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Objective Capital Precious Metals, Diamonds and Gemstones Investment Summit: Panel Discussion: Outlook for the Precious Metals Markets  - David Wilson
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Objective Capital Precious Metals, Diamonds and Gemstones Investment Summit: Panel Discussion: Outlook for the Precious Metals Markets - David Wilson

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Objective Capital Precious Metals, Diamonds and Gemstones Investment Summit …

Objective Capital Precious Metals, Diamonds and Gemstones Investment Summit
Panel Discussion: Outlook for the Precious Metals Markets
20 May 2010
by David Wilson - Societe Generale
Bill Fisher - RX Exploration
David Hargreaves - Fair Trade Gemstones

Published in: Economy & Finance, Business

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  • 1. PRECIOUS METALS, DIAMONDS & GEMSTONES INVESTMENT SUMMIT 2.00 – 2.40 Panel Discussion: Outlook for the Precious Metals Markets David Wilson – Director - Metals Research, Société Générale Bill Fisher – Director, RX Exploration Inc David Hargreaves – CEO, Fair Trade Gemstones THE LONDON CHAMBER OF COMMERCE AND INDUSTRY ● THURSDAY, 20 MAY 2010 www.ObjectiveCapitalConferences.com
  • 2. An overview of Platinum market drivers May 2010 David Wilson Director – Metals Research david.wilson@sgcib.com +44 (0)20-7762-5384 Important Notice: The circumstances in which this publication has been produced are such that it is not appropriate to characterise it as independent investment research as referred to in European MIF directive and that it should be treated as a marketing material even if it contains a CONFIDENTIAL research recommendation (« recommandation d’investissement à caractère promotionnel »).
  • 3. 2 Platinum is still in surplus, but rising mining costs and improving sentiment in autos in particular should support prices 000 oz 000 oz 10 000 1200 9 000 800 8 000 400 7 000 0 6 000 -400 5 000 -800 4 000 -1200 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010F 2011F S upply Demand Balance, rh scale Source: GFMS & SG Cross Asset Research  Platinum’s surplus (prior to ETF investment activity) is increasing due to:  A recovery in South African production.  Increasing supply from other areas including automotive scrap  The recent falls in automotive demand, which will take a long time to be recouped  Bullish longer-term fundamentals (non-OECD demand vs. maturing supply).
  • 4. 3 Global platinum inventories are estimated to have fallen by 2.4 million ounces since the start of 1999 0 35 -500 30 -1000 25 -1500 -2000 20 -2500 15 -3000 10 -3500 5 -4000 -4500 0 1999 2003 2007 2011F 000 ounces weeks' demand Source: GFMS & SG Cross Asset Research  This is equivalent to roughly 24 weeks’ demand  But the market has been able accommodate new ETF instruments as the balance has shifted into surplus  And there is plenty of liquidity in the market  With one month lease rates below 0.5%, and twelve months below 2%
  • 5. 4 ETF net investment has taken up over a third of a million ounces of platinum so far this year, augmenting demand by an ~15% 000 oz 1 200 1 000 800 600 400 200 0 Apr-07 Apr-08 Apr-09 Apr-10 ETF ZKB ETF NY Source: GFMS & SG Cross Asset Research  Although this interest has been distorted by the new ETF in New York  Platinum ETFs have absorbed approximately 330,000 ounces so far this year  With some small attrition in the ETF Securities London-listed funds, a slight increase in ZKB and over 330,000 ounces into the New York ETF  If this rate of accrual were to continue then ETFs would more than absorb this year’s industrial surplus, but this looks doubtful
  • 6. 5 Net speculative platinum positions on NYMEX reached a record in mid- April at 1.38 million ounces 000 oz 1 600 1 400 1 200 1 000 800 600 400 200 0 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 -200 Source: CFTC & SG Cross Asset Research  This is starting to look top-heavy and may point towards a short term price correction  This position is equivalent to 18% of one year’s industrial demand  And the gross long position is just off a record level and comprises 41% of total open interest, vs a 38% average over the past fifteen months
