Rox Resources Ltd (RXL)roxresources.com.au/wp-content/uploads/2012/11/RXL-19112014.pdf · also be...

19 November 2014

Rox Resources Ltd (RXL)

Progressing nickel, zinc & copper projects

Recommendation

Buy (Initiation) Price

$0.03 Valuation

$0.06 (unchanged)

Risk

Speculative

Analyst

Stuart Howe 613 9235 1782

Fred Truong 613 9235 1629 Authorisation

TS Lim 612 8224 2810

Expected Return

Capital growth 82%

Dividend yield 0%

Total expected return 82%

Company Data & Ratios

Enterprise value $23m

Market cap $28m

Issued capital 850m

Free float 93%

Avg. daily val. (52wk) $210,550

12 month price range $0.03-$0.06

GICS sector

Materials Disclosure: Bell Potter Securities acted as Lead Manager to a $4.5m placement in September 2014and received fees for that service.

Price Performance

BELL POTTER SECURITIES LIMITED ACN 25 006 390 7721 AFSL 243480

DISCLAIMER AND DISCLOSURES THIS REPORT MUST BE READ WITH THE DISCLAIMER AND DISCLOSURES ON PAGE 17 THAT FORM PART OF IT.

(1m) (3m) (12m)

Price (A$) 0.04 0.05 0.03

Absolute (%) -18.60 -28.57 9.38

Rel market (%) -22.45 -26.31 9.23

Project news flow set to intensify into 2015 By the end of 2014, we expect that RXL will provide further clarity on the potential

development path for its Fisher East nickel project. Ongoing exploration results should

also be released from this asset, from a zinc-lead project earn-in by Teck Australia Pty

Ltd (Teck, the Australian subsidiary of Teck Resources Ltd), and from RXL’s earn-in to

the Bonya copper project. RXL has established this solid project portfolio over the last

three years, which we believe is currently undervalued by the market.

We initiate with a Buy (Speculative) recommendation and a $0.06/sh target price.

Fisher East nickel (RXL 100%) - RXL’s most mature project The Fisher East deposit (72kt contained nickel) is located 150km northeast of Leinster,

Western Australia. Mineralisation is open along strike and at depth. We expect RXL

will soon release preliminary scoping study parameters for Fisher East, with both an

integrated mine-concentrator development and mine plus toll-treat option considered.

Steady result from Reward zinc-lead & Bonya copper Teck’s earn-in to the Reward zinc-lead tenements has entered its second phase, with

Teck spending a further $10m to increase its equity interest to 70% by August 2018. In

the first earn-in phase, Teck spent $5m over four years to earn 51%. RXL is earning

into 51% of the Bonya copper project by spending $500k by the end of August 2014. A

further $1m spend by the end of 2016 will take this interest to 70%. Reward is around

8km west of Glencore’s McArthur River zinc-lead mine and Bonya 20km west of KGL

Resources’ Jervois copper project.

Investment thesis – Buy (Speculative) TP$0.06/sh RXL is a highly Speculative investment with significant exploration and development

risk. Our Buy (Sepeculative) rating is supported by: positive news flow from the Fisher

East nickel project and a solid fundamental nickel price outlook; Teck continuing its

70% earn-in at the Reward zinc-lead project; and Bonya continuing to exhibit high-

grade intersections within close proximity to another potential copper development in

that region.

Absolute Price Quarterly cash flows

Sep-13a Dec-13a Mar-14a Jun-14a Sep-14a Dec-14e

Exploration & evaluation $k -1,580 -717 -621 -670 -1,588 -1,700

Administration $k -371 -204 -362 -265 -275 -300

Capital raised $k 0 2,288 3,327 -34 4,241 0

Other $k 11 5 -88 -1,125 11 15

Total quarterly cash flow $k -1,940 1,372 2,256 -2,094 2,389 -1,985

Quarter end cash $k 1,024 2,396 4,652 2,558 4,947 2,962

Shares on issue m 591 665 734 745 850 850

SOURCE: IRESS SOURCE: COMPANY REPORTS & BELL POTTER SECURITIES ESTIMATES

$0.0

$0.0

$0.0

$0.1

$0.1

$0.1

$0.1

Nov 12 May 13 Nov 13 May 14

RXL S&P 300 Rebased

Speculative

Rox Resources Ltd (RXL) 19 November 2014


Progressing three Australian base metal assets

Our RXL recommendation is Buy (Speculative):

- RXL’s core projects are: Fisher East nickel (Western Australia, RXL 100%); Reward

zinc (Northern Territory, RXL 49%, Teck earning up to 70%); and Bonya copper

(Northern Territory, RXL earning 70%). Over the last two years, exploration drilling has

returned significant high-grade intersections at each of these projects.

