E: mike [email protected] Focus Minerals Ltd...

of 15

Focus Minerals Ltd

Gold

: P

rodu

ce

r

Share Price $241m $0.070

Valuation - (pre bid) $386m $0.11

Valuation - (pro forma) $536m $0.12

Issued Capital -current 3,440.5m

Issued Capital -pro-forma (est) 4,518.5m

Market Cap-current $240.8m

Market Cap -pro-forma (est) $316.3m

Cash and Bullion- est $37.5m

Debt (est) $0.0m

EV - pre bid $203.3m

EV - pro-forma $278.8m

EV/Resource Oz - pre bid $90/oz

EV/Resource Oz - pro forma $62/oz

EV/Reserve Oz - pre bid $813/oz

EV/Reserve Oz - pro forma $372/oz

FY10a FY11e FY12e

Prod (koz Au) 63 73 227

Cash Costs (A$/oz) 801 941 870

Op Cash Flw 28 35 126

NPAT 10.9 20.4 72.0

CF/Share (cps) 0.8 1.3 2.1

EPS (cps) 0.4 0.6 1.6

P/E 18.4 12.7 4.4

Resources (Moz Au) - pre bid 2.25

Resources (Moz Au) - pro forma 4.50

Reserves (Moz Au)- pre bid 0.25

Reserves (Moz Au)- pro forma 0.75

Author:

Mike Millikan

Resources Analyst

Ph: +61 8 9268 2805

E: [email protected]

FML.asx

Buy

6 Jul 2011

Brief Business Description:

WA gold developer/producer

Campbell Baird (CEO)

Hartleys Brief Investment Conclusion

CRE Acquisition could increase production to

230Kozpa in CY12. Reserves and resources

doubled.

Chairman & MD

Don Taig (Chairman)

Hartleys has completed a capital raising in the past

12 months for Focus Minerals Limited (“Focus”), for

w hich it has earned fees. Hartleys is acting as

Corporate Adviser to Focus in its friendly off-market

takeover of Crescent Gold Limited for w hich it w ill

earn fees. See back page for full disclosure.

Company Address

Level 30, 44 St Georges Terrace

Perth WA 6000

FOCUS MINERALS LTD

Friendly Bid for Crescent adds Production Ounces Hartleys is a transaction adviser to FML in respect of this bid

Focus Minerals Limited (“Focus”, “FML”, “Company”) has made an off-

market takeover for Crescent Gold Limited (“Crescent”, “CRE”). The bid is

friendly and Crescent’s board is unanimously recommending the offer and

have provided acceptances for all their shares. The consideration being

offered to Crescent Shareholders is one FML share for every 1.18 CRE

shares held. Focus has also entered into a pre-bid acceptance agreement

with Crescent’s major shareholder, Deutsche Bank Group (“Deutsche”),

which owns 29.23% of Crescent. The pre-bid agreement is in respect of

19.9% of shares in Crescent. In the absence of a superior offer, Deutsche

intends to accept the bid for the remaining 9.33%. Focus currently has a

diluted 18.5% relevant interest in Crescent following conversion of a

convertible note to CRE shares by note holders.

Combined production of 230Kozpa targeted for CY2012 The transaction enables Focus to grow production, double resources and

diversify operations. Targeted production from Crescent’s Laverton

operation is expected to add ~100kozpa for combined production of

~230koz in CY2012.

Adverse weather conditions impacted the Laverton operations during the

Dec CY’10 and March CY’11 quarters, causing a loss of haulage days and a

decrease to ore processed. Reduced production and revenue resulted in

tight working capital which hampered CRE’s development progress at

Laverton. We see the strong balance sheet of Focus, along with FML’s

management/operational expertise as important factors for the turnaround of

the Laverton operation. Operational efficiencies provide an opportunity to

reduce costs and improve cash flows, but the biggest improvements can

come through improved ore scheduling (increase mined ore grades and

improve processed tonnes). Focus is targeting cash costs below $900/oz,

which we believe is attainable.

Resources double to 4.5Moz, Reserves now 746Koz

The combined entity will have gold resources of 4.5Moz. Crescent’s current

resource is 2.25Moz at a grade of 2.1g/t Au, with the vast majority of the

resources contained within shallow-oxide open pits. Focus’ current resource

is also 2.25Moz but at a slightly higher grade of 2.6g/t Au, due to some

higher grade underground resources. Combined reserves through the

merger would be ~746koz at grade of ~2.1g/t Au. Focus’ post merger

EV/Resource metric is calculated to be $62/oz, a considerable discount to

its producer peer’s of $115/oz, which provides a revaluation opportunity.

A pipeline of exploration opportunities The combined group has a strong portfolio of expanding mine operations

and a pipeline of exploration opportunities. Post-merger integration will

provide the financial capability and in-house experience to unlock CRE’s

exploration value across the Laverton district; a well endowed goldfield that

has produced over 25Moz of gold from deposits less than 200m deep. Our

preliminary valuation of Crescent sees value in the transaction and we

continue to recommend Focus Minerals Limited as a Buy. The offer opened

on 30th June 2011 and closes on 1

st August 2011, unless extended.

Hartleys Limited ABN 33 104 195 057 (AFSL 230052) 141 St Georges Terrace, Perth, Western Australia, 6000

Hartleys does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the

firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single

factor in making their investment decision.

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.0

50.0

100.0

150.0

200.0

250.0

Jul-11Mar-11Nov-10Jul-10

Volume - RHS

FML Shareprice - LHS

Sector (S&P/ASX SMALL RESOURCES) - LHS

A$ M

Focus Minerals Ltd

Source: IRESS

Hartleys Limited Focus Minerals Limited 6 July 2011

of 15

SUMMARY MODEL- FML CURRENT

Focus Minerals Ltd Share Price

FML $0.070 Buy

Key Market Information Directors Company Information

Share Price $0.070 Don Taig (Chairman) Level 30, 44 St Georges Terrace

Market Capitalisation $241m Campbell Baird (CEO) Perth WA 6000

52 Week High-Low $0.07-$0.04 Phil Lockyer (Non-Exec Director) Tel: +61 8 9215 7888

Issued Capital 3440.5m Bruce McComish (Non-Exec Director) Fax: +61 8 9215 7889

Issued Capital (fully diluted inc. ITM options) 3440.5m Gerry Fahey (Non-Exec Director) Web: w w w .focusminerals.com.au

Options 77.9m@$A0.10

Hedging None Top Shareholders -December 2010 m shares %

Yearly Turnover/Volume $495.7m/7,392.6m shares

Liquidity Measure (Yearly Turnover/Issued Capital) 215% 1 Sector Investment Managers Ltd 100.00 2.91%

Valuation $0.11 2 Old Mutual (Institutional Group) 65.20 1.90%

Price Target $0.11 3 DWP Bank 61.00 1.77%

4 New City Investment Managers Ltd 60.00 1.74%

5 Focus Minerals Management 70.50 2.05%

Financial Performance Unit FY2010A FY2011F FY2012F FY2013F 6

7

Net Revenue A$m 77.4 108.6 193.7 197.3 8

Total Costs A$m (53.4) (74.8) (110.2) (111.1) 9 Reserves & Resources Gold Mt g/t Au Koz Attrib.

