AXG Mining Limited

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AXG Mining Limited (“AXG” or “the Company”) (ASX: AXC) has entered into optionagreements with TSX listed Lara Exploration on two potentially “high impact”copper+/-gold+/-molybdenum porphyry projects in the prospective Andahualyas-Yaurimineral field of southern Peru.

This field hosts world class mines such as Tintaya, Las Bambas, and Antapaccay(Xstrata), Constancia (Hudbay Minerals), Haquria (First Quantum Minerals) andQuechua Project (Pan Pacific Copper Company). The belt currently hosts over 4Btof Inferred and Indicated Resources.

The option agreements allow AXG to earn up to 75% of the Condoroma andCoporaque Projects via a two stage farm in which will see the expenditure of up toA$10.50 million and cash/share payments of A$1.80 million.

Recent reconnaissance exploration at Condoroma and Coporaque has defined multipledrill ready targets which will be the focus of the maiden drill campaign commencingApril/May 2012. Condoroma is situated around 45 kilometres from a sealed road andCoporaque close to the town of Espinar. Both projects are also proximal to existingmining operations which could provide a treatment option in the event of future projectdevelopments.

Peru is fast becoming one of the hot spots of exploration and mining with copperproduction scheduled to increase to over 2.0 million tonnes per annum by 2015. Peruis now the second ranked copper producer of the world behind Chile and fourth interms of molybdenum production. The Peruvian Government has taken a tough stanceon minority groups opposed to mining. For example, recent tensions between localfarmers surrounding the proposed US$4.8b Minas Conga copper development whichsaw the imposition of a state of emergency by President Ollanata Humala.

The AXG technical team has also been strengthened recently led by geologist JeremyNiemi (15 years experience including stints at Noront Resources, Kinross and INCOExploration) and Peruvian Engineer Carlos Lzaro, RM Research believe theCompany now has the necessary manpower to execute the exploration program.

Funds from the current A$1.50 million capital raising will be applied to initial cashpayments to Lara Exploration (A$100K) and for the Company’s maiden drill programscheduled to commence in April/May 2012 on several drill ready targets.

We are maintaining a speculative buy on the Company ahead of the commencement ofexploration in mid 2012.

*Pro-Forma Capital Structure

Sector MaterialsShare Price (A$) 0.008Ordinary Shares –Halston (m) 165.0Placement (m) 170.0Fully Paid Ordinary Shares (m) 530.0Market Cap (undil) (A$m) 4.2

Approx Cash (A$m) 1.4*Post A$1.50m placement @ 0.9c + Acquisition of Peru exploration assets

Directors & Management

Alex Bajada Non-Exec ChairmanGordon Sklenka Exec DirectorRoland Berzins Non-Exec Dir & Co Sec

Major Shareholders

Penson Aust Noms 9.3%King Town Holdings Pty Ltd 9.3%Formaine Pty Ltd 3.0%Spartan Noms Pty Ltd 3.0%

Analyst

Guy Le Page +61 2 9488 0800

Share Price Performance

AXG Mining LimitedEnters world class Peruvian copper belt...

25th January 2012

ASX Code: AXCSpeculative Buy

– Copyright © 2012 RM Research - www.proactiveinvestors.com.au

25 January 2012

INVESTMENT CASEPreviously defined targets: Previous reconnaissance exploration on Condoroma andCoporaque has defined multiple drill ready targets which will be the focus of the maiden drillcampaign commencing April/May 2012.

World Class Mineral Endowment: RM Research believes both Condoroma and Coporaqueare strategically located along the Andahualyas-Yauri mineral field, a host of world classmines such as Tintaya, Las Bambas, and Antapaccay (Xstrata), Constancia (HudbayMinerals), Haquria (First Quantum Minerals) and Quechua Project (Pan Pacific CopperCompany). The belt is prospective for porphyry hosted Cu+/-Au+/-Mo deposits and hostsover 4Bt of Inferred and Indicated Resources.

Experienced Technical Team: Led by geologist Jeremy Niemi (15 years experienceincluding stints at Noront Resources, Kinross and INCO Exploration) and PeruvianEngineer Carlos Lzaro, RM Research believes the Company has the necessary manpower toexecute the exploration program.

Infrastructure Advantages: Condoroma is situated around 45 kilometres from a sealed roadand Coporaque close to the town of Espinar. Both projects are also proximal to existingmining operations which could provide a treatment option in the event of future projectdevelopments.