- Fisher East nickel is located around 150km northeast of Leinster, Western Australia.

RXL has defined a 3.6Mt resource grading 2.0% nickel for 72.1kt contained nickel.

The resource includes high-grade components, occurs over a 3km strike length and is

open along strike and at depth. Further drilling at Fisher East is underway and RXL

expect to release preliminary scoping study parameters for a potential development by

the end of 2014. We expect that full development and toll treating options will be

considered.

- Reward zinc-lead is around 8km west of Glencore’s McArthur River zinc-lead mine

and is funded by earn-in partner Teck. Teck will increase its equity in Reward to 70%

by spending an additional $10m by August 2018. Recent high-grade intersections

include 35m at 6.1% combined zinc and lead from 665m and 34.4m at 6.2% combined

zinc and lead from 652m.

- Bonya copper is located around 350km east of Alice Springs and RXL is earning into

70% by spending $1.5m by December 2016. Initial follow-up drilling of VTEM targets

has intersected high-grade shallow copper mineralisation. The project is 20km west of

KGL Resources’ Jervois copper project.

Capital position and near-term requirements

- At 30 September 2014, RXL had cash of $4.9m and no debt. Bell Potter Securities

acted as Lead Manager to a Placement of 100.7m shares at $0.043/sh to raise $4.5m

in September 2014.

- RXL’s cash outflow estimates for the December 2014 quarter include $1.7m for

exploration and $0.3m for administration. We estimate RXL will have cash of around

$3m at the end of 2014, and will require a further capital raising in 2015 to support

ongoing project development and administration expenses.

- RXL is scheduled to pay the Mt Fisher prospector $0.2m by 31 December 2014 and a

final $2.3m by 30 June 2015.

Table 1 - RXL's quarterly cash flows

Sep-12(a) Dec-12(a) Mar-13(a) Jun-13(a) Sep-13(a) Dec-13(a) Mar-14(a) Jun-14(a) Sep-14(a) Dec-14(e)

Exploration & evaluation $k -273 -294 -876 -2,026 -1,580 -717 -621 -670 -1,588 -1,700

Administration $k -225 -200 -296 -255 -371 -204 -362 -265 -275 -300

Capital raised $k 0 1,495 4,607 0 0 2,288 3,327 -34 4,241 0

Other $k 8 62 1 -74 11 5 -88 -1,125 11 15

Total quarterly cash flow $k -490 1,063 3,436 -2,355 -1,940 1,372 2,256 -2,094 2,389 -1,985

Quarter end cash $k 820 1,883 5,319 2,964 1,024 2,396 4,652 2,558 4,947 2,962

Shares on issue (diluted) m 398 491 591 591 591 665 734 745 850 850

SOURCE: COMPANY DATA AND BELL POTTER SECURITIES ESTIMATES


Forthcoming news flow and value catalysts

- Ongoing – Drill assay results from Fisher East, Reward (Teena) and Bonya;

- Late 2014 – Preliminary scoping study parameters and metallurgical testing results for

a nickel project development at Fisher East;

- Early 2015 – Updated mineral resource for the Fisher East project; and

- Mid-2015 – Scoping study for a nickel project development at Fisher East.

Valuation: Sum of 3 key projects – Fisher East, Reward, Bonya

RXL is a highly speculative investment with projects in pre-scoping study stage. We have

therefore not undertaken detailed financial modelling of potential projects. Our RXL

valuation is heuristic based.

RXL’s value is leveraged to the success of three projects:

- Fisher East nickel and its potential for a successful mine development in the near

term;

- Reward zinc, Teck’s earn-in and ultimately its development aspirations; and

- Bonya copper and its potential to be a meaningful ore contributor to a development in

that region.

We factor in RXL raising an additional $5m (at $0.03/sh) over the next six months to fund

ongoing exploration and administration.

Table 2 - Valuation assumptions

$m $/sh

Fisher East nickel 30 0.04

Reward zinc 20 0.02

Bonya copper 10 0.01

Corporate overheads -6 -0.01

Total 54 0.06

Cash & options 5 0.01

Total before capital raising 59 0.07

Assumed capital raising

Equity requirement $m 5

Share issue price $/sh 0.03

New shares issued m 167

New diluted shares on issue m 1,022

New cash & options 10 0.01

Valuation after assumed capital raising 64 0.06

SOURCE: BELL POTTER SECURITIES ESTIMATES


Nickel, lead-zinc & copper projects

RXL’s key Australian based base metals projects

RXL’s three key base metals projects are:

- Fisher East nickel (RXL 100%) – Located around 150km northeast of Leinster with a

resource of 3.6Mt at 2.0% nickel for 72.1kt contained nickel and exploration upside.

