ASX 25Jun13 Research Report

25 June 2013

Elementos Limited (ELT)

Cleveland tin project : 53kt tin JORC

ELT transitions from explorer to developer by acquiring the

Cleveland project, which has 53kt tin, 20kt copper and 8.8kt

tungsten in JORC Resources

See Page 23 for Disclaimer and Disclosures 25 June 2013

Recommendation Elementos has announced a merger with the unlisted Rockwell Minerals, the major asset of which is the Cleveland tin-copper and tungsten project in Tasmania, which has over $1 .5B in JORC contained metal.

We estimate that the hard rock tin-copper project h as a NPV of $95m, for a capital investment of $80m; an IRR of 4 6%. We expect that ELT will secure a strategic investor to take a 30% stake in the project and secure debt.

ELT’s commitments are then funded.

BUY

Price

1.7c

Valuation

12.2c

Snapshot Market Cap. $2.6 million (pre-

merger)

Shares on Issue 154.3m pre-merger

406m post-merger

Tin price v. LME stocks

0 t

5,000 t

10,000 t

15,000 t

20,000 t

25,000 t

30,000 t

$ 5,000/t

$ 10,000/t

$ 15,000/t

$ 20,000/t

$ 25,000/t

$ 30,000/t

$ 35,000/t

$ 40,000/t

$ 45,000/t

Jan . 09 Jul. 09 Jan. 10 Jul. 10 Jan. 11 Jul. 11 Jan. 12 Jul. 12 Jan. 13

LME tin stocks Tin price, LME cash

Elementos is an ASX listed explorer with a

portfolio of tenements in N-W Qld,

focussing on the copper-gold-cobalt areas

at Millenium and Selwyn South and also

three copper and gold projects in Chile and

Argentina.

ELT announced its merger with Rockwell

Minerals in April 2013, adding the

Cleveland tin-copper project. Cleveland

was mined by Aberfoyle from 1968 to

1986, with 5,645kt of ore extracted to sell

about 24kt of Sn and 10kt of Cu in

concentrate.

Cleveland has an advanced 60kt tin-

equivalent JORC Mineral Resource. The

mine is near infrastructure, including

power, water and sealed roads, with the

port of Burnie about 70km away by road.

It has near term cashflow potential from a

low cost tailings resource and significant

potential to expand the tin-copper

resource, both at depth and along strike.

There is also a tungsten resource at depth.

Cleveland Tin – Hard Rock Project

Cleveland tin project has total JORC resources of 6.1Mt, grading 0.68% Sn and

0.25% Cu, for nearly 42kt of contained tin plus 15kt copper.

Beer & Co estimates that it will cost about $80m in capital to produce about

3,600t/yr of tin, at an all-up cash cost of about US$ 7.00/lb.

We estimate an after-tax NPV of $A 95m for 100% of this project. We expect

that ELT will sell a stake of about 30% to finance development.

We estimate that first product would be at the end of 2016, when we expect tin

prices to peak with the closure of Minsur’s San Rafael mine.

Proven mining and metallurgy, and 4 km decline in place from historical

operation significantly de-risks project and reduced future cap.ex.

Tailings Project

There are 3.85Mt of tailings grading 0.30% Sn and 0.13% Cu.

Beer & Co estimates that for cap.ex of about $25m, assuming about 50%

recovery of the tin and 75% recovery of the copper, to produce about 5,500t of

tin over 4 years, generating an after-tax NPV of $30m.

We expect that ELT will seek a partner for this project independent of the hard

rock project, as the product may be non-standard.

Potential

There is significant exploration potential for tin-copper mineralisation at depth

and along strike.

Cleveland also has a tungsten resource, which is presently 2.9Mt at 0.30% WO3,

but with intercepts of 177m and 162m, it is believed to have the potential to be

significantly larger. However, this is a longer term project.



ELT has announced a

merger with the unlisted

company, Rockwell

Minerals.

Rockwell minerals’ asset

is the Cleveland mine,

which has 6Mt of hard

rock resources, grading

0.68% Sn and 0.25% Cu,

along with some tailings.

Beer & Co propose a

development scenario

focussed on the hard

rock Resources, while

seeking to monetise the

tailings.

Elementos : An emerging producer

Background

ELT has announced a merger with the un-listed company, Rockwell Minerals. Rockwell’s

main asset is its 50% share of the Cleveland tin mine in Tasmania, and its option to buy

the balance (final payment $700k by 31 Dec 2013).

Cleveland was operated

from 1968 to 1986 by

Aberfoyle, mining 5,645kt of

ore and producing about

24kt of Sn and 10kt of Cu in

concentrate.

Figure 1 shows that the mine

has JORC resources, from a

review of stored drill core

and operational records.

In this analysis, we are able

to ascribe a value to both

the hard rock tin - copper

resources and also the

tailings, but in our view

Figure 1 : Cleveland mine – JORC Resources

Cleveland mine, hard rock Tin and Copper Resources

Sn grade Cu grade

Indicated 4,239 kt 0.70 % 0.28 %

Inferred 1,880 kt 0.64 % 0.19 %

TOTAL 6,119 kt 0.68 % 0.25 %

Cleveland mine, Tin and Copper Resources in tailings

Sn grade Cu grade

Inferred 3,850 kt 0.30 % 0.13 %

Cleveland mine, Tungsten Resources

WO3 grade

Inferred 2,930 kt 0.30 % Source : ELT ASX announcement, April 2013, Beer & Co

the tungsten resource needs significantly more work before any more than a nominal

value can be ascribed to it.

Conceptually, it would be possible to develop the tailings first, which could be brought

into production while the hard rock resources are being progressed through feasibility.

However, we see potential issues with this approach :

� The metallurgical test-work to date suggests a recovery of about 35% - 50% to a

marketable tin concentrate (>50% Sn), but much higher recovery (63% - 68%) to a

lower grade concentrate, for which it will be more difficult to find a buyer

→ If a fuming plant is built, as has been proposed by Renison to treat their tailings,

then that becomes a potential buyer, so it is best to wait until that is resolved

before proceeding

� The tailings project could be joint ventured with a party different to the one that

would be interested in the hard rock project.

Development Scenario

In this analysis, we focus on the hard rock resources.

In our view, ELT will need to raise equity from its shareholders to complete

environmental clearance and a scoping study. We expect that this will require $2m -

$3m and take about 12 months.

We project that ELT will then seek a strategic equity, or possibly an industry investor to

upgrade the work to bankable standard. This should take a further 12 months, at a cost

of $5m - $7.5m.

The final step will be to seek an industry partner, such as a tin smelter, consumer or

trader, to buy a share in the project, which will fund ELT’s equity investment.



Total cap.ex is $82m,

excluding feasibility

studies.

First product is projected

for end 2016.

Cash cost is projected to

be under $7/lb

Figure 2 summarises the projections

made by Beer & Co in this analysis.

Our analysis is based on exploiting the

JORC resources. We are confident that

the mine will have a significantly longer

life than the current resources.

Figure 3 shows the resulting cashflows

generated by the project, as well as the

details of our commodity price

assumptions (we use a discount rate of

10% for the industry investor, but no

value for franking credits).