EBITDA A$m 24.0 33.8 83.5 86.1 #

Depreciation/Amort A$m (12.2) (19.3) (22.7) (25.2) Gold

EBIT A$m 11.8 14.5 60.8 60.9 Reserves - Total 2.687 2.6 223 223

Net Interest A$m (0.9) 0.1 2.2 2.9 Surface Stocks - Total 0.84 0.9 25 25

Pre-Tax Profit A$m 10.9 14.6 63.0 63.7 Reserves-Total M ar-11 3.53 2.2 247 247

Tax Expense A$m - - (18.9) (19.1)

NPAT A$m 10.9 14.6 44.1 44.6 Tindals Project - Total 13.11 2.8 1,186 1,186

Abnormal Items A$m - - - - Mount Project - Total 2.09 5.5 370 370

Reported Profit A$m 10.9 14.6 44.1 44.6 Lindsays Project - Total 7.91 1.8 470 470

Three Mile Hill Project - Total 1.52 2.0 100 100

Financial Position Unit FY2010A FY2011F FY2012F FY2013F Norris Project - Total 1.87 2.1 124 124

Resources-Total M ar-11 26.51 2.6 2,250 2,250

Cash A$m 7.2 35.3 92.3 147.9

Other Current Assets A$m 10.1 13.8 16.1 16.1 Reserves & Resources Nickel Mt Ni% Kt Attrib.

Total Current Assets A$m 17.3 49.1 108.4 164.0

Property, Plant & Equip. A$m 39.8 31.0 40.3 47.2 Nickel

Exploration A$m 58.2 80.3 76.3 72.2 Inferred Resource- Total 0.59 2.2 13 13

Investments/other A$m - - - -

Tot Non-Curr. Assets A$m 98.0 111.3 116.7 119.4

Total Assets A$m 115.3 160.4 225.0 283.4 Production Summary Unit FY2010A FY2011F FY2012F FY2013F

*Attributable

Short Term Borrow ings A$m (0.1) (0.1) (0.1) (0.1) Payable Gold Metal 000oz 63 73 132 134

Other A$m (13.7) (9.7) (11.4) (11.4) Cash Costs (incl. royalty) $A/oz 801 941 783 778

Total Curr. Liabilities A$m (13.8) (9.8) (11.4) (11.5)

Long Term Borrow ings A$m (0.0) (0.3) (0.3) (0.3) Price Assumptions Unit FY2010A FY2011F FY2012F FY2013F

Other A$m (1.7) (1.7) (20.6) (30.9)

Total Non-Curr. Liabil. A$m (1.8) (2.1) (21.0) (31.3) Gold US$/oz - 1383 1459 1394

Total Liabilities A$m (15.6) (11.9) (32.4) (42.8) Exchange Rate A$/US$ - 0.99 1.03 0.98

$A Gold A$/oz 1155 1402 1423 1429

Net Assets A$m 99.7 148.5 192.6 240.6

Hedging Unit FY2010A FY2011F FY2012F FY2013F

Cashflow Unit FY2010A FY2011F FY2012F FY2013F

Total Forw ard Sales - Gold 000oz 9.4 - - -

Operating Cashflow A$m 27.9 26.9 82.8 86.2 Forw ard Gold Price $A/oz 994 - - -

Income Tax Paid A$m - - - (8.8)

Interest & Other A$m (0.0) 0.1 2.2 2.9 Sensitivity Analysis Valuation ($/s) NPAT EPS (¢) CFPS (¢)

Operating Activities A$m 27.8 27.0 84.9 80.2

Base Case 0.11 14.6 0.5 1.1

PP&E + Development A$m (35.7) (16.0) (16.0) (16.0) Exchange Rate +10% 0.09 9.6 0.3 0.9

Exploration A$m (6.3) (16.3) (12.0) (12.0) Exchange Rate -10% 0.14 20.7 0.7 1.3

Investments A$m 0.2 0.0 - - Gold Price +10% 0.14 20.1 0.6 1.3

Investment Activities A$m (41.7) (32.3) (28.0) (28.0) Gold Price -10% 0.09 9.1 0.3 0.9

Operating Costs +10% 0.10 11.1 0.4 1.0

Repayment of Borrow ings A$m (8.5) - - - Operating Costs -10% 0.13 18.1 0.6 1.2

Equity A$m 8.7 35.1 - 3.4 *N.B. NPAT, EPS, CFPS forecasts are for FY2011

Dividends Paid A$m - - - -

Financing Activities A$m (0.2) 33.4 - 3.4 Share Price Valuation (NAV) Est. $m Est. $/share

Net Cashflow A$m (14.1) 28.1 56.9 55.6 Coolgardie (NPV @ 8%) 302.7 0.088

Nepean Nickel Asset 15.0 0.004

Ratio Analysis Unit FY2010A FY2011F FY2012F FY2013F Exploration 30.0 0.009

Cash 31.1 0.009

Cashflow Per Share A¢ 0.8 1.1 1.9 2.0 Forw ards 0.0 0.000

Cashflow Multiple X 8.7 6.5 3.6 3.5 Corporate Overheads (NPV @ 3%) (6.1) (0.002)

Earnings Per Share A¢ 0.4 0.5 1.3 1.3 Total Debt - -

Price to Earnings Ratio X 18.4 15.2 5.5 5.5 Tax Losses 6.2 0.002

Dividends Per Share A¢ - - - - Options & Other Equity 6.9 0.002

Dividend Yield % - - - - Total 385.7 0.11

Net Debt / Equity % na na na na

Interest Cover X na na - - Spot Valuation

Return on Equity % 11% 10% 23% 19% (AUDUSD: 1.07, Gold: US$1,492/oz) 428.1 0.12

Analyst: Mike MillikanPhone: +61 8 9268 2805

Sources: IRESS, Company Information, Hartleys Research

July 2011

Last Updated: 06/07/2011


Page 2 of 15

PRELIM SUMMARY MODEL- COMBINED ENTITY

Focus Minerals Ltd Share Price

FML $0.070 Buy

Key Market Information Directors Company Information

Share Price $0.070 Don Taig (Chairman) Level 30, 44 St Georges Terrace

Market Capitalisation $316m Campbell Baird (CEO) Perth WA 6000

52 Week High-Low $0.07-$0.04 Phil Lockyer (Non-Exec Director) Tel: +61 8 9215 7888

Issued Capital 4515.8m Bruce McComish (Non-Exec Director) Fax: +61 8 9215 7889

Issued Capital (fully diluted inc. ITM options) 4515.8m Gerry Fahey (Non-Exec Director) Web: w w w .focusminerals.com.au

Hedging None Top Shareholders m shares %

Yearly Turnover/Volume $494.5m/7,376.8m shares

Liquidity Measure (Yearly Turnover/Issued Capital) 163% 1 Sector Investment Managers Ltd 100.00 2.91%

Valuation $0.12 2 Old Mutual (Institutional Group) 65.20 1.90%

Price Target $0.08 3 DWP Bank 61.00 1.77%

4 New City Investment Managers Ltd 60.00 1.74%

5 Focus Minerals Management 70.50 2.05%

Financial Performance Unit FY2010A FY2011F FY2012F FY2013F 6

7 Reserves & Resources Gold Mt g/t Au Koz Attrib.

Net Revenue A$m 77.4 108.6 328.6 339.5 8

Total Costs A$m (53.4) (74.8) (204.1) (204.7) 9 Gold

EBITDA A$m 24.0 33.8 124.5 134.8 # Reserves - Laverton 6.385 2.3 473 473

Depreciation/Amort A$m (12.2) (19.3) (24.3) (31.6) Reserves - Coolgardie 2.687 2.6 223 223

EBIT A$m 11.8 14.5 100.2 103.2 Surface Stocks - Total 1.72 0.9 51 51

Net Interest A$m (0.9) 0.1 2.6 5.1 Reserves-Total 10.80 2.2 746 746

Pre-Tax Profit A$m 10.9 14.6 102.8 108.3

Tax Expense A$m - - (30.8) (32.5) Laverton Project - Total 31.61 2.2 2,254 2,254

NPAT A$m 10.9 14.6 72.0 75.8 Tindals Project - Total 13.11 2.8 1,186 1,186

Abnormal Items A$m - - - - Mount Project - Total 2.09 5.5 370 370

Reported Profit A$m 10.9 14.6 72.0 75.8 Lindsays Project - Total 7.91 1.8 470 470

Three Mile Hill Project - Total 1.52 2.0 100 100

Financial Position Unit FY2010A FY2011F FY2012F FY2013F Norris Project - Total 1.87 2.1 124 124

Resources-Total 58.12 2.4 4,504 4,504

Cash A$m 7.2 35.3 117.0 199.1

Other Current Assets A$m 10.1 13.8 20.1 20.0 Reserves & Resources Nickel Mt Ni% Kt Attrib.