RXL has commenced early scoping study work for a development at this project.

- Reward zinc (RXL 49%, Teck 51%) – Major zinc discovery 8km from the McArthur

River zinc mine (Glencore). Teck can earn up to 70% of Reward by funding a further

$10m in exploration by August 2018.

- Bonya copper (RXL earning 70%) – Outcropping copper oxide mineralisation with

geochemical and EM targets. RXL is earning 51% for $500k spend by December

2014, then to 70% for an extra $1m by December 2016.

Figure 1 - Project locations

SOURCE: RXL 2014 ANNUAL REPORT

Fisher East nickel: Resource now 3.6Mt at 2.0% Ni for 72.1kt Ni

RXL will complete a high-level scoping study for a potential development at Fisher East in

1H2015. The total mineral resource at Fisher East is now 3.6Mt grading 2.0% nickel,

containing 72.1kt nickel metal over the Camelwood and Musket deposits. Of this 3.6Mt

resource, 1.8Mt at 2.1% nickel is in the JORC Indicated category. There is also a high-

grade zone of 100,000t at 10.1% nickel within the Musket deposit. The current deposits

occur over a 3km strike length. Most of the nickel mineralisation occurs as disseminiated

sulphides. However, there are also important zones of massive sulphides.


Exploration upside from EM conductors and high-grade intersections

The following diagram shows the current resource across the Camelwood and Musket

deposits. The deposits are open along strike and at depth, with untested downhole

electromagnetic targets and high-grade intersections at Camelwood and Musket outside of

the current resource envelope. We expect that further high-grade discoveries will add to

the current Fisher East resource base.

Figure 2 - Fisher East nickel sulphide resource

SOURCE: RXL 2014 ANNUAL REPORT

Fisher East work program: Further drilling underway

RXL has recently re-commenced drilling and will extend a

ground EM survey at Fisher East. RC (29 holes for 5,500m)

and diamond (12 holes for 5,000m) drilling will follow up

previously identified mineralisation at Cannonball and

increase the known mineral resources at Musket and

Cammelwood. News flow from the programme will continue

through until the end of 2014.

RXL has also commenced metallurgical test work on

massive sulphide ore from the Camelwood deposit.

Recoveries of 91-95% to a concentrate grade of 14-17%

have been achieved. The test concentrate exhibits desirable

properties including low magnesium oxide values (2.6-

2.8%), high iron to magnesium oxide ratios (15-16:1) and

low arsenic (<100ppm). Metallurgical test work on

Camelwood and Musket disseminated sulphide ores is

ongoing.

Parameters for a preliminary scoping study are expected to

be announced by the end of 2014, with further detail

completed by mid-2015. We expect that both an integrated

mine-concentrator development will be considered, along

with mine and toll treating options.

Mineralisation style: Sulphides similar to Kambalda

The Fisher East nickel sulphide deposits are typical

Archean greenstone, komatiite-hosted, similar to the

Kambalda and Cosmos deposits. Mineralisation typically

occurs as shoots and lenses in ultramafic lava channels,

and is massive and disseminated. Massive ores typically

grade 4-20% nickel and disseminated ores 1.5-3.5% nickel.

Figure 3 - Fisher East Prospects

SOURCE: RXL ASX ANNOUNCEMENT 8/10/2014


Reward zinc-lead: Teck earn-in near Glencore’s McArthur River

The Reward zinc-lead project in the McArthur Basin (Northern Territory) is a joint venture

between RXL (49%) and Teck (51%). The joint venture agreement is now in its second

stage, with Teck earning a further 19% interest by spending $10m by August 2018. In

October 2010, RXL announced the Teck farm-in agreement over the Myrtle zinc-lead

deposit and surrounding tenements. The agreement enabled Teck to earn a 51% interest

by spending $5m over four years. Teck manages the exploration efforts at Reward.

Teena zinc prospect is Teck’s current focus

RXL announced the high grade zinc discovery at Teena in August 2013. Zones of high-

grade Sedex zinc-lead sulphide mineralisation were intersected including 26.4m grading

13.3% combined zinc and lead from 1,060m. Throughout 2013, exploration drilling

continued to intersect high-grade zones at depth and extended the strike length of

mineralisation to over 1.5km.