Figure 2 : Cleveland development

Hard-rock

First product Dec. 2016

Capital expenditure $A 89m

Ore processed annually 740 kt

tin recovery 70 %

Annual tin production 3,600t

Total tin produced 28,881t

all in cash cost US 699 c/lb

Project NPV $A 96m

Source : Beer & Co estimates

Figure 3 : Projected cashflows Cleveland mine, hard rock tin-copper project

2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25

AUD-USD 0.950 0.938 0.888 0.840 0.830 0.830 0.830 0.830 0.830 0.830

Tin price USD /t 24,750 25,000 27,750 30,750 32,000 25,000 25,000 25,000 25,000 25,000

Copper price USD /t 6,614 6,614 6,614 6,614 6,614 6,614 6,614 6,614 6,614 6,614

Tin sold tonnes 0 1,507 3,529 3,626 3,626 3,626 3,626 3,394 3,315 2,632

Copper sold tonnes 0 603 1,425 1,554 1,554 1,554 1,554 1,181 1,055 837

Tin Revenue USD m 0 38 98 112 116 91 91 85 83 66

smelting charges USD m 0 (3) (8) (9) (10) (8) (8) (7) (7) (6)

Net copper revenue USD m 0 4 8 9 9 9 9 7 6 5

Cash Costs USD m 0 (23) (45) (44) (45) (46) (47) (49) (50) (42)

Royalties USD m 0 (2) (5) (6) (6) (5) (5) (4) (4) (3)

Dep'cn & Amort'sn USD m 0 (9) (17) (16) (16) (16) (16) (10) (2) 0

E B I T USD m 0 4 31 45 48 25 23 22 25 20

Interest Expense USD m (1) (4) (3) (2) (2) (1) (0) (0) (0) 0

Tax Expense USD m 0 (0) (8) (13) (14) (7) (7) (6) (8) (6)

N P A T USD m (1) 0 19 30 33 17 16 15 18 14

Project Cap.Ex USD m (58) 0 0 0 0 0 0 0 0 0

Sus. Cap. Ex USD m 0 (2) (3) (3) (3) (3) (3) (3) (2) 0

Net Project Cashflow USD m (59) 7 34 43 46 30 30 22 18 14

N P V = US$ 91m IRR = 43% Source : Beer & Co estimates

Selling a 30% stake in

the Cleveland project to

a strategic investor, who

can assist with project

finance, should generate

sufficient cash to pay for

the equity needed to

develop the project

Our valuation of the hard rock project is $A95m (after feasibility studies). Sale of a 30%

project stake to a potential off-take partner who can assist in securing debt finance

should provide sufficient funds for ELT’s equity contribution, which means that ELT may

not need to raise more equity to fund development

Our indicative valuation of the tailings project is USD 29m. Sale of a 50% stake would

provide ELT with enough capital to fund its share of equity in a $A 25m development; we

expect that ELT will need to retain a stake in the project to ensure effective

development.

In our view, the tin industry is amenable to special development options due to the tight

supply conditions, especially with the largest single mine, San Rafael which supplies

about 10% of the world’s supply, to shut in 2017, while significant demand, for solder in

the electronics sector, is insensitive to price.

Appendix 1 has more background on the tin industry.



Valuation of Elementos

Figure 4 shows our projected cashflow, after-tax, for ELT from each asset. It shows our

projected tax payments as well the net cash from operations and project and sustaining

capital and also the cash received from the sale of a 50% interest in the tailings project

and a 30% interest in the hard rock project.

Figure 4 : Beer & Co projected cashflows for Elementos

2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26

Cleveland, hard-rock, afer tax, 70% share AUD m (1.9) (6.0) (22.8) 3.5 19.1 28.2 30.2 16.1 20.4 18.1 14.8 11.8

franking credits 0.0 (0.2) 0.3 6.9 11.0 12.2 6.4 6.2 5.6 6.4 5.1 0.0

Cleveland Tailings, afer tax, 50% share AUD m (0.5) (10.3) 7.8 9.2 11.7 7.4 0.0 0.0 0.0 0.0 0.0 0.0

franking credits 0.0 0.4 1.9 2.5 3.6 2.4 0.0 0.0 0.0 0.0 0.0 0.0

Asset sales 12.4 30.1

ELT corporate costs AUD m (2.0) (2.0) (3.0) (4.0) (4.0) (4.0) (4.0) (4.0) (4.0) (4.0) (4.0) (4.0)

Equity raised 2.5 5.0

Cash balance 10.5 27.5 11.7 29.9 71.3 117.4 150.1 168.4 190.4 210.9 226.8 234.6 Source : Beer & Co estimates

Beer & Co value ELT at

12.2c/share

We are bullish on tin.

We have a BUY

recommendation

To derive a valuation for ELT, we have discounted the cashflows in Figure 4 using a

discount rate of 12%. Figure 5 shows that we have then risked these valuations and also

given some value for taxes paid through the franking credits generated.

Figure 5 : Detail of Elementos valuation

risk 100% Product per share

Cleveland, hard-rock 75% $A 42 m $A 32 m 5.4 c

franking credits 45% $A 27 m $A 12 m 2.0 c

Cleveland Tailings 60% $A 13 m $A 8 m 1.3 c


Asset Sales 75% $A 34 m $A 26 m 4.3 c

Tungsten nom. $A 5 m $A 5 m 0.8 c

ELT other exploration nom. $A 2 m $A 2 m 0.3 c

ELT corporate costs 100% ($A 21 m) ($A 21 m) (3.6c)

Equity raised 100% $A 6 m $A 6 m 1.1 c

TOTAL $A 115 m $A 72 m 12.2 c

shares on issue 154.3m FPO shares

SPP raising 1.8 c 29m new shares

Issued to Rockwell 55% 225m new shares

Scoping Study 80m new shares

BFS 100m new shares

30 June 2013discount rate = 12 %


Figure 5 shows that our base case valuation for ELT is now 12.2c/share, including some

nominal value for the exploration assets.

Conclusions

We are bullish on tin. We are confident that ELT is able to deliver this project.

We are confident that a fair valuation for ELT is a multiple of the current share price.

In the current risk averse environment, there are some real gems, and ELT is one, though

it does come with a funding risk.

We initiate research on ELT with a BUY recommendation.



Cleveland is a tin-copper

project that was mined

from 1968 to 1986

It is located in N-W

Tasmania, in an historic

mining district

Cleveland mine

Background

As shown in Figure 6, the Cleveland

tin-copper mine is in north-west

Tasmania, an historic and current

mining district, with many current

mining operations within 50km.

A 2 lane bitumen road passes

through the tenement, with power

and water available, and 73km by

road from the port of Burnie.

The Cleveland tin-copper mine was

operated by Aberfoyle (ABF) from

1968 to 1986, being shut with the

collapse in the tin price.

The mine was very modern when it

was first developed as it was the

first to be operated by rubber-tyred

truck haulage, with decline access,

which is now standard, as opposed

to in mine tracks with shaft

haulage.

Figure 6 :Cleveland tin-copper mine

Source : ELT presentation, April 2013

Geology

Gossanous outcrops were first discovered by prospectors in 1898. Tin was first identified

in 1900 and mining commenced in 1908 and by 1917, when the mine closed, it had

produced about 275t of tin in a cassiterite concentrate.

Figure 6 showed that there are many mining operations in the vicinity of Mt Cleveland.

Figure 7 shows 3 principal rock groups :

� Tin-tungsten deposits, and some silver-lead (and zinc) deposits associated with

Devonian-Carboniferous granite;

� Base metal deposits (lead-silver-zinc and copper-gold) associated with the Cambrian

era Mt Read volcanics; and

� Iron ore deposits associated with the pre-Cambrian metamorphic rocks of the Arthur

Mobile belt.

As shown in Figure 7, the Cleveland mine is to the north of the outcrop of the Meredith

granite, which is believed to be the source of the mineralised fluids.

Tin-Copper mineralisation

The known tin-copper mineralisation at Cleveland occurs within a series of sedimentary

rocks, known as Hall’s Formation, which is underlain by sandstone and overlain by

volcanics. The sedimentary rocks are of Cambrian age and have been tilted to near

vertical, as shown in Figure 8.



The mineralisation

occurs in near vertical

lenses, with strike of up

to 550m, width up to

30m and extending

down dip for up to 800m

In other similar mines, at

Renison and Cornwall,

the mineralisation

continues down to the

granite contact, which

for Cleveland is 4km

below the surface

The sedimentary rocks have

been intruded by Devonian-

Carboniferous era Merdith

granite. A separate quartz

porphyry dyke occurs 350m

below the surface.

