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Jacob Securities' report on the Tantalum / Niobium market. July 19 2011

Jacob Securities' report on the Tantalum / Niobium market. July 19 2011

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    • EQUITY RESEARCH Luisa Moreno, Ph.D, Analyst lmoreno@jacobsecurities.com +1 (416)866-8380 July 19, 2011 Tantalum and Niobium Primer Stock Rating: SPECULATIVE BUY Risk Rating: High Two Critical MetalsJacob Securities Inc. (“Jacob Securities”) does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firmmay 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.For analyst certification and other important disclosures, refer to the Disclosure Section, at the end of this report
    • <TITLE>OCTOBOCTERJSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH. ContentsInvestment Summary .............................................................................................................................................................. 3General Properties .................................................................................................................................................................. 4Mineralogy and Occurrences .................................................................................................................................................. 4Resources and Reserves.......................................................................................................................................................... 8Mining and Processing ............................................................................................................................................................ 9World Supply ......................................................................................................................................................................... 11World Demand ...................................................................................................................................................................... 16International Trade ............................................................................................................................................................... 23Prices ..................................................................................................................................................................................... 24Recycling and Substitution .................................................................................................................................................... 26Profiled Companies ............................................................................................................................................................... 27Acronyms .............................................................................................................................................................................. 35Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 2
    • <TITLE>OCTOBOCTER JSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH . Investment Summary Two Critical Metals  There is currently a growing supply gap of tantalum products. This situation has been caused by the fact that the largest tantalum mines in Australia, Canada andThere is a growing Africa were forced to close in 2008–2009 due to the global economic slowdown andsupply-demand gap for depressed tantalum prices. There are currently a few mines and projects undertantalum. development, and those that are able to start first and have a production cost advantage will have a better chance to secure contracts with the top three processors and develop a sustainable tantalum mine business.  The European Union (EU) has recently declared niobium and tantalum as critical metals. Brazil, the world’s ultimate producer of niobium, has recently engaged in a joint venture (JV) with Korean and Japanese companies with the aim to gain accessNiobium and tantalum to new processing technologies and expand niobium applications and production. Ahave been declared drastic difference from the current rare earth situation between China and the rest ofcritical elements by the world. The EU has identified niobium as a critical material given its uniqueEU. characteristics and significance for the EU manufacturers and economy. The largest end-use market for niobium is HSLA (high strength, low alloy) Steel. Niobium demand is expected to grow at 5–7% per year going forward, driven by the growth in the emerging economies and their anticipated consumption of steel.  It has been estimated that in 2009 about 50% of the tantalum supply was from the DRC and Rwanda, two zones affected by brutal guerrilla wars and genocide. Conflict minerals from these areas are often used to support these wars. The “ConflictA significant Minerals Law” in the U.S. aims at restricting the trade of conflict minerals, and manypercentage of tantalum technology companies, like Apple Inc. (NASDAQ:AAPL), Motorola Solutions Inc.supply is from African (NYSE:MSI) and AVX Corp., are taking initiatives to comply with the law. Theconflict areas. restrictions regarding conflict minerals are likely to improve tantalum trading conditions and keep prices at sustainable levels for conflict-free tantalum miners.  There are only a few listed companies that offer a clear exposure to tantalum andNoventa Ltd.,Commerce niobium, which includes: Noventa Ltd. (AIM:NVTA;TSX:NTA), Commerce ResourcesResources Corp., Corp. (TSXV:CCE), Pacific Wildcat Resources Corp. (TSXV:PAW) and GippslandPacific Wildcat Ltd. (ASX:GIP). Noventa is a pure-play tantalum company, currently mining andResources Corp. and producing tantalum concentrate at Marropino in Mozambique. Pacific Wildcat isGippsland Ltd. are exploring niobium in Kenya’s Mrima Hill deposit and evaluating the dormant Muianeprofiled in this report. tantalum mine in Mozambique. Commerce Resources is exploring the Upper Fir property in British Columbia for tantalum and niobium. Gippsland Ltd. is the owner of the tantalum project Abu Dabbab in Egypt; the company plans to start production in 2013. Some of the rare earths companies, like Avalon Rare Metals Inc. (TSX:AVL) and Quest Rare Minerals Ltd. (TSXV:QRM;OTC:QMNME), also have significant amounts of tantalum and niobium minerals in their deposits, and lithium company Galaxy Resources Ltd. (ASX:GXY) produces tantalum concentrate as a by-product.  Tantalum and niobium will likely keep their status of critical materials for the world’s largest economies (e.g. U.S., Japan, EU and China) because of their essential applications in the major growing sectors of their economies, such as the electronics, energy, construction and manufacturing sectors. Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 3
    • <TITLE>OCTOBOCTER JSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH . General Properties Tantalum is a transition metal with atomic number 73 and atomic weight 181. The element is usually found together with niobium with an atomic number 41 and atomic weight 93 (Exhibit 1). The two elements are part of the Group 5 in the periodic table, along with vanadium (V) and dubnium (Db). Tantalum is a grey blue, ductile metal with a high melting point and high resistance to chemical attack at temperatures below 1 C. It is, however, dissolvable in hydrofluoric acid or in acidic solutions containing fluoride ion, sulphur trioxide and potassium hydroxide. Tantalum is easy to machine and is highly conductive of heat and electricity. Niobium is a lustrous gray, ductile metal, and has similar physical and chemical properties to tantalum, which makes them sometimes difficult to distinguish. Exhibit 1: Selected Tantalum and Niobium Properties Properties Niobium (Nb) Tanatalum (Ta) Atomic Number 41 73 Atomic Weight 92.90638 180.9479 Density at 293K (g/cm3) 8.581 16.677 Melting Point °C 2468 2996 Boiling point °C 4930 5425 Vickers hardness MPa 1320 873 Electrical resistivity (nano ohm-metres) 152 at 0°C 131 at 20°C Source: BGSTantalum and niobium Tantalum and niobium have unique mechanical, electrical and chemical properties,have unique andindispensable which make them indispensable in many industrial applications. In addition to theproperties. properties listed above, they also have nearly zero electric resistance at low temperatures, high corrosion resistance, shape memory properties and high capacitance (i.e. ability to store electric change). Mineralogy and Occurrences Mineralogy Tantalum is a fairly widely distributed element but relatively rare, with an average crustal abundance of 1.7 mg/kg (0.000017%); niobium crustal abundance is 20 mg/kg. Tantalum and niobium are hosted in a variety of minerals, some of which are listed in Exhibit 2. Tantalum and niobium are almost exclusively found in complex oxide and hydroxide minerals. Silicates of these elements exist but they are relatively rare, one such example is the eudialyte mineral (Na4(Ca,Ce)2(Fe++,Mn,Y)ZrSi8O22(OH,Cl)2). Tantalum and niobium also substitute ions in common oxide groups, such as the titanium minerals, rutile and ilmenite. The oxides comprise the majority of the economically important minerals. The most common tantalum and niobium minerals are the columbite-tantalite (also known as coltan) group minerals. When tantalum outweighs niobium the mineral is called tantalite, when niobium outweighs tantalum the mineral is Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 4
    • <TITLE>OCTOBOCTER JSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH . called columbite. When tantalum and niobium are equally weighted it may be referred to as coltan. Wodginite is also an important source of tantalum and pyrochlore is of particular importance to niobium.Niobium usually Tantalum and niobium deposits are often associated with igneous rocks (e.g.outweighs tantalum in pegmatites, granites, syenites and carbonatites). Carbonatites and alkaline igneouscarbonatites andsyenites, whereas in rocks (e.g. alkali granites and syenites) are usually enriched in a variety of elements,pegmatites and granites including rare earths (REE), zirconium and niobium, but usually have low tantalumtantalum reaches content. The main niobium-bearing minerals in these deposits usually include perovskitehigher concentrations. and pyrochlore. Pegmatites and granites enriched with lithium minerals, caesium, as well as tantalum and niobium, are the main sources of tantalum in the world and usually contain lower levels of niobium. Columbite-tantaline and wodginite are usually the main tantalum- bearing minerals in these deposits. Exhibit 2: Selected Tantalum and Niobium Minerals Mineral name Mineral group Formula Nb2O5 (%) Ta2O5 (%) Columbite Columbite-tantalite (Fe,Mn)(Nb,Ta)2O6 78.72 n.a. Tantalite Columbite-tantalite (Fe,Mn)(Nb,Ta)2O6 n.a. 86.17 Pyrochlore Pyrochlore (Na,Ca)2Nb 2O6(O,OH,F) 75.12 n.a. Microlite Pyrochlore (Na,Ca)2Nb 2O6(O,OH,F) n.a. 83.53 Tapiolite Tapiolite (Fe,Mn)(Ta,Nb)2O6 1.33 83.96 Ixiolite Ixiolite (Ta,Nb,Sn,Mn,Fe)4O8 8.30 68.96 Wodginite Wodginite (Ta,Nb,Sn,Mn,Fe)O2 8.37 69.58 Loparite Perovskite (Ce,La,Na,Ca,Sr)(Ti,Nb)O3 16.15 n.a. Lueshite Perovskite NaNbO3 81.09 n.a. Euxenite Euxenite (Y,Ca,Ce,U,Th)(Nb,Ti,Ta)2O6 47.43 22.53 Struverite Rutile (Ti,Ta,Fe)O2 11.32 37.65 Iimenorutile Rutile Fe x (Nb,Ta)2x 4Ti1-x O2 27 n.a. Source: BGS Occurrences Africa: In Mozambique, the Alto Ligonha Province contains various zones of pegmatite mineralization that have been mined since 1926. Noventa Ltd. is currently mining tantalum at the Marropino mine and has plans to mine and explore various other sites in the province, including Morrua, Mutala and Ginama. The Marropino pegmatite is the classic example of zoned lithium rare-metal pegmatite rich in lithium, cesium and tantalum (known as LCT family). Also in Mozambique, Pacific Wildcat Resources Corp. is currently evaluating the dormant Muiane mine; the company is also exploring the Mrima niobium deposit in Kenya. In Central Africa, tantalum-mineralized pegmatites are associated with the Mesoproterozoic Kibaran belt and can be found in Burundi, Rwanda, Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 5