Total Current Assets A$m 17.3 49.1 137.1 219.2

Property, Plant & Equip. A$m 39.8 31.0 48.9 60.3 Nickel

Exploration A$m 58.2 80.3 79.7 75.6 Inferred Resource- Total 0.59 2.2 13 13

Investments/other A$m - - - -

Tot Non-Curr. Assets A$m 98.0 111.3 128.5 135.9 Production Summary Unit FY2010A FY2011F FY2012F FY2013F

Total Assets A$m 115.3 160.4 265.6 355.1 *Attributable

Payable Gold Metal 000oz 63 73 227 234

Short Term Borrow ings A$m (0.1) (0.1) (0.1) (0.1) Cash Costs $A/oz 801 941 870 847

Other A$m (13.7) (9.7) (19.9) (20.0)

Total Curr. Liabilities A$m (13.8) (9.8) (20.0) (20.0) Price Assumptions Unit FY2010A FY2011F FY2012F FY2013F

Long Term Borrow ings A$m (0.0) (0.3) (0.3) (0.3)

Other A$m (1.7) (1.7) (18.9) (29.1) Gold US$/oz - 1383 1459 1394

Total Non-Curr. Liabil. A$m (1.8) (2.1) (19.3) (29.5) Exchange Rate A$/US$ - 0.99 1.03 0.98

Total Liabilities A$m (15.6) (11.9) (39.3) (49.5) $A Gold A$/oz 1155 1402 1423 1429

Net Assets A$m 99.7 148.5 226.3 305.6 Hedging Unit FY2010A FY2011F FY2012F FY2013F

Cashflow Unit FY2010A FY2011F FY2012F FY2013F Total Forw ard Sales - Gold 000oz 9.4 - - -

Forw ard Gold Price $A/oz 994 - - -

Operating Cashflow A$m 27.9 26.9 126.1 134.9

Income Tax Paid A$m - - (13.7) (22.3) Sensitivity Analysis Valuation ($/s) NPAT EPS (¢) CFPS (¢)

Interest & Other A$m (0.0) 0.1 2.6 5.1

Operating Activities A$m 27.8 27.0 115.1 117.8 Base Case 0.12 72.0 1.6 2.1

Exchange Rate +10% 0.09 51.5 1.1 1.7

PP&E + Development A$m (35.7) (16.0) (24.0) (24.0) Exchange Rate -10% 0.15 97.3 2.2 2.7

Exploration A$m (6.3) (16.3) (16.0) (15.0) Gold Price +10% 0.14 94.7 2.1 2.6

Investments A$m 0.2 0.0 - - Gold Price -10% 0.09 49.4 1.1 1.6

Investment Activities A$m (41.7) (32.3) (40.0) (39.0) Operating Costs +10% 0.10 58.4 1.3 1.8

Operating Costs -10% 0.13 85.7 1.9 2.4

Repayment of Borrow ings A$m (8.5) - - - *N.B. NPAT, EPS, CFPS forecasts are for FY2012

Equity A$m 8.7 35.1 - 3.4

Dividends Paid A$m - - - - Share Price Valuation (NAV) Est. $m Est. $/share

Financing Activities A$m (0.2) 33.4 - 3.4

Coolgardie (NPV @ 8%) 302.7 0.067

Net Cashflow A$m (14.1) 28.1 75.1 82.2 Laverton Gold (NPV @ 10%) 119.1 0.026

Crescent Other Assets 15.0 0.003

Ratio Analysis Unit FY2010A FY2011F FY2012F FY2013F Nepean Nickel Asset 15.0 0.003

Exploration 40.0 0.009

Cashflow Per Share A¢ 0.8 1.1 2.1 2.4 Cash 37.5 0.008

Cashflow Multiple X 8.7 6.1 3.3 3.0 Forw ards 0.0 0.000

Earnings Per Share A¢ 0.4 0.5 1.6 1.7 Corporate Overheads (NPV @ 3%) (6.1) (0.001)

Price to Earnings Ratio X 18.4 14.3 4.4 4.2 Total Debt - -

Dividends Per Share A¢ - - - - Tax Losses 6.0 0.001

Dividend Yield % - - - - Options & Other Equity 6.9 0.002

Net Debt / Equity % na na na na Total 536 0.12

Interest Cover X na na - -

Return on Equity % 11% 10% 32% 25%

Analyst: Mike MillikanPhone: +61 8 9268 2805

Sources: IRESS, Company Information, Hartleys Research

July 2011

Last Updated: 06/07/2011


Page 3 of 15

LAVERTON GOLD PROJECT

Overview Crescent Gold Limited’s (“Crecent”, “CRE”) Laverton Gold Project is located 250km

north-north east of Kalgoorlie, in and around the small mining district of Laverton,

Western Australia. Laverton is a prolific gold production region with major gold

mines, such as Barrick Gold’s Granny Smith (>3Moz) and Wallaby (7Moz) and

AngloGold Ashanti’s Sunrise Dam (7Moz). The goldfield has produced over 25Moz

of gold with current production estimated to be over 500kozpa from deposits less

than 200m deep.

Crescent controls over 1400km2 of mining, exploration and prospecting licences

within the Laverton district. The tenement package contains a current resource of

over 2.25Moz from multiple shallow oxide gold deposits and one underground

resource. CRE currently has an Ore Processing Agreement (OPA) with Barrick Gold.

Fig. 1: Laverton Gold Project, WA

Granny Smith mil l 3.8mtpa

OPA with Barr ick

Most ly shallow oxide gold deposits

amenable to open pit mining

Source: Crescent Gold Limited

Company History Crescent listed on ASX in March 2003 following the acquisition of the Laverton gold

assets. The gold project was commissioned in March 2007 as an open pit operation

processing ore through the refurbished Barnicoat mill (1mtpa) for ~90kozpa over an

expected 4 year mine life. In August 2007 the plant was upgraded to 1.5mtpa

through the addition of a second ball mill. The operation was then placed on care

and maintenance in July 2008 due to escalating costs, ore crushing issues and

reliance on its single ore source (Sickle Deposit).

Project located 250km

north east of

Kalgoor l ie

Controls over 1400km 2

of ground with a

2.25Moz resource

Project f irst

commissioned in

March 2007 and then

placed on care and

maintenance in July

2008 due to escalat ing

costs, mil l problems

and underperformance

of ore source


Page 4 of 15

After a 12-month review of operations and development of more open pits, CRE

executed an Ore Purchase Agreement (OPA) with Barrick Gold in June 2009.