Tin and copper is borne in

semi-massive sulphide lenses,

comprises 20% - 30% sulphide

minerals, dominated by

pyrrhotite (FeS) and pyrite

(FeS2), with quartz, fluorite

and carbonates.

The semi-massive sulphide

was formed by the

replacement of limestone and

is geologically similar to the

tin bearing semi-massive and

Figure 7 : Geology of N-W Tasmania

Source : April 2013 Mineral Resource report

massive sulphide mineralisation at Renison, which has Resources of 9.64Mt grading

1.56% Sn and 0.27% Cu.

As shown in Figure 8, the

mineralisation occurs in faulted, near

vertically dipping, lenses with strike

lengths of up to 550m, thickness across

strike up to 30m and down-dip extents

up to 800m.

Figure 8 shows the lodes of tin-copper

mineralisation. It also shows the

quartz porphyry dyke and

demonstrates how the transportation

of the mineralised fluids and resulting

distribution of mineralisation was

controlled by a number of faults.

Modelling of the granite, based on geo-

physical gravity survey, indicates that

the top of the granite is at a depth of

nearly 4 km from the surface, which is

deeper than thought by the explorers

from 1960s to 1980s.

At Renison the mineralisation

continues down to the granite contact,

as it does at Cornwall, UK.

This suggests that there is significant

scope for further extensions of

mineralisation at depth.

Figure 8 : Cleveland mine geology




There is also a deep

tungsten Resource, of

nearly 8kt of contained

WO3

The Cleveland mine was

developed as a modern,

under-ground mine

Tungsten mineralisation

The tungsten mineral,

wolframite, is borne in

quartz stock-works, about

500m below the surface,

(350m from portal), as

shown in Figure 9. The

tungsten bearing stock-work

(veinlets) was formed by

intense quartz veining

around, and possibly from,

the quartz porphyry dyke, in

the manner of a halo. The

dyke dips vertically and has

Figure 9 : Cleveland mine orebodies


a known strike length of 300m and is up to 300m across strike and has a down dip

extent of 900m.

Note the very significant intersections, up to 177m of mineralisation, shown in Figure 9.

Cleveland : Hard Rock Mine

While Figure 1 includes a tailings resource, our valuation shows greater value in the hard

rock resources.

In the view of Beer & Co, the hard rock resources are also more easily able to be financed

as it is more similar to tin concentrate produced by other tin mining operations.

Mining

Figure 10 is a graphic of the

resources estimated in Figure 1. It

clearly shows the steeply dipping,

near vertical nature of the

mineralised lenses.

It also shows existing decline

development, in red.

While the Cleveland mine was

developed by Aberfoyle in the mid

1960s, it was developed in the

manner of a modern under-ground

mine, with decline access and

haulage by rubber tyred trucks.

The rock is highly competent; from a

site visit, the Hall’s Open Cut (refer to

Figure 8) was inspected and while it

was developed nearly 50 years ago,

the unsupported walls still stand as

shown in Figure 11.

Figure 10 : Graphic of resources




It was mined by open

stoping

The rock walls are highly

competent so the stopes

have not been back-

filled

Figure 11 : Walls of Hall’s open cut, 50 years later

Source : Beer & Co site visit

The shape of the ore lenses, as shown in

Figure 10, coupled with the highly

competent rocks, as illustrated by

Figure 11, suggest that the mining will be

amenable to bulk mining methods.

Figure 12 is a diagram of open stope

mining, which was employed by Aberfoyle.

In its mining, Aberfoyle generally did not

backfill, so there are significant voids in

the mine.

Historically, the mine had relatively low

mining costs, despite low equipment

utilisation rates.

As shown in Figure 13, there is 4km of

decline development in place, down to

500m below surface, by 5.0m x 5.0m

drives, and over 11km of under-ground

development.

Figure 12 : Mined by open stoping


Figure 13 shows the development undertaken by Aberfoyle. The paths shown are the

transport drifts, so the area above them should be open.

In Figure 13, the red circle, a little higher than the middle, is the portal access. The mine

is in a hill, so it was accessed by an adit, with significant development both above and

below the access at the base of the hill.

The processing operations were sited at this access.



There is an existing,

though closed, portal

access at the base of the

hill, but with

mineralisation both

above and below it.

A modern operation

should be able to

achieve much better

metallurgical results

than the historical

results.

The mine is substantially

developed, having been

previously mined.

Figure 13 : Cleveland development

Processing

While the tin and the copper mineralisation

are associated, they are metallurgically

independent; the tin is cassiterite (SnO2) and

the copper in chalcopyrite (CuFeS2), with

some bornite (Cu5FeS4).

As the mine operated for nearly 20 years,

there is a good history of metallurgical

operations.

However, as shown in Figure 2, the historical

operations were probably not highly efficient

as the grades of the tailings are nearly half

that of the primary ore, so that recoveries

must have been about 60%.

There are a number of reasons for the poor

historical recovery :

� The grain size of the mineralisation is

relatively fine, generally 5µm - 20 µm;

� SnO2 flotation was introduced only in

1974, and since then, better reagents

have been developed; and

� Copper recovery was not operated for

periods


Recoveries were also negatively impacted as the mill was campaigned, 5 days a week, for

part of its operations, due to tin quotas.

Review of the historical operating records shows that overall tin from cassiterite

recoveries were 69% in some years, with many years over 70% through the concentrator,

after allowing some losses through the Heavy Media Separation circuit.

The proposed circuit is a conventional crush, grind, then a sulphide float to capture the

copper, gravity capture of the coarser tin in the tailings and then a Cassiterite float.

Development

The pathway into

production is relatively

quick as Cleveland has

previously been developed

as an operating mine.

However, the mine has

filled with water as it is

open at the top of the hill,

as shown in Figure 13.

The major clearance

Figure 14 : Project timeline

time completed

Clearances 9 months Mar. 2014

Scoping 6 months Sep. 2014

Bankable F S 9 months Jun. 2015

Finance 3 months Sep. 2015

Mill construction, etc 12 months Sep. 2016

First product 3 months Dec. 2016 Source : Beer & Co estimates

required is to be able to pump water from the mine, which has filled with rain water

which has entered through the surface open-cut. While discussions have been held,

ELT will need to engage an appropriate consultant who will then undertake the analysis

and should lodge the application before year end for approval by March 2014.



The first step will be to

drain the mine of the

rainwater than has

entered though the

open void of the open

cut operations.

Then a scoping study will

be a relatively near term

result

There is a pattern

developing of strategic

partners in certain

projects, especially

those in strategic metals,

or those for which

supply is constrained.

Tin is both supply

constrained, due to the

expected closure of the

largest rock mine

(Minsur’s San Rafael in

Peru), and its use as

solder in electronics

Our understanding is that the water tested to date is effectively rain water. The major

issue is timing the release in a wet area so that the existing systems are able to cope with

the flow.

As the mine is progressively dried, the major step will be to survey the existing mine. If

safe then ELT will inspect to assess the geo-technical conditions, assess the clean-up

work required and inspect the state of development to determine the potential presence

of developed but un-stoped ore.

The result will be the scoping study.

Feasibility Study

The work required for the feasibility study will be

� some confirmatory drilling of the exiting resource,

� assess the cost and detail of repair work required for areas developed

� develop an indicative mine plan

� some metallurgical test work on the ore to be mined as part of the design of the

processing circuit.

We expect this will take about 9 months.

