastern margin of the Bibra deposit. The laterite mineralisation occurs at the surface projection
of the underlying shear zones. The laterite mineralisation is typically 1-10m thick and is covered by unconsolidated transported
sediments. The laterite domain has been fully defined on a close spaced 25x25m pattern, and thus confidence in the zone is high.
The laterite mineralisation is so valuation at Bibra because:
• It has a very low strip ratio
• The ore is free digging, i.e. no blasting required so
• It has not been subject to historical mining, 100% of the near-surface resource remains intact
• Typically hosts the highest grades at Bibra (1.4g/t versus the global resource at 1.1g/t)
• The laterite ore shows the highest metallurgical recovery
The laterite mineralisation will contribute to de-risking the initial production phase of the operation, by generating early cash flow
and reducing working capital requirements. There is no pre-strip required at Bibra!
Figure 51 - Grade contours of laterite mineralisation (LHS) and cross section showing grade and continuity of laterite mineralisation
Source: Capricorn
The laterite has a high-grade core
We believe there could be scope for the laterite zone to ultimately deliver more ounces than in the mine plan. We base this on the
fact that a recently, a significant high-grade component has consistently been intersected within the central core of the laterite.
Results reported in February 2017 include:
• 9m at 1.7g/t from 8m including 3m at 4.1g/t
• 7m at 2.7g/t from 8m including 4m at 4.3g/t
• 21m at 1.3g/t from 9m inclosing 5m at 2.9g/t
• 16m at 1.5g/t from 8m including 5m at 3.9g/t
Note the shallow depth that these high-grade intercepts start from. The laterite layer is remarkably consistent.
Prepared by Tamesis Partners LLP See final two pages for important disclosures
36
Francopan
Francopan is located approximately 5km south east of Bibra, with mineralisation covered by the northern margin of the Bangemall
Basin. Francopan at present is defined by broad zones of lower grade mineralisation containing narrow zones of higher grade
mineralisation. Francopan has only been subject to limited broad-spaced drilling beneath the 120m of cover sequences, as the focus
of exploration moved to Bibra, following the discovery by IGO.
Due to the depth of mineralisation compared to Bibra, Francopan is not a major focus at present, but Capricorn may in the future be
targeted to investigate the size of the mineralised system and determine any potential connection to the Bibra deposit. Nevertheless,
Francopan remains open to depth and along strike and of particular interest is that a second mineralised sequence has been identified
including zones of 15m at 3g/t Au, at depth below which prior holes were terminated. We think this opens up the potential for repeats
and a potentially deeper, higher grade, mineralised system.
Mineralisation has been recently postulated to be the down plunge extension of the K3 deposit which is situated to the north east,
which has seen limited drilling. The mineralisation at Francopan is too deep for open pit mining, and there is no indication as yet that
the grade would support an underground mine. However, the deposit has not been fully probed by drilling and if the discrete high-
grade zones within the broader low-grade zones can be expanded then the deposit starts to become more interestingly. Either way,
we view Francopan as one for Capricorn’s back pocket for now.
Figure 52 - Francopan mineralisation, drilling and aeromag (LHS) and cross section (RHS)
Source: Capricorn
Prepared by Tamesis Partners LLP See final two pages for important disclosures
37
Resources – a robust 1.1Moz resource base
In April 2017, Capricorn released an update to the Karlawinda resource, with the total resource now standing at 31Mt at 1.1g/t Au
for 1,114,000 ounces of gold. On the back of a highly successful 2016 in-fill drill programme, an impressive 92% of the resource
was classified into the Indicated category, whereas all previous resource estimates contained only Inferred Resources.
Figure 53 - Bibra JORC open pit resource – April 2017. Cut-off 0.5g/t Au, Gold Price A$1,750/oz
Source: Capricorn
Bibra is extremely well drilled out – the pit shell is based only on indicated resources
The latest resource update reflects a high level of confidence in the resource through a comprehensive in-fill drilling programme.
Although 92% of the resource sits in the indicated category, 100% of this makes up the entire resource within the optimised Bibra
pit shell. The inferred resources are actually new resources that are contained within additional, proximal prospects; Southern Corridor
and Easky prospects.
The indicated classification is based on programme of 25m x 25m and 50m x 25m nominal grid spacing which in our experience is
more than sufficient to provide the required confidence to define an Indicated resource, given the style and geometry of
mineralisation. In total, the resource is based on 880 RC holes (118,153m) and 77 diamond holes (12,330m).
Other key parameters to note: The resource has been constrained by a A$1,750/ounce conceptual optimal pit shell. The mineralisation
has been wireframe modelled using a 0.3g/t Au assay cut-off grade. The resource estimate has been reported above a block grade
of 0.5g/t Au.
Capricorn has delivered impressive resource growth
The April resource update represents a 22% increase over the previously published resource in July 2016. Furthermore, since
acquiring the project, Capricorn has increased the resource by 71% in terms of contained ounces. The grade of the resource during
its various iterations has remained markedly consistent at 1.1g/t Au. The resource growth within the Bibra open pit area, has been
driven by additional, and generally higher-grade, mineralisation at depth and by a number of zones of mineralisation in the hanging
wall of the main mineralised domains, plus more ounces have been added to the near-surface laterite and oxide-upper saprolite
domains.
Figure 54 - Capricorn has a solid track record of generating resource growth at Bibra
Source: Capricorn, Tamesis
Indicated Inferred Total
Tonnes Grade Ounces Tonnes Grade Ounces Tonnes Grade Ounces
Mt g/t Au Moz Mt g/t Au Moz Mt g/t Au Moz
28.9 1.10 1.03 2.4 1.06 0.084 31.3 1.10 1.114
0
200
400
600
800
1,000
1,200
Mar 2011 Aug 2014 July 2016 April 2017
Tota
l Reso
urc
e (ko
z A
u)
Indicated Inferred
71% increase in resource since
C apricorn acquistion.
92% now in Indicated category
1.1g/t
1.1g/t
1.1g/t
1.1g/t
Prepared by Tamesis Partners LLP See final two pages for important disclosures
38
The orebody is not entirely well-behaved however…
Given the confidence in the geological interpretation of Bibra, the drill spacing and demonstrating continuity of mineralisation, it is
at first glance surprising that no Measured Resource has been defined. The reason for this is that the Bibra orebody has been found
to contain nuggety gold particularly in the 100-500μm range. Even using multiple fire-assays (up to 4) and averaging the results to
simulate a larger sample mass, the repeatability of assays has been poor. This is not the case with the sub 75μm size fraction which
shows good repeatability. Thus, the poor assay repeatability stops the resource from being classified as measured, not drill spacing
or other factors. We think the risk is probably to the upside, given the broad zones of well-defined lower grade mineralisation. 5,000m
of grade control drilling is planned for mid-year to further investigate this issue.