Peruvian Mining Industry from Strength to Strength: Peru is now ranked 2nd in worldcopper production (behind Chile), 4th in Molybdenum and has the 6th highest explorationexpenditure in the world. The country remains stable with a strong mining culture.

COMPANY OVERVIEW

AXG Mining is a mineral exploration company that listed on the Australian SecuritiesExchange in 2006 raising A$4.0 million to initially focus on mineral exploration in WesternAustralia.

The Company has recently switched its focus to South America where it has entered intooption agreements to earn up to 75% in two Cu+/-Au+/-Mo porphyry projects in SouthernPeru, namely the Condoroma and Coporaque, Projects. Significantly the projects are situatedalong the highly prospective Andahuaylas-Yauri belt, a known host of several world classCu+/-Au+/-Mo deposits.

RM Research

FIGURE 1: AXG MiningLtd key explorationprojects (source: AXGMining Ltd Presentation,November 2011).

– Copyright © 2012 RM Research – www.rmresearch.com.au

25 January 2012

EXPLORATION OVERVIEW

Farm-in agreement on Condoroma and CoporaqueIn early September 2011, AXC signed Letters of Intent with TSX Listed Lara Exploration Ltd(“Lara Exploration”) (TSX: LRA) to earn up to 75% in both the Condoroma and CoporaqueProjects, situated in the Cusco region of southern Peru. The projects comprise 24 mineralconcessions covering 17,764 hectares. Previous reconnaissance exploration has beensuccessful in outlining a number of drill targets which will be the target of follow up drilling bythe Company in April/May 2012.

Regional Exploration and Mining ActivityBoth Condoroma and Coporaque are strategically located along the Andahualyas-Yaurimineral field, a host of world class mines such as Tintaya (105Mt @ 1.16% Cu, 120-Ktpa Cuproduction), Las Bambas (1.50Bt @ 0.61% Cu, 160Ktpa Cu) and Antapaccay (105Mt @1.16% Cu, 160Ktpa Cu production) (Xstrata), Constancia (372Mt @ 0.39%, 100Ktpa Cuforecast) (Hudbay Minerals), Haquria (688Mt @ 0.63% Cu, 230Ktpa forecast Cu production)(First Quantum Minerals) and Quechua Project (680Mt @ 0.38% Cu, 75Ktpa forecast Cuproduction) (Pan Pacific Copper Company). The belt is prospective for porphyry hostedCu+/-Au+/-Mo deposits and hosts over 4Bt of Inferred and Indicated Cu+/-Au+/-MoResources.

Peru is ranked 2nd globally in copper production, 4th in the world in molybdenum productionand is South America’s largest gold producer. Peru is also ranked 6th globally and 2nd in LatinAmerica in terms of attracting exploration investment.

FIGURE 2: AXG MiningLimited Peruvianexploration projects(source, AXG Mining Ltd,presentation November2011).


25 January 2012

Condoroma Project (AXG earning 55-75%)

The project comprises 12 mining claims covering 9,816 hectares and lies adjacent to historicalAu, Cu, Ag, Pb, Zn mines. Previous geochemical sampling together with Induced Polarisation(“IP”) and Magnetic surveys has outlined a total of six drill targets (Figure 3) covering a totalarea of 1.7km x 0.80km. Diamond drilling is scheduled to commence in April/May 2012.

Skarn and porphyry copper mineralisation is the target, both common mineralisation stylesknown to host major mineral deposits in the region. Significant surface mineralization andstructural features transect the property and trend towards the Tintaya-Antapaccay deposits tothe northwest. An IP survey has revealed conductive targets along this trend which will be thetarget of the upcoming drill campaign.

Terms of Option Agreement

The Company may earn 55% by:

(i) On exercise of the option agreement a payment of US$100K together with furthercash payments of US$700K (mixture of AXG shares + cash), and

(ii) AXG can earn an addition 20% by:a. Cash payment to Lara Exploration of US$1.0 million within 60 days of

earning a 55% interest in the Condoroma, andb. Spending a further US$7.0 million over the subsequent 3 year period, andc. Completing a Pre-Feasibility Study within 4 years of executing the option for

an additional 20% interest.

Date Payments Exploration Explanatory NotesExpenditure

US$ US$Execution Date (“ED”) US$100K Cash payment upon signingED + 12 months (Yr 1) US$200K US$1.0m 1,500m Diamond Drilling

US$500K US$1.0m 2,000m Diamond DrillingED + 36 months (Yr 3) US$1.5mBy end of yr 3, aggregate payments of $800k and explor. expend of $3.5 million earns a 55% interestNotice Date (“ND”) US$1.0m ND within 60 days of earning 55%

ND + 36 months (Yr 6) US7.0mMinimum of A$1.50 million of explor.