  • 7. 6 South Africa remains the primary source of platinum supply with 76% of mine production and 64% of total Other 6% Russia 13% North America 5% S outh Africa 76% Source: GFMS & SG Cross Asset Research  South Africa’s major producers continue to watch the purse-strings  Although the major producers are running cost profiles lower than prevailing prices, their balance sheets have been under strain  And the Eskom price increases will contribute to roughly 10% per annum cost increases  This is unlikely – barring any extreme problems from external causes such as power loss – to affect output plans, but is likely to continue to defer marginal expansion programmes
  • 8. 7 Emission control demand remains the key to platinum, with jewellery in second place for platinum 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2003 2004 2005 2006 2007 2008 2009 2010 J ewellery Autocats Other Source: GFMS & SG Cross Asset Research  Platinum use in autocats contracted sharply in the global downturn  And while recovering, will lose market share to palladium as Europe, which is platinum-intensive, continues to struggle  Especially by comparison with the recoveries elsewhere and the strength in China  Jewellery demand has rebounded, but now needs to consolidate and may struggle at higher prices
  • 9. 8 China remains key to platinum demand, especially in the jewellery sector 000 oz % 1 800 90 1 500 75 1 200 60 900 45 600 30 300 15 0 0 1999 2001 2003 2005 2007 2009 China J ewellery As % of jewellery total Source: GFMS & SG Cross Asset Research  China’s jewellery demand rebounded last year and was almost certainly the second highest year on record  But conditions slowed in late 2009 and the market is now consolidating in response to higher prices  The country’s robust auto sector is underpinning its platinum demand, but is more important for palladium  While the country’s economic growth is supporting demand in the glass and other sectors, suggesting that China is now likely to be the world’s second largest platinum consumer behind Europe
  • 10. 9 China’s automotive sector; palladium the primary beneficiary 000 oz 700 600 500 400 300 200 100 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 P latinum P alladium Source: GFMS & SG Cross Asset Research  Palladium demand in the auto sector is likely to grow by more than 10% this year  The Chinese auto market is not yet mature and new emission control limits are being rolled out across the country  The industry is gasoline fuelled in the main and therefore much more reliant on palladium  While it must not be forgotten that palladium is also now taking market share from platinum in the diesel sector
  • 11. 10 By late April, Platinum had unwound 63% of the fall from its 2009 high, while palladium has unwound 84% of its fall P latinum US $/oz P alladium US $/oz 2 800 600 2 100 450 1 400 300 700 150 08 08 09 09 10 08 08 09 09 10 Apr- J ul- Oct- J an- Apr- J ul- Oct- J an- Apr- J an- P latinum P alladium Source: GFMS & SG Cross Asset Research  Price recoveries have been driven by an improving economic outlook  With palladium especially boosted by the auto and electronic sectors  While platinum has been boosted by improving jewellery (allied to reduced scrap return)  But the majority of the recovery is now out of the way and there is a case for a mild retraction in prices
  • 12. Platinum market to remain in surplus in 2010 (excluding investment demand) PLA T INUM 000oz 2005 2006 2007 2008 2009 2010f Non-Russian prim ary product ion 5,632 5,447 5,074 4,671 4,600 4,720 Russian product ion 960 948 917 835 840 860 Ot her 13 628 591 645 635 700 Fabricat ion dem and: - Aut ocat alyst ** 3,056 3,251 3,218 2,816 1,950 2,050 - Jewellery 1,792 1,682 1,329 736 1,800 1,700 - Indust rial 1,827 1,849 1,950 2,273 1,500 1,701 Invest m ent in ETF/ ETCs 194 104 384 Residual balance -70 241 -217 222 441 830 Pr i ce – p m f i x, $ / o z 897 1 ,1 4 2 1 ,3 0 3 1 ,5 7 8 1 ,2 0 9 1 ,6 5 0 * Nat ional Defence St ockpile, aut om ot ive indust ry, fut ures ex changes ** net of scrap Source: SGCIB 11
  • 13. Forecast risks Upside risks  Further postponement/cancellation of expansion projects  Energy related disruption at South African operations  Faster than expected demand recovery in world outside China  Further and higher than expected investment flows (into ETFs) Downside risks  Slower than expected global economic growth in 2010 / evaporation of positive investor sentiment  Further palladium inroads into the diesel auto cat sector 12