The Bibra resource is split into a number of domains, with 808koz or 73% contained within the fresh domain
Figure 55 - Bibra JORC resource by domain
Source: Capricorn
The laterite is an extensive near-surface blanket of mineralisation within the lateritic profile. Mineralisation in the saprolite and
transition domains is variable hosted by clays and weathered rock across the entire Bibra Deposit to a depth of approximately 70m.
The fresh domain mineralisation lies below the Saprolite-Transition Domain, and contains low levels of disseminated pyrite. It
comprises a central high-grade core of consistent mineralisation within a broader zone of lower grade mineralisation with sporadic
high grades.
The impact of the near-surface laterite gold resource is illustrated by the chart below which shows the ounces per vertical metre
(“ovm”). Note the spike between 5-15m from the surface in the laterite zone. The drop in ovm within the upper saprolite zone
between 10m and 20m depth represents the depletion zone, as typically found overlying deposits in these terrains. The remainder
of the resource behaves in a consistent manner down to the base of the resource at 240m.
Figure 56 - Bibra – ounces per vertical metre
Source: Capricorn
Domain Tonnes (Mt) Grade (g/t Au) Ounces (koz)
Laterite 1.5 1.4 67.6
Oxide - upper saprolite 2.3 1.0 73.0
Lower saprolite 3.1 1.0 99.9
Transitional 2.1 1.0 65.3
Fresh 22.3 1.1 808.4
Total 31.3 1.1 1.1
Prepared by Tamesis Partners LLP See final two pages for important disclosures
39
Resource drilling at Karlawinda
Figure 57 - Aerial photo showing extent and spacing of resource drilling
Bibra Resource and optimised pit shells
Source: Capricorn
Prepared by Tamesis Partners LLP See final two pages for important disclosures
40
Reserves
Maiden Reserves – 713koz, supports initial 7-year LOM
In August 2017, Capricorn released its maiden JORC-compliant (2012) reserve statement for Bibra. Ore reserves amount to 21Mt at
1.06g/t Au, containing 713koz. The reserve is contained entirely within the April 2017 open pit constrained resource and is based
entirely on Indicated Resources, using a variable cut-off grade of between 0.40-0.47g/t Au, depending on the ore type. The reserve
supports an initial 7-year LOM at the anticipated 100kozpa production rate.
Figure 58 - Bibra JORC open pit reserves – August 2017. Cut-off 0.40-0.47g/t Au, Gold Price A$1,500/oz
Source: Capricorn
70% conversion from resource to reserves – largely a function of the gold price
The ore reserve estimate represents a 70% conversion rate from the Indicated Resource, which we deem as a good result and in-
line with expectations. A significant proportion of the variance in ounces between the c.1Moz Indicated Resource and the 713koz is
a result of the pit optimisation and selection of gold price (in addition to dilution). The reserves are calculated using a pit constrained
at a gold price of A$1,500/oz, compared to A$1,750/oz used for the April 2017 resource statement. This drives the pit optimisation
and effectively excludes approximately 300koz of material at the base of the pit from the reserve. See cross-section below.
The shallow dip and consistency of the Bibra orebody means that the relationship between gold price and pit economics is
straightforward. The terminal position of the highwall at the western end of the pit is largely determined by gold price. Thus, if the
mine plan is updated in the future, under a period of sustained higher gold price, this would allow a deeper pushback of the highwall,
allowing the 300koz of gold contained in material at the base of the pit to be accessed.
Figure 59 - 300koz at the base of the pit didn’t make it into reserves due to the gold price
Source: Capricorn, Tamesis
Dilution is modest
As part of the modifying, the reserve incorporates mining dilution and recovery factors. The addition of dilution results in only a 11%
reduction in tonnes, a 2% reduction in in-situ grade and a 13% reduction in contained metal. The dilution was modelled based on a
5 x 6.25 x 2.5 SMU (selective mining unit).
Proved Reserves Probable Reserves Total Reserves
Tonnes Grade Ounces Tonnes Grade Ounces Tonnes Grade Ounces
Mt g/t Au Moz Mt g/t Au Moz Mt g/t Au Moz
- - - 21 1.06 0.713 21 1.06 0.713
Prepared by Tamesis Partners LLP See final two pages for important disclosures
41
The mining plan has been fine-tuned, strip ratio decreased
Part of the reason for the delay in releasing the reserve update (August 2017 vs. originally slated for May) was due to Capricorn fine-
tuning the mining plan. This was undertaken to smooth out the strip ratio, which increases over time in the later stage pits, and to
optimise the smaller pit generated by applying the A$1,500/oz gold price.
The pit now has a three-stage design. The stage 1 pit shell contains predominantly laterite and oxide mineralisation has a strip ratio
of 2.9. The strip ratio for stages 2 and 3 is 4.9 and 5.5 respectively. This averages out as a LOM strip ratio of 4.7, an improvement
over the previous estimate of 5.5 over LOM. Oxide and laterites will be treated mainly in the first two years of operation, with a ball
mill required for the treatment of fresh material at the end of year 2.
Figure 60 - Bibra Ore Reserve – detailed staged open pit ore profiles – ounces per stage vs. strip ratio
Source: Capricorn, Tamesis
Other key take-aways from the reserve update
• Metallurgy - The reserve incorporates the improved gold recoveries from the results of improved metallurgical test-work
reported in June 2017 (see processing section later in this note). This includes the increase in gravity recoverable gold and
a coarsening of the grind size which has increased processing throughput to 3.75Mtpa (fresh) from 3.4Mtpa precisely.
• Tailings - New Integrated Waste Landform tailings disposal being contemplated – should lead to a reduction in ongoing
sustaining capital as tailings are encapsulated by mining waste, rather than having separate waste dumps. The smaller
footprint is anticipated to result in a lower sustaining capital cost.
• Power - options being considered are site-based diesel, gas trucked from the Goldfields Gas Pipeline, or grid power which
will require a 63km powerline to Newman.
