recommendation positive

RECOMMENDATION : POSITIVE October 24, 2012

Cerro is one of our preferred junior gold
companies, with a highly attractive Mexican gold
project due for commissioning in 2014.

Even allowing for some funding dilution, the company is
attractively priced relative to its competitors, with
the added benefit of very high further exploration
upside.

Mexican based gold/silver play. Cerro has a number of gold and silver assets located in Mexico, the most advanced being Cerro Del Gallo. This project is ready for development for a 4.5mtpa heap leach operation, followed by a 3mtpa CIL to produce close to 100k ounces of gold equivalent annually at low operating costs and capital
expenditure.

Low cost operation. Cerro del Gallo has very low forecast
operating costs of US$516/oz on a gold equivalent C1 basis. Costs including depreciation and royalties are also low at forecast

US$840/oz on a gold equivalent basis.

Further exploration upside. Namiquipa in northern Mexico is
potentially a second project for the group. This project is located in the Chihuahua province and has the potential to develop into a high grade silver project.

Significant resource base. Cerro currently has 4.56m ounces of gold equivalent, comprised 3.2m ounces gold and 70.4m ounces silver.

Proven management. Norm Seckold, Chairman, is well known to
us through his previous role as Chairman and director of Bolnisi Gold, and has consistently delivered value to shareholders. Tony McDonald, CEO has also long been associated with the same stable of assets as Norm, with a similar consistent performance.