The 2014 drilling campaign at the Teena prospect has intersected mineralisation at

shallower depths:

- In late October 2014, RXL announced a 35m intersection grading 6.1% combined zinc

and lead from 665m (TNDD013).

- The most recently released results (10 November 2014) include 34.4m intersection

grading 6.2% combined zinc and lead from 652m (TNDD014).

The Teena prospect is located around 8km west of Glencore’s McArthur River zinc-lead

mine.

Figure 4 - Reward zinc-lead project location Figure 5 - Teena prospect drill plan (current 10 November 2014)

SOURCE: RXL ASX ANNOUNCEMENT 8/10/2014 SOURCE: RXL ASX ANNOUNCEMENT 10/11/2014

Myrtle deposit adds further weight to Reward prospectivity

RXL has previously delineated a (JORC 2004) mineral resource of 43.6Mt at 5.04% zinc

and lead. The resource includes a 5.8Mt indicated component grading 3.56% zinc and

0.9% lead.


McArthur River Mine (Glencore) next door…

MIM Holdings and Japanese consortium ANT Minerals (Nippon, Mitsui and Marubeni)

commenced commercial operations at McArthur River in 1995. The open pit development

at McArthur River occurred during 2007-08. Xstrata plc acquired MIM in July 2003 and

subsequently the ANT Minerals share in September 2005. Glencore acquired Xstrata in

2013.

McArthur River has an estimated mine life to 2038. The McArthur River open pit measured

and indicated resource is 194Mt grading 9.2% zinc, 4.0% lead and 41g/t silver and reserve

is 109Mt grading 10% zinc, 4.6% lead and 46g/t silver (31/12/2013 estimates).

McArthur River is currently producing at rates of around 200ktpa zinc, 45ktpa lead and

1.35Mozpa silver. A US$360m (Phase 3) expansion approved in mid-2012 will more than

double plant capacity from 2.5Mtpa ore to 5-5.5Mtpa ore.

Reward featured in recent Teck investor presentations

Figure 6 - Teck’s November 2013 Zinc presentation

SOURCE: TECK WEBSITE ACCESSED 18/11/2014

Bonya copper: Earning-in to 70% of NT copper project

RXL signed the Bonya farm-in agreement with Arafura Resources (ASX: ARU) in October

2012. Under the terms of the farm-in, RXL can earn 51% of copper, lead, zinc, silver, gold,

bismuth and PGE mineral rights by spending $500k on exploration by December 2014.

RXL’s equity can increase to 70% by spending a further $1m by December 2016. Bonya is

a 279km2 tenement package located 350km east of Alice Springs (Northern Territory).

VTEM surveys and recent drilling highlight project prospectivity

RXL’s recent work plan at Bonya includes:

- October 2013 to March 2014 - Competed a VTEM (Versatile Time Domain Electo-

Magnetic) survey to detect electro-magnetic conductors (such as sulphide

accumulations) to a depth of up to 1km. Interpretation of survey data identified ten


exploration targets for follow-up, many with coincident secondary copper and copper

in soil anomalies.

- August to October 2014 - Reverse circulation drilling to test VTEM targets. In early

October 2014, RXL reported intersections of visible massive sulphide mineralisation

with portable XRF analysis indicating grades of over 3% copper. Assays results

released in late October 2014 and early November 2014 included intersections of:

11m at 4.4% copper from 30m; 38m at 4.4% copper from 60m; and 9m at 3.8%

copper from 97m.

- November 2014 - Drilling at Bonya has recommenced. Further intersections have also

been reported including: 2m at 1.9% copper from 10m; 2m at 3.1% copper from 55m

and 1m at 1.2% copper from 69m.

Figure 7 - Bonya Mine Prospect drill plan Figure 8 – Bonya Mine Prospect drill cross section

SOURCE: RXL ASX ANNOUNCEMENT 20/10/2014 SOURCE: RXL ASX ANNOUNCEMENT 20/10/2014

Regional implications: Adjacent to KGL’s Jervois Project (+280kt contained copper)

RXL’s recent high-grade copper exploration success at the Bonya project is around 20km

west of KGL Resources’ (ASX: KGL) Jervois copper project. Given this close proximity,

should RXL achieve further exploration success at Bonya, it is likely that the Bonya and

Jervois projects will be co-developed.

KGL expects to complete a prefeasibility study for Jervois by the end of 2014. The study is

examining the development of its mineral resource of 25.3Mt grading 1.1% copper for

contained copper of 280kt. KGL has an additional exploration target of 50-150kt contained

copper. On current resources and the exploration target, the study is likely to examine an

open pit project producing around 25ktpa copper.