Pit Stage Tonnes Grade Gold Strip
g/t Au koz w:o
Stage 1a 554,000 0.09 16 5.4
Stage 1b 1,630,000 1.2 63 3.1
Stage 1c 2,892,000 1.05 98 2.4
Stage 2 8,172,000 1.03 271 4.9
Stage 3 7,777,000 1.06 266 5.5
Total 21,025,000 1.06 713 4.7
16
63
98
271 266
1.0
2.0
3.0
4.0
5.0
6.0
0
50
100
150
200
250
300
Stage 1a Stage 1b Stage 1c Stage 2 Stage 3
Str
ip r
ati
o (
x)
Re
se
rve o
un
ces (
ko
z)
Reserve ounces Strip ratio
LOM strip 4.7
Prepared by Tamesis Partners LLP See final two pages for important disclosures
42
Mining – straightforward low strip pit
One of the main attractions of Karlawinda is the simplicity of mining, in our view. The operation will be a simple, single open pit
mining operation, developed in three stages 1(1a, 1b and 1c), 2 and 3, constrained by a A$1,500/oz gold price.
The strip ratio is extremely low compared to other operating mines and global gold development projects. Optimisation work as part
of the reserve estimate indicates a weighted average strip ratio of 2.9 during Stage 1 and 4.7 over the LOM. Stage 1 deals almost
entirely with the exploitation of the laterite and oxide ore.
Truck/shovel, shallow dipping, minimal dilution, a pit with significant optionality
The selected mining method, design and extraction sequence has been chosen to minimise dilution and ore loss, and defer waste
movement. Ore and waste is planned to be blasted on 5m benches, and excavated as 2.5m flitches as part of a simple, drill and
blast, excavator and truck operation. Capricorn assumes that the laterite will largely be free dig, but the overall requirement for
material blasting for the oxide mineralisation is c.40% and 100% in transition and fresh ore. This translates to a low mining cost over
the initial 1-3 years of mine life.
The 28° dip of the orebody means that the ramps can largely be driven along the footwall, minimising dilution. Geotechnical
conditions are excellent with an overall slope angle of 47° on the hangingwall, with the footwall slope of 25° following the natural
dip of the orebody. A final decision on final wall angle will not be decided until at least year 3, once the geotechnical behaviour of
the interim wall is known.
Contractor mining is the current plan, but flexing owner-operator model
The current mining operating costs are based on contractor mining and budgeted quotes for drilling, blasting, loading and haulage.
However, as part of the feasibility study we expect Capricorn to investigate various options to introduce elements of owner-operating
into the mix. To maximise cost effectiveness and the trade-off between capex and opex, we understand this may be a hybrid model
with elements of both contractor and owner operations to secure maximum benefit of prevailing economic climate for equipment or
contract rates.
Furthermore, Capricorn believes there is considerable scale and optionality around equipment size and schedules, which should flow
through to low mining costs.
Figure 61 - Bibra Ore Reserve, oblique view of detailed staged open pit designs
Source: Capricorn
Prepared by Tamesis Partners LLP See final two pages for important disclosures
43
Processing – simple process, high recoveries validate gravity circuit
Capricorn envisages a very simple process flowsheet for Bibra ore, utilising crush, grind, gravity recovery and conventional CIL
processing. The flowsheet incorporates the latest metallurgical testwork (press release 19th June) and has been developed to
Feasibility Study standards. High recoveries of 92.5%% over LOM have been demonstrated in the latest test-work.
Process design summary – proven technology, metallurgical risk is very low
Bibra ore will be processed through a conventional CIL plant. The comminution circuit will utilise a single stage primary jaw crusher
followed by a 6.5MW SAG mill (2.5MW ball mill introduced in year 2-3). After the second year of operations, Capricorn envisages
installing a 2.5MW ball mill. This followed by a conventional gravity circuit (2x 48” Knelson concentrators with gravity leach reactors)
and finally a CIP process. The plant will have maximum throughput of 3Mtpa for primary (fresh) ore and up to 3.75Mtpa for processing
oxides.
Higher production option
If Capricorn is successful in making additions to mine-life, there may be opportunities to add a larger ball mill for fresh ore
comminution. This means that the 2.5MW ball mill that is planned to be incorporated for fresh ore in Year 2, could potentially be a
bigger mill of 3-3.5MW, which would allow for higher production throughput. The downstream components of the plant are already
sized for 3.75Mtpa oxide throughput, which means no further plant upgrades would be required.
Bibra’s metallurgical advantage
Considerable metallurgical testwork has been undertaken on Bibra ore, in particular from RC drill samples from 2010 to 2013, and
more recently, testwork as part of the ongoing DFS, with samples for testwork sourced from diamond and RC drilling completed by
Capricorn in 2016. Bibra ore has several characteristics that make processing extremely simple, with high recoveries:
• Non-refractory. Bibra ore is non-refractory, free-milling and amenable to cyanidation
• Gravity gold. A significant portion of gold is recovered via gravity early in the flow sheet – see below
• Low reagent consumption. Cyanide and reagent consumption is low, especially for the fresh ore. However, Lime
consumption is relatively high for the supergene ore, as expected.
• Coarse grind size. The fresh rock is highly competent, and overall the mineralisation has low to medium abrasion
characteristics. Grind optimisation suggests a grind size of 120um for fresh ore and 150um for oxide ore, which is a relatively
coarse grind size, thus requiring less residence time and energy in the milling phase.
Prepared by Tamesis Partners LLP See final two pages for important disclosures
44
Figure 62 - Karlawinda Process flowsheet – oxide (top) and fresh ore (bottom)
Source: Capricorn
Prepared by Tamesis Partners LLP See final two pages for important disclosures
45
June 2017 testwork confirmed and improved metallurgical performance
On 19th June, Capricorn released the results of metallurgical testwork completed as part of the DFS. The new round of testwork
improved key comminution results across the board. Importantly, the results indicated an increase in the proportion of gold in Bibra
ore that is gravity recoverable, and an overall increase in average LOM recoveries. This should feed through to potentially reduced
capital and processing costs for certain areas within the Karlawinda flowsheet.
Figure 63 - Recent improvements in comminution and metallurgical recovery
Source: Capricorn, Tamesis
Comminution improved across the board
• SMC - a measure of the resistance to breakage of rock particles in a SAG mill. Small improvements for both oxide and fresh
ore.
• BBWI - a measure of the energy required to grind particles to a given size at the finer end of the ball mill grinding spectrum
– an indicator of the hardness of the ore type. Values have reduced for both oxide and fresh ore and significant
improvements have been achieved, without gold recovery losses, at coarser grind sizes.