  • 14. 13 Disclaimer The information herein is not intended to be an offer to buy or sell, or a solicitation of an offer to buy or sell, any securities and including any expression of opinion, has been obtained from or is based upon sources believed to be reliable but is not guaranteed as to accuracy or completeness although Société Générale (“SG”) believe it to be fair and not misleading or deceptive. SG, and their affiliated companies in the SG Group, may from time to time deal in, profit from the trading of, hold or act as market-makers or act as advisers, brokers or bankers in relation to the securities, or derivatives thereof, of persons, firms or entities mentioned in this document or be represented on the board of such persons, firms or entities. Employees of SG, and their affiliated companies in the SG Group, or individuals connected to them may from time to time have a position in or be holding any of the investments or related investments mentioned in this document. SG and their affiliated companies in the SG Group are under no obligation to disclose or take account of this document when advising or dealing with or for their customers. The views of SG reflected in this document may change without notice. To the maximum extent possible at law, SG does not accept any liability whatsoever arising from the use of the material or information contained herein. Dealing in warrants and/or derivative products such as futures, options, and contracts for differences has specific risks and other significant aspects. You should not deal in these products unless you understand their nature and the extent of your exposure to risk. This research document is not intended for use by or targeted at retail customers. Should a retail customer obtain a copy of this report they should not base their investment decisions solely on the basis of this document but must seek independent financial advice. Important Notice: The circumstances in which this publication has been produced are such (for example because of reporting or remuneration structures or the physical location of the author of the material), that it is not appropriate to characterise it as independent investment research as referred to in European MIF directive and that it should be treated as a marketing material even if it contains a research recommendation (« recommandation d’investissement à caractère promotionnel »). This publication is also not subject to any prohibition on dealing ahead of the dissemination of investment research. However, it must be made clear that all publications issued by SG will be clear, fair, and not misleading. Analyst Certification: Each author of this research report hereby certifies that the views expressed in the research report accurately reflect his or her personal views about any and all of the subject securities or issuers. Notice to French Investors: This publication is issued in France by or through Société Générale ("SG") which is authorised by the CECEI and regulated by the AMF (Autorité des Marchés Financiers). Notice to UK Investors: This publication is issued in the United Kingdom by or through Société Générale ("SG") London Branch which is regulated by the Financial Services Authority ("FSA") for the conduct of its UK business. Notice to US Investors: This report is issued solely to major US institutional investors pursuant to SEC Rule 15a-6. Any US person wishing to discuss this report or effect transactions in any security discussed herein should do so with or through SG Americas Securities, LLC to conform with the requirements of US securities law. SG Americas Securities, LLC, 1221 Avenue of the Americas, New York, NY, 10020. (212) 278-6000. Some of the securities mentioned herein may not be qualified for sale under the securities laws of certain states, except for unsolicited orders. Customer purchase orders made on the basis of this report cannot be considered to be unsolicited by SG Americas Securities, LLC and therefore may not be accepted by SG Americas Securities, LLC investment executives unless the security is qualified for sale in the state. Notice to Japanese Investors: This report is distributed in Japan by Société Générale Securities (North Pacific) Ltd., Tokyo Branch, which is regulated by the Financial Services Agency of Japan. The products mentioned in this report may not be eligible for sale in Japan and they may not be suitable for all types of investors. Notice to Australian Investors: Société Générale Australia Branch (ABN 71 092 516 286) (SG) takes responsibility for publishing this document. SG holds an AFSL no. 236651 issued under the Corporations Act 2001 (Cth) ("Act"). The information contained in this newsletter is only directed to recipients who are aware they are wholesale clients as defined under the Act. http://www.sgcib.com. Copyright: The Société Générale Group 2010. All rights reserved.
