something to wet your appetites

To all holders of CFE, something of interest from my broker.

Cape Lambert Ltd (CFE)
Value Drivers are Mounting Up Initiating Coverage
CFE is an ASX listed, Perth based resources investment company with a geographically
diverse portfolio of exploration and development projects spanning a number of
commodities, but mainly concentrated in iron ore, gold, copper and uranium. The
investment strategy is to acquire and invest in undervalued or distressed resource assets.

CFE have demonstrated a proven strategy of generating shareholder value through the
distribution of special dividends, in-specie distributions in new companies to existing
shareholders and asset sales that have resulted significant cash assets. We expect this
to continue over the next 12-18 months and initiate coverage with a Buy recommendation
on the basis that the sum of parts valuation is greater than the current market value.
Key Points

The current share price equals CFE s cash and cash receivables and therefore CFE s
considerable project portfolio is not given any value in the market. We believe this situation
will be redressed and a re-rating will occur when asset sales begin to realise significant
increases in cash.

We value CFE with a 12 month price target of $0.80 per share. We assume that within the
next 12-18 months, the value proposition presented by the Marampa and Mayoko deposits
will become clear once cash has been realised for these project through asset sales.We also envisage that value for the Sappes Gold Project in Greece would have realised and
other potential corporate transactions involving other assets in the CFE portfolio would have
been advanced.

The Marampa Iron Ore Project and the recently acquired Mayoko Iron Ore Project in Sierra
Leone and Republic of Congo respectively differ from some large +1 billion tonne peer
projects in West Africa due to their proximity to infrastructure which can be readily up-graded
or refurbished, without the requirement for very large CAPEX requirements.

CFE are progressing activities that add significant value to these projects with a view towards asset
sales to derive value for shareholders.
We believe CFE are looking to find a buyer for the Sappes Gold Project in Greece, which
should be aided by the completion of an update to the Feasibility Study and approvals from
the Greek authorities on the EIS. Once this issue is resolved we estimate that a potential
purchaser would see the project as significantly de-risked.
Rock phosphate and base metals projects in Queensland provide additional scope for
corporate transactions and we would expect to see some activity on these projects over the
next 18 months.

We believe the Board and management team at CFE are aggressive and have a very clear
understanding of their strategy to deliver shareholder value. A significant portfolio of
interests over a number of commodities provides flexibility in asset selection and the growing
balance sheet will provide the funding to drive value add activities over a number of projects
in the future.
30 July 2010

Projects CFE Equity Valuation A$/Share
% ($m)
Marampa, Sierra Leone Iron Ore 100 700 mt 91 0.15
Mayoko, Rep. Congo Iron Ore 100 900 mt 117 0.19
Sappes, Greece Gold 100 829 Kozs 50 0.08
Lady Loretta, Australia Zinc - Lead 25 13.7 mt 25 0.04
Leichhardt, Australia Copper 100 8..2 mt 25 0.04
Australis, Australia Rock Phosphate 100 na 20 0.03
Project Sub-total 328 0.52
Investments
Listed Equities 28 0.05
Convertible Notes 9 0.01
Investment Sub-total 37 0.06
Total Projects and Investments 365 0.58
Cash Reconciliation
Cash at 15/07/2010 133 0.21
Cash Receivables MCC for CopperCo 88 0.14
DMM Acquisition for Mayoko -32 -0.05
Dividend Special capital return at 7c per share -44 -0.07
Corporate outgoings -10 -0.02
Cash Sub-total 135 0.22
Total Valuation 500 0.80
Size
Figure 16. CFE Summary Valuation Table Source: DJC
RECOMMENDATION

We value CFE with a 12 month price target of $0.80 per share. We assume that within the next
12-18 months, the value proposition presented by the Marampa and Mayoko deposits will
become clear or cash has been realised for these project through asset sales. We also envisage
that value for the Sappes Gold Project in Greece would have realised and other potential
corporate transactions involving other assets in the CFE portfolio would have been advanced.

The current share price equals CFE s cash, listed investments and cash receivables. Therefore
CFE s considerable project portfolio is not given any value in the market. We believe this
situation will be redressed and a re-rating will occur when asset sales begin to realise significant
increases in cash on the balance sheet.
On this basis and using the above project valuation assumptions, we initiate coverage on
CFE with a Buy recommendation and a 12 month price target of $0.80 per share.

Cheers