• UCS - measure of the compressive strength of the rock - provides guidance on ore competency. A reduction from 150Mpa
to 54Mpa observed in recent testwork, which is expected to impact positively on the size of crusher required, throughput
rates and power usage with a commensurate reduction in both capex and opex.
• Abrasion Index - measures the abrasiveness of the ore which impacts on wear rates and equipment selection in the
grinding circuit. The abrasion rates were reduced on both oxide and fresh ore. This will result in in lower expected wear
rates during crushing and grinding.
A significant portion of gold at Bibra is recoverable by gravity
The latest testwork has without doubt demonstrated the benefits of including a gravity gold circuit. Gravity recoverable gold is
estimated to range between <10% for laterite, 25% for oxide and 45% for transition and fresh ore at a P80 grind size. This is vast
improvement over 1.) the original 2012 testwork which didn’t even include a gravity circuit and 2.) the scoping study which indicated
24% gravity recovery from fresh ore as a result a greater effort in recovering fine gold through Knelson concentrators.
The improvement in gravity recovery, particularly in the fresh ore (representing 72% of total resource) is an excellent result for
Capricorn. The high recovery of gravity gold is important because it leads to overall greater recoveries, with a lower residual gold in
the tailings.
The presence of coarse gold creates slower cyanide leaching rates, but the application of gravity gold extraction prior to cyanide
leaching actually results in vastly improved leach kinetics. The result of this is that leaching residence time is reduced from 48hours
to 28-32hours, with increased recovery and reduced reagent/consumable use (e.g. Cyanide, lime), and of course a lower requirement
for leaching tankage, reducing capex.
Test Ore Scoping DFS DSMC Test Oxide 87 89 2.30% Improved ✓
SAG Mill Comminution Test Fresh 28 30 7.14% Improved ✓
BBWI Oxide 16.7 kWh/t 13.0 kWh/t -22.16% Improved ✓
Bond Ball Mill Work Index Fresh 15.8 kWh/t 14.5 kWh/t -8.23% Improved ✓
UCS
Unconfined Compressive Strength Fresh 150 Mpa 54 Mpa -64.00% Improved ✓
Abraision Index Oxide 0.08 g 0.07 g -12.50% Improved ✓
Fresh 0.25 g 0.23 g -8.00% Improved ✓
Gravity Recovery Oxide - 25%
Fresh 24% 45% 87.50% Improved ✓
Overall average Recovery All ores 90.4% 92.6% 2.43% Improved ✓
Throughput Oxide 3.40 Mtpa 3.75 Mtpa 10.29% Improved ✓
Primary 3.00 Mtpa 3.00 Mtpa - No change
Prepared by Tamesis Partners LLP See final two pages for important disclosures
46
Overall recoveries have increased to 92.6%
The overall recovery has also increased. This represents the combination of the gravity recovery and recovery from cyanide leaching
in the CIL circuit. The estimated plant gold recovery ranges from 91.8% to 94.1%, depending on ore type. The overall average LOM
recovery has increased to 92.6% in the DFS, from 90.4% in the scoping study.
The overall recovery has not been sacrificed, notwithstanding a significantly coarser grind size for laterite, oxide and transitional
material (150 microns versus 125 microns in scoping studies). Further optimisation work on the crushing and grinding requirements
of the project is underway.
Environmental – a relatively benign landscape
The environmental landscape around Karlawinda and the Bibra project is relatively benign. The landscape is fairly flat and typified
by colluvial soils, spinifex grass and acacia/mulga scrub. A level 1 flora, vegetation and fauna study initiated in 2010 found no species
of particular concern for the project, and Level 2 survey undertaken in May 2016 recorded no Threatened or Declared Rare Flora.
None of the vegetation types recorded are considered to represent a State or Federal Threatened Ecological Community or Priority
Ecological Community.
Importantly, recent studies as part of the DFS have found no evidence of stygofauna or troglofauna. Subterranean species have
now been ruled out from being present in both the open pit and borefield areas. A second seasonal survey for Terrestrial Invertebrates
was scheduled for the June quarter, which will complete the remaining environmental survey items as part of the environmental
permitting process.
A note on the Scoping Study – July 2016
Capricorn issued a press release on 29th July 2016 stating that a scoping study had been completed and a full DFS was underway.
At the time, the Karlawinda resource was entirely categorised as Inferred Resources, insufficient to report a production target, and
ASX disclosure rules prevented the company from reporting the scoping study outputs in full. Thus, no indication of capex, opex or
production was given, except reporting that process design was investigating a 2.5-3Mtpa plant.
Prepared by Tamesis Partners LLP See final two pages for important disclosures
47
Expansion opportunities – large scale system ready for growth
Capricorn mobilised several drill rigs to Karlawinda for the 2017 drill programme. Whilst a portion of this drilling is focused on shallow
mineralisation within the pit shell, a large component focused on investigating and consolidating several prospects and targets outside
of the current resource envelope. Previous wide-spaced drilling has demonstrated that the Bibra system remains open, with significant
untested potential, particularly to the south.
We believe that there is excellent potential to expand the current resource, with the recent drilling likely to be reflected in any future
resource update. Capricorn is working on a number of key target zones all within 1-2km from the current Bibra resource. The
prospects to note include: Portrush Prospect, Easky Prospect and the Southern Corridor Prospect, a number of parallel trends
immediately west of the Bibra pit. See figure below. Portrush and Easky are the most important near-mine prospects.
Exploration has been scaled down whilst the team focus on delivery of the DFS, but this will be revisited once management time and
resources are less encumbered by the feasibility work stream.
Figure 64 - Near-mine expansion opportunities - Portrush Trend (LHS), Bibra Gold System (RHS)
Source: Capricorn
Acquisition of new magnetic data will help probe regional potential
Given the demonstrated magnetic association of the gold mineralisation at Bibra, Capricorn has acquired a new high-quality airborne
magnetic data set. The survey was flown in June 2017 and covered the Bibra Gold System and surrounding areas over a total area
of approximately 20km x 12km on a flight line spacing of 50m.
Understanding of the geological controls on Bibra is improving
Good progress has been made in 2017 in understanding the controls and the structures that host mineralisation. Capricorn now
believes that it understands the orientation of controlling structures, which should make it easier to predict and trace mineralisation
between different areas. Once the DFS is out of the way, the regional potential could really be put into play.