    • <TITLE>OCTOBOCTER JSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH . Uganda and the Democratic Republic of Congo (DRC). In these countries, columbite- tantalite minerals are found in weathered pegmatites and secondary placer deposits. Tantalum-mineralized granites and pegmatites can also be found in North African countries, including the Kenticha pegmatite in Ethiopia and the Majahayan pegmatite in Somalia. In Egypt, the tantalum mineralization of the Abu Dabbab and Nuweibi deposit is found in stock-like granite instead of pegmatite; the project is being developed by Gippsland Ltd. and is near production. The Lueshe deposit in the DRC is a carbonatite deposit and has been mined for niobium. In Malawi, the Kanyika niobium and tantalum project is run by Globe Metals and Mining. The large Pilanesberg alkaline complex in South Africa contains eudialyte- rich syenites with zirconium, niobium and rare earth. Niobium and tantalum deposits of the Alkaline to peralkaline type have also been found in Morocco, Nigeria and Namibia. Asia: In China, 73% of tantalum and niobium mines are found in three provinces: 26% in Jiangxi, 24% in Inner Mongolia and 23% in Guangdong. Some of the Chinese columbite mines are characteristically small with low grades. The columbite deposits in China are usually associated with rare earth elements (REE). For instance, the world’s largest rare earth deposit, Bayan Obo, is also rich in niobium, and some of the REE deposits in the country also contain small amounts of tantalum. In Malaysia and South-western Thailand, tantalum has been produced from weathered tin-mineralized granites and pegmatite and secondary placer deposits. The Khaldzan-Buregtey zirconium-niobium- REE peralkaline granite-related deposit is located in western Mongolia, the main niobium mineral is pyrochloride. Australia has one of the largest tantalum resources, and for many years was the largestAustralia has one of thehighest tantalum producer of tantalum. The Greenbushes and Wodgina mines, from which most of thereserves in the world. tantalum was produced, are owned by Global Advanced Metal (formerly Talison Minerals Pty Ltd.), and they ceased production in 2008 due to poor global economic conditions and depressed tantalum prices. The mines are expected to resume production in 2011. The Greenbushes deposit contains large resources of tantalum and lithium associated with tin mineralization; the pegmatite has been exploited by both open-pit and underground mines. At the Wodgina pegmatite district, the main tantalum minerals include manganese-rich tantalite and wodginite. Brazil: The Volta Grande mine in Nazareno, Minas Gerais, is characterized by albite-Brazil is the largest spondumene-type pegmatite and is mined for tantalum, niobium and lithium. Brazil isproducer of niobiumand has the largest currently the largest producer of niobium. The Araxá mine is the largest producingreserves. niobium mine in the world and is owned by Companhia Brasileira de Metalurgia e Mineração (CBMM).The second-largest niobium mine is at Catalão and is owned by Anglo American Plc. Another carbonatite-hosted niobium deposit is the Morro dos Seis Lagos deposit. Niobium and tantalum are also extracted from the albite-rich peralkaline granite tin deposit at the Pitinga mine, in the Amazon state. Canada: The Tanco pegmatite in Manitoba hosts a high variety of tantalum minerals that are generally fine grain, making processing a challenge. The deposit also contains caesium and lithium and is owned by Cabot Corporation. Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 6
    • <TITLE>OCTOBOCTERJSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH. In the Northwest Territories, the Thor Lake igneous complex comprises syenites and peralkaline granites with various hydrothermally mineralized zones. The deposit is currently being explored for rare earths by Avalon Rare Metals Inc., but is also rich in yttrium and zirconium, as well as tantalum and niobium, which are found mainly in columbite-tantalite minerals. The Oka carbonatite complex in Quebec includes three separate tantalum niobium deposits containing pervskite and pyrochlore group minerals. The Niobec mine in Quebec is the largest niobium mine outside of Brazil and is owned by IAMGOLD Corporation. Niobec is also the only known underground niobium mine in the world. The mine lies in the southern region of the Saint-Honoré carbonatite complex; the main mineral is pyrochlore. Nearby, the Crevier syenite carbonatite deposit with tantalum and niobium mineralization is currently being explored. The Strange Lake peralkaline granite deposit in Quebec is currently being evaluated by Quest Rare Minerals Ltd. for rare earths; the deposit is also rich in tantalum and niobium. Commonwealth of Independent States: The Tomtor deposit in Siberia, Russia, is a carbonatite-hosted niobium deposit, and the Lovozero syenite massif is rich in eudialyte, loparite and apatite with small percentages of niobium and tantalum. Europe: The Sokli carbonatite complex in Finland is rich in phosphate and niobium minerals (e.g. pyrochlore) and is owned by Yara International ASA. Greenland: The Kvanefjeld deposit in Southwest Greenland is a multi-element deposit containing niobium-tantalum-REE and is associated with the llimaussaq intrusive complex. Greenland Minerals and Energy Ltd. is currently exploring the deposit. The Motzfeld deposit owned by Ram Resources is also a multi-element deposit that has been targeted mainly for niobium, tantalum and REE. Saudi Arabia: The Ghurayyah alkaline granite deposit contains tantalum, niobium and rare earths. The columbite-tantalite and pyrochlore are the main tantalum and niobium minerals. Tertiary Minerals Plc is currently exploring the deposit. The United States: According to the United States Geological Survey (USGS), all of the tantalum and niobium resources in United States are considered uneconomic at 2010 prices. However, the country has a few niobium and tantalum occurrences. For instance, in Alaska, the Ray Mountain REE deposit, now being explored by Ucore Rare Metals, is reported as having minor amounts of tantalum and niobium. In Nebraska, Quantum Rare earths Developments Corp. is currently exploring the Elk Creek carbonatite, located south of Lincoln; according to the USGS, this deposit has the potential to be one of the largest global resources of niobium and REE. It should be noted that the tantalum and niobium occurrences discussed above include both economic and non-economic occurrences. In the following section, we present the tantalum and niobium resources and reserves per country. It is important to note that resources refer to the estimated ore occurrences and reserves are the portion of resources that can be economically mined.Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 7
    • <TITLE>OCTOBOCTER JSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH . Resources and Reserves Major resources of tantalum are located in Brazil, Australia, China and Russia. Brazil and Australia have combined about 70% of the global tantalum reserves (Exhibit 3). Exhibit 3: Tantalum Resources and ReservesAustralia and Brazilhave about 70% of the Resources Resources Reserves Reservesglobal tantalum Country ( tonnes Ta2O5) (%) ( tonnes Ta) ( %)reserves. Brazil 129 274 40.8 87 360 57.2 Australia 65 771 20.7 40 560 26.5 China and Southeast Aisa 33 112 10.4 7 800 5.1 Russia and Middle East 31 298 10.0 ------ ------ Central Africa 28 576 9.0 3 120 2.0 Other Africa 21 318 6.7 12 480 8.2 North America 5 443 1.7 1 500* 1.0 Europe 2 268 0.7 ------ ------ Total 317 060 100 152 820 100 *Deemed uneconomic at 2010 prices Source:BGS; JSI Contrary to tantalum, most of the niobium reserves are located in only a few countries. Brazil holds the largest niobium reserves (93%), followed by Canada (Exhibit 4). Other unquantified niobium resources and reserves may be found in Egypt, Malawi and Greenland. Exhibit 4: Niobium ReservesNiobium reserves arealmost exclusively Reserves Reserves Contained Nb2O5located in two Countrycountries, Brazil and (tonnes) (%) (tonnes)Canada. Brazil 452 200 000 93.35 11 142 740 Canada 32 086 000 6.62 179 682 United States 150 000* 0.03 ------ Total 484 436 000 100 11 322 422 Source: USGS Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 8
    • <TITLE>OCTOBOCTER JSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH . Mining and Processing Mining Tantalum and niobium are mined using conventional open-pit and underground mining techniques. Surface mining (open pit) is used to extract near-surface deposits (<100 metres) and is generally cheaper and safer. This method involves removing large tonnages of waste to access the ore, digging or blasting the ore with explosives, and transporting the ore by truck or conveyor belt for processing or stockpiling. If the mineralization is found deep in the ground, it may not be economical to remove the unmineralized material (waste) to access the ore; as such, underground mining is preferred. In underground mining, various techniques may be used, depending on the type of rock. In large ore bodies, mechanized systems can be applied, but in the case of narrow veins, labour-intensive drilling and blasting techniques are usually used. Common less- expensive underground mining techniques are the block-caving method and the room- and-pillar method. In the block-caving method, very large ore bodies are drilled and blasted in such a way that several thousand tonnes of broken ore may be extracted per day. In the room-and-pillar method, mined material is extracted across a horizontal plane opening multiple spaces or "rooms" underground while leaving "pillars" of untouched material to support the roof overburden. Waste material is sometimes used to fill worked places, which secures the roof and safely disposes of the waste. This technique has been used at the Tanco pegmatite deposit in Canada. Hard-rock deposits may be mined using standard surface, underground or both methods. For example, the Wodgina tantalum open-pit mine in Australia is mined using drilling and blasting techniques.Extraction from placer Extraction from placer deposits usually requires less costly mining techniques. In dry-deposits usually doesnot involve drilling and mining applications, shovels, scrapers and bulldozers are used to remove and transportblasting and requires the often unconsolidated ore to the processing plant. This method usually does notless costly miningtechniques. require drilling and blasting, with the exception of occasional areas that may have cemented sand. The weathered Araxá carbonatite deposit in Brazil is mined using economic open-pit methods. Tantalum and niobium are also extracted as by-products. It has been suggested that about 14% of the total tantalum is extracted as a by-product, and only 2% for niobium. Tantalum-bearing tin slags are a common source of tantalum. Processing Methods Tantalum and niobium minerals, such as columbite-tantalite, are first crushed and milled, and then the ground down ore undergoes several conditioning treatments to produce a slurry substance. During tantalum production, the ore slurry is usually concentrated to about 30% tantalum oxide using mainly gravity and magnetic technique, depending on the type of ore. Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 9