Finance and development

ELT will be working with potential industry / off-take partners. Two current examples

include :

� Toyota Tsusho’s investment for 20% of Kasbah Resources’ (KAS) tin development at

Achmmach, where TTC invested at the pre-feasibility stage to fund the BFS, with a

top-up based on the value of the operation produced by the BFS to have a 25% JV

interest

� Toyota’s investment to take a 25% JV interest in Orocobre’s (ORE) Olaroz lithium

development in Argentina.

Beer & Co is aware of similar deals in the pipeline that have yet to be publicly

announced.

In our view, the timing of such negotiations will suit ELT as we expect the tin market to

be much tighter in 2015.

We expect that the sale of a 30% stake should fund ELT’s equity requirements.

Financial Analysis

Figure 15 shows the operational projections made by Beer & Co and used in this analysis.

It shows that Beer & Co has assumed

� A mine life that corresponds to the total of the present resources

− While many will use only Reserves to value an operation, we feel that this takes

no account of the mineralisation that could be mined, as we are confident that

the mine life will extend beyond this time frame;

� Recovery of 70% for the tin, which compares with 74% for KAS’s Achmmach project

in Morocco and 72% projected for the Heemskirk project being developed by Stellar

Resources (SRZ), about 50km south of Mt Cleveland, at Zeehan in western Tasmania;



We have based our

assumptions on

comparative operations

and also the historical

work of Aberfoyle

� Recovery of 80% of the copper, which compares with around 90% for most copper

mines

− however, recovery is related to grade and with a low copper grade, lower

recoveries should be expected.

� A mining rate of 740kt/yr, which compares with 600kt/yr assumed by SRZ for

Heemskirk and typically 600kt – 800kt/yr for an under-ground mine

− the mine geology lends itself to higher productivity bulk under-ground mining

− Aberfoyle mined over 500kt of ore in 1973, but generally mined around

350kt/yr, though some of this was constrained by tin quotas

− We expect that using 40t and 50t trucks, as opposed to the 25t and 35t trucks

used by Aberfoyle, coupled with effective mine communications, the mine will

produce at higher rates.

Figure 15 : Beer & Co projections for Cleveland mining operations

2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25

Resources

Indicated '000 tonnes 4,239 3,888 3,148 2,408 1,668 928 188 0 0 0

tin 0.70 % 0.70 % 0.70 % 0.70 % 0.70 % 0.70 % 0.70 % 0.00 % 0.00 % 0.00 %

copper 0.28 % 0.28 % 0.28 % 0.28 % 0.28 % 0.28 % 0.28 % 0.00 % 0.00 % 0.00 %

Inferred '000 tonnes 1,880 1,880 1,880 1,880 1,880 1,880 1,880 1,328 588 0

tin 0.64 % 0.64 % 0.64 % 0.64 % 0.64 % 0.64 % 0.64 % 0.64 % 0.64 % 0.00 %

copper 0.19 % 0.19 % 0.19 % 0.19 % 0.19 % 0.19 % 0.19 % 0.19 % 0.19 % 0.00 %

Mining operations

Ore Mined '000 tonnes 0 352 740 740 740 740 740 740 740 588

Sn grade 0.70 % 0.70 % 0.70 % 0.70 % 0.70 % 0.70 % 0.70 % 0.66 % 0.64 % 0.64 %

Sn recovery 60 % 61 % 68 % 70 % 70 % 70 % 70 % 70 % 70 % 70 %

Sn in conc tonnes 0 1,507 3,529 3,626 3,626 3,626 3,626 3,394 3,315 2,632

Conc grade 45 % 46 % 53 % 55 % 55 % 55 % 55 % 55 % 55 % 55 %

Sn conc tonnes 0 3,259 6,645 6,593 6,593 6,593 6,593 6,171 6,028 4,785

Cu grade 0.28 % 0.28 % 0.28 % 0.28 % 0.28 % 0.28 % 0.28 % 0.21 % 0.19 % 0.19 %

Cu recovery 60 % 61 % 69 % 75 % 75 % 75 % 75 % 75 % 75 % 75 %

Cu in conc tonnes 0 603 1,425 1,554 1,554 1,554 1,554 1,181 1,055 837

Conc grade 20 % 20 % 23 % 24 % 24 % 24 % 24 % 24 % 24 % 24 %

Cu conc tonnes 0 2,941 6,126 6,475 6,475 6,475 6,475 4,921 4,394 3,488 Source : Beer & Co estimates

Our estimated mining

costs rise over time

Figure 16 shows our projected costs of operations shown in Figure 15. Figure 16 shows

mining costs rising steadily over time as the mine face migrates further from the portal,

increasing trucking distance and travel time from the surface to the work face.

Figure 16 : Beer & Co projected operating costs, Cleveland hard rock project

2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25

UNDERGROUND MINING $ 11.7m $ 24.7m $ 26.5m $ 28.3m $ 30.0m $ 31.7m $ 33.4m $ 35.1m $ 29.7m

AUD /t ore 33 33 36 38 41 43 45 47 51

PROCESSING $ 8.9m $ 17.5m $ 17.5m $ 17.5m $ 17.5m $ 17.5m $ 17.5m $ 17.5m $ 14.2m

AUD /t ore 25 24 24 24 24 24 24 24 24

SITE ADMIN $ 3.8m $ 7.0m $ 7.0m $ 7.0m $ 7.0m $ 7.0m $ 7.0m $ 7.0m $ 5.8m

AUD /t ore 11 9 9 9 9 9 9 9 10

TRANSPORT $ 0.6m $ 1.2m $ 1.2m $ 1.2m $ 1.2m $ 1.2m $ 1.0m $ 1.0m $ 0.8m

AUD /t ore 1.6 1.6 1.6 1.6 1.6 1.6 1.4 1.3 1.3

AUD /t conc 92 92 92 92 92 92 92 92 92 Source : Beer & Co estimates



Our estimated costs are

higher than others we

know well, due to lower

Sn grades

However, initial cap.ex is

much lower.

Figure 17 shows the same information in terms of product costs. It shows that we

estimate cash costs, over the life of Mine, including royalties and sustaining capital, to be

just under $7.00/lb. This is slightly higher than other tin operations with which we are

familiar, reflecting the lower grade.

However, the Cleveland project has a much lower capital cost due to the mine

development already in place.

Figure 17 : Cleveland hard rock project – estimated tin costs

2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25

Mining US 317 c/lb 327 c/lb 281 c/lb 279 c/lb 294 c/lb 311 c/lb 329 c/lb 370 c/lb 398 c/lb 425 c/lb

Processing US 191 c/lb 247 c/lb 199 c/lb 184 c/lb 181 c/lb 181 c/lb 181 c/lb 194 c/lb 198 c/lb 202 c/lb

Site Admin US 77 c/lb 105 c/lb 80 c/lb 74 c/lb 73 c/lb 73 c/lb 73 c/lb 78 c/lb 80 c/lb 82 c/lb

Transport US 13 c/lb 16 c/lb 13 c/lb 13 c/lb 12 c/lb 12 c/lb 12 c/lb 11 c/lb 11 c/lb 11 c/lb

TC/RC US 72 c/lb 79 c/lb 83 c/lb 69 c/lb 69 c/lb 69 c/lb 69 c/lb 69 c/lb 69 c/lb 69 c/lb

Royalties US 64 c/lb 66 c/lb 75 c/lb 62 c/lb 62 c/lb 62 c/lb 62 c/lb 61 c/lb 61 c/lb 59 c/lb

Copper (US108c/lb) (106c/lb) (108c/lb) (115c/lb) (115c/lb) (115c/lb) (115c/lb) (93c/lb) (85c/lb) (85c/lb)

Sustaining Capital US 60 c/lb 77 c/lb 63 c/lb 58 c/lb 58 c/lb 58 c/lb 58 c/lb 62 c/lb 50 c/lb 0 c/lb

TOTAL US 685 c/lb US 811 c/lb US 687 c/lb US 624 c/lb US 635 c/lb US 652 c/lb US 670 c/lb US 752 c/lb US 782 c/lb US 764 c/lb Source : Beer & Co estimates

Financing

Figure 18 shows our estimate of the project cashflows, after completion of the feasibility

study. The resulting valuation, using a discount rate of 10%, is US$ 91m.