Financial terms of the agreement are confidential and under the OPA Crescent does

not own the out-turn (gold produced), so CRE cannot state a direct cash cost. Each

milling campaign runs for ~50 days per quarter for targeted production of over

100kozpa. CRE extended the initial 2-year term to a 4-year term in April 2010; the

OPA is currently set to finish in June 2013.

The ore is treated through the 3.8mtpa Granny Smith mill located ~ 20km from the

Laverton Gold Project. The OPA provides mutual benefits for both companies

allowing Barrick to fill idle mill capacity (effectively lowering milling costs) and

providing a low capital/lower processing alternative to CRE.

Crescent’s initial aim was to fill 600kt – 700kt of idle capacity per quarter for ~2.5-

2.8mtpa (utilising ~65-70% of the mill spare capacity). Barrick processing charge is

determined on an open book/transparent basis which includes processing cost +

~10%. During the processing campaigns gold pours are undertaken roughly every

fortnight, with CRE receiving cash payments for ~50% of the value of the gold at the

time the gold doré is shipped. A final reconciliation payment (less costs and margin)

is paid to CRE at the end of each 50 day campaign period.

The CRE Barnicoat mill remains on care and maintenance and is generally

considered to be in good condition, though it requires a new crushing circuit (circa

$10m) and some minor refurbishment (mostly cosmetic), if ever recommissioned.

Fig. 2: Granny Smith Mill (LHS)and Barnicoat Mill (RHS)

Source: Barrick Gold Corporation; Hartleys Research

CRE Quarterly Performance - OPA As mentioned the OPA was executed with Barrick Gold in June 2009 with

processing commenced on the 12th October 2009 for first gold poured 21

st October

2009 (Dec Q CY2009). The first campaign generated equivalent cash costs (C1) of

A$841/oz, which was slightly lower than the long-term equivalent cash cost forecast

of A$850/oz. Our estimates on Fig.4 (RHS) are rough estimates only, calculated

from reported production costs over reported ounces produced (they are indicative

only). The production for the December Q CY2009 resulted in positive cash flows

with ore sourced predominantly from the Sickle and Euro open pits.

Ore Purchase

Agreement (OPA)

executed with Barr ick

Gold in June 2009

Target production ‐

>100koz pa but

ounces are owned by

Barr ick

Each mil l ing campaign

= 50days / qtr

OPA generates

improved cash f lows

for CRE and

maximises the

eff iciency of Barr ick’s

Granny Smith mil l

Successful f irst

campaign achieving

equivalent cash costs

of A$841/oz

CRE does not own the

gold produced, so

they cannot state a

direct cash cost

Barrick’s Granny Smith Mill 3.8mtpa

CRE’s Barnicoat Mill 1.5mtpa


Page 5 of 15

Fig. 3: Quarterly Production, Oz Target & Produced, Grade(LHS), Processed Ore (RHS)

Source: Crescent Gold Limited

The processed ore for March Q CY2010 was generally in-line with expectations

(615kt of ore) but netted less ounces due to a change to the mining schedule and

some rain-affected operating days lowering head grade (clearly evident on Fig. 3).

CRE made an operating loss for this quarter. Development activity focussed on the

shortest lead time to mining, including the Craiggiemore, West Laverton, Mary Mac

South and Mary Mac deposits.

Fig. 4: Quarterly Prod- Oz, Rev, Prod Costs, Expl & Dev (LHS), Est Eq Cash Costs (RHS)

Source: Crescent Gold Limited; Hartleys Research Estimates; *Note Eq cash costs indicative only

The June Q CY2010 saw the results of campaign 3 with ore processed within

expectations but again grade was below the forecast 12-month range of 1.6-1.8g/t

Au. It would appear CRE was just cash flow positive for the quarter (reported net

cash inflow of A$0.4m).

CRE was forecasting September Q CY2010 (campaign 4) processing ~640kt at an

improved head grade of 1.6g/t. Processed tonnes exceeded guidance but the

achieved grade was lower than expected (1.4g/t achieved versus 1.6g/t target). It

would appear that the quarter was capital intensive with production costs escalating

to A$47.9m, up from A$29.7m in the previous quarter. CRE reported costs incurred

related predominantly to mining and exploration activities, though reported

exploration and development costs were down for the quarter.

The open pit mining of Admiral Hill pit during the September Q CY2010, contributed

to the higher production costs. The reserve grade for this deposit is 2g/t Au for

50koz, from a resource of 200koz @ 1.2g/t Au, providing an expected good grade

feed for the OPA. However, CRE reported in the preceding quarter that the mining

operations at Admiral Hill were suspended in October 2010 as ore containing high

copper levels were identified earlier than anticipated. The high copper content in the

ore resulted in processing delays at the Granny Smith mill as Barrick Gold has

stringent cyanide guidelines, adhering to the Cyanide Code which does not to allow

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2.0

0

5,000

10,000

15,000

20,000

25,000

30,000

Dec Q CY09 Mar Q CY10 Jun Q CY10 Sep Q CY10 Dec Q CY10 Mar Q CY11

Gra

de

g/t

Au

Au

Oz

CRE Quarterly Production

Oz Target Oz Prod Grade g/t

200

300

400

500

600

700

800

0

5,000

10,000

15,000

20,000

25,000

30,000


Ore

Pro

cess

ed

Thousands

Au

Oz


Oz Target Oz Prod Processed Target Processed Ore

0

10

20

30

40

50

60

0

5,000

10,000

15,000

20,000

25,000

30,000


Millions

Au

Oz


Oz Prod Revenue Prod Costs Expl & Dev

0

500

1,000

1,500

2,000

2,500

0

5,000

10,000

15,000

20,000

25,000

30,000


Au

Oz


Oz Prod Eq Cash cost est (Prod)

Lower head grade in

the March Q CY10

Ore processed with in

expectat ion in the

June Q CY10 but

grade below guidance

High product ion costs

for CRE in Sep Q

CY10

High-copper levels

encountered earl ier

than anticipated at

Admiral Hil l resulted

in processing delays

at the Granny Smith

mil l


Page 6 of 15

weak acid dissociable (WAD) cyanide levels from the processing plant to the tailings

dam to exceed guideline levels (>50ppm). Cyanide-soluble copper minerals in gold-

rich ores can cause various processing issues resulting in low gold recoveries and

high cyanide consumption and more importantly, the presence of copper in tailings

tends to stabilise WAD cyanide in a form toxic to wildlife.

For the December Q CY2010 and March Q CY2011, CRE had a drop off in

processed ore (both quarters well below the targeted of ~640kt) at head grades

around 1.2g/t Au which led to a reduction in ounces produced and impacted

revenue. Weather had a severe impact on operations in both quarters, with heavy

rain causing delays to ore haulage to the Granny Smith mill (16 haulage days loss in

the Dec Q CY2010 and 22 haulage days loss in the March Q CY2011).

The rains washed out some haul roads which were then required to be repaired and

also stopped operations completely for a few days. Mining at the high-grade Fish

deposit (3.5g/t Au pit), located ~120km from Laverton was also suspended for haul

road repairs and for the 40-man village to be completed to enable better utilisation of

mining personnel and equipment.

Improved Production Performance Going Forward Clearly adverse weather impacted production in the December and March quarters

and during these periods some of the low grade stockpiles were used to supplement

higher grade ore feed. CRE anticipates a reduction in costs, increase grade profile

and improved ore scheduling in the coming quarters. We can see this achieved

through the following measures now in place:

All haul roads are fully operational and the new mining village at Fish has been

completed.