    • <TITLE>OCTOBOCTER JSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH . In niobium concentrate production process, the ore slurry is further concentrated to about 54% using gravity separation, froth flotation, magnetic and electrostatic separation, and acid leaching may also be used depending on the characteristics of ore. Once the concentration process is complete, the concentrate is usually sent to a refinery plant where tantalum and niobium are separated using either an acid or solvent extraction process (Exhibit 5). Niobium companies that convert niobium oxide into ferro- niobium may do so using the aluminothermy reduction process or an electric arc furnace. Exhibit 5: Chemical Processing of Tantalum and Niobium Concentrates Source: BGS Artisanal MiningThere are positive andnegative implications Artisanal and small scale mining (ASSM) have increased significantly in recent years,that result from particularly in developing countries. There are positive and negative results from theseartisanal and smallscale mining activities activities. ASSM has been associated with socioeconomic development in some ruralin developing countries. areas, resulting in poverty alleviation, reducing rural migration and increasing national income. However, mining activities are often performed under poor environmentalThe United States has conditions with severe and negative implications for the local environment and health ofintroduced a legislation the workers (Exhibit 6). Additionally, in some situations, the revenue from ASSM hasdesigned to restrict theimportation and trade of been used to support brutal wars. For instance, in the DRC, minerals trade has been aconflict minerals in significant source of revenue for armed rebel groups that have committed horribleCentral Africa, inparticular in the DRC. human rights violations against locals. This situation has led the U.S. to introduce the “conflict minerals” law on May 20, 2010, which requires U.S. and foreign companies operating in the United States to report the use of conflict minerals (which includes Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 10
    • <TITLE>OCTOBOCTER JSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH . tantalum) from the DRC and neighbouring countries. The idea is to restrict, to the extent possible, the use of conflict minerals across the supply chain from processors to manufactures at different technology levels (including electronic component producers and cellphone manufactures). Restricting the diffusion of conflict minerals should lead to better trading conditions and pricing of the underlying metals, allowing conflict-free metals to be traded at fair and sustainable market prices. Exhibit 6: Artisanal Miners Source:GoogleEstimates indicate that The DRC has large resources of columbine-tantalite minerals in many areas of thethe DRC has made inexcess of $1.0 billion country. It has been estimated that more than 50% of the world tantalum supply comesdollars from sales of from Africa and a significant percentage of that is said to be from the DRC. It has beenconflict minerals. estimated that in 2009, the DRC made more than US$1.0 billion through the sales of conflict minerals. It will likely be almost impossible to completely stop the spread and use of conflict minerals in the world, but the current law in the United States has certainly created an awareness of the problems associated with conflict minerals and it will likely reduce the use of these minerals significantly. There are many non-governmental organizations working on this problem and several technology companies are refusing to use conflict minerals-bearing components in their products. The global economic growth (although slow), combined with the introduction of the conflict free mineral law in the United States, and other industrial countries, has contributed to higher tantalum prices, which should make possible the return to the market place of large tantalum producers such as Global Advanced Metals (previously Talison Minerals Pty Ltd.) and other companies. World Supply SourcesCurrently only 60% oftantalum supply isderived from direct Tantalum supply is derived from various sources: about 60% is obtained from primarymining. sources (i.e. direct mining of tantalum ores), 10% from secondary concentrates, 10% from tin slags and 20% from scrap, synthetic concentrates and recycling (Exhibit 7). Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 11
    • <TITLE>OCTOBOCTER JSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH . Exhibit 7: Historical Tantalum Sources Scrap, Synthetic Concentrates and Recycling 20% Primary Tin Slag Concentrates 10% 60% Secondary Concentrates 10% Source:TCI Niobium supply is derived mainly from primary sources (Exhibit 8), with the mineralNiobium supply is pyrochlore accounting for more than 95% of the total primary production. Less than 15%derived mainly from is derived from tin slags and recycling.mining. Exhibit 8: Niobium Sources Recycling 10% -15% Primary and Secondary concentrates 85% - 90% Source:TCI; USGS The Defense National Stockpile Center (DNSC), a division of The United States Defense Logistics Agency (USDLA), used to be a significant source of tantalum and niobium. However, in 2008, the DNSC announced that the stockpile of these metals has been depleted and were no longer offered for sale. Production Tantalum Production In the last two years, Brazil and Mozambique were the largest producers of tantalum (Exhibit 9). The largest operating tantalum mine in Brazil is the Mibra mine at Nazareno in Minas Gerais with a capacity of 300,000 pounds of Ta2O5 per year. In Mozambique, Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 12
    • <TITLE>OCTOBOCTER JSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH . the Marropino mine has the capacity to produce 600,000 tonnes of Ta2O5 and isBrazil and Mozambique currently producing close to 200,000 tonnes of Ta2O5 per year. Australia used to be theare currently the largestproducers of tantalum. world’s largest producer of tantalum and in 2 2 contributed to about 6 % or the total world production; however, its contribution to total production was only 10% in 2010. The two largest mines in Australia, the Wodgina and Greenbushes mines, were placed under care and maintenance in December 2008, due to poor economic conditions and depressed tantalum prices aggravated by increased volume of cheap conflict tantalum in the market. Exhibit 9: Tantalum Mine Production per Country Ta Mine Production (tonnes) 2009 2010 Australia 81 80Australia used to be thelargest tantalum Brazil 180 180producer. Canada 25 25 Mozambique 113 110 Rwanda 104 100 Other countries * 297 310 Total 800 805 * includes Burundi, Ethiopia, Uganda, Congo (Kinshasa), Zimbabwe and tantalum contained in tin slags Source:BGS ; USGS; JSI Other tantalum-producing mines are the Keticha mine in Ethiopia, the Lovozero mine in Russia, the Yichun mine in China and the Pitinga tin mine in Brazil. Additional tantalum production is also available in Southeast Asia, in particular in Malaysia and Thailand, from where tantalum is produced from tin-slags, and in Canada and Central Africa from small alluvial and soft rock deposits. Estimates indicate that Rwanda and the DRC accounted for 40–50% of the global tantalum production in 2009, with a significant portion from conflict areas. The volume of conflict minerals are, however, usually hard to track and quantify. In the late 90s, the technology sector increased at a rapid rate, driving global tantalumThe 2008 recession andthe depressed tantalum production up. Tantalum production peaked in 2001, likely associated with the dot-comprices caused many bubble and the expectation of continuing growth in the technology sector. During thatmines around the globeto suspend production. period, many companies built inventories of tantalum. However, with the slowdown in the technology sector, tantalum production decreased in the subsequent years (Exhibit 10). The 2008 recession and the low tantalum prices caused by the oversupply of tantalum in the market led many mines in Australia, Canada and Africa to suspend production, leading to a more than 50% decrease in mine production. Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 13
    • <TITLE>OCTOBOCTER JSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH . Exhibit 10: Tantalum Concentrate Mine Production 2,500 Ta Mine Production, tonnes 2,000 1,500 1,000 500 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source:BGS; JSI Niobium Production Brazil is the world’s largest producer of niobium (92%), followed by Canada (Exhibit 11). Brazil has two of the largest niobium deposits in the world, the Araxá and the Catalão deposits. The Araxá mine is operated by CBMM (Companhia Brasileira de Metalurgia e Mineração) and it has enough reserves to supply current global demand for 500 years; however, decreasing grades are increasing operating costs at the mine. The Catalão mine is operated by Anglo American Brazil (a subsidiary of Anglo American plc) and hasCBMM, Anglo American about 18 million tonnes of niobium oxide. The third-largest deposit is the Niobec depositBrazil and IAMGOLD in Quebec with 18,000 tonnes, and is owned by IAMGOLD Corp. The main niobiumtogether supply about85% of niobium to the mineral in these deposits is pyrochlore. CBMM, Anglo American Brazil and IAMGOLDmarket. together supply about 85% of niobium to the market, most of it being in the form of ferro- niobium with 60% niobium oxide content, for use in the production of high-strength, low- alloy steel (HSLA). Exhibit 11: Niobium ProducersBrazil is the largestproducer of niobium. Canada Other 7% 1% Brazil 92% Souce: USGS Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 14