Figure 9 - Bonya project tenements and KGL’s Jervois copper deposit

SOURCE: RXL WEBSITE ACCESSED 13/11/2014


Company timeline & management

Timeline from listing in 2004 to present

FY04 – RXL is listed on the ASX in April 2004. Corporate focus is the historic Menzies

goldfield north of Kalgoorlie in Western Australia. RXL consolidates the Menzies tenements

and commences an exploration program. The Menzies project is 100% RXL with a 2.1Mt

resource grading 2.5g/t for 170,000oz contained gold. RXL’s founding Chairman is Alistair

Cowden and Managing Director is Ian Mulholland.

FY05 – RXL enters agreements to acquire a 60% interest in the Pha Luang lead-zinc-silver

project in Laos, and commences diamond exploration in South Africa. Exploration at the

Menzies gold project is ongoing. RXL also discovers a significant nickel laterite deposit on

the Acacia Ridge area of the Menzies project.

FY06 – Exploration continues on the Laos lead and zinc project. The South African

diamond and Menzies gold projects are divested. RXL undertakes two capital raisings for a

total of 23.3m shares issued for $6.3m.

FY07 – Exploration ongoing at the Laos lead and zinc project. Jeffrey Gresham replaces

Alistair Cowden as RXL Non-Executive Chairman.

FY08 – RXL acquires the Reward zinc-lead project in the Northern Territory from Rio Tinto

Ltd. The company’s expenditure on the Pha Luang project in Laos is reduced to a

minimum while the Laos Government reviews the granting of Foreign Investment Licences.

FY09 – RXL defines a 37Mt, 5.2% zinc plus lead resource at the Myrtle prospect within the

Reward project in the Northern Territory. No further progress is made in the granting of a

Foreign Investment Licence by the Laotian Government, and as such the Pha Luang

project is maintained at minimum expenditure on care and maintenance.

RXL raises $1.4m in equity during FY09.

FY10 – RXL progresses the Myrtle zinc-lead deposit, undertaking metallurgical testing and

additional exploration drilling. A revised resource is now estimated at 43.6Mt grading

5.03% zinc plus lead, an 18.5% increase in ore tonnes and a 14.7% increase in contained

metal over the FY09 estimate. RXL also expands its land position in the Myrtle area and

negotiates the removal of a vendor lump-sum cash payment to Rio Tinto of A$1/t of

mineable resources stated in a Bankable Feasibility Study.

RXL withdraws from the Pha Luang project in Loas in December 2009. Brett Dickson joins

the RXL board as an Executive Director, replacing Non-Executive Director Michael

Blakiston.


FY11 – RXL signs an earn-in agreement with Teck for the Myrtle (Reward) zinc

project. Teck can earn a 51% interest in the project by spending $5m by August

2014, and increase that interest to 70% by spending a further $10m by August 2018.

RXL negotiates the purchase of the Mt Fisher gold-nickel project from Avoca

Resources and a local prospector, a 615km2 greenstone belt tenement position in

Western Australia. The tenements have a previously defined gold-in-regolith anomaly

extending over 7km in strike length.

RXL pegs a new phosphate project in the Northern Territory (Marqua), 300km south-west

of Mt Isa. The tenements exhibit a 25km strike length of phosphate bearing rocks identified

from surface sampling.



FY12 – Exploration is ongoing at the Mt Fisher gold and nickel, Myrtle/Reward zinc and

lead and Marqua phosphate projects. A JORC resource of 973kt grading 2.75g/t gold for

86koz is defined at Mt Fisher. Teck undertakes various geophysical and geochemical

surveys at Myrtle/Reward as part of its farm-in agreement. Drilling at Marqua records a

number of high-grade intercepts.

RXL raises $347k in equity during FY12.

FY13 – RXL discover a significant nickel sulphide occurrence at the Camelwood prospect

at Mt Fisher. Intersections of massive and disseminated sulphide occur over a strike length

of 1.2km and to a depth of 500m. Further prospective targets at Mt Fisher are identified.

Teck makes a significant discovery of high-grade zinc-lead mineralisation at the Teena

prospect within the Reward project in the Northern Territory. Intersections exceed 13% zinc

plus lead over a downhole thickness of greater than 20m

RXL enters a joint venture to earn into the Bonya copper project in the Northern

Territory. The project exhibits historical workings and rock chip samples of up to

33% copper.