Ore from Fish should provide good-grade ore feed for the mill and opportunities

exist to mine the Lord Byron deposit, ~8km from Fish which though slightly lower

grade could provide another 30koz to the mining inventory, extending mining in

this area.

CRE in March delivered 225kt of ore to the mill in preparation for campaign 7

scheduled for June Q CY2011.

To further de-risk operations CRE continues to transport ore to the mill with the road

train fleet (Hamptons contract) resumed to full capacity. Having a growing stockpile

of better grade ore at the mill will provide a buffer for any unforeseen climatic events

and potentially enable ore blending of Admiral Hill in the future.

With a multitude of deposits in the development pipeline, Mary Mac and West

Laverton are ready for the commencement of mining later in the year. An ore reserve

for the Apollo deposit was released in early June 2011, with four small pits planned

for development. A shire road will need to be moved prior to commencement, with

approvals well advanced. Apollo is just out of Laverton and contains 54koz (reserve)

at a respectable 2.2g/t Au and is the first of a cluster of deposits to be development

in the area.

Severe rainfal l in the

Dec Q CY10 and Mar

Q CY11 impacted on

operat ions, causing a

combined loss of 38

haulage days and

suspension of mining

and processing

Pipel ine of

development

opportunit ies for

improved grades and

increase ore

schedul ing

Some of the key

deposits include Fish,

Mary Mac, West

Laverton and Apollo

Tight working capi tal

has hampered CRE in

the past


Page 7 of 15

Fig. 5: Mary Mac grade control drill ing (LHS); Apollo completed resource drill ing (RHS)

Source: Hartleys Research

Tight working capital has clearly hampered CRE progress following the disappointing

December and March production quarters. We see the strong balance sheet of

Focus (FML) as an important factor for operational turnaround; along with

operational efficiencies providing an opportunity to further increase (improve) cash

flows. Focus also plans to provide funds for regional exploration which provides

upside for resource extensions (growth) and new discoveries.

The appointment of Mark Hine as Chief Operating Officer (a mining engineer

formally with Macmahons) in May 2011 also provides us with confidence that the

Laverton operations can be turned around. His extensive mining experience and

mining services background bodes well for contract negotiations and the

management of costs.

Crescent Reserves and Resources

Fig. 6: Crescent Ore Reserves

Reserve Proven & Probable

Deposit Tonnes (Kt) Grade (g/t) Au Oz

Admiral Hill 780 2.0 50,000

Bells 35 2.9 3,000

Burtville 415 1.4 18,000

Craiggiemore 400 2.0 26,000

Fish 435 3.5 49,000

Grouse 83 2.0 5,000

Lord Byron 640 1.4 30,000

Mary Mac 420 1.8 24,000

Mary Mac South 570 1.4 7,000

Sickle 145 1.5 35,000

West Laverton 825 1.3 35,000

Apollo 770 2.2 54,000

Stockpiles 885 0.9 26,000

Sub‐Total Open Pit Deposits 6410 1.7 354,000

Summit ‐ Underground 860 5.3 145,000

TOTAL 7,270 2.1 499,000

Source: Crescent Gold Limited; all reserves reported 30 June 2010 except Apollo reserve

reported 7 June 2011

The Admiral Hill deposit still remains a priority deposit for CRE, due to the grade and

contained ounces. The zones of increased copper content could potentially be

blended with other ore to decrease copper levels with CRE of the opinion that

copper levels below 30ppm will be able to be processed through the Granny Smith

FML’s strong balance

could be an important

factor for operational

turnaround, provid ing

the much needed

working capita l for on-

going development

and mining

Key deposits include

Craiggiemore, Fish,

Mary Mac, West

Laverton and Apollo

Summit is the old

WMC Lancef ie ld mine

and contains

refractory ore

Following operat ional

review and more

detai led ore sampling

mining at Admiral Hi l l

could recommence

soon


Page 8 of 15

mill without further incident. Test-work into the restart of this pit has commenced, no

further development is required as highlighted in Fig. 7. CRE (FML) just needs to get

on top of the metallurgy of the deposit.

Fig. 7: Admiral Hill open pit


Fig. 8: Crescent Mineral Resources

Resource Measured Indicated Inferred Total

Deposit Tonnes

(Kt) Grade (g/t)

Tonnes (Kt)

Grade (g/t)

Tonnes (Kt)

Grade (g/t)

Tonnes (Kt)

Grade (g/t) Au Oz

Admiral Hill - - 4060 1.2 1000 1.2 5060 1.2 200,000

Barnicoat - - 340 1.3 250 1.0 590 1.2 22,000

Bells - - 595 2.0 35 1.4 630 2.0 40,000

Black Label - - - - 610 1.0 610 1.0 20,000

Burtville - - 700 1.5 - - 700 1.6 35,000

Castaway - - 250 1.5 30 1.8 280 1.6 14,000

Craiggiemore - - 935 2.3 110 2.8 1045 2.4 79,000

Euro - - 255 1.7 310 1.7 565 1.7 31,000

Fish - - 445 4.0 130 3.7 575 3.9 73,000

Grouse - - 520 1.7 30 1.3 550 1.7 30,000

Ida H - - - - 630 1.4 630 1.4 28,000

Lily Pond Well - - - - 340 1.4 340 1.4 15,000

Lord Byron - - 3200 1.0 2000 0.9 5200 1.0 160,000

Mary Mac - - 500 2.1 15 1.6 515 2.1 35,000

Mary Mac S - - 770 1.7 90 1.8 860 1.7 48,000

Sickle 390 1.7 200 2.6 150 3.1 740 2.2 52,000

West Laverton 41 1.9 1270 1.8 300 1.5 1611 1.7 89,000

Liberty - - 800 2.1 830 2.0 1630 2.0 107,000

Calypso - - 310 2.8 110 1.7 420 2.5 34,000

Elation - - 50 1.7 120 1.6 170 1.6 9,000

Eclipse - - 200 2.9 150 2.0 350 2.5 28,000

Aurora - - 180 2.9 380 2.3 560 2.5 45,000

Emerald - - 1590 2.1 1100 2.1 2690 2.1 179,000

Apollo 107 2.4 2082 2.2 278 2.6 2467 2.3 179,000

Summit - - 2040 6.5 620 7.1 2660 6.6 568,000

Crown Jewel - - - - 90 6.0 90 6.2 18,000

Odyssey - - 70 4.0 3 5.0 73 4.3 10,000

TOTAL 538 1.7 21,362 2.2 9,711 2.0 31,611 2.2 2,254,000

Source: Crescent Gold Limited; All resources reported at 30 June 2010, except Apollo resource reported 7 June 2011.


Page 9 of 15

The resources at Barnicoat, Burtville, Craggiemore, Ida H, Sickle, West Laverton,

Crown Jewel, Odyssey, Apollo and Liberty lie below existing open pits, while

resources at Craggiemore, Mary Mac, Ida H and Summit (old WMC Lancefield mine)

are transected by historic underground workings.

Mineral Resources for Summit are based on historic underground mine records and

reports; mining occurred prior 1940 and from 1980 to 1994. Following a deep drilling

programme and assessment of historical data, a comprehensive resource evaluation

was completed by Resource Service Group in 1995.

Development studies have recently focused on the Apollo, Aurora, Eclipse and

Calypso deposits, 7 km to the west of Laverton. Diamond drill holes were recently

drilled into the Aurora and Calypso deposits for the purpose to supply material for

density test work and to build a better understanding of geological controls on

mineralisation. These deposits could provide further development opportunities.