Prepared by Tamesis Partners LLP See final two pages for important disclosures
48
The Easky Prospect – shaping up to be a potential satellite, mineralisation remains open
New RC drilling in 2016 and 2017 indicate that Easky is shaping up to become a potential satellite deposit. Easky is situated a mere
500m west of Bibra, i.e. well within trucking distance and 800m south of Portrush. The recent drilling delineated a zone of strong,
continuous shallow-dipping mineralisation with up to 200m down-dip extent, over an area of 500m x 500m.
As a firm indication of the extent of the Karlawinda mineralising system, the mineralisation at Easky is identical to that at Bibra with
the same style and similar grades. Easky mineralisation appears as shallow, west-dipping lodes, hosted by weathered meta-
sediments, with evidence of supergene enrichment at the base of oxidation. The mineralisation intersected in recent drilling is present
in multiple stacked zones with strong high-grade shoot control.
The current drilling at Easky remains relatively wide-spaced and the mineralisation remains open to the east. There is also an
opportunity to expand the high-grade shoots within the broader mineralised system.
December 2016 drilling – key intercepts 2017 drilling – key intercepts • 8m at 1.4g/t Au from 51m
• 8m at 2.1g/t Au from 93m
Pre-2016 intercepts • 16m at 1.7g/t Au from 28m
• 8m at 2.6g/t Au from 50m
• 20m at 1/0g/t Au from 36m
• 12m at 1.4g/t Au from 69m
• 8m at 3.74g/t from 83m
• 22m at 1.35g/t from 52m
• 21m at 1g/t Au from 36m
• 5m at 3.39g/t from 73m.
Easky is potentially shaping up to be a very interesting prospect for Capricorn, with the recent work raising the possibly of a near-
mine, shallow source of mineralisation. Zones or ore grade mineralisation have already been identified, and if Capricorn can expand
on this it would provide additional feed for the proposed Karlawinda processing plant – either to extend mine-life, or more likely to
add/replace additional high-grade ore into the mill. Given that the mineralisation is of the same style and with the same host-rocks
so close to Bibra, we would expect the ore to have similar metallurgical characteristics and blend seamlessly into the ROM mill feed.
Figure 65 - Cross section through the Easky prospect (recent drilling black text, pre-resource drilling blue text)
Source: Capricorn
Prepared by Tamesis Partners LLP See final two pages for important disclosures
49
Portrush Discovery
First-pass RC drilling results from the Portrush prospect were reported in September 2016, confirming the prospect as a potential
source of shallow mineralisation situated in the immediate hangingwall of the Bibra deposit, partially within the existing proposed
Bibra pit design. The mineralisation at Portrush is near-surface (within 150m), in the HW, immediately west of the Bibra open pit.
Capricorn considers that due to the flat-lying, stacked geometry, the mineralisation is considered highly favourable for inclusion into
the Bibra resource as part of an expanded pit shell. Key results from drilling include:
2016 drilling – key intercepts 2017 drilling – key intercepts • 11m at 1.00g/t Au from 57m
• 7m at 1.40g/t Au from 71m
• 8m at 1.15g/t Au from 28m
• 17m at 1.00g/t Au from 67m
• 12m @ 1.02g/t Au from 94m
• 14m at 2.06g/t Au from 2m • 10m at 1.41g/t Au from 56m • 28m at 1.47g/t Au from 65m • 25m at 2.28g/t Au from 77m • 16m at 1.43g/t Au from 73m
• 25m at 1.01g/t Au from 60m The mineralisation at Portrush remains open in the down-dip direction to the west and is interpreted to be structurally controlled
along a major mineralised fault (Portrush Zone) that has been interpreted to extend over a strike length of at least 2.5km.
If further drilling results stand up to scrutiny, we believe the prospect could have important implications for the future development
of Bibra, given the location within the hangingwall package, which may influence an expanded open pit or further push back. The
recent drilling targeted a broad shoot of oxide mineralisation located on the western margin of the Bibra Deposit. Capricorn says that
the recent drill results “suggest an improvement in widths and grade of the shoot at Portrush with depth and have the potential to
result in an expanded optimised pit design is this area”.
Figure 66 - Portrush Prospect, section 200175mN, recent drilling (black text) pre-Resource drilling (blue text).
Source: Capricorn
Prepared by Tamesis Partners LLP See final two pages for important disclosures
50
Southern Corridor – untested large-scale potential could add considerable ounces
In October 2016, Capricorn announced a new discovery at what was named the Southern Corridor Prospect, located within 500m to
the south of the main Bibra resource. Results from two initial RC holes drilled into the prospect returned a new zone of mineralisation
which Capricorn has interpreted to represent the southern extension of Bibra.
The Southern Corridor prospect extends over a 700m strike length which has to date, remained untested. The drill holes intersected
a broad zone of anomalous mineralisation over a width of 100m (100m at 0.47g/t Au), with higher grade mineralisation hosted in
discrete shear zones as at Bibra. The first two drill holes returned intercepts of:
• 12m at 1.37g/t Au from 117m
• 8m at 1.42g/t Au from 80m
In our view, the Southern Corridor prospect is of interest, foremost because of the proximity to Bibra, but also because the true
potential of this extension has not been tested. Drill spacing is currently very wide, with intersections approximately 140m apart, the
mineralisation extends to within 20m of the surface, and mineralisation remains open.
The potential scale of the deposit remains untested, as evidenced by previous drilling which intersected a series of stacked, flat-lying
gold lodes and returned significant grades at a location 700m to the south of the above-mentioned drilling. These intersections
included below, suggest that based on Capricorn’s current geological interpretation, that this mineralisation is part of the same
Southern Corridor, and likely to be contiguous.
• 9m at 2.5g/t Au from 114m
• 9m at 1.0g/t Au from 194m
• 4m at 2.6g/t Au from 166m
Figure 67 - Southern Corridor; drilling plan view (LHS), and cross section 199900mN (RHS)
Source: Capricorn
Bundoran Prospect could be a Bibra analogue
Capricorn’s August 2017 drilling press release revealed a new high-priority exploration target called Bundoran located 3km east of
Bibra. An induced polarization (IP) feature has been modelled in close association with a large discordant magnetic anomaly. Wide-
spaced reconnaissance drilling in proximity to the new target area has previously returned several significant gold values.
Capricorn is particularly interested in Bundoran because gold mineralisation at Bibra shows a strong association with of both magnetic
and IP anomalies. The recently acquired detailed airborne magnetic data will be used to refine the existing target model ahead of
drill testing.