Expend/yrND + 48 months (Yr 7) Delivery of NI 43-101 PFS

By end of yr 3 following ND, aggregate payments of US$1.0 million, exploration expenditures of US$7.0million and by end of yr 4 following ND, the delivery of a NI 43-101 Pre-Feasibility Study earns anadditional 20% interest

Aggregate payments of US$1.8 million, exploration expenditures of US$10.5 million and delivery of a NI43-101 Pre-Feasibility Study earns a 75% total interest in Condoroma

FIGURE 3: CondoromaProject, target area(source, Datastream,November 2011).

TABLE 1: AXG MiningLimited option and farm-in summary forCondoroma (source, AXGMining Ltd, Notice ofGeneral Meeting, and18th October 2011).


25 January 2012

Coporaque ProjectPrevious reconnaissance exploration by Lara Exploration has identified outcropping porphyryCu-Au-Mo mineralization and six areas worthy of follow up exploration. Follow up explorationwill consist of more detailed mapping and geochemical sampling ahead of a maiden drillcampaign later in the 2012 season.

Terms of Option Agreement

Pursuant to a Letter of Intent, the Company may earn 55% in the project by:

(i) On exercise of the option agreement a payment of US$100K together with furthercash payments of US$650K (mixture of AXG shares + cash), and

(ii) AXC can earn an addition 20% by:a. Cash payment to Lara Exploration of US$1.0 million within 60 days of

earning a 55% interest in Coporaque, andb. Spending a further US$7.0 million over the subsequent 3 year period, andc. Completing a Pre-Feasibility Study within 4 years of executing the option for

an additional 20% interest.

Date Payments Exploration Explanatory Notes

Expenditure

US$ US$

Execution Date (“ED”) US$100K Cash payment upon signing

ED + 12 months (Yr 1) US$200K US$0.5m

ED + 24 months (Yr 2) US$350K US$1.0m 1,000m Diamond Drilling

ED + 36 months (Yr 3) US$1.5m 1,500m Diamond Drilling

By end of yr 3, aggregate payments of $650k and exploration expenditures of $3.0 m earns a 55% interestNotice Date (“ND”) US$1.0m ND within 60 days of earning 55%

ND + 36 months (Yr 6) US7.0m Minimum of A$1.50 million of expend/yr

ND + 48 months (Yr 7) Delivery of NI 43-101 Pre-Feasibility Study

By end of yr 3 following ND, aggregate payments of $1.0 million, exploration expenditures of US$7.0 millionand by end of yr 4 following ND, the delivery of a NI 43-101 Pre-Feasibility Study earns anadditional 20% interest

Aggregate payments of US$1.65 million, exploration expenditures of US$10.0 million and delivery of a NI43-101. Pre-Feasibility Study earns a 75% total interest in Coporaque

TABLE 2: AXG MiningLimited option and farm-in summary forCoporaque Project(source, AXG Mining Ltd,Notice of GeneralMeeting, 18th October2011).


25 January 2012

MILESTONES

The 2012 program (Table 3) at Condoroma will provide the most interest to the market as drilltargets are further defined and a 1,500m drill program is launched. Coporaque remains moregrass roots with activity in 2012 likely to be limited to reconnaissance exploration ahead of amaiden drill program in 2013.

CORPORATEThe Company is currently issuing up to 170 million Shares at 0.9 cents each to raise up toA$1.5 million (before expenses of the Offer).

In addition to the cash and share payments to Lara Exploration as set out above, theCompany (pursuant to a Term Sheet dated 16 September 2011) will also acquire (subject todue diligence) 100% of the issued capital of Halston Exploration Inc. (“Halston”) which in turnhas the right to earn up to 75% interest in Condoroma and Coporaque:

(i) 126 million fully paid ordinary shares of AXG, and

(ii) reimbursement of up to US$150,000 in business development expenditures. Post theacquisition of Halston.

The above payments are subject to, inter alia, due diligence and the execution of the Optionand Farm In Agreement on both Condoroma and Coporaque.

The funds from the capital raising are to be applied approximately as follows:

ITEMFull

SubscriptionMinimum

SubscriptionPayment to Lara (A$) A$200,000 A$200,000

Condoroma/Coporaque Expenditure A$700,000 A$7,136

Expenses of the Prospectus offer A$107,712 A$27,275

Working Capital A$522,288 A$15,589

TOTALS A$1,530,000 A$250,000

TABLE 3: AXG MiningLimited importantmilestones. (source, AXGMining Limited,Prospectus, 2 December2011).