COMPARATIVES The combined entity will have gold resources of 4.5Moz. Crescent’s current resource

is 2.25Moz at a grade of 2.1g/t Au, with the vast majority of the resources contained

within shallow-oxide open pits. Focus’ current resource is also 2.25Moz but at a

slightly higher grade of 2.6g/t Au, due to some higher grade underground resources.

Combined reserves through the merger would be ~746koz at grade of ~2.1g/t Au.

Focus’ post-merger EV/Resource metric is calculated to be $62/oz, a considerable

discount to its producer peers average of $115/oz, which provides a revaluation

opportunity for the Company. The transaction price CRE 5.9cps (FML 7cps))

equates to ~$35/resource oz.

Fig. 9: EV/Resource Peer Comparison


PRELIMINARY VALUATION METRICS Assuming that all the CRE options are cancelled by agreement with the CRE option

holders for a cash amount (based on Black/Scholes option valuations at the

Announcement Date) and that all CRE shareholders convert to FML shares at 1.18

CRE share for every FML share, FML post acquisition should have 4,515.8m shares

on issue.

115

0

50

100

150

200

250

300

Med

usa

Allie

d

Tro

y

New

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Kin

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Reg

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A$

/oz

EV/Resource oz (A$/oz)

437

90

62

25

523

The combined ent ity

wil l have gold

resources of 4.5Moz

Combined reserves

through the merger

would be ~746koz at

grade of ~2.1g/t Au

Focus’ post -merger

EV/Resource metr ic is

calculated to be

$62/oz, a discount to

i ts producer peers

average of $115/oz,

which provides a

revaluat ion

opportunity

Focus post acquis it ion

should have an EV of

over A$278m, with

forecast product ion of

~230koz in CY’12

Mining at Mary Mac is

about to recommence,

fol lowing the safe

col lapse of open pit

ore into an old

underground void

Apollo, Aurora,

Eclipse and Calypso

deposits are only 7 km

to the west of

Laverton


Page 10 of 15

Fig. 10: Merged Entity Implied Value

Company Crescent Focus Focus

(post acquisition)

ASX Code CRE FML FML

Shares m 1,197.1 3,440.5 4,515.8

Share Price $ 0.055 0.07 0.07

Options* m 80.1 77.9 77.9

Market Cap $m 65.8 240.8 316.1

Cash $m 6.1 31.1 37.5

Debt (Con Note) $m 13.5 0 0

Debt (Bank) $m 0 0 0

EV $m 73.2 209.7 278.6

Prod Forecast CY'12 100,000 130,000 230,000

Tenements sqkm 1,400 449 1,849

Reserves Moz 0.499 0.247 0.746

Resources Moz 2.25 2.25 4.5

*Assumes that all CRE options are cancelled by agreement with the CRE option holders for a cash amount (based on Black/Scholes option valuations at the Announcement Date)

Source: Focus Minerals Limited; Hartleys Research

Our current valuation for Focus is $386m, which equates to ~11c/share. We have a

developed a preliminary sum of parts valuation for Crescent of ~$137m. This is

dominated by our NPV10 for the Laverton Gold Project of ~$119m. Crescent’s other

assets include the Barnicoat mill and uranium ground, which we have been very

conservative in our assigned value (the mill alone is likely to have a value of $15m).

The Laverton exploration value of $10m assumes some resource growth and small

additional discoveries; we have removed Summit (Lancefield) from our valuation,

leaving upside should an economically viable feasibility study be reported for the

considered refractory underground ore.

Crescent Gold also has an accumulated loss of A$184m, which assuming a tax

ruling and successful merger, FML should be able to use to off-set future Company

profits (or part thereof). We have assumed that no tax is paid from the Laverton

operations for the initial 4-years assumed in our model, but have not used assigned

value to the accumulated losses outside this for simplicity (leaving further upside in

our preliminary model). We see the transaction as value accretive and as such we

continue to recommend Focus Minerals Limited as a Buy.

Fig. 11: Preliminary Valuation

Share Price Valuation (NAV) 4,515.8

Est. $m Est. $m Est. $m Est. $/share

FML CRE FML (PA) FML (PA)

Coolgardie (NPV @ 8%) 302.7

302.7 0.067

Laverton Gold (NPV @ 10%)

119.1 119.1 0.026

Crescent Other Assets

15.0 15.0 0.003

Nepean Nickel Asset 15.0

15.0 0.003

Exploration 30.0 10.0 40.0 0.009

Cash 31.1 6.1 37.5 0.008

Forwards 0.0

0.0 0.000

Corporate Overheads (NPV @ 3%) (6.1)

(6.1) (0.001)

Total Debt 0.0 (13.5) 0.0 0.000

Tax Losses 6.2 1* 6.2 0.001

Options & Other Equity 6.9 6.9 0.002

Total 386 137 536 0.12

Source: Hartleys Research; Note 1* CRE has A$184.7m in accumulated losses;

FML should be able to use the vast majority of these to off-set future profits.

Our Laverton Gold

model assumes

quarter ly ore

processing of just

over 500kt/q at open

pit reserve grades,

di luted for mining (not

exceeding 1.7g/ t)

We assume 90% mil l

recoveries over a 4-

year l i fe (we expect

the OPA to be

renegotiated and

extended)

Our Eq cash costs

start high at

A$1200/oz and

improve after 3

quarters to A$920/oz

higher than the

targeted A$850/oz

CRE also has an

accumulated loss of

A$184m

The consideration

being offered to

Crescent

Shareholders is one

FML share for every

1.18 CRE shares held


Page 11 of 15

KEY DATES & CONDITIONS The timetable is:

Monday, 20 June 2011 Announcement of Transaction

Wednesday, 29 June 2011 Focus lodges its Bidder’s Statement with ASIC and ASX and serves

it on Crescent

Wednesday, 29 June 2011 Crescent lodges its Target’s Statement with ASIC and ASX and

serves it on Focus

Thursday, 30 June 2011 Joint despatch of Bidder's Statement and Target’s Statement

Thursday, 30 June 2011 Offer Opens

Monday, 1 August 2011 Close of Offer (unless extended)

Pursuant to the BIA, Focus and Crescent have agreed customary exclusivity

arrangements, including “no shop” and “no talk” provisions.

The bid is subject to there being no other superior bids.

Minimum acceptance condition of 90%

No material adverse change in relation to Crescent

No prescribed occurrences in relation to Crescent

No break fee payable to any other party

The value of the Focus Offer depends on the market price of Focus Shares. The

following table sets out the implied value of Focus Offer assuming different market

prices of FML shares:

Fig. 12: Offer Calculator

FML Share Price Implied CRE Offer Price

8.5 7.2

8.4 7.1

8.3 7.0

8.2 6.9

8.1 6.9

8.0 6.8

7.9 6.7

7.8 6.6

7.7 6.5

7.6 6.4

7.5 6.4

7.4 6.3

7.3 6.2

7.2 6.1

7.1 6.0

7.0 5.9

6.9 5.8

6.8 5.8

6.7 5.7

6.6 5.6

6.5 5.5


Bidder’s and Target ’s

Statements lodged

Offer opened 30 t h

June 2011

Unless extended the

Offer should close 1 s t

August 2011

Minimum acceptance

of 90%

No break fees

Off market takeover

for CRE at an implied

pre-open bid pr ice of

6.5c per CRE share, a

30.5% premium to

Crescent ’s pre -b id

closing price (17 June

2011)


Page 12 of 15

RISKS We see the key risk to Focus Minerals is that the Crescent Laverton operation

continues to underperform with costs escalating (increased cash costs) and erode

cash flows. Adverse weather conditions have been the main cause for operational

underperformance for the December and March quarters. Crescent has, since the

March quarter implemented changes to improve operations, such as develop pits

well in advance of mining, establish a new mining village at the key Fish deposit and

continue to build a large stockpile of high-grade and medium-grade ore at the

Granny Smith mill.

