The Role of the Investor in Financing Exploration PAUL BURTON MD GFMS WORLD GOLD FINEX LONDON SEPT

EXPLORATION

6D MODEL OF MINING D ETECTION D ISCOVERY D EFINITION D ESIGN D EVELOPMENT D EPLETING High Risk Lower Risk

US$ millions NEWMONT NORMANDY NEWMONT NORMANDY EXPLORATION CUTBACKS PRE $111 POST $73 Source: Barrick Gold

US$ millions BARRICK HOMESTAKE BARRICK HOMESTAKE POST $104 EXPLORATION CUTBACKS PRE $149 Source: Barrick Gold

EXPLORATION SPENDING Source: GFMS World Gold

EXPLORATION SPENDING Source: MEG

Production V Exploration Source: GFMS, MEG

“Companies at all levels of the industry have substantially increased their budgets over the past five years, but the junior sector is clearly driving the current exploration upswing. Junior exploration spending has increased a remarkable 909% since the bottom of the cycle in 2002, accounting for more than half of the overall year-on-year increase in each of the last four years, and for more than half of the 2006 and 2007worldwide total”. Source:MEG

EXPLORER - DEFINITION Entrepreneurial Professional geologists TSXV, AIM, ASX Intellectual capital Ability to burn cash Performance on results not gold price

What does a Junior Explorer do? DETECTION DISCOVERY De facto exploration arms of majors

$10 9 DISCOVERYDEFINITION AND DEVELOPMENT DEPLETION SHARE PRICE HIGHER RISK LOWER RISK Life Cycle of a Mining Share Source: US Global Funds/Tocqueville US$5/oz US$40- 70/oz US$140/oz

JUNIOR EXPLORER Source: Stockwatch

“The juniors’ dependence on equity financing to fund exploration makes them the most volatile sector of the industry, suffering the steepest declines in exploration during bad times and enjoying meteoric increases during the booms.” Source: MEG

RISK MATRIX EXPLORER MAJOR High Low Risk Propensity LowHigh Equity Risk

3 YR COMPARISON Source: Barry Cooper, CIBC World Markets

2006 EQUITY PERFORMANCE Source: GFMS World Gold

MARKET SIZE (US$ Billion) Source: Tocqueville Asset Management

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