  • 15. An overview of Platinum market drivers Date - Location David Wilson Director – Metals Research david.wilson@sgcib.com +44 (0)20-7762-5384 Important Notice: The circumstances in which this publication has been produced are such that it is not appropriate to characterise it as independent investment research as referred to in European MIF directive and that it should be treated as a marketing material even if it contains a research recommendation (« recommandation d’investissement à caractère promotionnel »).
  • 16. PRECIOUS METALS, DIAMONDS & GEMSTONES INVESTMENT SUMMIT 12.15 – 12.40 Focus on Gold: Challenges of gold mining in the US – reopening the Drumlummon Mine in Montana Bill Fisher – Director, RX Exploration THE LONDON CHAMBER OF COMMERCE AND INDUSTRY ● THURSDAY, 20 MAY 2010 www.ObjectiveCapitalConferences.com 1
  • 17. Gold and Silver Production in North America May 2010
  • 18. Safe Harbor The following presentation may include certain “forward-looking statements” within the meaning of the United States Private Litigation Reform Act of 1995 and applicable Canadian Securities Laws. All statements, other than statements of historical fact, included in the presentation, including, without limitation, statements regarding potential mineralization and reserves, exploration results, and future plans and objectives of RX Exploration Inc., are forward-looking statements. Words such as “expect”, “anticipate”, “estimate”, “may”, “will”, “should”, “intend”, “believe” and other similar expressions are forward-looking statements. Forward-looking statements are not guarantees of future results and conditions but rather reflect our current views with respect to future events and are subject to risks, uncertainties, assumptions and other factors, and actual results and future events could differ materially from those anticipated in such statements. There can be no assurance that such forward-looking statements will prove to be accurate. Some of the important factors that could cause actual results to differ materially from our expectations are disclosed under the heading “Risk Factors” and elsewhere in documents filed from time to time with the Canadian provincial securities regulators. We base our forward-looking statements on information currently available to us and we do not assume any obligation to update them, except as required by law. An additional Cautionary Note to Investors – In the event that we use certain terms in this presentation, such as “resource”, “measured resource”, “indicated resource” and “inferred resource”. U.S investors are cautioned that, while such terms are recognized and required by Canadian Securities Laws, the United States Securities and Exchange Commission does not recognize them. Under U.S. standards, mineralization may not be classified as a “reserve” unless the determination has been made that the mineralization could be economically and legally produced or extracted at the time the reserve determination has been made. U.S. investors should not assume that all or any part of measured or indicated resources will ever be converted into reserves. In addition, “inferred resources” have a great amount of uncertainty as to their existence and as to whether they can be mined legally or economically. Accordingly, information concerning descriptions of mineralization in this presentation may not be comparable to information made public by companies that are subject to the SEC’s Industry Guide 7. 3
  • 19. RX Exploration : Gold and silver developer  100% ownership of Montana’s Drumlummon mine, subject to 2% NSR  Historic development at numerous levels up to 1600 feet  1 million ounces gold produced, 1885 -1905  Never fully explored or exploited by previous operators  Fully permitted; Grid power and year round paved road access  Test mining operations in progress  Development drift averages 41 g/t gold and 1,901 g/t silver over 3.2 metre width  Gold and silver bulk sampling commenced April 2010  1,000 tpd permitted Philipsburg mill leased May 2010  Multiple Exploration targets. Drill results include: 178 g/t (5.2 opt) gold and 97.3 g/t (2.84 opt) silver over 0.30 metres 4