Figure 18 : Cleveland hard rock project – projected cashflows

2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25

AUD-USD 0.950 0.938 0.888 0.840 0.830 0.830 0.830 0.830 0.830 0.830

Tin price USD /t 24,750 25,000 27,750 30,750 32,000 25,000 25,000 25,000 25,000 25,000

Copper price USD /t 6,614 6,614 6,614 6,614 6,614 6,614 6,614 6,614 6,614 6,614

Tin sold tonnes 0 1,507 3,529 3,626 3,626 3,626 3,626 3,394 3,315 2,632

Copper sold tonnes 0 603 1,425 1,554 1,554 1,554 1,554 1,181 1,055 837

Tin Revenue USD m 0 38 98 112 116 91 91 85 83 66

smelting charges USD m 0 (3) (8) (9) (10) (8) (8) (7) (7) (6)

Net copper revenue USD m 0 4 8 9 9 9 9 7 6 5

Cash Costs USD m 0 (23) (45) (44) (45) (46) (47) (49) (50) (42)

Royalties USD m 0 (2) (5) (6) (6) (5) (5) (4) (4) (3)

Dep'cn & Amort'sn USD m 0 (9) (17) (16) (16) (16) (16) (10) (2) 0

E B I T USD m 0 4 31 45 48 25 23 22 25 20

Interest Expense USD m (1) (4) (3) (2) (2) (1) (0) (0) (0) 0

Tax Expense USD m 0 (0) (8) (13) (14) (7) (7) (6) (8) (6)

N P A T USD m (1) 0 19 30 33 17 16 15 18 14

Project Cap.Ex USD m (58) 0 0 0 0 0 0 0 0 0

Sus. Cap. Ex USD m 0 (2) (3) (3) (3) (3) (3) (3) (2) 0

Net Project Cashflow USD m (59) 7 34 43 46 30 30 22 18 14

N P V = US$ 91m IRR = 43% Source : Beer & Co estimates

Beer & Co projects that the project will be financed :

� public equity to fund the scoping study

� strategic equity investors to find the Feasibility Study

� An industry partner to buy a stake in the project that will find ELT’s equity to develop

the project



Our estimate of project

capital costs of $81.5m,

plus a further $7.5m in

feasibility assessments

We project that selling a

30% stake will provide

enough equity to fund

ELT’s share

Beer & Co is confident

that there is strong

interest from strategic

industry parties

There are good reasons

to expect that

commercial product can

be extracted from the

tailings

Figure 19 shows the detail of Beer

& Co’s estimate of the capital

costs to bring Cleveland back into

production.

There is a high degree of

estimation in these estimates as

the mine has yet to be inspected

so we cannot know how much

work is needed to be done.

Figure 20 shows our projections

for funding. It shows that we

have assumed that ELT sells a 30%

stake in the project.

We have assumed that the

investor is able to assist in debt

financing for the project.

Figure 19 : Project capital costs

Feasibility Studies $A 7.5m

Mobile plant and equipment $A 10.0m

Tailings dam $A 5.0m

Mine development - underground $A 5.0m

Fixed plant / mill $A 35m

Power / utilities $A 2.5m

Civils, offices, etc $A 5.0m

initital working capital $A 5.0m

Owner's costs $A 2.5m

E P C M $A 5.0m

Contingency $A 6.5m

TOTAL $A 89.0m Source : Beer & Co estimates

Note that the project cost in Figure 20

is after the cost of the feasibility

study.

Figure 20 shows by selling a 30%

stake, and being able to secure 60%

debt finding, ELT will not require any

further equity to develop its share of

the Cleveland project.

Beer & Co is confident that funding of

this nature is very feasible due to the

strategic nature of tin as a

commodity.

Figure 20 : Cleveland funding

Project Cap.ex $A 82m

Project Finance 60%

leaves Equity Funding $A 33m

Project stake sold 30%

leaves ELT to fund $A 23m

Revenue from sale of stake ($A 29m)

ELT corporate costs $A 4m

Net ELT equity ($A 2m) Source : Beer & Co estimates

Cleveland : potential tailings project

Figure 1 showed that there is a JORC Resource at Cleveland in the tailings, which is also

shown in Figure 21.

Figure 21 : Cleveland Tailings Resources

Sn grade Cu grade

Inferred Resources 3,850 kt 0.30 % 0.13 % Source : ELT ASX announcement, April 2013

Above we discussed that the tails results from a combination of

� Grain size of the mineralisation, which is is relatively fine, generally 5µm - 20 µm;

� SnO2 flotation was introduced only in 1974, and since then, better reagents have

been developed;

� The mill was, for a period, operated only 5 days a week; and

� Copper recovery was not operated for periods.



ELT would achieve a

good commercial

outcome producing a

low grade (10% - 15%

Sn) conc, due to its high

recovery (63% - 68%

from testing).

We have chosen to

evaluate a standard

grade concentrate with

lower recoveries, and

higher cap.ex, as it

present a more readily

saleable product.

ELT may well be able to

achieve a better

outcome than we have

projected.

First product could be by

the end of 2014.

Development

There are 2 possible development routes :

(i) Produce a high grade, commercial concentrate, grading 50% - 60% Sn in conc, but at

a recovery of only about 35% of the tin in the tailings; or

(ii) Produce a high recovery (65%), but low grade (15%) concentrate.

High grade v. low grade conc

In our analysis, the latter option provides a better potential commercial return, but it is

hostage to be able to sell the low grade concentrate.

The Renison mine has, for many years, had a proposal to build a fuming plant. It is being

now considered more actively as the hard rock mine gets deeper and the tailings, which

had a Measured Resource of 20,461kt at 0.45% Sn and 0.21% Cu.

There is also the possibility of selling the low grade concentrate to a party in China that is

able to process it.

In this analysis, we assume that the tailings are developed through the low recovery,

higher grade product.

Development route

We have assumed that this project is developed independently of the hard rock project.

This reflects our view, based on the work done by Beer & Co, that the parties that would

be interested in the hard rock project are not the same as those that would be interested

in a low cap.ex, short life, tailings retreat project.

In our view, the tailings project must be done as the existing tailings dams have been

compromised by forestry activities.

In our view, ELT could well

find a suitable partner for

this project as part of its

marketing of the hard rock

project. Figure 22 shows

that the tailings project

could be in production by

the end of 2014.

Figure 22 : Potential development time-frame

time completed

Clearances 6 months Dec. 2013

Engineering 3 months Mar. 2014

Construciton 6 months Sep. 2014

First product 3 months Dec. 2014 Source : Beer & Co estimates

Financial Analysis

Figure 23 shows the project parameters

for a potential tailings project.

Note that at a processing rate of 1.0Mt/yr,

the resource of 3.85Mt gives a project life

of 4 years.

Figure 24 shows our projected cashflows

for the potential tailings project.

It shows that our analysis has assumed no

debt financing.

Figure 23 : Tailings project

Tailings

First product Dec. 2014

Capital expenditure $A 25m

Ore processed annually 1,000 kt

tin recovery 50 %

Annual tin production 1,500t

Total tin produced 5,541t

all in cash cost US 469 c/lb

Project NPV $A 30m Source : Beer & Co estimates



In any event, it is 4 year

project that generates

good cashflows

We assume that ELT sells

� A 30% stake in the

hard rock project,

after the FS has

been completed in

mid 20915; and

� A 50% stake in the

tailings project in

early 2014.