Another risk for Focus to mitigate (should the merger be successful) is the risk that

Barrick fills the idle capacity of the Granny Smith mill its own ore (processing risk).

We consider this risk to be low; given the size of the mill and current idle capacity of

~70%. Also, there is no reported nearby ore sources that could fill capacity.

Other risks include being involved in any mining operations, whereby the orebody

underperforms (unusual and unexpected geologic formations are encountered and

other geotechnical issues impact on mining), weather events (such as localised

flooding) impact on ore removal and haulage to the processing facility and

contractors used for services fail to deliver on the mine schedule or proposed

development. These risks can be mitigated through effective mine planning and

scheduling and drilling well in advance of development to ensure deposit confidence

in regards to tonnes, grade, contained ounces and expected dilution.

SUMMARY AND COMMENTARY We see this as a very significant transaction for the Company, as it will give Focus a

solid springboard to not only increase production, but also add a pipeline of

exploration opportunities in proven goldfield that contains large gold deposits.

The transaction enables Focus to grow production, effectively doubling resources

and diversify operations. Targeted production from Crescent’s Laverton operation is

expected to add ~100kozpa for combined production of 230koz in CY2012. With

increased production the Company believes cash costs can improved and is

targeting cash costs below $900/oz for both operations. We see this target as

achievable through operational efficiencies and grade improvements, but to be

conservative in our modelling we take into account higher cash costs.

The combined group has a strong portfolio of expanding mine operations and a

pipeline of exploration opportunities. Post-merger integration will provide the

financial capability and in-house experience to unlock Crescent’s exploration value

across the Laverton district; a well endowed goldfield that has produced over 25Moz

of gold from deposits less than 200m deep.

Our preliminary valuation on Crescent sees value in the transaction and we continue

to recommend Focus Minerals Limited as a Buy. The offer opened on the 30th June

2011 and closes on the 1st of August 2011, unless extended.

The key r isk to Focus

is that the Laverton

operat ion continues to

underperform and

erode cash f lows

The transaction

enables Focus to grow

production, effectively

doubl ing resources

and diversi fy

operat ions

The combined group

has a strong portfo l io

of expanding mine

operat ions and a

pipeline of exploration

opportunit ies

We see value in the

transit ion and we

cont inue to

recommend Focus

Minerals Limited as a

Buy

of 15

HARTLEYS RESEARCH COVERAGE LIST Hartleys Research Coverage Hartleys Hartleys

Name Ticker Last M. CAP Status Research Name Ticker Last M. CAP Status Research

Price* (A$m) Recommendation Price* (A$m) Recommendation

Resources Oil & Gas

Gold Conventional Oil & Gas

1. Intrepid Mines Limited IAU 1.46 623 Explorer Speculative Buy 1. Woodside Petroleum Ltd WPL 40.81 31,837 Major Buy

2. Beadell Resources Limited BDR 0.855 531 Developer Accumulate 2. Nexus Energy Ltd NXS 0.34 326 Developer / Explorer No Rating

3. Gold One International Limited GDO 0.505 407 Producer No Rating 3. Tap Oil Ltd TAP 0.84 201 Producer / Explorer Buy

4. Silver Lake Resources Limited SLR 2.12 379 Producer Buy 4. FAR Ltd FAR 0.11 137 Explorer / Producer Speculative Buy

5. Integra Mining Limited IGR 0.470 355 Producer Accumulate 5. Carnarvon Petroleum Ltd CVN 0.19 130 Producer / Explorer Accumulate

6. Tanami Gold NL TAM 0.890 231 Producer Accumulate 6. Cooper Energy Ltd COE 0.38 111 Producer / Explorer Buy

7. Catalpa Resources Limited CAH 1.41 229 Producer Buy 7. Otto Energy Ltd OEL 0.09 98 Explorer / Producer Buy

8. Focus Minerals Ltd FML 0.070 200 Producer Buy 8. Amadeus Energy Ltd AMU 0.22 66 Producer / Explorer Neutral

9. Northern Star Resources Ltd NST 0.445 134 Producer Buy 9. Haw kley Oil and Gas Ltd HOG 0.33 61 Producer / Explorer Buy

10. PMI Gold Corporation Limited PVM 0.650 125 Developer Speculative Buy 10. WHL Energy Ltd WHN 0.03 25 Explorer / Producer Speculative Buy

11. YTC Resources Limited YTC 0.590 116 Developer Speculative Buy 11. Sun Resources NL SUR 0.03 10 Explorer / Producer Neutral

12. Papillon Resources Limited PIR 0.535 98 Explorer Speculative Buy

13. Cortona Resources Limited CRC 0.135 26 Developer Speculative Buy 12. Aurora Oil and Gas Ltd AUT 3.42 1,381 Producer / Developer Reduce

14. Ausquest Limited AQD 0.110 25 Explorer Speculative Buy 13. Samson Oil & Gas Ltd SSN 0.135 233 Developer / Producer Buy

15. Emmerson Resources Limited ERM 0.115 23 Explorer Speculative Buy 14. Oilex Ltd OEX 0.37 92 Explorer / Producer Speculative Buy

16. Canyon Resources Limited CAY 0.325 10 Explorer Speculative Buy 15. European Gas Ltd EPG 0.39 78 Producer / Explorer Speculative Buy

17. Geopacif ic Resources NL GPR 0.205 8 Explorer Speculative Buy 16. Strike Energy Ltd STX 0.19 61 Explorer / Producer Buy

18. Southern Gold Limited SAU 0.052 7 Explorer Speculative Buy 17. Entek Energy Ltd ETE 0.17 49 Producer / Explorer Speculative Buy

Iron Ore Sub-Total 34,897

19. Atlas Iron Limited AGO 3.79 2,071 Producer Buy Industrials

20. Centaurus Metals Ltd CTM 0.084 71 Explorer Speculative Buy Resource Services - Capital Intensive

Coal 1. Ausdrill Limited ASL 3.31 1,008 Contract Drilling Buy

21. Riversdale Mining Limited RIV 16.20 3,052 Developer No Rating 2. NRW Holdings Ltd NWH 2.68 752 Contract mining Accumulate

Base Metals 3. Mermaid Marine Ltd MRM 3.24 690 Oil & Gas Services Accumulate

22. Independence Group NL IGO 5.680 1,150 Gold, Ni, Zn, Cu

Producer/Explorer

Buy 4. Fleetw ood Corporation FWD 11.26 645 Accomodation Neutral

23. Aviva Corporation Limited AVA 0.210 29 Explorer Speculative Buy 5. Matrix Composites &

Engineering Limited

MCE 7.99 583 Oil & Gas Services Buy

Other metals 6. Imdex Ltd IMD 2.22 444 Drilling Supplies Buy

24. Kasbah Resources Limited KAS 0.225 53 Tin Developer Buy 7. Macmahon Holdings Limited MAH 0.56 411 Contract mining Neutral

25. Shaw River Resources Limited SRR 0.175 44 Manganese:

Explorer/Developer

Speculative Buy 8. MACA Ltd MLD 2.40 360 Contract mining Buy

26. Hazelw ood Resources Ltd HAZ 0.155 36 Tungsten Developer Speculative Buy 9. Pacif ic Energy Ltd PEA 0.45 158 Remote Pow er Buy