  • 20. Share Capital Listing CNSX Symbol “RXE” Recent share price1 CAD $0.61/share 52 week low–high CAD $0.165–$0.65 Shares outstanding 109 million – basic 196 million – fully diluted Market capitalization CAD $66.5 million Cash CAD ~$6 million Share ownership RX Management (~20%); Spruce Ridge Resources (~10%) Funds (May 2010) Sprott Asset Management (4.6% basic or ~ 5.1% fully diluted) The company has commenced application for listing on the TSX Venture Exchange. All of the company’s filings are current. 1 As of May 12, 2010 5
  • 21. The RX Exploration Team Management CEO: Murray Nye – Co-founder, director, principal of Venbanc, Inc., an investment and merchant bank specializing in the structuring and financing of start-up companies; provides follow-up financial and management advisory assistance. CFO: Max Polinsky, B.Comm – Co-founder, director and principal of Venbanc, Inc. Director of Mining Operations: Mike Gunsinger – Mike was employed for 40 years by Patrick Harrison and Co., underground mining contractor, servicing major mining companies such as Inco and Noranda, and the US Military. Upon retirement, established his own underground contracting company and has been active in Utah and Montana. Consulting Mine Geologist: Ben Porterfield – Ben leads a team of geologists at the Drumlummon mine. He was formerly a geologist for Kennecott, focused on their Terra gold project in Alaska. Following Kennecott’s divestiture of the project, Ben continues to develop the project independently. Board of Directors Chairman John O’Donnell, (B.A. Econ, L.L.B.) Directors Murray Nye Max Polinsky Bill Fisher, (P.Geo.) Former Chairman, Aurelian Resources and VP Exploration, Boliden Ltd. John Ryan (CGA) President, Spruce Ridge Resources Edward Ellwood (MBA) Management Consultant Paul Teodorovici Property Management Consultant 6
  • 22. The Drumlummon Mine - Marysville, Montana Marysville, Montana is located 25 miles North-West of Helena, Montana’s capital city. Contact Mill, Philipsburg, 114 miles by road southwest from Marysville RX Exploration Drumlummon Mine and Contact Mill locations Marysville HELENA Philipsburg 7
  • 23. Drumlummon Mine Property Map The property consists of 26 patented mining claims (290 acres) and 68 staked claims (1,390 acres) May 2010 added Bald Butte Gold/Moly projects A’ A 8
  • 24. History of the Drumlummon Mine 1876: Drumlummon deposit discovered by Thomas Cruse 1883 - 1901: Montana Co. puts mine into production. Loses claim dispute in 1901 and floods mine to 400 foot level. 1902 – 1910: Production continues above 400 foot level by Montana Co while claim appeals in Annual Average Gold Prices in US Dollars per progress. Loses appeal. 1000 1910 - 1929: St Louis Company takes ownership. Leases mine periodically. Production 900 sourced above the 400 foot level. Market crash of ’29 stops production. 800 1941 - 1951: Montana Rainbow Co. dewaters and restarts production in 1946. Mill burns down in 1950 and production ceases. Rebuilding the mill not economically viable. 700 2007: RX consolidates all land claims, initiates surface drilling, completes NI 43-101 report. Begins underground rehabilitation. Ounce 600 2008: Charly Vein system discovered 500 2010: RX reopens the mine 400 300 200 100 0 83 92 01 10 19 28 37 46 55 64 73 82 91 00 09 18 18 19 19 19 19 19 19 19 19 19 19 19 20 20 Year 9