Figure 24 : Financial projections, Cleveland tailings project

2013-14 2014-15 2015-16 2016-17 2017-18 2018-19

AUD-USD 0.950 0.950 0.950 0.938 0.888 0.840

Tin price USD /t 22,269 22,086 24,750 25,000 27,750 30,750

Copper price USD /t 7,165 6,889 6,614 6,614 6,614 6,614

Tin sold tonnes 0 338 1,181 1,200 1,200 645

Copper sold tonnes 0 244 780 788 894 535

Tin Revenue USD m 0 8 29 30 33 19

smelting charges USD m 0 (1) (2) (2) (2) (1)

Net copper revenue USD m 0 1 5 5 5 3

Cash Costs USD m 0 (5) (16) (16) (15) (8)

Royalties USD m 0 (0) (2) (2) (2) (1)

Dep'cn & Amort'sn USD m 0 (2) (6) (6) (5) (3)

E B I T USD m 0 2 9 10 15 10

Interest Expense USD m 0 0 0 0 0 0

Tax Expense USD m 0 (1) (3) (3) (4) (3)

N P A T USD m 0 1 6 7 10 7

Project Cap.Ex USD m (0) (21) 0 0 0 0

Net Project Cashflow USD m (0) (18) 12 12 15 9 Source : Beer & Co estimates

Tungsten

Figure 4 showed a tungsten resource.

It shows that this resource underlies the tin. Hence, we expect that it be developed after

the tin mine has been in operation.

Also, the deposit requires further drilling and drilling from the surface is expensive.

Instead, we expect it will be drilled from the depths of the tin mine. As the hard rock tin

mine only comes into operation at the end of 2017, definitional drilling can only take

place at a later time.

Consequently, the present value of an operation will be small, and we only give it a

nominal valuation.

Financial Analysis of Elementos

In our analysis, Beer & Co assumes :

� ELT sells a 30% stake in the hard rock project, receiving 100% of the value;

� ELT sells a 50% stake in the tailings project, receiving 90% of the value;

� ELT’s existing exploration projects in Argentina and Chile, which have significant

known copper-gold mineralisation, have a nominal value; and

� Cleveland’s tungsten resource has a nominal value.

Figure 25 shows Beer & Co’s projected cashflows for ELT at a total, corporate level.

Figure 26 shows projected financials for ELT.



Figure 25 : Beer & Co’s projected cashflows for Elementos

2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26

Cleveland, hard-rock, afer tax, 70% shareAUD m (1.9) (6.0) (25.1) 3.2 18.4 27.6 29.6 15.4 20.3 18.2 14.8 11.8

franking credits 0.0 (0.2) 0.1 6.6 10.7 11.8 6.1 5.9 5.5 6.4 5.1 0.0

Cleveland Tailings, afer tax, 50% shareAUD m (0.5) (10.3) 7.8 9.2 11.7 7.4 0.0 0.0 0.0 0.0 0.0 0.0

franking credits 0.0 0.4 1.9 2.5 3.6 2.4 0.0 0.0 0.0 0.0 0.0 0.0

Asset sales 12.4 28.8

ELT corporate costs AUD m (2.0) (2.0) (3.0) (4.0) (4.0) (4.0) (4.0) (4.0) (4.0) (4.0) (4.0) (4.0)

Equity raised 2.5 5.0

Cash balance 10.5 26.1 7.9 25.4 65.9 111.0 142.7 160.0 181.8 202.4 218.3 226.1 Source : Beer & Co estimates

Figure 26 : Beer & Co’s projected financial outcomes for Elementos 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25

AUD-USD 0.950 0.950 0.950 0.938 0.888 0.840 0.830 0.830 0.830 0.830 0.830 0.830

Tin price USD/t 22,269 22,086 24,750 25,000 27,750 30,750 32,000 25,000 25,000 25,000 25,000 25,000

Copper price USD/t 7,165 6,889 6,614 6,614 6,614 6,614 6,614 6,614 6,614 6,614 6,614 6,614

Tin sold, ELT share 0t 193t 679t 1,801t 3,220t 2,941t 2,538t 2,538t 2,538t 2,376t 2,321t 1,842t

Copper sold, ELT share 0t 122t 390t 816t 1,444t 1,355t 1,088t 1,088t 1,088t 827t 738t 586t

Tin Revenue AUD m 0 5 18 48 101 107 98 76 76 72 70 55

smelting charges AUD m 0 (0) (1) (4) (8) (9) (8) (7) (7) (6) (6) (5)

Net copper revenue AUD m 0 1 2 5 10 10 8 8 8 6 5 4

Cash costs AUD m 0 (3) (8) (26) (44) (41) (38) (39) (40) (41) (42) (35)

Royalties AUD m 0 (0) (1) (3) (5) (6) (5) (4) (4) (4) (4) (3)

Corproate AUD m (2) (2) (2) (3) (4) (4) (4) (4) (4) (4) (4) (4)

Depreciation AUD m 0 (1) (3) (10) (17) (15) (14) (14) (14) (8) (2) 0

E B I T AUD m (2) (1) 4 9 33 42 37 17 16 14 17 13

Net Interest AUD m 0 0 (1) (3) (3) (2) (1) (1) (0) (0) (0) 0

Tax Expense AUD m 0 (0) (2) (3) (10) (13) (12) (6) (6) (5) (6) (5)

N P A T AUD m (2) (1) 2 3 20 27 24 10 10 9 11 8

e p s (0.4c) (0.2c) 0.4 c 0.5 c 3.4 c 4.5 c 4.0 c 1.7 c 1.7 c 1.5 c 1.8 c 1.3 c Source : Beer & Co estimates

Beer & Co has a risked,

base case valuation of

ELT of 12.2c/share

Figure 27 shows Beer & Co’s derived valuation, on a per share basis, for ELT.

Figure 27 : Beer & Co valuation of ELT

risk 100% Product per share

Cleveland, hard-rock 75% $A 42 m $A 32 m 5.4 c


Cleveland Tailings 60% $A 13 m $A 8 m 1.3 c


Asset Sales 75% $A 34 m $A 26 m 4.3 c

Tungsten nom. $A 5 m $A 5 m 0.8 c

ELT other exploration nom. $A 2 m $A 2 m 0.3 c

ELT corporate costs 100% ($A 21 m) ($A 21 m) (3.6c)

Equity raised 100% $A 6 m $A 6 m 1.1 c

TOTAL $A 115 m $A 72 m 12.2 c

shares on issue 154.3m FPO shares

SPP raising 1.8 c 29m new shares

Issued to Rockwell 55% 225m new shares

Scoping Study 80m new shares

BFS 100m new shares

30 June 2013discount rate = 12 %


Beer & Co projects that ELT will need to raise equity to completed the scoping study and

undertake the feasibility study.



Comparatives

The tin market is a relatively small market, with total consumption of about 360kt/yr.

Nearly all listed companies with tin are listed on the ASX. Figure 28 show the companies

and some details about them. Only those highlighted would be regarded as being

genuine tin exposure.