TABLE 4: AXG MiningLimited application offunds from a A$1.5 millionProspectus Issue.(source: AXG MiningLimited, Prospectus, 2December 2011).


25 January 2012

COPPER & BASE METAL OUTLOOK

Overall the GFMS Base Metal Index (Figure 4) is off 30% since March 2011 on the back of theEuropean debt crises and weak growth among developed economies. In addition to theEurope debt crisis, the preliminary reading of HSBC’s China showed the level of activity ofChinese factories stood at 49 reflecting contraction in December 2011, though the decline wasslower than in November. Growth in China’s export values eased to it’s softest pace in almosttwo years in October with partial indicators of domestic demand remaining relatively robust.While weaker investor demand implies that the price of copper may further weaken,supportive fundamentals should sustain prices around current levels. Stocks of all majormetals in LME warehouses remain above long-run average levels.Investor appetite for base metals has improved over the past month or so, with most industrialmetals prices recovering somewhat from heavy falls recorded in September.RM Research is forecasting further market volatility to drive base metal price movements overthe coming months. While tight supply side factors are persisting in some of the base metalsmarkets (e.g. copper) – supply is projected to pick up over the next few years. Apprehensionover slowing growth in the emerging economies, most notably China, has generated someconcern over whether demand from these economies will be sufficient to maintain currentprices. We also maintain our view that demand from emerging economies will offset weakerdeveloped economy growth and expected increases in metal supply.

FIGURE 4: Base metalperformance May 2005 –2011 (source,Datastream, November2011).

FIGURE 5: 5 Year GFMSBase Metal Index (source,KITCO, December 2011).


25 January 2012

PERUVIAN MINING SECTORMining accounts for around 61% of Peru’s exports and 5% of GDP. Current extraction coversgold, copper, silver, lead, zinc, molybdenum, tin and iron with the majority of mines(Copper/Gold) situated in the Andes region.

Peru ranks highest in Latin America in terms of its climate for investment in mining. Theestimated portfolio of mining investment is composed of 41 major projects, including bothexploration and expansion projects, which together amount to US$42.5 billion for the period2010-2016. Over US$6.8 billion of the announced investment will come from miningcompanies such as Xstrata Copper and Antamina (BHP Billiton, Xstrata Copper).

Despite the huge investment in Peru by multinational mining companies, the recentconfrontation over US$4.8 billion Minas Conga development between President Humala andlocal protesters – which also included the declaration of a state of emergency, demonstratesthat clashes between local farming communities and multinational mining companies are setto continue for the foreseeable future.

Investment in mineral exploration in Peru has grown rapidly in the last three years and nowaccounts for 5% of the global exploration budget (>US$534 million). According to the MetalsEconomics Group, Peru ranked 6th in the world and 2nd in Latin America for investment inexploration.

RISK ANALYSISThe Company is primarily exposed to copper and recent declines in base metals on theback of the European debt crisis together with poor economic indicators in the developedeconomies could put further pressure on base metals in the medium term.

Further declines in equity markets may continue to put pressure on junior resourcecompanies as investors switch out of “risk” into perceived safe haven investments. Ourmedium term view is that the risk premium has been eroded for many junior resourcecompanies and we see near term upside.

Political unrest in Peru, which had a traditionally strong union base, could see an increasein risk rating for the country and a decline in exploration and mining activity. RMResearch does not perceive this to be a significant risk at this stage however the recentconfrontation over US$4.8b Minas Conga development between President Humala andlocal protesters – which also included the declaration of a state of emergency,demonstrates that clashes between local farming communities and multinational miningcompanies are set to continue for the foreseeable future.

There is a risk that AXG will not be able to raise sufficient funds to either exercise theoption or meet the expenditure obligations as set out above due to the prevailing difficultconditions for riskier asset classes.

RM Research


25 January 2012

DIRECTORS AND MANAGEMENTAlex Bajada, Dip. Ed NON-EXEC CHAIRMAN

Mr. Bajada has many years of experience in the corporate sector and the management ofpublic companies. He is Executive Director of Spartan Nominees Pty Ltd, Chairman of OdinEnergy Ltd and Excalibur Mining Limited, Director of Wesbeam Pty Ltd andHawkesbridge Limited and independent Director of the WA Local GovernmentSuperannuation Plan.

