$NIOBF : NioCorp — Independent Economic Analysis

Standard Model10-Year Contracted Sales Model
Long-Term Price Case$3,676/kg Sc2O3 | $0.99/kg TiO2 | $46.55/kg NbLong-Term Price Case $3,676/kg Sc2O3 | $46.55/kg Nb
ProjectElk CreekProjectElk Creek
Payable Primary Product (Nb)168,861 tonnes (168,861,000 kg)Payable Primary Product (Nb) 35,180 tonnes (35,180,000 kg)
Payable Byproduct Metal (TiO2)418,841 tonnes (418,841,000 kg)Payable Byproduct Metal (TiO2) 418,841 tonnes (418,841,000 kg)
Payable Co-Product Metal (Sc2O3)3,410 tonnes (3,410,000 kg)Payable Co-Product Metal (Sc2O3) 947 tonnes (947,000 kg)
Shares Outstanding226,666,534Shares Outstanding226,666,534
Market Cap$95,993,277Market Cap $95,993,277
Average Annual Production7,220 tonnes FeNb (7,220,000 kg)Average Annual Production10,923,113 kg NbEq
Recovery93.14% Sc2O3 | 40.31% TiO2 | Nb 82.36%Recovery93.14% Sc2O3 | Nb 82.36%
LoM36 YearsContracted Sales Model Term10 Years
Payable Product (NbEq)447,052,463 kg NbEq Payable Product (NbEq) 109,231,128 kg NbEq
True All-in Cost (TAIC) $24.15/kgTrue All-in Cost (TAIC)$33.78/kg
Gross Revenue$20,810,292,140Gross Revenue$5,084,709,008
Total Operating Cost($6,717,578,000)Operating Cost($1,865,993,888)
Operating Margin (EBITDA)$14,092,714,140Operating Margin (EBITDA)$3,218,715,120
Income Taxes($2,467,634,246)Income Taxes($563,597,018)
Total Capital Cost($1,609,397,000)Capital Cost($1,260,504,167)
Cumulative Net Income$10,015,682,894Cumulative Net Income$1,394,613,935
Net Profit Margin48%Net Profit Margin 27%
Absolute Cost Structure (ACS)52%Absolute Cost Structure (ACS) 72%
MTQ Score0.9MTQ Score0.4
True Value$44.19/sh.True Value$6.15/sh.
True Value Discount (TVD)99%True Value Discount (TVD)93%
Cash Flow Multiple10xCash Flow Multiple 7.3x
Net Annual Cash Flow$161,728,000Net Annual Cash Flow $139,488,153
Future Market Cap$1,617,280,000Future Market Cap $1,018,263,517
Future Market Cap Growth1,585%Future Market Cap Growth 961%
Target$7.14/sh.Target$4.49/sh.

Notes: All Values in U.S. Dollars

NioCorp has signed a commercial sales agreement with Traxys North America. Under the agreement, Traxys is obligated to purchase 12 tonnes of Sc over the course of Elk Creek’s first 10 years of production. Additionally, 75% of the Elk Creek Project’s primary product, Ferroniobium (FeNb), is under contract over the first 10 years of production: thyssenkrupp (OTC: TYEKF), 50%; Commercial Metals Company, 25%

Fahy Capital Management is not an investor in NioCorp. We may, however, initiate a position in thyssenkrupp this quarter.