Figure 28 : Other listed tin exposures on the ASX ASX Market Status Project

Code Capitalisation tin grade contained tin tin grade contained tin share M&I Sn M&I Sn eq. Rec total Sn total Sn eq Rec

Metals X - Renison Bell MLX.ASX $A 182m Producing 3.7 Mt 1.06% Sn 39 kt Sn 4.8 Mt 1.07% Sn 51 kt Sn 50% $ 994/t $ 1,487/t $ 744/t $ 1,112/t

including Rentails Scoping 13.9 Mt 0.51% Sn 71 kt Sn 15.1 Mt 0.56% Sn 84 kt Sn 50% $ 547/t $ 818/t $ 461/t $ 690/t

adding gold projects DFS Jan 2013 (??) 6,803 kt Sn eq 10,031 kt Sn eq varies $ 9/t $ 6/t

Gippsland Limited GIP.ASX $A 14m Commissioning 14.6 Mt 0.11% Sn 16 kt Sn 20.0 Mt 0.09% Sn 17 kt Sn 45% $ 408/t $ 639/t $ 370/t $ 580/t

including tantalum 14.6 Mt 0.47% Sn eq 68 kt Sn eq 44.5 Mt 0.19% Sn eq 83 kt Sn eq 45% $ 211/t $ 174/t

Wolf Minerals Ltd WLF.ASX $A 59m Funded, but 117 Mt 0.02% Sn 23 kt Sn 401 Mt 0.02% Sn 80 kt Sn 100% $ 1,228/t $ 1,861/t $ 358/t $ 543/t

including tungsten not fully permitted 117 Mt 0.16% Sn eq 187 kt Sn eq 401 Mt 0.15% Sn eq 603 kt Sn eq 100% $ 15/t $ 48/t

Venture Minerals VMS.ASX $A 32m BFS Nov. 2012 9.5 Mt 0.30% Sn 29 kt Sn 13.4 Mt 0.30% Sn 40 kt Sn 100% $ 227/t $ 315/t $ 161/t $ 223/t

including iron & tungsten 9.5 Mt 0.55% Sn eq 52 kt Sn eq 13.4 Mt 0.50% Sn eq 67 kt Sn eq 100% $ 101/t $ 97/t

Kasbah Resources Ltd KAS.ASX $A 42m BFS due Dec 2013 11.8 Mt 0.87% Sn 103 kt Sn 12.2 Mt 0.86% Sn 105 kt Sn 80% $ 101/t $ 136/t $ 97/t $ 132/t

Consolidated Tin Mines Ltd CSD.ASX $A 9m PFS due Aug 2013 1.3 Mt 0.72% Sn 9 kt Sn 4.8 Mt 0.60% Sn 29 kt Sn 50% $ 411/t $ 604/t $ 134/t $ 197/t

including iron 1.3 Mt 0.60% Sn eq 8 kt Sn eq 4.8 Mt 0.51% Sn eq 24 kt Sn eq 50% $ 211/t $ 159/t

Stellar Resources Ltd SRZ.ASX $A 12m PFS due June 2013 1.4 Mt 1.25% Sn 18 kt 6.3 Mt 1.14% Sn 71 kt Sn 100% $ 211/t $ 285/t $ 52/t $ 70/t

Ausnico Limited ANW.ASX $A 2m Scoping 0.0 Mt 0.00% Sn 0 kt Sn 46.8 Mt 0.15% Sn 68 kt Sn 100% $ 0/t $ 0/t $ 11/t $ 15/t

Elementos ELT.ASX $A 5m Scoping 4.2 Mt 0.70% Sn 12 kt Sn 10.0 Mt 0.53% Sn 53 kt Sn 100% $ 77/t $ 110/t $ 60/t $ 85/t

including tcopper & ungsten 4.2 Mt 0.56% Sn eq 24 kt Sn eq 13.9 Mt 0.33% Sn eq 46 kt Sn 100% $ 11/t $ 69/t

New Age Exploration NAE.ASX $A 15m Scoping 0.0 Mt 0.00% Sn 0 kt Sn 9.1 Mt 0.21% Sn 19 kt Sn 100% $ 0/t $ 0/t $ 205/t $ 293/t

including tungsten, copper & silver 0.0 Mt 0 kt Sn eq 9.1 Mt 0.61% Sn eq 56 kt Sn eq 100% $ 0/t $ 70/t

Monto Minerals MOO.ASX 100%

Measured & Indicated Resources Total Resoruces EV per tonne of (recoverable) tin in Resources

Source : IRESS, various companies, Beer & Co

A comparative shows

that more mature

projects are more highly

valued.....

which should follow as

more capital has been

put into them.

Figure 29 shows the comparative valuations of the ASX tin stocks. Figure 29 is organised

in order of maturity, and it shows that the producer, MetalsX, is the most highly valued,

while Venture and Kasbah are the next to get into production.

Figure 29 : EV per tonne of tin in Resources

$ 0/t

$ 100/t

$ 200/t

$ 300/t

$ 400/t

$ 500/t

$ 600/t

$ 700/t

$ 800/t

Metals X - Renison Bell

Venture Minerals

Consolidated Tin Mines Ltd

Kasbah Resources Ltd

Stellar Resources Ltd

Elementos

Ausnico Limited

Source : IRESS, various companies, Beer & Co

Figure 29 shows a decline in value with maturity, partly due to the capital that needs to

be invested to become a producer.



Conclusions

Elementos is in the process of merging with the unlisted company, Rockwell Minerals.

Rockwell Minerals’ main asset is the Cleveland tin-copper mine, which has 53kt of tin in

JORC Resources, plus 20kt copper and nearly 9kt tungsten.

Beer & Co speculates that ELT will

� raise equity to fund the completion of a scoping study;

� then proceed to a feasibility study;

� use the FS as a basis for attracting a joint venture party to assist in financing the

development; and

� seek strategic investors to monetise the tailings resources.

Our valuation of ELT on this basis is about 12c/share.

Figure 30 compares ELT to its most direct peers. It shows that ELT may have higher all in

cash costs, but much lower initial capital.

Figure 30 : Comparison of ASX listed tin companies

Achmmach Heemskirk Cleveland

Mining Inventory 14,000 kt 6,280 kt 6,119 kt

Sn grade 1.00 % Sn 1.14 % Sn 0.68 % Sn

other n/a n/a 0.25 % Cu

Annual mining rate 1,000 kt 600 kt 740 kt

Annutal tin production 7,400t 4,700t 6,600t

all in cash cost US 492 c/lb US 610 c/lb US 699 c/lb

First product Jun. 2015 Mar. 2015 Dec. 2016

Capital Cost (after FS) $A 167m $A 100m $A 82m Source : Beer & Co estimates

We believe that ELT is an outstanding investment opportunity.

While it has risks, it also has options and the development path may differ from that we

have used in this analysis.

We initiate research with a Buy recommendation.



Appendix

Tin Fundamentals

Figure A1 shows recent historical tin prices and Beer & Co’s projected tin prices, showing

that we expect tin prices to be high at this time as, in 2017, the world’s largest single

source, Minsur’s San Rafael mine, in Peru, is expected to shut taking out about 38kt/yr of

supply. We are confident that the mine will cease as Minsur state on their web-site that

they have ceased near mine exploration, and also production has been falling, with 2012

down to 26kt.

Figure A1 : Tin prices, historical v. projected and LME tin stocks

0 t

5,000 t

10,000 t

15,000 t

20,000 t

25,000 t

30,000 t

35,000 t

$ 0/t

$ 5,000/t

$ 10,000/t

$ 15,000/t

$ 20,000/t

$ 25,000/t

$ 30,000/t

$ 35,000/t

Jul. 07 Apr. 08 Jan. 09 Oct. 09 Jul. 10 Apr. 11 Jan. 12 Oct. 12 Jul. 13 Apr. 14 Jan. 15 Oct. 15 Jul. 16 Apr. 17 Jan. 18 Oct. 18 Jul. 19 Apr. 20

LME tin stocks

Tin price, LME cash

Projected prices

Source : IRESS, Beer & Co

Figure A1 shows that the tin price has performed in line with our expectation when we

prepared our estimates, in September 2012.

Our bullishness is underlined by the importance of Minsur to global supply; in 2011,

Minsur produced about 36kt, or about 10% of global tin consumption of about 360kt/yr.

ITRI is MORE bullish

Figure A2 : Analysts all expect higher prices

Source : ITRI presentation, September 2012



Figure A2 shows that ITRI (International Tin Research Institute) expects higher future

prices; higher than the projections used by Beer&Co in our analyses. ITRI is the only

organisation that undertakes tin market research, to complement its function of

developing tin consumption.