    • <TITLE>OCTOBOCTER JSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH . The niobium production, profile which shows a steady increase in the last six years (Exhibit 12), is dramatically different from that of tantalum. Niobium production increased from about 20,000 tonnes in 2000 to more than 80,000 tonnes in 2010, driven by increased demand for HSLA steel used in the manufacture of vehicles, and in construction of buildings, ships and refinery equipment. The increase in steel consumption has been linked to the economic growth in the emerging markets, in particular the BRIC countries (i.e. Brazil, China, India and Russia). Exhibit 12: Niobium Concentrate Mine Production 90,000 80,000 Nb Mine Production. tonnesNiobium production hasincreased fourfold over 70,000the past ten years. 60,000 50,000 40,000 30,000 20,000 10,000 - 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: BGS; JSI Projects Under Development Tantalum supply has been constrained in recent years as a result of production halts at the world’s largest tantalum producing mines in Australia, Canada and Mozambique. As mentioned above, poor economic conditions in 2008 and the growing supply of cheap conflict tantalum in the market caused significant decrease in tantalum prices, granting many tantalum mines around the globe uneconomic and causing over a 50% decrease in production of conflict-free tantalum in 2009. Since the introduction of the conflict-freeThe growing constraint minerals law in the U.S., there have been major constraints in the diffusion of conflictin tantalum supply hasled to an increase in tantalum; however, as previous mines struggle to re-start production there’s likely aexploration projects. supply-demand gap forming in the market; at least in the short term. This growing constraint in tantalum supply has led to an increase in exploration projects. Exhibit 13 presents a list of some of the current tantalum projects. Noventa’s mine Marropino is currently producing at a rate of about 200,000 lb/year and expects to increase production to 600,000 pounds by the end of this year. The company has two other tantalum projects in Morrua and Mutala with short-term production potential. Global Advanced Metals (GAM), plans to re-start the Wodgina mine in Australia thisGAM plans to re-startproduction at the year, with an initial production of 700,000 pounds per year. In Egypt, Gippsland Ltd. isWodgina mine this year. developing the Abu Dabbab mine scheduled for production in 2013, with a production target of 650,000 pounds per year. In Malawi, Globe Metals and Mining is developing the Kanyika project and plans to bring it to production in 2013. The plan is to produce 200 tonnes of ferro-niobium and 400,000 tonnes of tantalum pentoxide per year. Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 15
    • <TITLE>OCTOBOCTER JSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH . Other projects under development include Commerce Resources Upper Fir deposit with large niobium and tantalum resources, and the Motzfeldt deposit in Greenland that has the potential of becoming an extremely large niobium-tantalum deposit with about 500 million tonnes of resources. This project is 51%-owned by Ram Resources. Exhibit 13: Selected Projects Resouces*, Project/Mine Company Deposit Production Status % Ta 2O5 % Nb2O5 Million Tonnes Wodgina, Global Advanced 700,000 lbs Ta2O5 Li-albite granite Feasibility n.a 0.027 n.a Australia Metals (frm Talison) p.a., 2011 Marropino, Zoned LCT-type 600,000 lbs p.a Noventa In Production 8.1 0.022 n.a Mozambique pegmatite Ta2O5, 2011 Morrua, Zoned LCT-type 250,000 lbsp.a Noventa Feasibility 7.8 0.049 n.a Mozambique pegmatite Ta2O5,2012 Abu Dabbab, 650,000 lbs p.a. Gippsland Li-albite granite Feasibility 44.5 0.025 n.a Egypt Ta2O5, 2013 200 tonnes Fe-Nb, Globe Metals and Carbonatite-nephelite Kanyika, Malawi 400,000 lbs Ta2O5, Feasibility 21 0.018 0.41 Mining syenite 2013 Commerce Carbonatite-nephelite Upper Fir, Canada n.a. Conceptional 36.4 0.019 0.17 Resources syenite Carbonatite-nephelite Anita, Canada Les Mineraux Crevier n.a. Conceptional 23.75 0.019 0.186 syenite Motzfeldt, Alkaline-peralkaline Ram Resources n.a. Conceptional 500 0.011-0.013 0.13-0.15 Greenland granite Carbonatite-nephelite Crevier, Canada MDN Inc. n.a. Conceptional 25.4 0.023 0.2 syenite Carbonatite-nephelite Mrima Hill, Kenya Pacific Wildcat n.a. Conceptional 105.3 n.a. 0.65 syenite *Include all categories of resources Source: BGS; JSI World Demand Tantalum demand has increased steadily in the last 10 years, driven by developments and growth in the technology sector. According to Paumanok Publications Inc., a leading market research firm in the electronic components sector, demand for tantalum concentrate increased from 2.97 million pounds in 1995 to about 6.22 million pounds inEstimates indicate that 2008, at an average growth rate of 6% per year. However, we think there was likely atantalum demand hasgrown by 6% between slowdown in tantalum demand during the 2001–2002 downturn and that the preceding1995 and 2002, but had years’ demand may have grown by double digits (10–12% in some years) driven by thea one-year decline of31% in 2009 due to the steady growth of the electronics industry and increasing applications for tantalum in therecent global economic super-alloys sector. The recent global economic slowdown caused a significantslowdown. decrease in demand for industrial metals. Tantalum demand estimates for 2009 indicate a one-year decline of 31%, which equates to 4.3 million tonnes for that year. Tantalum products are used in a variety of industries, such as medical, construction andTantalum demandexpected to grow by 9% electronics. We believe that as the global economy improves, demand for tantalum,in the next 4 years. niobium and other industrial metals will rise. Paumanok Publications Inc. estimates that demand for tantalum will grow 9% per year in the next four years as the markets Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 16
    • <TITLE>OCTOBOCTER JSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH . recover. Exhibit 14 shows our production and demand forecast for tantalum under three scenarios: low growth (6% CAGR), medium growth (9% CAGR) and high growth (12% CAGR). Exhibit 14: Tantalum Supply and Demand Forecast 10,000,000 Other Sources 8,000,000 Malawi Egypt 6,000,000 Australia Mozambique 4,000,000 Current Sources Demand 6% CAGR 2,000,000 Demand 9% CAGR Demand 12% CAGR - 2009 2010 2011 2012 2013 2014 2015 Source: JSI Our analysis indicates that there should be sufficient supply of tantalum in the market, assuming a growth rate below 9% and assuming all the projects currently under development will not be delayed or cancelled. We believe there is currently a shortfall of tantalum in the market, caused by the 2008–2009 shutdowns of the largest tantalum mines in Australia, Canada and Mozambique, and due to increased restriction in trade of conflict tantalum. As tantalum production increases, however, prices are likely to fall andHigh-cost tantalumproducers may be kept the lowest-cost producers will be better positioned to maintain operations. In fact, someout of the market and of the high-cost producers may be squeezed and/or kept out of the market and newnew “low-cost”producers may be able “low-cost” producers may be able to enter the market by offering competitive prices.to enter the market by Tantalum production volume estimates from the DRC vary depending on the year andoffering competitive the source. Our estimates indicate that in 2010 less than 30% of the total primaryprices. production was obtained from conflict areas. We believe this number is likely to fall further as old and new mines come into production. Also, given the increasing efforts to curb “blood” minerals and the potential for new production in the near term, we do not expect conflict-tantalum to cause major price and production disruptions going forward. Niobium is mostly sold as ferro-niobium alloy. Estimated global annual consumption ofNiobium is mostly soldas ferro-niobium alloy. ferro-niobium was nearly 180 million pounds in 2010. According to Niobec, annual niobium demand has grown at a rate of 10% between 2002 and 2009, driven by the growing need for high-grade steel, especially from the emerging economies of China and India. For example, it is estimated that China has doubled its niobium imports in the last four years and now accounts for 30% of the global Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 17
    • <TITLE>OCTOBOCTER JSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH . consumption. As demand and production of crude steel rises, demand for niobium is also expected to rise but at a higher rate as demand for niobium in other sectors increase. As mentioned above, the economic growth in emerging nations is driving the demand forThe economic growth high-grade steel products, and securing niobium supplies has become an importantin developing issue for the leading steel producers, such as Korean company Posco and Nippon Steeleconomies is expectedto drive up demand for Corp. in Japan. This situation has prompted a consortium of Korean and Japanesesteel and niobium. companies to invest an aggregate amount of about US$2.0 billion for a 15% stake in the Brazilian company CBMM, the world’s largest niobium producer. According to various niobium resource companies, the niobium market is expected to continue to grow at a rate of 5–7% per year driven mainly by higher demand for high-Niobium market isexpected to grow at a grade steel use in the automotive and construction industries, which are expected torate of 5–7% per year. expand as the global economy recovers. Although it has been estimated that Brazil likely has sufficient niobium resources to supply the current world demand for centuries, given the economic importance of niobium for the leading economies, we believe that users of niobium will likely pursue partnerships with other niobium producers around the world in the attempt to diversify supplier and country risks. As such, if demand for niobium continues to grow, we are likely to see new niobium producers entering the market in the next five years, especially those with potential for low production costs. Uses and Application The three largest consumers of tantalum raw materials are H.C. Starck GmbH in Germany, Cabot Corporation in the United States and Ningxia Non-Ferrous Metals Import and Export Corporation in China (Exhibit 15). These three companies account for about 85% of the global consumption of tantalum concentrate. Tantalum raw material is processed to create various products, such as powders for the capacitor manufactures. The capacitors are then sold to the circuit board assemblers, who then supply them to high-tech companies such as Dell Inc., Airbus S.A.S., Sony Corp., etc. Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 18