  • 25. Mining Strategy - 2010  Bulk sampling, leading to trial mining, will target ore from two key areas of the Drumlummon Mine (D Block and Charly Vein)  Both areas are being developed by drifting, followed by trial stoping  Currently taking bulk sample with a target grade of over 10 g/t gold and 400 g/t silver  Contracted trucking fleet already shipping ore to mill  Company is processing a series of 100+ ton bulk samples to fine tune existing gravity and flotation circuits (Metallurgy lab tests showed gold recovery of 92%)  Bulk sampling in May 2010 estimated at a rate of 200 tons per day increasing to trial mining at a rate of 500 tons per day by Q1 2011  Ore to be shipped to RX’s leased mill, at Philipsburg, for processing 10
  • 26. Drumlummon Development Vision Mine development will expand from existing workings – drilling will extend the target envelope, with follow up from rehabilitated workings A A’ South South 9 Hour North North Surface Workings Drumlummon Workings Drumlummon Workings Surface Setup 400 Level Exploration 400 Level 9 Hour Target Workings Previously 700 Level Exploration Disputed 700 Level Target Ground 1000 Level Exploration Charly Vein Previously 1000 Level Exploration Disputed Target Shaft No.2 Charly Vein Ground Xmas Vein Vein Xmas Target Shaft No.2 1600 Level 1600 Level 11
  • 27. Drumlummon Development philosophy “Drill for Structure…” Drill Hole From To Width Gold Silver (m) (m) (m) (g/t) (g/t) DDH 08-05 119.5 121.4 1.8 37.8 1,081.4 DDH 08-15 122.9 125.8 2.9 44.1 1,393.0 DDH 08-26 123.8 125.6 1.8 33.5 350.4 DDH 08-28 143.2 145.5 2.3 51.8 380.6 DDH 08-29 1.2 3.6 2.4 9.9 1,821.3 DDH 09-102 73.2 76.8 3.7 41.1 572.6 6.8 DDH 10-115 9.7 16.5 21.1 57.8 (true width 3 m) 8.0 DDH 10-120 4.3 12.3 19.76 45.2 (true width 3 m) 12
  • 28. Drumlummon Development philosophy “… drift for Grade” D-block D Block 400 Level 500 level cross-cut Xmas Vein through Charly Vein 700 Level 1000 Level Charly Vein 1600 Level 70 metres of Charly vein development drift averaged 41 g/t gold and 1,901 g/t silver over faces averaging 3.2 metres in width (PR May 2010) 13
  • 29. Development Progress  400 level haulage drifts and internal ramps fully operational for test mining (over 500 ton per day ore and waste capacity)  By April 2010,142 holes (44,863 feet) of drilling completed defining multiple high grade gold and silver zones. New hanging wall drill station commissioned (May 2010) Charly Vein  Fully permitted water treatment plant currently dewatering mine – able to drain system at 100 ft depth per month  Portal completed for 800 level decline decision in Q3 2010 – for haulage capacity to reach 1,000 tpd 500 level cross-cut 14
  • 30. RX’s Fully Permitted Philipsburg Mill  Existing mill 114 miles from mine accessible by paved highway ($20.50 per ton hauling cost), on care and maintenance from 2008  Two separate 500 ton per day circuits including crusher, regrind mills, gravity and flotation circuits  Facility has milled more than 1 million tons of ore from Inspiration’s poly metallic Black Pine Mine  1.5 million tons of tailings space currently available at the mill site  Leased for $30,000 per month plus per ton milling fee 15
  • 31. Bulk Sampling and Exploration Schedule 16
  • 32. Property Exploration of Resource Potential  Objectives : Consolidate medium-term mine plan and drill/drift on multi- million ounce gold/silver potential along strike and at depth  Continue exploration of D Block, Charly Vein and newly discovered mineralization to upgrade known resource  Charly vein remains open to the north, south and at depth; may represent the extension of the partially mined high-grade Xmas Vein.  New drill stations in the hanging wall of the Charly vein enables exploration of new and existing targets laterally as well as at depth  Continue rehabilitating historical workings over 1500 m. to the south in order to access and drill “Previously Disputed Ground” and beyond  This ground was never mined due to the historic claim dispute  Additional land has been acquired in the vicinity of the mine for future exploration  Specifically the Bald Butte Moly/gold/silver property located 5 km to the SW 17