$NORZF : NorZinc — Independent Economic Analysis

Long-Term Price Case$24/oz. Ag, $1.10/lb. Zn, $1.00/lb. Pb
ProjectPrairie Creek
Mineral Reserves186,795,000 AgEq ozs.
Shares Outstanding369,700,000
Market Cap$24,030,500
Average Annual Production10,829,166 AgEq ozs.
Recovery87% Ag, 88% Pb, 83%, Zn
LoM15 Years
Payable Product162,437,490 AgEq ozs.
True All-in Cost (TAIC) $21.86/oz.
Gross Revenue$3,898,499,770
Smelter Deductions($454,000,000)
TCRC + Penalties($432,800,000)
Gross Income$3,011,699,770
Total Operating Cost($1,797,500,000)
Operating Profit$1,214,199,770
Income Taxes + Royalties($469,895,310)
Total Capital Costs ($395,900,000)
Net Income$348,404,460
Net Profit Margin9%
Absolute Cost Structure (ACS)91%
MTQ Score0.1
True Value$0.94/sh.
True Value Discount (TVD)93%
Cash Flow Multiple5x
Annual Cash Flow$23,174,415
Future Market Cap$115,872,075
Future Market Cap Growth382%
Target$0.31/sh.

Notes: All Values in U.S. Dollars

NorZinc is at the high end of the Absolute Cost Structure curve and the low end of the Net Profit Margin curve. In other words, Prairie Creek is a Project that will require substantially higher Silver, Lead and Zinc prices in order to be viable.

In a raging silver bull market, we think shares could appreciate by as much as 382%, which assumes shares will trade at approximately 5x future net annual cash flows.

Fahy Capital Management is not an investor in NorZinc.

$VNNHF : Belo Sun Receives Positive Ruling — Construction License Remains Valid

Belo Sun Mining reports that a three judge panel decision by the Court of Appeals of the Federal Justice in Brazil has ruled unanimously that SEMAS remains the competent authority for the environmental permitting of the Volta Grande Gold Project.

The ruling confirms that the Construction and Environmental Licenses granted by SEMAS for the Volta Grande Gold Project remain valid, subject to the completion of the Indigenous Study. [LINK]

$VNNHF : Belo Sun Mining — Independent Economic Analysis

Long-Term Price Case$1,700/oz. Au
Flagship ProjectVolta Grande
Mineral Reserves3,788,000 ozs.
Shares Outstanding442,631,915
Market Cap$84,100,064
Average Annual Production205,155 ozs.
Recovery93.1%
LoM17.2 Years
Payable Product3,524,100 ozs.
True All-in Cost (TAIC) $900/oz.
Gross Revenue$5,990,970,000
CFEM Royalty($42,240,000)
Gross Income$5,948,730,000
Total Operating Costs($2,488,640,000)
Operating Profit$3,460,090,000
Income Tax($155,060,400)
Total Capital Costs($486,086,900)
Net Income$2,818,942,700
Net Profit Margin47%
Absolute Cost Structure (ACS)53%
MTQ Score (Higher is Better)0.9
True Value$6.37/sh.
True Value Discount (TVD)97%
Cash Flow Multiple5x
Net Annual Cash Flow$164,124,000
Future Market Cap$820,620,000
Future Market Cap Growth876%
Target$1.85/sh.

Note: All Values in U.S. Dollars.

$DNN : Denison Mines — Independent Economic Analysis

Long-Term Price Case$65/lb. U308 $65/lb. U308
Flagship ProjectPhoenixGryphon
Project Percentage90% 90%
Mineral Reserves98,460,000 lbs. 98,460,000 lbs.
Shares Outstanding589,100,000589,100,000
Market Cap$342,267,100$342,267,100
Average Annual Production5.966M lbs.7.648M lbs.
Recovery98.5%98.2%
LoM10 Years7 Years
Payable Product58.767M lbs.48.817M lbs.
True All-in Cost (TAIC)$39.20/lb.$47.83/lb.
Gross Revenue$3,819,855,000$3,173,105,000
Saskatchewan Revenue Royalties & Surcharges + Resource Credit($276,939,487)($230,050,112)
Total Operating Cost($194,347,597)($567,610,551)
Operating Profit$3,348,567,916$2,375,444,337
Saskatchewan Profit Royalties ($502,285,187)($356,316,651)
Income Taxes($904,113,337)($641,369,971)
Total Capital Costs($425,950,000)($539,660,498)
Net Income (Denison Share)$1,364,597,453$754,287,495
Net Profit Margin36%24%
Absolute Cost Structure (ACS)60%74%
MTQ Score (Higher is Better)0.60.3
True Value$3.60/sh.
True Value Discount (TVD)86%
PhoenixGryphon
Cash Flow Multiple10x5x
Net Annual Cash Flow$138,530,520$118,184,544
Future Market Cap Contribution$1,385,305,200$590,922,720
Total Future Market Cap Growth477%
Target$3.35/sh.