Uranium 10. Sw ick Mining Services Ltd SWK 0.39 92 Contract Drilling Speculative Buy

27. Peninsula Energy Ltd PEN 0.074 155 Developer Buy Resource Services - Labour Intensive

28. Impact Minerals Limited IPT 0.056 7 Explorer Speculative Buy 11. Monadelphous Group Limited MND 18.53 1,594 Construction Buy

Sub-Total 10,197 12. Decmil Group Limited DCG 2.73 338 Construction Buy

13. Lycopodium Limited LYL 6.34 245 Engineer. & Constr. Accumulate

14. RCR Tomlinson Ltd RCR 1.71 226 Engineer. & Constr. Buy

15. LogiCamms Limited LCM 1.05 70 Engineer. & Constr. Speculative Buy

16. VDM Group Limited VMG 0.16 34 Engineer. & Constr. Speculative Buy

Other Industrial Companies

17. Seven West Media Limited SWM 4.12 3,175 Media Accumulate

18. Austal Limited ASB 2.81 528 Civil and Military

Vessels

Buy

19. iiNet Limited IIN 2.63 400 Telecommunications Buy

20. Cash Converters Internat.

Limited

CCV 0.74 296 Unsecured Finance Buy

21. Amcom Telecommunications

Limited

AMM 0.36 258 Telecommunications Buy

22. RedHill Education Ltd RDH 0.16 4 'For profit' education Neutral

Sub-Total 12,311

67. GRAND TOTAL 57,405

Source: IRESS, Hartleys Research. * 6 Jul 2011

Non Conventional Oil & Gas

of 15

HARTLEYS CORPORATE DIRECTORY

Research Trent Barnett Head of Research +61 8 9268 3052

Mike Millikan Resources Analyst +61 8 9268 2805

David Wall

Energy Analyst +61 8 9268 2826

Peter Gray Analyst +61 8 9268 2837

Janine Bell Research Assistant +61 8 9268 2831

Corporate Finance Grey Egerton-Warburton Head of Corp Fin. +61 8 9268 2851

Richard Simpson Director – Corp. Fin. +61 8 9268 2824

Paul Fryer Director – Corp. Fin. +61 8 9268 2819

Dale Bryan Director – Corp. Fin. +61 8 9268 2829

Ben Wale Snr Mgr – Corp. Fin. +61 8 9268 3055

Ben Crossing Snr Mgr – Corp. Fin. +61 8 9268 3047

Stephen Kite Snr Mgr Corp. Fin. +61 8 9268 3050

Scott Weir Corp. Finance Exec. +61 8 9268 2821

Registered Office

Level 6, 141 St Georges Tce Postal Address:

Perth WA 6000 GPO Box 2777

Australia Perth WA 6001

PH: +61 8 9268 2888 FX: +61 8 9268 2800

www.hartleys.com.au [email protected]

Note: personal email addresses of company employees are structured

in the following manner: [email protected]

Hartleys Recommendation Categories

Buy Share price appreciation anticipated.

Accumulate Share price appreciation anticipated but the risk/reward is

not as attractive as a “Buy”. Alternatively, for the share

price to rise it may be contingent on the outcome of an

uncertain or distant event. Analyst will often indicate a

price level at which it may become a “Buy”.

Neutral Take no action. Upside & downside risk/reward is evenly

balanced.

Reduce /

Take profits

There is unlikely to be further gains over the investment

time horizon but there is a possibility of some price

weakness over that period.

Sell Significant price depreciation anticipated.

No Rating No recommendation.

Speculative

Buy

Share price could be volatile. While it is anticipated that,

on a risk/reward basis, an investment is attractive, there is

at least one identifiable risk that has a meaningful

possibility of occurring, which, if it did occur, could lead to

significant share price reduction. Consequently, the

investment is considered high risk.

Institutional Sales Carrick Ryan +61 8 9268 2864

Justin Stewart +61 8 9268 3062

Simon van den Berg +61 8 9268 2867

Steven Boyce +61 8 9268 2817

Nick Wheeler +61 8 9268 3053

Wealth Management Nicola Bond +61 8 9268 2840

Bradley Booth +61 8 9268 2873

Adrian Brant +61 8 9268 3065

Nathan Bray +61 8 9268 2874

Sven Burrell +61 8 9268 2847

Simon Casey +61 8 9268 2875

Tony Chien +61 8 9268 2850

Travis Clark +61 8 9268 2876

David Cross +61 8 9268 2860

Nicholas Draper +61 8 9268 2883

John Featherby +61 8 9268 2811

Ben Fleay +61 8 9268 2844

John Georgiades +61 8 9268 2887

John Goodlad +61 8 9268 2890

Andrew Gribble +61 8 9268 2842

David Hainsworth +61 8 9268 3040

Neil Inglis +61 8 9268 2894

Murray Jacob +61 8 9268 2892

Bradley Knight +61 8 9268 2823

Gavin Lehmann +61 8 9268 2895

Shane Lehmann +61 8 9268 2897

Steven Loxley +61 8 9268 2857

Andrew Macnaughtan +61 8 9268 2898

Christian Marriott +61 8 9268 2828

Scott Metcalf +61 8 9268 2807

David Michael +61 8 9268 2835

Damir Mikulic +61 8 9268 3027

Nicole Morcombe +61 8 9268 2896

Jamie Moullin +61 8 9268 2856

Chris Munro +61 8 9268 2858

Michael Munro +61 8 9268 2820

Ian Parker +61 8 9268 2810

Ian Plowman +61 8 9268 3054

Margaret Radici +61 8 9268 3051

Charlie Ransom

(CEO)

+61 8 9268 2868

Elliott Rowton +61 8 9268 3059

Conlie Salvemini +61 8 9268 2833

David Smyth +61 8 9268 2839

Greg Soudure +61 8 9268 2834

Sonya Soudure +61 8 9268 2865

Dirk Vanderstruyf +61 8 9268 2855

Alex Wallis +61 8 9268 3060

Marlene White +61 8 9268 2806

Samuel Williams +61 8 9268 3041

Disclaimer/Disclosure

The author of this publication, Hartleys Limited ABN 33 104 195 057 (“Hartleys”), its Directors and their Associates from time to time may hold

shares in the security/securities mentioned in this Research document and therefore may benefit from any increase in the price of those

securities. Hartleys and its Advisers may earn brokerage, fees, commissions, other benefits or advantages as a result of a transaction arising

from any advice mentioned in publications to clients.

Hartleys has completed a capital raising in the past 12 months for Focus Minerals Limited (“Focus”), for which it has earned fees. Hartleys has

also provided corporate advice within the past 12 months and continues to provide corporate advice to Focus for which it has earned fees and

continues to earn fees. Hartleys is acting as Corporate Adviser to Focus in its friendly off-market takeover of Crescent Gold Limited for which it

will earn fees. The analyst travelled to site at the expense of Focus, with all associated costs being covered by Focus.

Any financial product advice contained in this document is unsolicited general information only. Do not act on this advice without first consulting

your investment adviser to determine whether the advice is appropriate for your investment objectives, financial situation and particular needs.

Hartleys believes that any information or advice (including any financial product advice) contained in this document is accurate when issued.

Hartleys however, does not warrant its accuracy or reliability. Hartleys, its officers, agents and employees exclude all liability whatsoever, in

negligence or otherwise, for any loss or damage relating to this document to the full extent permitted by law.

E: mike [email protected] Focus Minerals Ltd...

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