  • 33. Permitting and Community Relations  RX has received all permits and exemptions required for production:  Approval of exploration license including water discharge by the Montana Department of Environmental Quality  Approval of small miner exemption which permits the company to mine so long as surface operations do not exceed five acres  Approval of the alternative mine rescue capabilities by the U.S. Mine Safety and Health Administration  Approval of the ventilation, escape and evacuation plan by the U.S. Mine Safety and Health Administration  RX has been conducting regular Town Hall meetings to encourage community involvement and has addressed all of the concerns of the people of Marysville 18
  • 34. RX Exploration : Programs to Add Value  Develop the Drumlummon mine plan systematically, at a sustainable rate for short, medium and long term profitable operations  Step up mine production over time to match the 1,000 ton per day Phillpsburg mill capacity while maintaining grade and recoveries  Consolidate existing resources and their extensions, and convert to formal 43-101 reserves  Aggressively drill to test multi- million ounce gold/silver potential using the first class access down to 500 metres depth and for over 1.5 kilometres in length 19
  • 35. Value Drivers: Assessing RX’s value by gold produced Peer Group High-Grade Gold Producers <100,000 oz gold/year Shares Enterprise Recovered Grade 2009 EV/Oz Outstanding Value (gold equivalent - Production Produced Company (millions) (USD grams per tonne) (ounces) (US$) millions) Wesdome Gold Mines 100.4 $229 9.0 96,150 2,381 Richmont Mines 26.1 $99 5.0 63,500 1,555 Orvana Mineras Corp 115.2 $110 5.1 62,644 1,758 Medusa Mines 170.8 $693 16.7 47,869 14,481 Apollo Gold Corp 261.6 $195 2.7 44,739 4,358 Kirkland Lake Gold 63.3 $443 11.9 43,545 10,163 Alexis Minerals 147.7 $41 5.8 38,461 1,067 San Gold Mines 266 $1,133 18.0 23,500 48,234 Olympus Pacific Minerals 322.7 $114 10.3 23,000 4,987 Metanor Resources 122.4 $80 7.4 20,000 3,975 St Andrews Goldfields 326 $342 6.5 15,000 22,767 Avnel Gold Mining 79.2 $28 12.1 13,045 2,161 RX Exploration 109 $55 22.1* NA NA Average $274 10.2 40,952 $9,824 *NI 43-101 grade and 92% met recovery 20
  • 36. How the market values high grade gold producers Investors should compare RX to this peer group Potential Enterprise Value ($US Millions) $600,000,000 $500,000,000 $400,000,000 $300,000,000 $200,000,000 $100,000,000 $- 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 60,000 Potential Annual Production (oz Au)  Based on average Enterprise Value per Ounce Gold produced (US $9,824) 21
  • 37. RX Exploration : Summary  Cash on hand - C$6 million  Achieving immediate serial production in high grade Drumlummon mine, with operations to pay for all development and exploration work  Continuous exploration by drilling and rehabilitation of old workings to follow up encouraging drilling results  Surface exploration of Drumlummon extensions and nearby mineralization  Build treasury for development and future corporate development (in- the-money warrants would bring in C$29 million) 22
  • 38. Drumlummon – A Golden Future for a Historic Mine 406 – 138 Portage Ave. East Winnipeg, Manitoba Canada R3C 0A1 T: (204) 989-2434 F: (204) 989-2433 23
  • 39. Appendix A: NI 43-101 Compliant Resource - Charly Vein and Historic Resource  Calculated from 59 drill holes drilled into the Charly Vein System  A cutoff mining width of 5 feet was used as well as a minimum grade of 0.1 oz/t Au 400E Vein Tonnage Grade Au Grade Ag Ounces Ounces (oz/t) (g/t) (oz/t) (g/t) Au Ag A 67,284 0.39 13.4 12.2 418 26,192 820,166 B 39,740 0.53 18.2 7.3 250 21,097 291,053 C 48,494 0.48 16.5 16.6 569 23,414 804,341 Total Inferred 155,518 0.45 15.6 12.3 422 70,703 1,915,560 Resource Tonnage Grade Au Grade Ag Ounces Ounces (oz/t) (g/t) (oz/t) (g/t) Au Ag Historic 841,000 0.50 17.14 5.00 171.43 463,000 4,635,000 Resource* * Historic Resource is not NI 43-101 compliant 24