FY14 – RXL defines a nickel sulphide resource at the Camelwood and Musket prospects at

Mt Fisher. Exploration at the Reward zinc project by earn-in partner Teck continues to

intersect zinc-lead mineralisation over substantial downhole thicknesses. Geophysical

exploration techniques at the Bonya copper project identify a number of anomalies possibly

indicative of copper sulphide mineralisation.


Board of directors

Mr Jeff Gresham - Non-Executive Chairman, appointed October 2006

Mr Gresham is a geologist with a distinguished industry career of varied exploration,

operational and corporate experience both in Australia and internationally spanning over 40

years.

Previously he was Managing Director of Titan Resources, an active nickel explorer in

Western Australia, and roles prior to that have included Managing Director of gold miner

Wiluna Mines Limited, General Manager – Exploration for Homestake Gold of Australia, and

several senior executive roles with Western Mining Corporation (WMC) including Chief

Geologist of the Kambalda Nickel Operations, and Executive Vice President Exploration for

WMC’s Canadian subsidiary Westminster Canada Ltd.

Mr Gresham’s extensive professional experience covers numerous mineral deposit types

and he has authored a number of professional papers on the Kambalda nickel deposits and

the Olympic Dam copper-uranium deposit, and has a B.Sc (Hons) degree from the Victoria

University, Wellington, New Zealand.

Mr Ian Mullholland - Managing Director, appointed November 2003

Mr Mulholland is a geologist with over 30 years broad experience in the exploration and

mining industry in a number of commodity groups including gold, silver, copper, lead, zinc,

uranium, nickel and kaolin. He has been Managing Director of Rox Resources since it’s

inception, and prior to that he managed activities from grass roots exploration to advanced

resource definition, feasibility studies and mining operations for a number of major, medium

sized and junior companies including WMC, Esso, Otter Gold, Aurora Gold, Anaconda

Nickel, Archaean Gold, Summit Resources and Conquest Mining. His strength is in bringing

resources to economic fruition and his experience is particularly appropriate for his role with

Rox.


Mr Mulholland has been involved in the Nimbus silver-zinc project, the Mt Martin, Mt Muro,

Toka Tindung, Tanami and Mt Carlton gold-silver projects, the Murrin Murrin, Weld Range,

Marshall Pool, Lawlers and Cawse nickel projects, the Valhalla and Olympic Dam uranium

projects, and the Mt Windsor VMS copper-lead-zinc projects.

Mr Mulholland has a B.Sc. (Hons), Geology from the University of Sydney and a M.Sc. in

Exploration and Mining Geology from the James Cook University of North Queensland. He

is a Fellow of the AusIMM, the AIG, and the Society of Economic Geologists.

Mr Brett Dickson - Finance Director, appointed April 2010

Mr Dickson has over 30 years experience in the financial management of companies,

principally companies in early stage development of its resource or production, and offers

broad financial management skills. He has been Company Secretary and Chief Financial

Officer (CFO) for a number of successful resource companies listed on the ASX, and in

addition to Rox Resources currently also acts as Company Secretary and CFO for Azure

Minerals Limited.

He has had close involvement with the financing and development of a number of Greenfield

resources in the oil and gas and mineral sectors. Mr Dickson is a Certified Practising

Accountant with a Bachelors Degree in Economics and Finance from Curtin University.