Notes: All Values in U.S. Dollars

We boosted our stake in Denison Mines this morning by 25% following an updated analysis in which the company achieved a maximum in-house Composite Rating of 5. Denison Mines excelled in the following categories: Net Profit Margin (Phoenix), Absolute Cost Structure (Phoenix), True Value Discount, and Market Cap Growth. Our Target, however, has been lowered by 20%, as our updated calculations implied a True All-In Cost (TAIC) that was higher than expected for Phoenix, while Net Profit Margin and Absolute Cost Structure for Gryphon were average.

MTQ Scores & Composite Ratings — Study Group Comparison

$CPMMF : Crystal Peak Minerals — Independent Economic Analysis

Long-Term Price Case$645/t K2SO4
Flagship ProjectSevier Playa
Ownership100%
Mineral Reserves7,734,000 tonnes
Shares Outstanding348,594,751
Market Cap$40,785,586
Average Annual Production205,700 tonnes
Recovery80%
Payable Product6,171,000 tonnes
LoM30 Years
True All-in Cost (TAIC)$424/t
Gross Revenue$3,980,295,000
Royalties($222,896,520)
Net Revenue$3,757,398,480
Total Operating Costs ($1,372,677,240)
Operating Cash Flow$2,384,721,240
Income Taxes($372,016,513)
Total Capital Costs($646,489,167)
Net Income$1,366,215,560
Net Profit Margin34%
Absolute Cost Structure (ACS)66%
MTQ Score (Higher is Better)0.5
True Value$3.92/sh.
True Value Discount (TVD)97%
Cash Flow Multiple10x
Net Annual Cash Flow$45,459,700
Future Market Cap$454,597,000
Future Market Cap Growth1,015%
Target$1.30/sh.

Notes: All Values in U.S. Dollars

Crystal Peak Minerals is a top-rated stock with an MTQ Score (0.5) that is above average and a Composite Rating of 5 (Scale of 1-5).

Above $600/t K2SO4, Crystal Peak Minerals will enjoy both a Net Profit Margin > 30% and an Absolute Cost Structure below 70%.

MTQ Score (+ Composite Rating [Red Dotted Line]) — Study Group Comparison

$NTGSF : Golden Predator — Independent Economic Analysis

Long-Term Price Case$1,700/oz. Au
ProjectBrewery Creek
Mineral Resources577,000 ozs.
Shares Outstanding132,981,088
Market Cap$49,163,108
Average Annual Production53,853 ozs.
Recovery84%
LoM9 Years
Payable Product484,680 ozs.
True All-in Cost (TAIC)$1,291/oz.
Gross Revenue$823,956,000
Freight & Marketing($1,938,720)
Smelter Deduction($4,119,780)
Royalties($32,958,240)
Gross Income$784,939,260
Total Operating Cost($377,081,040)
Operating Profit$407,858,220
Income Tax($122,357,466)
Total Capital Costs ($116,973,363)
Net Income$168,527,391
Net Profit Margin20%
Absolute Cost Structure (ACS)76%
MTQ Score0.3
True Value$1.27/sh.
True Value Discount (TVD)72%
Cash Flow Multiple5x
Annual Cash Flow$22,025,877
Future Market Cap$110,129,385
Future Market Cap Growth124%
Target$0.83/sh.