    • <TITLE>OCTOBOCTER JSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH . Exhibit 15: Tantalum Supply Chain Concentrate Suppliers Concentrate Processors Tantalum Users End Users Sources: Refine tantalum into Capacitors Manufactures Using  Miners tantalum powder and tantalum capacitorsThree companies  Scrap/Recycling metal  25% of the marketaccount for about 85%  Synthetics/slagsof the global  Three companiesconsumption of  Leading Miners represent 85% of thetantalum concentrate. - Paranapanema market - Fluminense - Kenticha - Noventa  Care and Maintenance Alloys - GAM (Wodgina) - TANCO  17% of the market Aviation Industry  High Influence: - DRC Coltan Trade Miners 3 Major Processors 25% Used by Capacitor Producers Multiple End Users Source: PWC; JSI The largest producer of niobium, CBMM, mines and processes niobium to produce a variety of products, including ferro-niobium, nickel niobium and niobium metal. Exhibit 16: Niobium Supply Chain Miners and Processors Niobium Users End Users Mining and Processing Ferro-Niobium Users  Three companies  89% of the market supply 85% of the marketIn the last 6 years, 89%of the global niobiumproduction was used toproduce ferro-niobium. 3 Major Integrated Miners & Processors 89% Used for Ferro-Niobium Multiple End Users Source: JSI Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 19
    • <TITLE>OCTOBOCTER JSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH . CBMM sells its products to steel companies and major specialty alloy producers such as Cabot, H.C. GmbH and Treibacher AG, which in turn sell their products to the automotive, manufacturing and construction industries (Exhibit 16). Tantalum is utilized in a variety of forms and is commonly sold as tantalum pentoxide (Ta2O5), which is the initial form for the production of other tantalum compounds, such as tantalum chloride (TaCl5), tantalum carbide (TaC) and lithium tantalite (LiTaO3). Niobium pentoxide is usually the starting point for niobium compounds. Common niobium compounds include niobium chloride (NbCl5), niobium carbide (NbC) and lithium niobate (LiNbO3). Tantalum and niobium are extensively used in the production of alloys, metal carbides, powders and chemical compounds; they have a wide variety of applications in all major industries. Exhibits 17 and 18 show examples of applications for tantalum and niobium products by industry. Exhibit 17: Tantalum Uses by Industry Industry Usage Tantalum product Automotive Vehicle bodies Tantalum powder Ceramics and Ceramic capacitors, glass coatings and Tantalum oxide and yttrium tantalate surface coatings camera lenses Chemical processing equipment and oil Chemicals Tantalum metal &gas pipelines Cathode protection systems for largeTantalum and niobium steel structures such as oil platforms and Tantalum metal (sheets, rods, plates and Constructionhave a wide variety of corrosion resistant fasteners (e.g. wires)critical applications in screws, nuts and bolts)all major industries. Engineering Cutting tools Tantalum carbide Capacitors, surface acoustic wave filters Lithium tantalate, tantalum powder, tantalum Electronics for sensor and touchscreen technologies, ingots and tantalum nitride hard disk drives and LED lights Pacemakers, hearing aids and prosthetic Medicine Tantalum metal devices such as hip joints Furnace parts, supperalloys for jet Metallurgical Tantalum metal and tantalum ingots engines and rocket engine nozzles Missile parts, ignition systems, night Physics vision goggles and GPS (Global Tantalum ingots and tantalum oxide Positioning systems) Source: BSG Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 20
    • <TITLE>OCTOBOCTER JSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH . Exhibit 18: Niobium Uses by Industry Industry Usage Niobium product Automotive Vehicle bodies HSLA ferro-niobium (60% Nb) Ceramics and Ceramic capacitors, glass coatings and Niobium Oxide surface coatings camera lenses Chemical processing equipment and oil HSLA ferro-niobium (60% Nb), niobium Chemicals &gas pipelines metal and niobium-1% zirconium alloy Architectural Steel and cathode protection HSLA ferro-niobium (60% Nb), niobium Construction systems for large steel structures metal Engineering Cutting tools, railway tracks and ship hulls Niobium carbide Capacitors, street lighting systems and Niobium powder, niobium oxide and lithium Electronics surface acoustic wave filters for sensor niobate and touch screen technologies Superconducting magnetic coils in MRI Medicine scanners and magneto-encephalography niobium nitride (brain activity mapping) Super alloys for jet engines and turbine Vaccum-grade ferro-niobium and nickel- Metallurgical blades niobium Physics Particle physics research Niobium-titanium alloy and niobium-tin alloy Source: BSG Alloys Tantalum alloys are usually used in applications where resistance to corrosion isTantalum and niobiumalloys are commonly required, such as in the manufacturing of chemical processing equipment. Further,used in applications tantalum-ruthenium alloy is used in military applications for their oxidation resistance andwhere resistance tocorrosion is required. shape memory properties, i.e. if deformed they can return to the original shape when heated. Tantalum alloys are also used in invasive medical applications such asTantalum alloys are prosthetics and pacemakers given their biocompatibility with human tissue.used in prosthetics andpacemakers. Niobium alloys are also used for corrosion-resistance applications and medical devices. For example, niobium-titanium and niobium-tin alloys are used in the production of superconducting magnets for MRIs (Magnetic Resonance Imaging) used as cancerNiobium is most often diagnostic tool. Niobium is, however, most commonly used in the production of ferro-used in the production niobium, a vital component in the production of high-strength, low alloy steel for theof ferro-niobium, a vitalcomponent in the manufacturing of vehicles, railway tracks, pipelines, etc. Ferro-niobium increases steelproduction of high- strength but it can also offer cathode protection to large steel structures like oil platforms.strength, low alloy steelused in the The vacuum-grade ferro and nickel niobium are used in high-temperature, high-stressmanufacturing and applications, such as aircraft and aerospace turbines. Other metals alloyed to niobiumconstruction industries. include zirconium, titanium and tin. Carbides Tantalum and niobium carbides are extremely hard, refractory ceramics that are used in high-stress, high-temperature applications, such as in the production of high-speed cutting and boring tools, teeth for excavator buckets and drill bits for the mining industry. Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 21
    • <TITLE>OCTOBOCTER JSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH . These carbines are also used as refractory coatings in cutting tools, nuclear reactors and furnaces. PowdersTantalum powders are High-purity tantalum powder is mainly used in the production of capacitors because ofused in themanufacturing of the tantalum’s high capacitance coefficient. Although the amount of tantalum in eachcapacitors, which capacitor is small, this is a major tantalum application accounting for more than 20% ofaccount for more than the total tantalum market. Billions of capacitors are used in cellphones, computers and in20% of the totaltantalum market. many other applications. For example, cellphones with camera and video functions have 22–23 tantalum capacitors, and last year 417 million new cellphones were produced. Niobium powders are also used to produce capacitors, but they are usually larger in size and less efficient. ChemicalsTantalum nitrite is used Tantalum and niobium chemicals have been increasingly used in electronics, medicalin LEDs and solar applications, optics and in spluttered film in integrated circuitry. Tantalum and niobium inpanels, and niobiumnitrite is a key the oxide form are usually used in the manufacture of specialty glass and ceramics forcomponent of capacitors. Lithium tantalite and lithium niobate have unique optical, piezo- and pyro-superconducting electric properties and are extensively used in electronic applications. Tantalum nitrite ismagnets for MRIs. used in light emitting diodes (LED), solar cells and transistors, and niobium nitrite is a key component of superconducting magnets for MRIs. Exhibits 19 and 20 compare the end-uses of tantalum and niobium in 2004 and 2010, according to Tantalum-Niobium International Study Centre (TIC). Capacitor-grade tantalum still accounts for most of the production; however, contrary to what some believe, the amount is far below 50%. The study suggests that between 2004 and 2010, there has been a significant increase in usage of tantalum for the production of ingots, metal products and metallurgical grade powder. Approximately 89% of the global niobium production is used to produce ferro-niobium, and according to TIC, this situation has been about the same for the last six years despite the significant increase in niobium production and demand. The remaining 11% is used to produce niobium alloys, metals, high-purity ferro-niobium and niobium chemicals and carbides. Based on the TIC study, production of niobium metal products and high-purity ferro-niobium has decreased relative to all the other products. Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 22
    • <TITLE>OCTOBOCTER JSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH . Exhibit 19: Tantalum End-Uses in 2004 and 2010 Tantalum 2004 Tantalum 2010 Carbides Tantalum 7% Carbides Chemicals 9% Tantalum Ingot 15% Tantalum Ingot 12% 6% Tantalum Chemicals Mettallurgical 18% Grade Ta Tantalum Powder Mettallurgical Metals 11% Grade Ta Tantalum 17% Powder Metals Capacitor Grade Ta Powder 17% 22% 42% Capacitor Grade Ta Powder 24% Source: BSG Exhibit 20: Niobium End-Uses in 2004 and 2010 2004 2010 Niobium Niobium Chemicals and Chemicals and Niobium Metals Carbides Niobium Metals Carbides 1.4% 4.7% 0.9% 5.2% Other Other Ferro-Niobium Ferro-Niobium 11.0% 11.3% for HSLA for HSLA 89.0% 88.7% High Purity Niobium Alloys High Purity FeNb 0.9% Niobium Alloys FeNb 4.0% 2.7% 2.5% Source: BSG International TradeTrading data fortantalum and niobium Trading data from tantalum and niobium is usually combined with other elements, suchare usually combined as vanadium, zirconium molybdenum and titanium. This situation adds to the fact thatwith other elements. tantalum and niobium are sold in different forms and relative contents, making it difficult to determine the trade data for these elements. Australia used to be the world’s largest producer of tantalum for many years until 2008Brazil and Central when production was suspended in the Wodgina and Greenbushes mines. Brazil andAfrican countries have Central African countries like Ethiopia, Rwanda and the DRC have recently surpassedrecently surpassed Australia as exporters of tantalum, but this situation may change if and when theAustralia as the largestexporters of tantalum. Wodgina mine restarts production. According to the British Geological Survey (BGS), the main exporters of tantalum ores and slags to the EU include Japan, China and Kazakhstan. The USGS reported that, from 2006 to 2009, Australia supplied the U.S. with 66% of all the tantalum concentrate consumed and Canada supplied 21%. Tantalum metal was supplied by China (27%), Kazakhstan (27%) and Germany (15%). Tantalum waste and scrap imports were supplied by China (15%), Portugal (14%) and Germany (12%). Comparable data from other major importers is not available. Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 23