Prepared by Tamesis Partners LLP See final two pages for important disclosures
51
Appendix 1: Shareholders
Capricorn has solid backing, with a number of high-quality investors on the register. Notably Hawke’s Point with a 14.93% holding
and Centrepeak Resources Group with a 12.97% holding.
Figure 68 - Top 10 shareholders
Source: Capricorn
Centrepeak Resources Group
CRG founded Greenmount Resources, specifically to purchase the Karlawinda project, prior to its acquisition by Capricorn. CRG is a
private resource investment company run by a highly-experienced team of geoscientists and resource professionals. Capricorn’s
Executive Chairman, Heath Hellewell is Principal of Centrepeak Resources Group. The Centrepeak team collectively, has experience
spanning over 80 years from start-ups to large multi-nationals. CRG also holds a 6.4% interest in Trek Metals Limited (ASX: TKM).
Trek is farming into the Kroussou Zinc-Lead Project in Gabon.
Hawke’s Point - Capricorn passes through private equity due diligence
We view the new presence of Hawke’s Point on CMM’s register as a vote of confidence in the Karlawinda project. The Capricorn
investment would have gone through an extensive technical due diligence process. The Hawke’s Point team draws on investment
experience gained at major institutions such as Polygon and Och Ziff.
Recent financings
Capricorn’s recent financings are detailed below. We note that the company has shown restraint with equity financing, with proceeds
from share issues being highly focused towards moving Karlawinda along the development curve. The most recent financing in
February is particularly noteworthy with a A$10m cornerstone investment by Hawke’s Point Limited.
Figure 69 - Summary of recent financings
Source: Capricorn, Tamesis
Organisation / Individual No. of shares % of total
HAWKE'S POINT HOLDINGS I LIMITED 85,470,085 14.93%
CENTREPEAK RESOURCES GROUP PTY LTD 74,221,378 12.97%
ACORN CAPITAL LIMITED 34,704,712 6.06%
NEDLANDS NOMINEES PTY LTD 28,536,277 4.99%
MERRILL LYNCH (Aus) NOMINEES 23,000,000 4.02%
RUNNING WATER LTD & ASSOCIATES 19,444,276 3.40%
ELLENBROOK INVESTMENTS PTY LTD 17,671,673 3.09%
HARMANIS HOLDINGS PTY LTD 17,451,616 3.05%
RESOURCE DISCOVERY PTY LTD 14,135,222 2.47%
JULES LECLEZIO 11,700,000 2.04%
Others: 246,044,219 42.99%
Total share in issue 572,379,458 100.00%
Date Financing size (A$m) Price Shares (m)
Feb-17 $10m 11.7c/sh 85.5
Inc. 1-for-3 options (28.5m options, 4-yr term, exercise price 15c/sh)
Apr-16 $12.6m 13c/sh 97.2
Dec-15 $1.5m 3.3c/sh 45.5
Prepared by Tamesis Partners LLP See final two pages for important disclosures
52
Appendix 2: Board and Management – An experienced team of mine developers
Capricorn has assembled a high-quality board and senior management team, in our view. The director and management biographies
demonstrate that each member of the team brings a wealth of skills and direct experience of the Australian gold mining sector. In
particular, the team has a solid track record of discovery, followed by the successful development of numerous mining projects
globally and within the Australia. Members of the Capricorn team have gained experience with some of the largest and most successful
Australian mining companies such as Independence Group (Tropicana) and Evolution Mining (Mt Carlton). The team’s track record
and experience in constructing and commissioning mines into production gives us confidence that Capricorn will press ahead with
the fast-track development of Karlawinda.
Board of Directors
Mr Heath Hellewell - Executive Chairman
Mr Hellewell is an exploration geologist with over 22 years’ experience in gold, base metals and diamond exploration predominantly
in Australia and West Africa. Mr Hellewell graduated from Curtin University with an Honours Degree in Geology and is a member of
the Australian Institute of Geoscientists. Mr Hellewell has previously held senior exploration positions with several successful groups
including DeBeers Australia Pty Ltd and Resolute Mining Limited. Mr Hellewell joined Independence Group NL in 2000 prior to the
Company’s IPO and was part of the team that identified and acquired the Tropicana project area, eventually leading to the discovery
of the Tropicana and Havana gold deposits. Most recently he was the co-founding Executive Director of Doray Minerals Limited. In
2014 Heath was the co-winner of the prestigious “Prospector of the Year” award. Mr Hellewell is currently an independent Non-
Executive Director of Core Exploration Ltd (ASX: CXO) and Duketon Mining Limited (ASX:DKM).
Mr Guy LeClezio - Non-Executive Director
Mr LeClezio holds a Bachelor of Arts from the University of Western Australia. He has had 20 years’ experience in the mining industry
and was an Executive Director of Eyres Reed Ltd and Canadian Imperial Bank of Commerce who were leading Western Australian
stockbrokers specialising in the mining industry. Mr LeClezio was a founding director of Madagascar Resources NL and previously a
director of ASX listed Windy Knob Resources Ltd.
Mr Stuart Pether - Non-Executive Director
Stuart Pether has over 25 years’ resources industry experience in project development, technical studies, mine operations and
corporate management. His experience spans open pit and underground mining in a range of commodities including gold, nickel and
lead and zinc. A qualified mining engineer, he holds a Bachelor in Engineer (Mining Engineering) from the Western Australia School
of Mines. Stuart was previously the CEO for Kula Gold, the owner of the advance development project the Woodlark Island Gold
Project in PNG. He held the position of COO at Catalpa Resources where he was responsible for the construction, commissioning and
operation of the A$92 million Edna May Gold Project. Following the merger of Catalpa Resources with Conquest Mining in November
2011, forming Evolution Mining, he took up the position of VP, Project Development where he was responsible for technical studies
and major capital projects, including the construction of the A$140m Mt Carlton Gold Project in Queensland. Stuart is a member of
the Australasian Institute of Mining and Metallurgy and a committee member of the WASM Alumni.
Prepared by Tamesis Partners LLP See final two pages for important disclosures
53
Senior Management
Mr Peter Thompson - Chief Operating Officer B.Sc, M.Sc, MAusIMM
Mr Thompson trained as a geologist in Trinity College Dublin and Leicester University, he came to Australia in 1988 and has had a
continuous career in exploration and mining for gold, nickel and copper. Employed by WMC, Anaconda Nickel, Jubilee Mines, St
Barbara Ltd, Beaconsfield Gold and Central Asia Resources in a range of roles, he has overseen several discoveries, project
developments, feasibility studies, acquisitions, divestments and company start-ups. Recent responsibilities as CEO of Beaconsfield
Resources and Central Asia Resources included operating deep underground gold and heap leach start-up operations. Peter is
currently a non-executive director of Marmota Ltd.