SOURCE: RXL WEBSITE ACCESSED 17/11/2014


Mineral resource estimates

Table 3 - Fisher East nickel resource

Mt % Ni kt Ni

Camelwood

Oct-13 Measured

Indicated 0.6 2.4 14

Inferred 1.0 2.1 21

Total 1.6 2.2 35

Musket

Sep-14 Measured


Inferred 0.9 1.5 14

Total 2.1 1.8 38

Total

Sep-14 Measured

Indicated 1.8 2.1 37.8

Inferred 1.9 1.8 34.3

Total 3.6 2.0 72.1


Table 4 - Mt Fisher gold resource

Mt g/t Au koz Au

Feb-12 Measured 0.2 4.11 23


Inferred 0.6 2.3 45

Total 1.0 2.8 86


Table 5 - Reward zinc-lead resource

Mt % Zn % Pb % Zn+Pb kt Zn kt Pb

Myrtle 3% Zn + Pb cut-off

Mar-10 Measured

Indicated 5.8 3.6 0.9 4.5 205 52

Inferred 37.8 4.2 1.0 5.1 1,575 361

Total 43.6 4.1 0.9 5.0 1,780 413

Myrtle 5% Zn + Pb cut-off

Mar-10 Measured

Indicated 1.2 5.4 1.4 6.8 64 17

Inferred 14.1 5.5 1.4 6.8 768 196

Total 15.3 5.4 1.4 6.8 832 213



Capital structure

Table 6 - RXL capital structure

Issued shares (including performance shares) m 850

Share price $ 0.03

Market cap $m 28

Net cash $m 5

EV (undiluted) $m 23

Options (in money) m 6

Issued shares (diluted) m 856

Market cap (diluted) m 28

Net cash + options $m 5

EV (diluted) $m 23

SOURCE: IRESS & RXL ASX RELEASES

Table 7 - Major shareholders

Major shareholders % m shares

Drake Private Investments 4% 32

Rox Directors 3% 25

Other 93% 792

Total 100% 850


Table 8 - RXL share register history

Date Event Shares

Options

Added Ordinary Added Total

FY08

58

FY09

51 109

FY10

109 218

FY11

138 355

34

1/07/2011 Expiry of options

355 -30 4

18/07/2011 Issue of shares 4 359

4


4


4

10/08/2011 Issue of shares 15 398

4

22/11/2011 Issue of employee options 0 398 1 4

2/10/2012 Lapse of options 0 398 -4 1

3/12/2012 Share purchase plan 92 491 9 9

12/12/2012 Capital raising 10 501

9

15/02/2013 Capital raising 90 591

9

6/12/2013 Share purchase plan 75 665

9

27/02/2014 Issue of employee options 0 665 1 10

25/03/2014 Capital raising (shares & options) 69 734 6 16

4/04/2014 Capital raising (shares & options) 11 745 13 29

26/09/2014 Capital raising (shares & options) 101 846

29

30/09/2014 Capital raising (shares & options) 4 850

29




Company description – diversified base metals explorer

RXL is a mineral exploration company with Australian based projects: Fisher East nickel

(Western Australia, RXL 100%); Reward zinc (Northern Territory, RXL 49%, Teck earning

into 70%); and Bonya copper (Northern Territory, RXL earning 70%).

Investment thesis – Buy (Speculative) TP$0.06/sh

RXL is a highly Speculative investment with significant exploration and development risk.

Our Buy (Sepeculative) rating is supported by: positive news flow from the Fisher East

nickel project and a solid fundamental nickel price outlook; Teck continuing its 70% earn-in

at the Reward zinc-lead project; and Bonya continuing to exhibit high-grade intersections

within close proximity to another potential copper development in that region.

Valuation: Sum of 3 key projects – Fisher East, Reward, Bonya

RXL is a highly speculative investment with projects in pre-scoping study stage. We have

therefore not undertaken detailed financial modelling of potential projects. Our RXL

valuation is heuristic based.

RXL’s value is leveraged to the success of three projects:

- Fisher East nickel and its potential for a successful mine development in the near

term;

- Reward zinc, Teck’s earn-in and ultimately its development aspirations; and

- Bonya copper and its potential to be a meaningful ore contributor to a development in

that region.

We factor in RXL raising an additional $5m (at $0.03/sh) over the next six months to fund

ongoing exploration and administration.

Risks

Risks to resources sector equities include, but are not limited to:

- Commodity price and exchange rate fluctuations. Future earnings and valuations

of exploration, development and operating resources companies are subject to

fluctuations in underlying commodity prices and foreign currency exchange rates.

- Infrastructure access. Commodity producers are reliant upon access to transport

infrastructure. Access to infrastructure is often subject to contractual agreements,

permits, and capacity allocations. Agreements are typically long-term in nature (+10

years). Infrastructure can be subject to outages as a result of weather events or the

actions of third party providers.

- Operating and capital cost fluctuations. Markets for exploration, development and

mining inputs can fluctuate and cause significant changes to operating and capital

costs. Key mining operating costs are linked to energy and labour costs.

- Resource growth and mine life extensions. Future earnings forecasts and

valuations may rely upon resource and reserve growth to extend mine lives.

- Sovereign risks. Mining companies’ assets can be located in countries other than

Australia and are subject to the sovereign risks of that country.


- Regulatory changes risks. Changes to the regulation of infrastructure and taxation

(among other things) can impact the earnings and valuation of mining companies.

- Operating and development risks. Mining companies’ assets are subject to risks

associated with their operation and development. Risks for each company can be

heightened depending on method of operation (e.g. underground versus open pit

mining) or whether it is a single operation company. Development assets can be

subject to approvals timelines or weather events, causing delays to commissioning

and commercial production.