    • <TITLE>OCTOBOCTER JSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH . Brazil is the largest exporter of niobium and accounts for more than 90% of total niobiumBrazil is the largest exports; Canada is the second-largest exporter.exporter of niobium andaccounts for more than90% of total niobium Consumption of niobium in China has increased significantly in recent years and is nowexports. estimated at 30% of the global supply. It is estimated that more than 90% of all the Chinese niobium imports are from Brazil.Consumption of Europe imports about 30% of the niobium produced in Brazil and significant amounts ofniobium in China has tantalum for its manufacturing industries. The European Commission recently declaredincreased significantlyand it accounts now for tantalum and niobium as critical materials based on various factors, which include supply30% of total niobium risk for tantalum, lack of substitutes, no European production (of tantalum and niobium),supply. and their importance for the European manufacturing industry and economy. According to the USGS, from 2006 to 2009, niobium imports into the United States were from Brazil (84%), Canada (9%) and Germany (2%). Prices Tantalum is not openly traded in a metal exchange. Prices are established confidentiallyTantalum and niobium between the producer and the buyer. Trade journal report prices are based on interviewsare not openly traded in with buyers, sellers and traders. The price varies depending on the finished product,a metal exchange.Prices are established tantalum content and contract size. The average price of tantalum concentrate isconfidentially between US$130/lb, tantalum oxides and salts US$250/lb and capacity grade tantalumthe seller and the buyer. US$300/lb. Prices are volatile and are also influenced by the supply and demand conditions at the time of the contract. Tantalum prices increased significantly in 2001, likely due to the dot-com boom and fears of supply shortage. As companies built up their inventories, demand and pricing increased. However, when the dot-com bubble burst, demand for tantalum fell, leading to a collapse in prices (Exhibit 21). In the preceding years, users were able to access tantalum inventories, which caused demand for new tantalum to stay low, keeping prices low (<$50/lb) for many years. The low tantalum prices contributed to the suspension of many tantalum mines, like the Wodgina mine in Australia.The apparent shortageof tantalum supply With the depletion of tantalum inventories, increasing restrictions in trade of tantalumshould keep prices from conflict areas in Central Africa and delays in the re-opening of previous mines, wehigh. believe there will be a shortage of tantalum supply in the market and prices will likely stay at current levels in the short term. As the global economy recovers, we anticipate there will be an increase in demand for tantalum. In order to supply the market with conflict-free tantalum, we believe that prices will need to reach a sustaining level, above recent historical prices. We estimate that as new producers enter the market tantalum prices will likely fall by 30–40%. We expect long term tantalum concentrate prices to stay between $80 and $90/lb. At this price level, we believe that previous mines in Australia and Canada may become economic again. Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 24
    • <TITLE>OCTOBOCTER JSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH . Exhibit 21: Historical Prices of Tantalum Concentrate (US$/lb, 30%Ta2O5) $400.00 $300.00 $200.00 $100.00 $0.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Metal Pages; JSIPrior to 2007, ferro- Niobium is traded in the same fashion as tantalum, through bilateral contracts betweenniobium prices were buyers and sellers. Prices of niobium, however, have shown less volatility probablyfairly stable. because the supply of niobium is more stable and less risky (Exhibit 22). Prior to 2007, ferro-niobium prices were fairly stable between US$12/kg and US$14/kg. From 2007 onward, prices have stayed above US$20/lb, mainly due to higher demand and slow response from suppliers in fulfilling the market. As of June 2011, ferro-niobium prices seem to have stabilized at US$44–US$45/kg. In early 2011, CBMM received an investment of about US$2.0 billion, which should be sufficient to fund any near-term expansion projects. As the global economy recovers, we expect an increase in demand for ferro-niobium. We anticipate that niobium prices will stay close to US$40/kg in the long term as supply gradually meets increasing demand. Exhibit 22: Historical Prices of Ferro-Niobium (US$/kg) $25Niobium prices haveincreased in the recentyears likely as a result $20of demand growingfaster than supply. $15 $10 $5 2001 2002 2003 2004 2005 2006 2007 2008 $0 Source: IBRAM Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 25
    • <TITLE>OCTOBOCTER JSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH . Recycling and SubstitutionIt is estimated thatabout 20% of tantalum It is estimated that about 20% of tantalum supply is from recycling. Tantalum can besupply is from recycled from waste metals and scrap, such as old cell phones and computers.recycling, this numberis less than 15% for Recycling from capacitors, however, is difficult and not always effective. Niobium steelsniobium. and superalloys are the main recycling sources of niobium. Tantalum and niobium have a unique combination of properties that makes them hard to substitute. Possible substitutes are usually more costly or present performance deficiencies. Tantalum and niobium have similar chemical and physical properties thatTantalum and niobiumhave unique properties can be substituted for each other in some applications, for instance, in corrosion-that make them hard to resistance applications. Vanadium and molybdenum can be used as substitutes for bothsubstitute. Possible tantalum and niobium in steel and other alloys, when high strength at high temperaturessubstitutes are usuallymore costly and/or less is required.efficient. There are however some applications from which there is simply no substitutes, such as the use of porous tantalum alloys in the manufacturing of advanced prosthetic body parts in which many of the unique properties of tantalum play an important role. Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 26
    • <TITLE>OCTOBOCTERJSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH. Profiled Profiled Companies The information contained on the profiled companies’ page was obtained from the respective company’s public documents and do not constitute an offer to sell or the solicitation of an offer to buy any of the securities discussed herein. We do not represent that such information is accurate or complete and it should not be relied upon as such. Please see additional disclosures on page 37.Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 27
    • <TITLE>OCTOBOCTERJSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH.Noventa Limited (AIM:NVTA, £0.35; TSX:NTA, C$0.54) SelectedRare Earth Company Snapshots Ticker AIM:NVTANoventa Limited engages in the mining, extraction and production Date July 18, 2011of tantalum concentrate in the Republic of South Africa and the Share Price £0.35Republic of Mozambique. It also produces morganite, a by-product 52 Week High £2.50 52 Week Low £0.31of the tantalum concentrate production. The company’s products Shares Outstanding 25.77are used in the manufacture of electronic capacitors, turbine Market Cap £8.92blades, medical applications and industrial cutting tools. It holds Net Debt -£10.80 Cash & Short Term Investments £10.80mining concessions and mining licenses in the Alto Ligonha Debt £0.00Pegmatite Belt of Zambezia Province in the Republic of Total Enterprise Value -£1.88Mozambique, grouped in the Marropino, Morrua, Mutala, Gile, and EV/Resource Contained (t) -£3.69 Price/Volume ChartGinama areas. Noventa Limited serves customers in the United £3.00 8.0States and Asia. The company is headquartered in St Helier, the £2.50Channel Islands. 6.0 £2.00 £1.50 4.0 £1.00 2.0 Noventa’s Marropino mine is Mozambique’s only industrial-scale £0.50 tantalum mine in operation, and currently the only pure-play £0.00 0.0 Mar-11 Jun-11 tantalum company in the production stage, listed on major stock Volume Price exchanges. Project Details Name Marropino & Morrua Marropino contains circa 8.1 million tonnes of ore with an Location Mozambique average grade of 223 ppm tantalum, and is currently producing Project Stage In Production at an annualized rate of circa 200,000 pounds per year, but is Size of Property 21,000 ha Type of Ore LCT Pegmatite expected to reach an annualized 500,000 pounds of tantalum NI 43-101 (or equivalent) Yes concentrate by Q4 2011, rising to 600,000 in 2012 with a new Off take agreement Yes plant subject to financing. Marropino’s current tantalum mine life Target Production (year) In Production Target Production (tonnage) 900,000 lbs Ta2O5 is expected to be up to 51 months. Resource Measured n/a Morrua is anticipated to be the next mining concession to be Indicated 12.77Mt @ 327 ppm (g/t) developed subject to further drilling, geological study, Ta2O5 metallurgical evaluation and test work, as well as the Inferred 3.12Mt @ 392 ppm (g/t) development of a mining plan. Noventa expects the first Ta2O5 production from Morrua in 2013 with a planned output of about Ownership 100% 450,000 pounds per year. By 2013, Noventa could become one of the top primary producers of tantalum in the world, with a circa 10% market share based on current global output projections. The Marropino deposit also contains rare earths and small quantities have been stockpiled. Based on the geology of Noventa’s other concessions it is possible that they also contain rare earth elements, which would be another potential source of revenue for the company. (Continue on next page)Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 28
    • <TITLE>OCTOBOCTERJSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH.  Noventa employs circa 400 people at the mine, drawn mostly from the local community. As the company is the only significant employer in the area, it plays a crucial role in the communitavalay. For example, Noventa has built a school and a medical clinic for the region and the government has provided teachers and doctors to support the company’s initiative and ultimately the community. Noventa is also collaborating with leading mining schools in Mozambique to help train the next mining professionals for the company.  Noventa is also actively engaged in the exploration and evaluation of its other Mozambican properties, Mutala and Ginama, as well as other properties in Mozambique and South Africa. These activities should result in a continuous pipeline of projects to help support Noventa’s plans of becoming a leading supplier of tantalum.  Noventa recently announced that because of an unexpected increase in capital expenditures it will need to raise US$25 million. According to management, a combination of changes in drastic variation in foreign exchange due to changes in government currency policies, lower precipitation levels in the region, delays in negotiating a satisfactory procurement and construction contract, added to the fact that the then CEO who resigned at the beginning of May 2011 had a pressing family matter to attend to over a critical period of time, have led to a “perfect storm” situation for the Company, prompting management to raise significant funds in a seasonally weak market.  As of June 2, 2011, Noventa had US$17.5 million in cash and if it is able to raise the US$25 million, it plans to bring Marropino to full production by the end of 2011, as was previously planned, and at the same time fast-track construction at Morrua to benefit from the current higher tantalum prices. Noventa has an off-take agreement that commits most of the production from Marropino (only, and no other assets), at prices circa $62.5/lb after it has been able to renegotiate a contract with one of the customers for prices 27% to 30% higher. If the company is successful in raising the necessary funds, management believes that they will still have a good chance of becoming one of the leading tantalum producers in the world.Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 29
