6c by Christmas

Valuation from Patterson:

We have determined a valuation for AGO of $0.042/sh based on our iron ore price and exchange rate estimates (Figure 1). We see the key asset for the Company being the Mt Webber project which has an Ore Reserve estimate of 47.5Mt at 57.1% Fe at the end of June 2017. This provides for a c.4-5-year operation at current production rates. In FY18, the Company plans to increase production from 7Mt to 9Mt at Mt Webber which produces the bulk of the 9-10Mt (guidance) this year. The significance is this allows the Company to continue production at close to FY17 levels (14.4Mtpa) whilst conserving capital. This ultimately reduces risk for the Company and allows it to be potentially in a position to repay its debt in FY18, thus reducing its interest burden which stands at c.$11m per annum. Once the debt is repaid, the Company will be in a significantly improved positon. We agree with the Company’s decision to defer Corunna Downs as at the current pricing deck it is a marginal project. We have used $0.20/t to value McPhee Creek, SE Pilbara and the large Mineral Resources that the Company current owns. We have not included any value for AGO’s growth opportunities such as Davidson Creek or Miralga Creek. We see this as potential upside beyond our valuation.