- Funding and capital management risks. Funding and capital management risks can

include access to debt and equity finance, maintaining covenants on debt finance,

managing dividend payments, and managing debt repayments.

- Corporate/M&A risks. Risks associated with M&A activity including differences

between the entity’s and the market’s perception of value associated with transactions.


Bell Potter Securities Limited ACN 25 006 390 7721

Level 38, Aurora Place 88 Phillip Street, Sydney 2000

Telephone +61 2 9255 7200 www.bellpotter.com.au

Recommendation structure

Buy: Expect >15% total return on a

12 month view. For stocks regarded

as ‘Speculative’ a return of >30% is

expected.

Hold: Expect total return between -5%

and 15% on a 12 month view

Sell: Expect <-5% total return on a

12 month view

Speculative Investments are either start-up

enterprises with nil or only prospective

operations or recently commenced

operations with only forecast cash flows, or

companies that have commenced

operations or have been in operation for

some time but have only forecast cash

flows and/or a stressed balance sheet.

Such investments may carry an

exceptionally high level of capital risk and

volatility of returns.

Research Team

Staff Member

TS Lim

Industrials

Sam Haddad

John O’Shea

Chris Savage

Jonathan Snape

Sam Byrnes

Bryson Calwell

John Hester

Tanushree Jain

Financials

TS Lim

Lafitani Sotiriou

Resources

Peter Arden

Stuart Howe

Fred Truong

Quantitative

Tim Piper

Title/Sector

Head of Research

Industrials

Industrials

Industrials

Industrials

Industrials

Industrials Associate

Healthcare

Healthcare/Biotech

Banks/Regionals

Diversified

Resources

Resources

Resources

Research Assistant

Phone

612 8224 2810

612 8224 2819

613 9235 1633

612 8224 2835

613 9235 1601

612 8224 2886

613 9235 1853

612 8224 2871

612 8224 2849

612 8224 2810

613 9235 1668

613 9235 1833

613 9235 1782

613 9235 1629

612 8224 2825

@bellpotter.com.au

tslim

shaddad

joshea

csavage

jsnape

sbyrnes

bcalwell

jhester

tnjain

tslim

lsotiriou

parden

showe

ftruong

tpiper

The following may affect your legal rights. Important Disclaimer:

This document is a private communication to clients and is not intended for public circulation or for the use of any third party, without the prior approval of Bell Potter Securities Limited. In the USA and the UK this research is only for institutional investors. It is not for release, publication or distribution in whole or in part to any persons in the two specified countries. In Hong Kong this research is being distributed by Bell Potter Securities (HK) Limited which is licensed and regulated by the Securities and Futures Commission, Hong Kong. This is general investment advice only and does not constitute personal advice to any person. Because this document has been prepared without consideration of any specific client’s financial situation, particular needs and investment objectives (‘relevant personal circumstances’), a Bell Potter Securities Limited investment adviser (or the financial services licensee, or the representative of such licensee, who has provided you with this report by arraignment with Bell Potter Securities Limited) should be made aware of your relevant personal circumstances and consulted before any investment decision is made on the basis of this document.

While this document is based on information from sources which are considered reliable, Bell Potter Securities Limited has not verified independently the information contained in the document and Bell Potter Securities Limited and its directors, employees and consultants do not represent, warrant or guarantee, expressly or impliedly, that the information contained in this document is complete or accurate. Nor does Bell Potter Securities Limited accept any responsibility for updating any advice, views opinions, or recommendations contained in this document or for correcting any error or omission which may become apparent after the document has been issued.

Except insofar as liability under any statute cannot be excluded. Bell Potter Limited and its directors, employees and consultants do not accept any liability (whether arising in contract, in tort or negligence or otherwise) for any error or omission in this document or for any resulting loss or damage (whether direct, indirect, consequential or otherwise) suffered by the recipient of this document or any other person.

Disclosure of interest:

Bell Potter Securities Limited, its employees, consultants and its associates within the meaning of Chapter 7 of the Corporations Law may receive commissions, underwriting and management fees from transactions involving securities referred to in this document (which its representatives may directly share) and may from time to time hold interests in the securities referred to in this document.

Disclosure: Bell Potter Securities acted as Lead Manager to a $4.5m placement in September 2014 and received fees for that service.

ANALYST CERTIFICATION Each research analyst primarily responsible for the content of this research report, in whole or in part, certifies that with respect to each security or issuer that the analyst covered in this report: (1) all of the views expressed accurately reflect his or her personal views about those securities or issuers and were repared in an independent manner and (2) no part of his or her compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by that research analyst in the research report.

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