Ann: Kalman Resource Upgrade Lifts CuEq Inventory to over 530KT, page-29

Excuse me - but I don't agree.

There are 4 phases:

Scoping study
Pre-feasibility study
Definitive feasibility study
Bankable feasibility study

The scoping study is the first of these and with limited information, because parameters are assumed or factored because drilling is not done. Of
course they have to be reasonable but they are less strict than later stages because all a scoping study determines is whether or not further studies should go ahead. Resources may be Implied, Indicated or Measured. In scoping studies, headline figures will be particularly noted, such as projected annual production and net present value.Cost estimate accuracy is in the order of ±50%. Bottom line contingency is in the order of ±30%. Time required for submission of draft report is typically 3 - 6 months. Report reviews and final approval can add significant time to the overall project schedule.

Normal cost range (includes early supporting studies - geotechnical, metallurgical, etc., but not including exploration geology) - is approximately 0.2% of the total project value.

In the case of Kalman, we have already seen successful ore sorting and metallurgical testing is underway. So we do not start from zero. In addition, some drilling has already been undertaken (not enough for a pre-feasibility study, of course, but certainly enough for a scoping study).

The scoping study includes an economic analysis of the potential viability of mineral resources taken at an early stage of the project prior to the completion of a preliminary feasibility study. Scoping study will generally include information on how much money it will take to bring the project into production, how the mine will operate once it is built, and how much metal (and money) it will produce.

The economic analysis by way of a scoping study is generally the first signal to the public that a mineral project has potential viability. Given the significance of this milestone in the evolution of any mineral project, the market views scoping study results as important information.

After producing a positive scoping study a company can then move on to a pre-feasibility study. Here it becomes more expensive because a lot of infill drilling comes into play.

If I were to assume that the cost of the project would be A$500m to 1bn, then we are talking about scoping study costs in the hundreds of thousands of dollars, not millions. Probably we are in the range of 200-500k (my estimate). HMX can raise that themselves or a JV partner can dip his toe in the lukewarm water.

If the scoping study turns out positive (the better if worst and best case assumptions are always positive), then HMX can also look for a JV partner - who, for example, takes over the costs for phases 2 to 4 - step by step. E.g. for phase 2 20% of the future production, phase 3 another 20%, phase 4 or when the thing is actually built - another 20% (or so). So it could be that at the end of this process "only" 30-40% of the cash flows (or earnings) end up with HMX.

The other variant is that at some point HMX is simply "paid off" - i.e. the project is taken over.

It is clear that a positive scoping study gives the metal in the ground a very different value than it currently has. It is also clear that if, for example, copper prices rise to USD/ton 15000 in 2 years (as some think), then such a positive scoping study takes on a very different spin.

I continue to find it interesting that Dan doesn't seem to care about cash. He already said in Brisbane that it is enough to complete all planned "tasks"- either he assumes that HMX can do a CR at a much higher SP level - or he has an ace up his sleeve (or both or one is related to the other).

Conclusion:HMX does not need a massive dilution for a scoping study. But it is clear that if HMX wants to do everything itself - i.e. go into production with all 4 phases plus go into production - it will a) take an eternity and b) certainly not make us rich. But I don't think this is the plan!

DYOR