    • <TITLE>OCTOBOCTERJSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH.Pacific Wildcat Resources Corp. (TSXV:PAW, C$0.70) SelectedRare Earth Company Snapshots Ticker TSXV:PAWPacific Wildcat Resources Corporation engages in the exploration Date July 18, 2011and development of mineral and metal properties. The company Share Price $0.70primarily focuses on tantalum deposits in Mozambique. It 52 Week High $1.87 52 Week Low $0.17principally holds interests in seven mining leases covering Shares Outstanding 111.2approximately 450 square kilometres, located on parts of the Alto Market Cap $77.8Ligonha pegmatite belt, Mozambique. The company is based in Net Debt -$1.00 Cash & Short Term Investments $1.14Kelowna, B.C., Canada. Debt $0.13 Total Enterprise Value $76.8  Pacific Wildcat’s main project is the Mrima rare earth and EV/Resource Contained (t Nb) $1.1 Price/Volume Chart niobium deposit near Mombasa on the Kenyan coast. It is $2.00 5.0 located close to essential infrastructure with sealed roads. The main power source runs adjacent to the deposit, and the 4.0 $1.50 property is less than 100 kilometres from the largest deep 3.0 $1.00 water port in East Africa. 2.0 $0.50 1.0  Estimated inferred resources are 105.3 million tonnes at a $0.00 0.0 grade of 0.65% Nb2O5 which equates to 1,519 million pounds Jul-10 Oct-10 Jan-11 Apr-11 of contained resources. Based on historical data from the Volume Price Anglo American exploration period, the deposit may contain a Project Details high-grade zone of 10–15 million tonnes at 1.2–1.45% Nb2O5 Name Mrima Property Location Kenya based on a cut-off grade of 1.0% Nb2O5. These estimates Project Stage Scoping Study suggest that the Mrima deposit has the potential to become a Size of Property 118,000 ha world-class resource. Type of Ore Carbonatite- nephelite syenite NI 43-101 (or equivalent) Yes  The resource is located within 30 metres of surface and is Off take agreement n/a contained in weathered carbonatite, which usually requires Target Production (year) >2014 Target Production (tonnage) n/a low-cost mining techniques. Resource Measured n/a  The deposit also contains rare earth elements and the Indicated n/a company plans to self-fund the rare earth opportunity with the Inferred 105.3Mt @ 6500 ppm (g/t) future excess cash, generated from the niobium business. Nb2O5  Brazil is the world’s largest producer of niobium, supplying Ownership 70% Option nearly 90% of the market. It is reasonable to assume that buyers dont want a single source of supply and would encourage other sources like the Mrima property. Thus, the Mrima project could become a significant source of niobium.  Pacific Wildcat also owns the Muiane tantalum mine in Mozambique, which contains 1.4 million tonnes grading 250 ppm of tantalum Ta2O5. The company is currently evaluating the property.Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 30
    • <TITLE>OCTOBOCTERJSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH.Commerce Resources Corp. (TSXV:CCE, C$0.52) Selected RareEarth Company Snapshots Ticker TSXV:CCECommerce Resources Corp. engages in the exploration and Date July 18, 2011development of rare metals and rare earth elements in Canada. Share Price $0.52The company primarily focuses on the development of the Upper 52 Week High $1.08Fir deposit on its Blue River Tantalum/Niobium project located in 52 Week Low $0.25 Shares Outstanding 130.59British Columbia, Canada. Commerce Resources Corp. was Market Cap $67.91incorporated in 1999 and is based in Vancouver, B.C., Canada. Net Debt -$7.64 Cash & Short Term Investments -$7.64 Debt $0.00 The Upper Fir property is located in the Kamloops Mining Total Enterprise Value $60.26 Division of British Columbia, approximately 10 kilometres north EV/Resource Contained (t) $72.07 Price/Volume Chart of the Town of Blue River. The deposit contains an indicated $1.20 8.0 mineral resource of 36.35 million tonnes with 195 ppm Ta2O5 $1.00 and 1,700 ppm Nb2O5 and inferred resources of 6.40 million 6.0 $0.80 tonnes containing 199 ppm Ta2O5 and 1,890 ppm Nb2O5. $0.60 4.0 $0.40 Commerce Resources owns 100% of the Blue River Tantalum- $0.20 2.0 Niobium property, and the various projects within the property $0.00 0.0 are not subject to any royalties, back-in payments or other Jul-10 Oct-10 Jan-11 Apr-11 Volume Price agreements. Project Details Name Upper Fir, Blue River Tantalum-bearing minerals are typically found in pegmatitic ores; Location Canada, BC however, the Blue River Tantalum-Niobium project consists of a Project Stage Scoping study carbonatite system with a unique anomaly of high-grade Size of Property 105,373 (Blue River) Type of Ore carbonatite-nephelite syenite tantalum. The carbonatite is a relatively soft host rock and during NI 43-101 (or equivalent) Yes crushing it leaves the tantalum and niobium minerals largely Off take agreement n/a intact, translating into a higher rate of recovery than that Target Production (year) 1.5 million lbs Ta2O5; obtained from tantalum projects hosted in pegmatites. 6.0 million lbs of Nb2O5 Preliminary tests suggest that the recovery rates for both Target Production (tonnage) <2015 tantalum and niobium may also be higher than the industry Resource average. Measured n/a Indicated 36.35Mt @ 195 ppm (g/t) Ta2O5; and 1,800 ppm (g/t) The property has excellent infrastructure, with good access to Nb2O5 water, proximity to power and a readily accessible system of Inferred 6.40Mt @ 199 ppm (g/t) paved roads. In fact, the Yellowhead Highway, Canadian Ta2O5; and 1,890 ppm (g/t) National Railway and BC Hydro power lines cross Commerce’s Nb2O5 property. Such infrastructure should translate into relatively low capital and operating costs. Ownership 100% The Upper Fir project is advancing as scheduled, the Company expects to complete the preliminary economic assessment this year and start production before 2015. Commerce also owns the rare earth Ashram deposit in Quebec, which has been ranked as possibly one of the largest rare earth deposits outside of China. The initial NI 43-101 report estimates inferred resources of 117.34 million tonnes at 1.74% TREO, with good quantities of critical rare earth elements.Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 31
    • <TITLE>OCTOBOCTERJSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH.Gippsland Limited (ASX:GIP, A$0.03) Selected Rare Earth CompanySnapshots Ticker ASX:GIPGippsland Limited engages in the exploration and development of Date July 18, 2011 Share Price $0.03mineral resources primarily in Egypt. It explores for tantalum, 52 Week High $0.07niobium, feldspar, as well as gold, copper and nickel. The 52 Week Low $0.03company focuses on the development of the Abu Dabbab Shares Outstanding 625.13 Market Cap $16.88tantalite, tin and feldspar project located within the Central Net Debt -$1.22Eastern Desert in Egypt, and the Adobha project, a copper, gold Cash & Short Term Investments $1.22and volcanogenic massive sulphide project with a 2,100-square- Debt $0.00 Total Enterprise Value $15.66kilometre exploration license and three prospecting licenses in an EV/Reserves Contained (t) $20.30area of 100 square kilometres in the northwestern part of Eritrea. Price/Volume ChartIt also holds interests in the Nuweibi project located inland from $0.08 20.0the western shore of the Red Sea; nine tenement areas located in $0.06 15.0the Wadi Allaqi region situated to the southeast of Aswan inEgypt; and the Heemskirk tin deposit located in the northwest of $0.04 10.0Tasmania, Australia. Gippsland Limited is based in Claremont, $0.02 5.0Australia. $0.00 0.0 Jul-10 Oct-10 Jan-11 Apr-11 Gippsland Ltd.’s main tantalum project, Abu Dabbab tantalum- Volume Price tin-feldspar, is located within the Central Eastern Desert in Project Details Egypt. The deposit has total resources of 44.5 million tonnes Name Abu Dabbab at 250 ppm Ta2O5. The property is located about 16 kilometres Location Egypt inland from the western shore of the Red Sea and it is being Project Stage Feasibility developed by Tantalum Egypt JSC, a company incorporated Size of Property 1,400 ha Type of Ore Li-albite granite in Egypt and 50%-owned by the Egyptian Government via the NI 43-101 (or equivalent) Yes Egyptian Mineral Resources Authority (EMRA) and 50% by Off take agreement Yes Tantalum International Pty Ltd., which is a 100%-owned Target Production (year) > 650,0000 lbs Ta2O5 subsidiary of Gippsland Ltd. Target Production (tonnage) 2013 Resource Measured 15.20Mt @ 290ppm (g/t) The bankable feasibility study (BFS) prepared by the Ta2O5 international engineering group Lycopodium Engineering Ltd. Indicated 17.30Mt @250 ppm (g/t) determined that the Abu Dabbab deposit has the potential to Ta2O5 become a major global supplier of tantalum while operating Inferred 12.00Mt @ 250 ppm (g/t) from a low-cost basis. The updated study indicates that at 3 Ta2O5 Reserves million tonnes per year mill feed rate, 925,000 (600,000 Proven 15.2Mt @ 260ppm (g/t) pounds under off-take agreement) of Ta2O5; 2,200 tonnes of Ta2O5 tin metal and 2.4 million tonnes of feldspar per year can be Probable 15.04Mt @250 ppm (g/t) produced. The updated capital cost is estimated at US$225 Ta2O5 million. Ownership 50% An agreement has been reached with a leading tantalum consumer for the supply of 6 million pounds of tantalum pentoxide to H.C. Starck over the initial 10 years of production. The pricing formula contained in the off-take agreement is set to provide protection against production cost increases. The company intends to start production in 2013.Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 32