Notes: All Values in U.S. Dollars

$BNNLF : Bannerman Resources — Independent Economic Analysis

Long-Term Price Case$75/lb. U308
Flagship ProjectEtango
Mineral Reserves130.1M lbs.
Fully Diluted Shares1,136,000,844
Fully Diluted Market Cap$40,896,030
Average Annual Production7,059,438 lbs.
Recovery87%
LoM16 Years
Payable Product112,951,000 lbs.
True All-in Cost (TAIC) $63.71/lb.
Gross Revenue$8,471,325,000
Royalty($423,566,250)
Gross Income$8,047,758,750
Total Operating Costs($4,291,071,000)
Operating Profit$3,756,687,750
Income Taxes($1,408,757,906)
Total Capital Costs($1,075,141,000)
Net Income$1,272,788,844
Net Profit Margin15%
Absolute Cost Structure (ACS)85%
MTQ Score (Higher is Better)0.2
True Value$1.12/sh.
True Value Discount (TVD)97%
Cash Flow Multiple5x
Annual Cash Flow$79,701,055
Future Market Cap$398,505,275
Future Market Cap Growth874%
Target$0.35/sh.

Notes: All Values in U.S. Dollars

TAIC Comparison (Lower is Better)

Net Profit Margin Comparison (Higher is Better)

MTQ Score Comparison (Higher is Better)

True Value Discount Comparison (Higher is Better)

MTQ Score — Global Study Group Comparison (Higher is Better)

ACS Curve Impact on MTQ Score

For stocks under study, Absolute Cost Structures (ACS) above 70% are associated with rapid falloffs in MTQ Scores and low MTQ Scores are predictors of low Net Profit Margins.

We will be monitoring stock price performance of a basket* of stocks over the next 24 months in order to establish whether or not there is a statistically significant correlation between price performance and MTQ Scores.

If we are able to ascertain that MTQ Scores serve as predictors of price performance, those scores will become cornerstones of our stock selection process.

*Fahy Capital Management does not necessarily own shares of the stocks under study.

$RIOFF : Rio2 Limited — Independent Economic Analysis

Long-Term Price Case$1,700/oz. Au
ProjectFenix (Cerro Maricunga[OLD])
Mineral Reserves3,743,000 ozs.
Shares Outstanding118,239,464
Market Cap$38,427,826
Average Annual Production227,895 ozs.
Recovery79.2%
LoM13 Years
Payable Product2,962,630 ozs.
True All-in Cost (TAIC) $1,333/oz.
Gross Revenue$5,036,471,000
Royalties($251,823,550)
Gross Income$4,784,647,450
Total Operating Cost($2,748,135,588)
Operating Profit$2,036,511,862
Income Taxes($549,858,203)
Total Capital Costs ($398,900,000)
Net Income$1,087,753,659
Net Profit Margin22%
Absolute Cost Structure (ACS)78%
MTQ Score0.3
True Value$9.20/sh.
Cash Flow Multiple5x
Annual Cash Flow$83,637,465
Future Market Cap$418,187,325
Future Market Cap Growth988%
Target$3.54/sh.

Notes: All Values in U.S. Dollars

The Fenix Project is on the high end of the TAIC curve. It will need higher gold prices to be viable. Above $1,700, Net Profit Margin becomes sustainable. It is important to note that social investment costs will be much higher than envisioned by Atacama Pacific and that will have a further deleterious impact on margins, as has the 35% increase in Chilean Corporate Taxes since 2014.

MTQ Score Comparison

MTQ Scores of Recently Evaluated Stocks

Note: A high score (> 0.5) implies a greater-than-even chance of an enterprise exhibiting both a high Net Profit Margin and low Absolute Cost Structure at the Long-Term Price Case at which it was evaluated.

Our Hypothesis: High MTQ Scores are a reliable determinant of Future Market Cap Growth

The MTQ Score is the 4th pillar of our updated valuation methodology. It will be published in future analyses alongside TAIC, ACS and True Value.