Gordon Sklenka, B.Comm. EXEC DIRECTOR

Mr. Sklenka has over 15 years of experience in corporate finance in the areas of capitalraisings, IPOs, acquisitions and project finance in the resources and technology sectors. Mr.Sklenka has worked with a number of listed public companies in both Australia and Canadaand developed extensive experience in company formation, capital raising and projectacquisition. Mr. Sklenka is currently a Director of Tribune Resources NL and Rand MiningNL.

Roland Berzins, MBA NON-EXEC DIRECTOR

Mr. Berzins has over 21 years of experience in the mining industry and was previously ChiefAccountant for 6 years for Kalgoorlie Consolidated Gold Mines Pty Ltd. Since 1996 Mr.Berzins has been company secretary for a variety of ASX listed companies, and has also hadexperience in retail, merchant banking, venture capital and SME business advisory.

Jeremy Niemi P.Geo. VICE PRESIDENT EXPLORATION

Geologist with 15+ years experience in the discovery and development of gold, base metaland iron ore deposits Previously VP of Geology for Noront Resources, Manager of TechnicalServices at Kinross Gold, and INCO Exploration.

Carlos Salinas Lazaro EXPLORATION MANAGER

Geological engineer with 25+ years experience in exploration and project generation of Cu-Mo-Au porphyry deposits.

Brenda Moyano GENERAL MANAGER

14+ years experience performing administrative and management services for mineralexploration companies in Peru Previously worked for Minera Newcrest Peru S.A., MineraMeridian Peru SAC, and Peruvian Latin Resources.

Ivo Polach BUSINESS DEVELOPMENT MANAGER

15+ years of project management, generation, development, logistics in Latin America andworldwide Previous experience with Altynor Gold, Apoquindo Minerals, MawsonResources, and Aeroquest Airborne.


25 January 2012

CONCLUSIONCondoroma and Coporaque represent two high-impact base metal projects situated close toinfrastructure, operating mines and in a world class mineral province with over 4Bt ofresources that remains in its infancy. With drill-ready targets at both projects, the market willbe taking significant interest in exploration activity as it gears up for its maiden drill program inApril/May 2012. Led by seasoned geologist, Jeremy Niemi, RM Research remains cautiouslyoptimistic of a fruitful field season. The primary risk in our view is the ability of the Company toraise sufficient funds to fulfil its commitment over the next 12 months in a fairly difficult marketfor junior explorers.

Speculative Buy.

RM Research


25 January 2012

Registered OfficesPerthLevel 2, 6 Kings Park RoadWest Perth WA 6005

Phone: +61 8 9321 3277Fax: +61 8 9321 8399

PO Box 154West Perth WA 6872

Email / [email protected]

RM Research Recommendation CategoriesCare has been taken to define the level of risk to return associated with a particular company.Our recommendation ranking system is as follows:

Buy Companies with ‘Buy’ recommendations have been cash flow positive for some time and have a moderate tolow risk profile. We expect these to outperform the broader market.

Speculative Buy We forecast strong earnings growth or value creation that may achieve a return well above that of thebroader market. These companies also carry a higher than normal level of risk.

Hold A sound well managed company that may achieve market performance or less, perhaps due to anovervalued share price, broader sector issues, or internal challenges.

Sell Risk is high and upside low or very difficult to determine. We expect a strong underperformance relative tothe market and see better opportunities elsewhere.

Disclaimer / DisclosureThis report was produced by RM Research Pty Ltd, which is a Corporate Authorised Representative of RM Capital Pty Ltd (Licence no. 221938). RM Research will receivepayment of A$35,000 for the compilation and distribution of four research reports. RM Research Pty Ltd has made every effort to ensure that the information and materialcontained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of theinformation and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, RM Research Pty Ltddoes not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is forinformation purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities. The securities recommended by RM Researchcarry no guarantee with respect to return of capital or the market value of those securities. There are general risks associated with any investment in securities. Investorsshould be aware that these risks might result in loss of income and capital invested. Neither RM Research nor any of its associates guarantees the repayment of capital.WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particularinvestor’s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this documentwithout obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financialsituation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any)before making any decision.DISCLOSURE: RM Research Pty Ltd and/or its directors, associates, employees or representatives may not effect a transaction upon its or their own account in theinvestments referred to in this report or any related investment until the expiry of 24 hours after the report has been published. Additionally, RM Research Pty Ltd may have,within the previous twelve months, provided advice or financial services to the companies mentioned in this report. As at the date of this report, the directors, associates,employees, representatives or Authorised Representatives of RM Research Pty Ltd and RM Capital Pty Ltd may hold shares in Dourado Resources Limited.

AXG Mining Limited

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