The following presentation was given by Joel Schneyer, Managing Director at Headwaters MB at the SME's 3rd Annual Current Trends in Mining Finance Conference in New York, NY.

1. The New Industry Paradigm: Industry Specialist
Private Equity Investors as Drivers in the Mining Sector
SME’s Third Annual Mining Finance Conference
New York City
Joel Schneyer – Managing Director
April 28, 2015

2. Difficult Investment Landscape for Miners
Source: Modified from NovaGold - Presentation at San Francisco Gold Conference, November 2013
South America
1.Peru: Construction halted at largest mine due to
gov’t review and social unrest.
2.Ecuador: Political obstacles and windfall tax
discourage foreign investment in mining.
3.Venezuela: Five mining companies seeking
compensation through World Bank’s arbitration
court following nationalizations.
4.Bolivia: Nationalization of various natural resources
assets.
5.Argentina: Miners required to repatriate revenues
from foreign sales, limitations imposed on foreign
exchange. Controls on imports of
equipment/supplies have also been tightened
Africa
•Ghana: Increase in tariffs on mines and introduced a
windfall tax, halting project expansions.
•Guinea: New law gives government a 35% stake;
threat of nationalization.
•Mali: Recent military coup creating political
uncertainty
•Kenya: Rising mineral royalties and drilling fees for
mining.
•Congo: Plans to revise mining code, raise taxes and
increase stake in mining projects
•Zimbabwe: Gov’t plans to seize control of foreign-
owned mines.
•South Africa: Ongoing dialogue to nationalize mining
industry.
Russia, Asia & Australia
13.Indonesia: Newly proposed legislation
limits foreign ownership of mines to 49%.
14.Philippines: New royalties and taxes being
imposed on mining companies.
15.Mongolia: Drafting investment law to
restrict foreign ownership.
16.Kyrgyzstan: Parliamentary motion calling
for increased government stake in one of its
largest mines
Heightened Geopolitical/Permitting Risk in North America
2
BC: Mt Polly tailings
dam spill
Quebec: Innu
First Nations
launch $900M
lawsuit against
Rio Tinto
BC: First
Nations
Supreme Court
Ruling
MEX: Torex
kidnappings
Aust: BHP & Rio Tinto
iron ore tax avoidance
investigation
Greece: Revokes
Skouries mine
development
license
Zambia:
Planned royalty
hike to 9%

3. Access To Public Capital Decreasing – Exploration Decreasing
3
Source:
Toronto Stock Exchange and TSX Venture Exchange
Total Financing (C$ Billions)
Source:
Global Exploration Budget Trends ($ Millions)

4. Disconnect Between Gold Miner ETFs and Broader Market
4
Source: Yahoo Finance

5. Why Buy An Illiquid Share When You Can Buy An ETF?
5
Source: Yahoo Finance

6. Source: Headwaters Research
Industry Experiencing Mining Cost Inflation – N American Example
6

7. $/oz
$535/oz
Margins Under Pressure
7
Source: Metals Focus

8. 8
Development Stage Gold Companies trade at an Enterprise Value of $12 per ounce of M, I, & I
(NI 43-101) with average estimated project development costs of $91 per ounce
*EV = (share price x # shares) – current assets + total liabilities
**4/18/2015 share prices Au=$1203.35/oz, Ag=$16.23/oz
The Development Stage Business Model Looks To Be Unsustainable

9. 9
Once the Project enters the Development Investment Analysis Phase (PEA – Prefeasibility – Feasibility),
companies see a long period of share price erosion as studies, permitting and de-risking drag on
Life Cycle of a Gold Mining Share

10. 10
Actual Trading Market Multiples
 Small Gold Producers $51/oz Resource
 Intermediate Gold Producers $64/oz Resource
 Large Gold Producers $117/oz Resource
So What Is the Problem?
Development Stage Gold Companies Trade on Average at $12/oz Resource
Costs to Complete Drilling, Feasibility & Permitting ~$10/oz Resource
Capital Development Costs $91/oz Resource
Owners Costs Not in Feasibility (25%) $23/oz Resource
Total $136/oz Resource

11. 11
The Institutional Money has lost confidence that…
 costs can be controlled
 capital discipline will occur
 restructurings can deliver on promises
 returns on capital employed will improve
 the industry won’t pile back into too many new projects or expensive deals
when prices rebound
 resource nationalism will not overwhelm the industry
 commodity prices will not collapse
 “stuckholders” have an exit
… and the markets reflect this loss of confidence
Institutional Money Is Not Buying Any More Lottery Tickets

12. PE Investment Criteria
 Project in the lowest quartile of
cost curve
 Favorable technical review
 Board representation or control
 Permitting timeline
 Aligned financial interests
 Singular execution focus
 Exit strategy
12
Company
Project
Retail
Sovereign Wealth
InstitutionalMoney
Private Equity
Streaming & Royalty
Strategics
Merchant Traders
Mutual Funds
Major Shift In How Institutional Money Invests In Sector

13. 1. Commodity
2. Location
5. Technical &
Legal Review
7. Execution and/or
Completion Risk
Private Equity – Key Considerations
13
8. Size of Investment
4. Control & Board
Representation
3. Quality & Focus of
Management Team
6. Project
Competitiveness
9. Hold Period &
Exit
+ 20% Annualized Returns
6 to 10 year timeframe

14. SNL Mine Economics Cost Curve
14
Source:
Iron Ore Cost Curve
25% - $35/dmt
50% - $39/dmt
Copper Cost Curve
25% - $1.25/lb
50% - $1.60/lb

15. Permitting Times Are Increasing – The Donlin Gold Example
Source: NovaGold 2nd
Q & Project Update Presentation, July 2014
15
1.5Moz/year
First five full years 1
1.1Moz/year
life of mine1
WE ARE HERE

16. Number of Mining Companies by Stage of Project Development - 2013
16
Adapted from:
Increasing Private Equity
Interest and activity
Prefeasibility Feasibility ProductionResource
PEA
Exploration
1149
Production
188
Advanced
Exploration
866

17. The Headwaters Difference
17
 Global reach (30 countries, 50 offices)
 Full product/service offering
 #1 investment bank for private wealth in the US
 Advocacy – unapologetic and conflict free
 Award-winning client advice
 Deep pool of transaction experience (over $265 billion)
 National footprint (8 offices)
 Focused industry coverage (specialists, not generalists)
 Advocacy – unapologetic and conflict free
 Long history of success
 Teamwork unrivalled in the industry
Capabilities • Culture • Advocacy • Results