    • <TITLE>OCTOBOCTERJSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH. Tantalum and Niobium - Comparable Companies Analysis July 19, 2011 Exchange:Ticker AIM:NVTA TSXV:CCE TSXV:PAW ASX:GIP TSX:AVL TSXV:QRM ASX:RMR Company Name No venta Co mmerce P acific Gippsland A valo n Quest Rare Ram Reso urces Wildcat M inerals Reso urces Primary Project(s) M arro pino / Upper Fir M rima Hill A bu Dabbab Nechalacho Strange Lake M o tzfelt M o rrua Geography M o zambique B C, Canada Kenya Egypt No rthwest Quebec/ Greenland Territo ries Labrado r Share Price: Current £0.35 $0.53 $0.71 $0.03 $5.87 $5.08 $0.02 % Abov e/Below 52 Week Low 11.3% 112.0% 317.6% 0.0% 158.6% 145.4% 15.4% % Abov e/Below 52 Week High -86.2% -50.9% -62.0% -60.9% -39.2% -42.8% -63.4% Trading Currency GBP CAD CAD AUD CAD CAD AUD Daily Volume Traded (mm) - 3 Month Avg 0.38 0.29 0.20 0.50 0.69 0.35 0.89 Enterprise Value -£1.9 $60.26 $76.80 $15.66 $542.90 $268.71 $14.79 Market Capitalization £8.92 $67.9 $77.8 $16.9 $552.7 $296.0 $9.1 Resource (Mt): Measured - - - 15.20 - - - Measured & Indicated 12.78 36.35 - 35.20 57.49 - Measured, Indicated & Inferred 15.90 42.75 105.30 44.50 226.88 114.80 Other - - - - - - 500.00 Grade (Ta2O5%) 0.04% 0.02% - 0.03% 0.04% 0.01% 0.01% Contained M&I (Mlb) 9.86 15.63 - 20.18 50.70 - - Tantalum Contained Total (Mlb) 12.27 18.38 - 25.51 200.07 30.37 132.28 Ta Current Price (US$/lb) $130 $130 - $130 $130 $130 $130 Contained M&I Resource Value (US$ M) $1,282.0 $2,031.5 - $2,623.0 $6,590.7 $0.0 $0.0 Contained Total Resource Value (US$ M) $1,594.9 $2,389.2 - $3,316.0 $26,009.6 $3,948.2 $17,196.0 Grade (Nb2O5%) - 0.18% 0.65% - 0.38% 0.14% 0.14% Niobium Contained M&I (Mlb) - 62.49 - - 424.72 - - Contained Total (Mlb) - 170.96 1,508.95 - 1,900.70 354.33 1,543.23 Nb Current Price (US/lb) - 20.41 20.41 - 20.41 20.41 20.41 Contained M&I Resource Value (US$ M) - $1,275.5 - - $8,668.5 $0.0 $0.0 Contained Total Resource Value (US$ M) - $3,489.4 $30,797.7 - $38,793.3 $7,231.8 $31,497.4 TEV / Contained Ta (US$/lb) -$0.2 $3.4 n/a $0.7 $2.8 $9.3 $0.1 TEV / Contained Ta Resource Value 0.90% 2.98% n/a 0.54% 2.23% 7.87% 0.06% TEV / Contained Nb (US$/lb) n/a $3.9 $0.1 n/a $0.3 $0.9 $0.01 TEV / Contained Nb Resource Value n/a 2.98% 0.27% n/a 1.50% 4.30% 0.03% Resource Type NI 43-100 NI 43-100 NI 43-101 JORC NI 43-101 NI 43-101 n/a Stage of Development Production/ Scoping Scoping Feasibility Bankable Pre- Exploration Expansion Study Study Feasibility Feasibility Target Completion Date for Current Stage 2012 2011 2012 2012 Q4 2011 Q4 2011 2012 Target Production Start-Up In Production 2015 2015 2013 2016 2016 2015 Source: Capital IQ; Company Reports; JSI Analyst: Luisa Moreno , Ph.D USD/GBP: 1.61; USD/AUD: 1.06; USD/CAD: 1.05 lmoreno@jacobsecurities.comJacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 33
    • <TITLE>OCTOBOCTERJSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH. Companies Mentioned in This Report Anglo American Plc LSE:AAL Apple Inc. NYSE:AAPL Airbus SAS AVX Corp. Avalon Rare Metals Inc. TSX:AVL, AMEX:AVL Cabot Corp. NYSE:CBT Companhia Brasileira de Metalurgia and Mineração Dell Inc. NYSE:DELL Gippsland Ltd. ASX:GIP Global Advanced Metals Pty Ltd. Globe Metals and Mining Ltd. Greenland Minerals and Energy Ltd. ASX:GGG H.C. Stark GmbH IAMGOLD Corp. NYSE:IAG Motorola Solutions Inc. NYSE:MSI Nippon Steel Corp. JP:5401 Ningxia Non-Ferrous Metals Import and Export Corporation in China Noventa Ltd. AIM:NVTA, TSX:NTA Pacific Wildcat Resources Corp. TSXV:PAW POSCO NYSE:PKX Quantum Rare Earths Development Corp. TSXV:QRE Quest Rare Minerals Ltd. TSXV:QRM, AMEX:QRM Ram Resources Ltd. ASX:RMR Sony Corp. NYSE:SNE Tantalum Egypt JSC Tertiary Minerals Plc LSE:TYM Treibacher Industrie AG Yara International ASA OSL:YARJacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 34
    • <TITLE>OCTOBOCTERJSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH. Acronyms ASSM Artisanal and Small Scale Mining BGS British Geological Survey BRIC Brazil, Russia, India and China CAGR Compounded Annual Growth Rate CBMM Companhia Brasileira de Metalurgia and Mineração DNSC Defense National Stockpile Center DRC Democratic Republic of Congo GAM Global Advanced Metals Pty Ltd. HSLA High Strength Low Alloy (Steel) LCT Lithium, Caesium and Tantalum LED Light Emitting Diodes LiTaO3 Lithium Tantalite MRI Magnetic Resonance Imaging Nb2O5 Niobium Pentoxide NbC Niobium Carbide NbCl5 Niobium Chloride PWC Pacific Wildcat Resources Ltd. REE Rare Earth Element(s) Ta2O5 Tantalum Pentoxide TaC Tantalum Carbide TaCl5 Tantalum Chloride TANCO Tantalum Mining Corporation of Canada TIC Tantalum-Niobium Study Centre USDLA United States Defense logistics Agency USGS United States Geological SurveyJacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 35
    • <TITLE>OCTOBOCTERJSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH. Contact Info: Institutional Trading Brad Parkes, Head Sales &Trading 416-866-8345 bparkes@jacobsecurities.com Anne Brooks 416-866-8317 abrooks@jacobsecurities.com Joseph Thomson, Quantitative 416-866-8343 jthomson@jacobsecurities.com Institutional Sales Chris Barnes 416-866-8306 cbarnes@jacobsecurities.com Jeff Armstrong 416-866-8362 jarmstrong@jacobsecurities.com Steven Low 416-866-8349 sdmlow@jacobsecurities.com Equity Research Bill Cabel, Head of Research – IPPs 416-866-8356 bcabel@jacobsecurities.com John McIlveen - Renewable Energy 416-866-8303 jmcilveen@jacobsecurities.com Khurram Malik – Cleantech 416-866-8314 kmalik@jacobsecurities.com Luisa Moreno – Metals & Mining 416-866-8380 lmoreno@jacobsecurities.com Mark Jarvi – Associate 416-866-8354 mjarvi@jacobsecurities.com Moiz Valji – Associate 416-866-8374 mvalji@jacobsecurities.com Jacob Securities Inc. 199 Bay Street, Suite 2901 Commerce Court West, PO Box 322 Toronto, ON M5L 1G1 Phone: (416) 866-8300 Fax: (416) 866-8333 www.jacobsecurities.comJacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 36
    • <TITLE>OCTOBOCTERJSI SE BC TANTALUM & NIOBIUM PRIMER – TWO CRITICAL METALS JACOB SECURITIES INC. July 19th, 2011 EQUITY RESEARCH. Appendix: Important DisclosuresAnalyst Certification: Each authoring research analyst and associate of Jacob Securities Inc. (“Jacob Securities”) whose name appears on the front page of this investment research hereby certifies that (i) the recommendations and opinions expressed in this investment research accurately reflect the authoring analyst’s personal, independent and objective views about any and all of the designated investments or relevant issuers discussed herein that are within such authoring analyst’s coverage universe and (ii) no part of the authoring analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the authoring analyst in the investment research. The compensation of Research Analysts is intended to reflect the value of the services they provide to the clients of Jacob Securities. As with most other employees, the compensation of Research Analysts is impacted by the overall profitability of the firm, which may include revenues from investment banking activities of the firms Corporate Finance department. Research Analysts compensation is not, however, directly related to any specific corporate finance transactions.Company Disclosures: NVTA/NTA: 2 2. The fundamental research analyst(s) and or associate(s) have visited material operation of this issuer.Ratings & Risk Rankings: Each analyst assigns a rating that is appropriate to the analyst`s view of how that stock will perform (total return basis) over the next 12 months on an absolute basis. At times the anticipated total returns may fall outside of the general ranges stated below due to near-term events, market conditions or stock volatility or, in some cases, company-specific corporate structures that result in consistently high yields. Ratings. Buy: Anticipate total return appreciation generally in excess of 15% over the next 12 months. Speculative Buy: Anticipate total return appreciation generally in excess of 25% over the next 12 months, however, the company is either pre-revenue, has negative cash flow, or a major unpredictable event may occur within 12 months. Hold: Anticipate limited total return (general appreciation less than 15% [or 25% for speculative rated stocks] or decline less than 10%) over the next 12 months. Reduce: Near term price outlook is for a negative return; however the long term outlook is for a positive return. Sell: Near term and long term return is expected to be negative. Risk Rankings. Low: Low financial and operations risk, high predictability of financial results, low stock volatility. Medium: Moderate financial and operations risk, moderate predictability of financial results, moderate stock volatility. High: High financial and or operation risk, low predictability of financial results, high stock volatility.Research Distribution: Jacob Securities distributes research through Bloomberg, Thomson One, Capital IQ and client email lists.Analyst Trading: Jacob Securities does not permit analysts to own or trade securities of the companies they cover.Risk Qualifier: The information contained in this investment research has been compiled by Jacob Securities from sources believed to be reliable, but no representation or warranty, express or implied, is made by Jacob Securities its affiliated companies or any other person as to its fairness, accuracy, completeness or correctness. Jacob has not independently verified the facts, assumptions, and estimates contained herein. All estimates, opinions and other information contained in this investment research constitute Jacob Securities’ judgement as of the date of this investment research, are subject to change without notice and are provided in good faith but without legal responsibility or liability. This investment research is provided for information purposes only and does not constitute an offer or solicitation to buy or sell any designated investments discussed herein in any jurisdiction where such offer or solicitation would be prohibited. As a result, the designated investments discussed in this investment research may not be eligible for sale in some jurisdictions. This investment research, is not, and under no circumstances should be construed as, a solicitation to act as a securities broker or dealer in any jurisdiction by any person or company that is not legally permitted to carry on the business of a securities broker or dealer in that jurisdiction. To the fullest extent permitted by law, none of Jacob Securities, its affiliated companies or any other person accepts any liability whatsoever for any direct or consequential loss arising from or relating to any use of the information contained in this investment research. Jacob Securities Inc. is a member of the Investment Industry Regulatory Organization of Canada (IIROC) and Canadian Investor Protection Fund (CIPF).This research report is intended for Institutional and Accredited Investors. Please do not forward without the expressed written consent of Jacob Securities. Disclosure for Clients Outside of Canada. Jacob Securities is a registered entity in Canada only. As such, this research report was not prepared subject to any disclosure or disclaimer requirements outside of Canada. This material is not directed to, or intended for distribution to or use by, any person or entity if Jacob Securities is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to such person or entity. This report may not be reproduced, re-distributed or passed to any other person or published in whole or in part for any purpose without the prior consent of Jacob Securities. Additional information is available upon request.Ratings Distributions: Buy: 30% Speculative Buy: 33% Hold: 30% Reduce: 0% Sell: 4% Restricted: 4% © Jacob Securities Inc. All rights reserved.Jacob Securities Inc., 199 Bay Street, Suite 2901, Toronto, ON M5L 1G1 +1-416-866-8300 www.jacobsecurities.com Page 37