1. EQUITY MARKET FORCES AND THE POTENTIAL FOR MERGERS AND ACQUISITIONS IN THE JUNIOR MINING SECTOR RICHARD CHASE

2. 2 Ambrian’s Hypothesis We are at an inflexion point for the junior mining sector on AIM The liquidity crunch will push the most underwhelming exploration companies into the abyss It will help bring together those companies whose assets and management teams would benefit from the symbiosis in order to attract further funding and ultimately commercial development It will crystallise value for those investors skill full – or lucky – enough to own the outright winners We see it as a much needed shot in the arm for the sector

3. 3 Introduction The mining boom on AIM Liquidity – and how a lack of it has encouraged consolidation The credit crunch – its impact on market reactions and on financing Deal Making Other financing options

4. 4 AIM – IPOs and Further Issues (2001 – H1 2008) Source: London Stock Exchange

5. 5 Share Price Performance Since IPO Source: Ernst & Young

6. 6 A lack of liquidity The self-interest of brokers, The absence of a minimum threshold for the number of shareholders required for admission to AIM, A preponderance of institutional investors, A lack of retail clients, and London’s enigmatic market making system

7. 7 Mining Sector Risks Skills shortage Infrastructure access Carbon footprint, climate change and environmental compliance Rising costs Pipeline shrinkage Resource nationalisation Increased regulation.

8. 8 The Impact of the Credit Crunch on Financing Investors want production – which means cash flow The consequences of project delays and overruns can be severe on the share price Even good projects can be regarded as uneconomic and unattractive investment propositions if there are repetitive delays There is the real possibility that further cash injections become impossible for the smaller companies − Validated by the number of companies announcing spending reviews, emergency financing and even administration.

9. 9 Cash Reserves of AIM’s Mining Companies Source: Ernst & Young

10. 10 M&A Transactions Size Management Assets The influence of the global mining houses on M&A activity on AIM has been very limited A far more significant contribution has been hedge funds and activist investment firms − get to know your shareholders…and develop new ones!

11. 11 Other financing options The sale of non-core assets Farm-ins and Farm-outs for joint ventures Equipment leasing Forward sales The sale of project equity to an off-taker Development agency support The sale of a royalty Export credit finance Debt swaps / Debt Conversion Private Equity

12. 12 Ambrian Capital plc is an independent investment banking group listed on AIM (AIM: AMBR) Tel:- +44 (0) 20 7634 4700 www.ambrian.com