WEATHERING THE STORM Responding to the Capital Crisis in the mineral exploration industry Presentation to IGWG Finance & Taxation Committee March 6, 2013 Prospectors & Developers Association of Canada

Source: Metals Economics Group PDAC ESTABLISHED A CAPITAL CRISIS COMMITTEE IN DECEMBER 2012 TO ASSESS THE STATE OF THE INDUSTRY GOAL #1:ASSESS CURRENT CONDITIONS Industry financings, (Gamah International) Exploration expenditures, (SNL - MEG) Stock market activity (TMX Group) John Kaiser Intierra RMG Bloomberg PWC Richard Schodde Stockwatch InfoMine Oreninc GOAL #2:BRAINSTORM AND PRIORITIZE POSSIBLE SOLUTIONS GOAL #3:ADVOCATE ON BEHALF OF THE INDUSTRY CONTEXT 2

Source: Metals Economics Group THE TRIPLE WHAMMY 1.Reduction in Working Capital 2.Reduction in Capital Raises 3.Decline in Share Prices ANALYSIS - 1 3

WHAMMY #1: REDUCTION IN WORKING CAPITAL ANALYSIS - 2 4

Source: Gamah International WHAMMY #2: REDUCTION IN FINANCING LEVELS ANALYSIS - 3 5

Source: Gamah International WHAMMY #2: REDUCTION IN FINANCING LEVELS ANALYSIS - 4 6

Source: TMX Group TSX Venture Exchange Statistics Share Price Distribution ANALYSIS- 5 WHAMMY #3: REDUCTION IN SHARE PRICES 7

Source: TMX Group TSX Venture Exchange Statistics Market Capitalization of Mining Issuers ( ) ANALYSIS- 6 WHAMMY #3: REDUCTION IN SHARE PRICES 8

SUMMARY  Working Capital - about one third of all junior companies with less than $200,000  Financings - a sharp increase in the number of very small raises  Share Price - 60% of issuers on the TSXV with a share price of 10 cents or less at the end of 2012 ANALYSIS- 7 9

 The downturn is not restricted to the smaller exploration juniors as we see sharp deceases across both the TSXV and the TSX in terms of market cap and share price.  Major companies have also been passive on the investment and acquisition of juniors as a result of their own financial issues over the past couple of years.  Disconnect between metal prices and share prices ANALYSIS- 8 CONTEXTUAL FACTORS 10

It may not make good sense to simply wait for higher prices to naturally rebalance the junior sector. IMPLICATIONS ANALYSIS- 9 11

1. Facilitating Capital Raising Top Request: Extension of METC 2. Retaining Professionals (HQPs) Top Request: Funding to F/P/T Surveys 3. Maintaining the Viability of Companies Top Request: Jointly studying compliance costs faced by exploration companies WHAT CAN BE DONE? SOLUTIONS- 1 12

CASH GRANTS  Increase grants being offered to prospectors / government share (e.g. NL government increased its grant share from 50% to 66%) SECURITIES REGULATIONS  Convince regulators to expand existing exemptions from the prospectus requirements for private placements TAX POLICY  Renew/augment the Mineral Exploration Tax Credit CAPITAL RAISING SOLUTIONS

Boost short-term funding to Geological Surveys / universities in all jurisdictions to provide short term contracts for geos laid off from juniors Public incentives for companies to keep geoscientists employed (e.g. wage subsidies, internships) Work with major mining companies to boost exploration programs during the downturn RETAINING HQPs SOLUTIONS

INDUSTRY ACTIONS  Facilitating consolidations  Facilitating collaborative financing solutions  Educating members  Developing a “survival toolkit” for members  Negotiate “bulk” rates for legal/accounting fees MAINTAIN COMPANY VIABILITY SOLUTIONS

GOVERNMENT ACTIONS  Work with PDAC and regulatory commissions to study regulatory compliance costs for exploration companies and identify solutions that protect investors while enhancing capital markets  Help us educate the exploration industry about claiming costs related to community consultation, environmental assessments and feasibility studies as Canadian Exploration Expenses (see Annex I and handout) MAINTAIN COMPANY VIABILITY SOLUTIONS

Awareness of guidelines The Prospectors and Developers Association of Canada Knowledge of guidelines Helped determine eligibility of expenses ANNEX Although companies are aware of the guidelines and find them helpful…

Claimed consultation costs as CEE Those who consulted with Aboriginal and other communities The Prospectors and Developers Association of Canada Claimed assessment costs as CEE Those who conducted an environmental assessment ANNEX Consider preliminary planning and head office work as eligible for CEE Planning costs claimed as CEE? … many companies are not claiming eligible expenses