Mr Peter Langworthy Executive General Manager – Geology B.Sc Hons, MAusIMM
Mr Langworthy is a geologist with a career spanning 26 years in mineral exploration and project development in Australia and
Indonesia. He has specific expertise in building successful teams that have been responsible for significant mineral discoveries and
in integrating technically sound exploration and resource development strategies into corporate planning. His industry experience
includes 12 years in senior management roles with WMC Resources, four years with PacMin Mining as Exploration Manager, five
years with Jubilee Mines where he was responsible for numerous discoveries at the Cosmos Nickel Mine and the Sinclair nickel project,
and three years with Talisman Mining as Technical Director. At Jubilee, he was part of the corporate team responsible for the growth
of the company until it was taken over by Xstrata for $23/share. Mr Langworthy is a non-executive chairman of Syndicated Metals
Limited (March 2012 to present).
Mr Jonathan Shellabear - Chief Financial Officer
Jonathan Shellabear has over 25 years’ experience in the Australian and international resources industry as a senior corporate
executive and investment banker. Mr Shellabear holds a Bachelor of Science with Honours in Geology and a Master in Business
Administration from the University of Western Australia. He has extensive capital markets and advisory experience and has held
senior investment banking positions with NM Rothschild & Sons, Deutsche Bank and Resource Finance Corporation. Jonathan was
previously the Managing Director and Chief Executive Officer of Dominion Mining Ltd which was acquired by Kingsgate Consolidated
Ltd in 2011 to create, at that time, Australia’s second largest gold company by market capitalisation. He has also held senior corporate
roles with Portman Limited (now Cliffs Natural Resources) as General Manager, Business Development and Heron Resources Ltd as
Managing Director and Chief Executive Officer.
Exploration Manager - Mr Michael Martin
Mr Martin has 18 years’ experience in all aspects of resource projects through Western Australia and Queensland. Prior to joining
Capricorn Metals, Mr Martin has held senior positions at Pacmin, Sons of Gwalia, Sipa Resources, Jubilee Mines, Xstrata, Talisman
Mining and Syndicated Metals. He has undertaken a variety of senior and leadership roles in mineral exploration, resource
development, resource estimation and mining in multiple commodities such as gold, nickel, copper, lead and zinc. Mr Martin graduated
from the University of Ballarat with an Honours Degree in Geology and is a member of the Australian Institute of Geoscientists (AIG).
Mr Jean-Luc Marquetoux - Gerant and Chief Financial Officer - Madagascar
Mr Marquetoux has a French degree in accounting and finance. He has over 25 years’ experience in accounting, auditing and financial
control management functions. He has worked in Madagascar since 1993 and has previously held staff positions with Unima, one of
the highest industry profile companies in Madagascar. He is based full time in Madagascar as Country Manager and Chief Financial
Officer.
Prepared by Tamesis Partners LLP See final two pages for important disclosures
54
Appendix 2: Capricorn Metals Ltd, Financials
Figure 70 - Summary forecast financial statements (June year-end)
Source: Tamesis estimates
Key Metrics 2016 2017F 2018F 2019F 2020F 2021F 2022F 2023F
EPS (A$/sh) (0.01) (0.00) (0.00) (0.01) 0.03 0.04 0.02 0.02
P/E n.m n.m n.m n.m 3.3x 2.3x 4.3x 4.1x
CFPS (A$/sh) (0.01) (0.00) (0.00) (0.01) 0.04 0.06 0.04 0.04
P/CFPS n.m n.m n.m n.m 2.3x 1.7x 2.4x 2.3x
FCFPS (A$/sh) (0.01) (0.02) (0.06) (0.07) 0.04 0.05 0.04 0.04
P/FCFPS n.m n.m n.m n.m 2.4x 1.7x 2.6x 2.5x
FCF Yield -12% -27% -71% -74% 42% 59% 39% 40%
EV/EBITDA n.m n.m n.m n.m 0.7x 0.6x 0.9x 0.9x
EBITDA Margin n.m n.m n.m n.m 56% 55% 35% 35%
Return on Assets (ROA) n.m n.m n.m n.m 16% 21% 12% 13%
Return on Equity (ROE) n.m n.m n.m n.m 29% 29% 14% 13%
Return on Capital Employed (ROCE) n.m n.m n.m n.m 28% 34% 19% 19%
Gearing (Debt/Equity) 0% 0% 112% 125% 78% 38% 18% 0%
Interest Cover n.m n.m n.m -0.3x 6.6x 10.1x 8.3x 15.8x
Shares Outstanding, basic (m) 271.65 572.38 1,077.38 1,077.38 1,077.38 1,077.38 1,077.38 1,077.38
Production 2016 2017F 2018F 2019F 2020F 2021F 2022F 2023F
Gold (koz) 0.0 0.0 0.0 0.0 68.7 94.2 94.7 94.7
C1 (A$/oz) 0 0 0 0 699 636 956 956
AISC (A$/oz) 0 0 0 0 811 744 1,079 1,079
Gold Price (A$/oz) - - 1,630 1,630 1,630 1,630 1,630 1,630
Income Statement (A$) 2016 2017F 2018F 2019F 2020F 2021F 2022F 2023F
Revenue 1 0 0 0 112 154 154 154
Cost of Sales (0) (0) 0 0 (60) (84) (115) (115)
G&A (1) (1) (2) (2) (2) (3) (3) (3)
EBITDA (4) (1) (2) (2) 63 84 54 54
DD&A (0) (0) 0 0 (13) (17) (17) (18)
EBIT (4) (1) (2) (2) 50 67 37 37
Net Interest Expense 0 0 0 (7) (8) (7) (4) (2)
PBT (4) (1) (2) (9) 42 61 32 34
Other 0 0 0 0 0 0 0 0
Taxes/Recovery (0) (0) 0 1 (13) (18) (10) (10)
Net Profit (Loss) - attributable (4) (1) (2) (8) 30 42 23 24
Minority Interest 0 0 0 0 0 0 0 0
Cashflow (A$) 2016 2017 2018 2019 2020 2021 2022 2023
PBT 0 (0) (2) (2) 50 67 37 37
DD&A 0 0 0 0 13 17 17 18
Tax, interest, other (2) (1) 0 (6) (20) (25) (14) (13)
Cash Flow From Operations (2) (2) (2) (8) 42 59 40 42
Capital Expenditure (2) (12) (68) (65) (1) (1) (2) (2)
Other 1 (2) 0 0 0 0 0 0
Cash Flow From Investing (1) (14) (68) (65) (1) (1) (2) (2)
Equity Issues (Net of Costs) 14 10 51 0 0 0 0 0
New Debt (ST+LT) 0 0 90 0 0 0 0 0
Repayments / other 0 0 0 0 (10) (25) (25) (30)
Cash Flow From Financing 13 10 140 0 (10) (25) (25) (30)
Net Change in Cash 11 (6) 70 (73) 31 33 13 10
Free Cash Flow (3) (14) (70) (73) 41 58 38 40
Balance Sheet (A$) 2016 2017 2018 2019 2020 2021 2022 2023
Cash & Equivalents 12 6 76 3 34 67 80 90
Total Current Assets 12 6 76 3 34 67 80 90
PP&E & Mining Interests 5 26 94 159 148 132 117 101
Deferred taxation 0 0 0 0 0 0 0 0
Other 9 0 (0) 0 (0) 0 (0) (0)
Total Assets 25 32 170 162 182 199 197 191
Short Term Debt 0 0 0 0 0 0 0 0
Current Liabilit ies 2 1 1 1 1 1 1 1
Long Term Debt 0 0 90 90 80 55 30 0
Other Long Term Liabilit ies 0 0 0 0 0 0 0 0
Total Liabilities 2 1 90 90 80 55 30 1
Shareholder Equity 23 31 80 72 101 144 167 191
Total Liab. & S/Holder Equity 25 32 170 162 182 199 197 191
Working Capital 10 5 75 2 34 67 80 90
Net Debt (Cash) (12) (6) 14 87 46 (12) (50) (90)
Prepared by Tamesis Partners LLP See final two pages for important disclosures
55
Copyright and Risk Warnings
