Ann: Company Update, page-36

For those new to CAP or wanting a refresh of the potential of this project - got back to the PFS results from ASX announcement dated 28 July 2017.

Some key highlights:

• IRR (post tax, not geared) - 17.8%
• IRR (post tax, geared) - 29.9%
• Total all in FOB US$/dmt $39.74
• Total CFR China US$/dmt $48.03
• Life on Mine EBITDA - US$401M

However, it needs to be remembered that the above is based on price assumptions of US$63/t for 62% Fe and US$75/t for 65% Fe. Given the product to be produced is 69.9% FE, then at current prices it should be getting over US$175/t - that is US$100 more than the PFS.

At current prices, annual EBITDA would be AUD$1.8 Billion (being PFS life of mine EBITDA of US$401 plus an extra US$100/t for current price times 10mtpa converted to AUD).

Yet the market cap is under $20 million.

The speedhumps to production are:

• Resolution of JV restructure - this is mainly sorting out legal issues following liquidator appointed to BVI company that owned the JV partner. However, I see this as more an opportunity to obtain full control and ownership of Hawsons.
• Funding of BFS - unlikely to be an issue in the current environment. Product marketing has been taking place over the last couple of years and once JV restructure sorted there could be a fight to secure offtake.
• Funding of the project itself - If the BFS confirms the PFS, then once again in the current environment, that shouldn't be an issue. The resource is large and consistent (some infill drilling since PFS to confirm this from memory), near Broken Hill so labour and skills nearby, access to existing rail and port infrastructure - so therefore many of the usual hurdles to production not there.