Tin supply is struggling

Figure A3 shows that the supply of tin from major producers has continued to fall, since

peaking in 2005.

Figure A3 : Production by major tin producers

0kt

50kt

100kt

150kt

200kt

250kt

300kt

350kt

2004 2005 2006 2007 2008 2009 2010 2011 2012

Other Latin America China

Other Indonesia P T Koba P T Timah

Source : ITRI, Beer & Co

However, Figure A4 shows that the shortfall in mine production has been generally

balanced by increasing secondary production. It also shows that the stock-piles

accumulated during the time of the International Tin Council, have been progressively

consumed.

Figure A4 : Falling primary but rising secondary production

$ 5,000/t

$ 10,000/t

$ 15,000/t

$ 20,000/t

$ 25,000/t

$ 30,000/t

150kt

200kt

250kt

300kt

350kt

400kt

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

secondary tin supply primary (mined) tin supply

tin demand tin pirce (real, 2012, USD terms)


Figure A5 is a list of tin projects nominated by ITRI as contributed to projected supply.

We have reviewed each project on this list and we regard some on this list as being

unlikely to proceed, in the absence of much higher tin prices than at present.



Accordingly, we have ranked the projects in terms of likelihood, and we believe that we

have been very kind in this ranking (in other words, if we were investing in these

projects, we would have fewer projects in the “high likelihood” category).

Reviewing this list shows that even with our generous treatment of projects, the volume

of tin that is expected to be produced from projects with a high likelihood is barely

enough to replace the projected fall in mine production from the San Rafael mine alone,

leave alone the expected continued fall in Indonesian and Chinese production.

This suggests that the trend in primary production shown in Figure A4 is likely to

continue; primary production is likely to continue to fall, or at best, remain flat

Figure A5 : Potential new sources of mined tin supply

Company Project Country High Medium Low

Minsur San Rafael talings Peru 7,500 t/yr

Syrymbet Syrymbet Kazakhstan 6,500 t/yr

Kasbah Resources Achmmach Morocco 5,600 t/yr

Amerilangui Ujin Narsiin Khundlen Mongolia 5,200 t/yr

TMR Limited offshore dredges Indonesia 5,000 t/yr

Metals X Rentails Australia 4,000 t/yr

Stellar Resources Heemskirk Australia 4,000 t/yr

Venture Minerals Mt Lindsay Australia 3,700 t/yr

P T Timah Deep offshore dredges Indonesia 3,600 t/yr

Consolidated Tin Mines Mt Garnet Australia 3,200 t/yr

Adex Mining Mt Pleasant Canada 3,200 t/yr

Deutsche Rostoff Gottesberg Germany 3,000 t/yr

Elementos Cleveland Australia 4,800 t/yr

Yunan Tin Wu Chang Ping China 3,000 t/yr

Sinchi Wayra Colquiri tailings Bolivia 2,700 t/yr

TNT Mines Aberfoyle Australia 2,500 t/yr

TNT Mines Ringarooma Bay Australia 500 t/yr

TNT Mines Moina Australia 1,000 t/yr

Silver Standard Pirquitas Argentina 2,500 t/yr40,400 t/yr 17,900 t/yr 13,200 t/yr


Demand is soft

Figure A4 shows that demand peaked in 2007 at about 373kt. It fell in 2008 to about

350kt and has been around that level since, apart from 2012, when demand fell to 333kt.

However, Figure A4 also shows that the fall in demand in 2012 matched a fall in supply so

that the year overall was roughly in balance.

Figure A6 shows that nearly half of tin consumption is in consumer electronics, which

includes computers and similar.

Tin is able to be recovered from consumer electronics relatively easily, which accounts

for the significant rise in secondary production shown in Figure A4.

It also accounts for the softness in tin demand shown in Figure A4 as demand has been

mitigated by miniaturisation, such as a tablet or note-book as opposed to a desk-top

computer, and thrifting.

We, along with nearly all other analysts, expect that demand will recover in 2013, leading

to supply deficits, though the projected deficit is well within available stocks.



Figure A6 : Tin consumption by sector

Figure A7 : Tin consumption by end use

13.5 %

18.5 %

32.0 %

21.2 %

7.8 %

6.9 %

Construction

Transport

Consumer Elecronics

Packaging

Machinery

Other

44.4 %

9.0 %

16.7 %

14.7 %

4.6 %

1.8 %

8.8 %

Solder - electronic

Solder - industrial

Tinplate

Chemicals

Brass & Bronze

Float glass

other

Source : ITRI, Beer & Co Source : ITRI, Beer & Co

Our $25,000/t Long Run price is modest

Figure A1 shows that we project a Long Run tin price of about $25,000/t. Figure A8

shows a supply curve for tin, to which we have added a line at $25,000/t to show that

our Long Run price projection is consistent with the data in this chart.

Figure A8 : Projected costs of tin supply

Source : ITRI / Greenfields Research, ITRI presentation, September 2012. Beer & Co

Conclusions

The tin price has held up reasonably well, especially compared with other mined

commodities. However, LME stocks of tin have increased during 2013 and are now a

little under 14kt, or about 10 days of supply, which is the tightest of LME metals, apart

from lead. However, much of this stock is of Indonesian refined material that barely

meets LME specification, but requires further refinement to be used as solder.

Tin prices have been subdued compared with expectations as demand has been weak.

All analysts expect demand to pick up as “hidden” stocks are exhausted and consumer

electronic demand recovers with the wave of miniaturisation being worked through.

Our bullishness is due to supply. Mine supply has fallen consistently, and we project that

mine supply, at best, will remain flat, and is likely to continue to fall, though not as

sharply as it has done in recent years.



Important Information

Confidential

This document is for the confidential use of the recipients only and is not to be reproduced without the authority

of Beer and Co Pty Ltd. It has been prepared at the request of Elementos Limited and Beer and Co Pty Ltd will

receive a fee for its preparation.

Disclaimer

The persons involved in or responsible for the preparation and publication of this report believe that the

information herein has been obtained from reliable sources and that any estimates, opinions, conclusions or

recommendations are reasonably held at the time of compilation. No warranty is made as to the accuracy of the

information in this document and, to the maximum extent permitted by law, Beer and Co Pty Ltd and its related

entities, their respective directors and officers disclaim all liability for any loss or damage which may be suffered by

any recipient through relying on anything contained or omitted from this document.

General Advice

The content is of a general nature and is based on a consideration of the securities alone, and as such is conditional

and must not be relied upon without advice from a securities adviser as to the appropriateness to you given your

individual investment objectives, financial situation and particular needs. Whilst this document is based on

information and assessments that are current at the date of publication, Beer and Co Pty Ltd has not undertaken

detailed due diligence on the information provided and has no obligation to provide revised assessments in the

event of changed circumstances.

Disclosure

Beer and Co Pty Ltd have been engaged by Elementos Limited to prepare this research report and is being paid a

fee for its preparation. In the future, Beer and Co Pty Ltd may provide capital raising services to Elementos Limited

on commercial terms. Directors of Beer and Co or other associate companies may own securities in Elementos

Limited. Beer and Co Pty Ltd seeks to do work with those companies it researches. As a result, investors should be

aware that Beer and Co Pty Ltd may have a conflict of interest that could affect the objectivity of this report.

Analyst Certification

The analyst responsible for this research report certifies that all of the views expressed reflect his personal views

about the securities and the issuer.

Report prepared by : Michael Beer

BEER AND CO PTY LTD ABN 88 158 837 186, AUTHORISED REPRESENTATIVE MELBOURNE VENTURE SECURITIES PTY LTD AFSL No.

224 313

Melbourne Office: Level 2, 11 Bank Place, Melbourne, Vic, Australia 3000

Telephone: Facsimile: Email:

(+613) 9600 3599 (+613) 9602 2291 [email protected]

ASX 25Jun13 Research Report

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