Capricorn Metals Limited. (the “Company”) is a corporate client of Tamesis Partners LLP.
Tamesis Partners LLP (“Tamesis”) has received remuneration for providing investment banking services and other services to the Company in the past twelve months and may continue to do so.
This note is a marketing communication and NOT independent research. As such, it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and this note is NOT subject to the prohibition on dealing ahead of the dissemination of investment research.
Not an offer to buy or sell
Under no circumstances is this note to be construed to be an offer to buy or sell or deal in any security and/or derivative instruments. It is not an initiation or an inducement to engage in investment activity under section 21 of the Financial Services and Markets Act 2000.
Note prepared in good faith and in reliance on publicly available information
Comments made in this note have been arrived at in good faith and are based, at least in part, on current public information that Tamesis considers reliable, but which it does not represent to be accurate or complete, and it should not be relied on as such. The information, opinions, forecasts and estimates contained in this document are current as of the date of this document and are subject to change without prior notification. No representation or warranty either actual or implied is made as to the accuracy, precision, completeness or correctness of the statements, opinions and judgements contained in this document.
Tamesis’ and related interests
The persons who produced this note may be partners, employees and/or associates of Tamesis. Tamesis and/or its employees and/or partners and associates may or may not hold shares, warrants, options, other derivative instruments or other financial interests in the Company and reserve the right to acquire, hold or dispose of such positions in the future and without prior notification to the Company, or any other person.
Information purposes only
This document is intended to be for background information purposes only and should be treated as such. This note is furnished on the basis and understanding that Tamesis is under no responsibility or liability whatsoever in respect thereof, to the Company, or any other person.
Investment Risk Warning
The value of any potential investment made in relation to companies mentioned in this document may rise or fall and sums realised may be less than those originally invested. Any reference to past performance should not be construed as being a guide to future performance.
Investment in small companies, and especially mineral exploration companies, carries a high degree of risk and investment in the companies or minerals mentioned in this document may be affected by related currency variations. Changes in the pricing of related currencies and or commodities mentioned in this document may have an adverse effect on the value, price or income of the investment.
Distribution
This note is not for public distribution, nor for distribution to, or to be used by, or to be relied upon by any person other than the Company. Without limiting the foregoing, this note may not be distributed to any persons (or groups of persons), to whom such distribution would contravene the UK Financial Services and Markets Act 2000 or would constitute a contravention of the corresponding statute or statutory instrument in any other jurisdiction.
Disclaimer
This note has been forwarded to you solely for information purposes only and should not be considered as an offer or solicitation of an offer to sell, buy or subscribe to any securities or any derivative instrument or any other rights pertaining thereto (“financial instruments”). This note is intended for use by professional and business investors only. This note may not be reproduced without the prior written consent of Tamesis.
The information and opinions expressed in this note have been compiled from sources believed to be reliable but, neither Tamesis, nor any of its partners, officers, or employees accept liability from any loss arising from the use hereof or makes any representations as to its accuracy and completeness. Any opinions, forecasts or estimates herein constitute a judgement as at the date of this note. There can be no assurance that future results or events will be consistent with any such opinions, forecasts or estimates. Past performance should not be taken as an indication or guarantee of future performance, and no representation or warranty, express or implied is made regarding future performance. This information is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company and its subsidiaries. Tamesis is not agreeing to nor is it required to update the opinions, forecasts or estimates contained herein.
The value of any securities or financial instruments mentioned in this note can fall as well as rise. Foreign currency denominated securities and financial instruments are subject to fluctuations in exchange rates that may have a positive or adverse effect on the value, price or income of such securities or financial instruments. Certain transactions, including those involving futures, options and other derivative instruments, can give rise to substantial risk and are not suitable for all investors. This note does not have regard to the specific instrument objectives, financial situation and the particular needs of any specific person who may receive this note.
Tamesis (or its partners, officers or employees) may, to the extent permitted by law, own or have a position in the securities or financial instruments (including derivative instruments or any other rights pertaining thereto) of any company or related company referred to herein, and may add to or dispose of any such position or may make a market or act as principle in any transaction in such securities or financial instruments. Partners of Tamesis may also be directors of any of the companies mentioned in this note. Tamesis may, from time to time, provide or solicit investment banking or other financial services to, for or from any company referred to herein. Tamesis (or its partners, officers or employees) may, to the extent permitted by law, act upon or use the information or opinions presented herein, or research or analysis on which they are based prior to the material being published.
Prepared by Tamesis Partners LLP See final two pages for important disclosures
56
Further Disclosures for the United Kingdom
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