Having seen G6Ms share price increase ~70% over the last month...

Having seen G6Ms share price increase ~70% over the last month and EQRs share price not change over the same period I had to revisit and compare the two projects again. EQR and Mt Carbine are very much an unloved company/asset and I think it is fair to say G6M and the Dolphin mine have more visibility and a more positive perception associated to them. Most of G6Ms recent gains came after their inclusion in the Four Corners report on the ABC regarding critical metals.

Reviewing the latest webinar of EQRs on my quest for info I thought the following, although most of it has been mentioned already, were worth reiterating.

Tony:

“I think exploration here in the future will potentially find another 2 or 3 other similar sized targets of Mt Carbine itself.”

“We start to add 7 to 10 times that (grade) from the open cut. We are going to have that huge jump when that comes online first quarter next year.”

“Because of the high grade of that ore coming out of the pit we have to dilute it and this is where it is kind of handy to have the lower grade here because you want a steady feed and we are targeting a steady feed of around the half percent mark to go to our plant.”

“the perseverance of this system is really surprising us and it works out that it is heading in the right direction for our future plans with our underground portal where it is now…..Kev touched on an important point, is that the low grade halo around the high grade in the current pit. We are mining that anyway and it adds quite a few 100 thousand tonnes to the thing which again changes the economics a bit and we are looking forward to running the numbers on all this.”

“Again we are dealing with such a small part of the global resource as we know it today. Knowing how far we can go, the potential is huge here. This is a world class deposit it’s got world class grades which makes it economical, we are in the lower quartile because of the grade of the tungsten we have. We will be hanging in there no matter what the price of tungsten is really. That extension you see there on the slide that potentially is adding in another 8 million tonnes into the open cut, we are taking 15 now, just that extra 10 holes added another 25-30% estimated. “

Kevin:

Q: When do you expect the second ore sorter and wet screen to be in production?

A: I am really hoping to have everything running by the end of this month (MAY)....... We hope to be done by the end of May and then that will give us the bump that we need in production to make a big difference on our cash in the company, We will certainly be cashflow positive at that point in time, we are now actually, but that will give us making some money if you will some more serious money”

Comparison

Below I have shared some of the areas I think are worth comparing when trying to value Mt Carbine and the Dolphin project. This is not financial advice. I am not a mining professional. This quite likely is full of incorrect assumptions and errors in calculations etc. This is just some fun. I hold EQR. I do not hold G6M. Please let me know where I have gone wrong if you find issues.

Current Resource

Dolphin

Dolphin- [email protected]% for 86400t contained

Bold Head - [email protected]% for 16016t contained

Total 102416t contained.

Mt Carbine

Mt Carbine BFS Pit- [email protected]% for 9130t contained

Mt Carbine UG- [email protected]% 25200t contained

Mt Carbine-Remaining- [email protected]% for 24510t contained

Iron Duke- 5.8mt @.59% for 34220t contained

Low Grade stock pile- [email protected]% for 9000t contained

Tailings- [email protected]% for 2000t contained

Total 104060t contained.

Both resources have similar sizes currently. Of note is Dolphins resource cut off is at .2% and Mt Carbines pit and underground is at .25% so Mt Carbine can squeeze a bit more metal out of current resources by reducing the cut off to .2% if prices allow(they currently do). Both have exploration potential however I believe it is only Mt Carbine that is carrying out ongoing exploration currently so if positive Mt Carbines resource has the potential to grow a lot faster. On a Macro level I believe Mt Carbines exploration prospects are far greater than that of King Island.

Funding

Mine: Mt Carbine Dolphin

Capex: $22.5m AUD $73m AUD

current debt: [email protected]% [email protected]%

$4.2m@0%

$1.5m@8%

End debt: [email protected]% $43.2m@7%

$0.3m interest PA $3.0m interest PA

Both projects are fully funded. Capex wise Mt Carbine is less than 1/3rd of the cost of Dolphin and comparing the expected debt at project completion the interest cost of Mt Carbine is 10% of that of Dolphins interest costs.

I believe there is a lot more risk associated with Dolphins build than Mt Carbine as Mt Carbine is a lot further along than Dolphin. By the end of May several key components will be up and running producing concentrate and the vast majority of funds have already been spent. Dolphin is currently expected to produce first concentrate in March 2023 if there are no delays and they have only drawn down 25% of their required debt and have 20mil cash from the 33mil capital raise plus whatever they held prior left. I expect cost increases to Dolphin and further delays based on the current mining environment. Both projects are subject to the industry cost increases currently being experienced but if we look at it on very simple terms and apply 20% increases to both projects capex we end up with an increase of 4.5mil to EQR and 14.6mil to G6M.

Both companies had a round of capital raising to raise capital for their respective builds. It is worth comparing the two. EQR raised $6mil AUD via a convertible note at 7% or conversion at 6.5c a ~45% premium to the then share price. G6M(KIS then) raised 31million at 14c a 17.6% discount. I have not included EQRs 6million convertible notes in the above debt as I fully expect it to be converted into shares in the next 12 months.

Production

Mine: Mt Carbine Dolphin

In production: Yes No

Current monthly rate: 47t@50% Nil

future expected rate: 5000t@60%? 4300t@63%

ore processed: 1mt/py 400k/py

Off Take covered: 100% 62%

Cash Flow positive currently: Yes No

BFS NPV: $131m AUD $241m AUD

BFS IRR: 154% 43%

opex:USD $51/mtu conc USD $58/mtu conc

margin: USD $127 p/mtu USD $120 p/mtu

cash flow: $63.5mil USD $51.6mil USD

Future production rates for both projects are hard to estimate. A large caveat in relation to EQR’s future production is that the current BFS has the following production rates of concentrate:

2022-1200t

2023-3020t

2024-5040t

2025-8020t

2026-2032 -1200t

The expectation is for the 2025 rates to be continued on. But for now I have chosen to just use 5000t as it is just below the average for the next(23/24/25) 3 years covered by the current open pit. However we already know that we have 2.36Mt at 1.05% from underground that can be added to years 2026/27/28/29/30 to get those years output >=8000tpa concentrate. Any extension to the pit via dyke west and the added resources of the pit halo will also add to mine life/potentially increase output.

Mt Carbines opex straight from the BFS based on CURRENT BFS life of mine is USD $113/mtu concentrate. However for this comparison we will just average out the opex for the 3 years 23/24/25 to match the 5000t/pa of concentrate.

EQR first 3 years opex

Year Tonnes $/t concentrate

2023 3020 $13168 $39767360

2024 5040 $8086 $40753440

2025 8020 $4412 $35384240

total: 16080 $115905040 $7208.024876p/t

$72 AUD or $50.5USD per MTU of concentrate

Dolphins opex is harder to come by. I calculated it based off:

400kt/pa @0.91% =3640t contained metal. x .75 (75% extraction) =2730 tonnes contained metal in concentrate for the year. Concentrate at 63% =4300 tonnes concentrate.

If a MTU of 100% tungsten is costing 130AUD opex (march 21 G6M presentation) we can multiply 2730 x $130= 354900/4300=$82.5 AUD per MTU of concentrate (~$58 USD)

If my understanding of the details in the presentation are correct and my calculations are correct both Dolphin and Mt Carbine have excellent opex’s that are low for tungsten and compare very favourably to other mines. EQRs opex for the year 2025 alone comes in at $30.8 USD per MTU of concentrate. IF EQR adds more high grade tungsten to the mine plan it will have opex at about half of that of G6Ms in the later years of mine life. Which based on the reported underground resource we know a good few years is already there. Costs of underground mining will be higher but grades should also be higher. We also already expect an increase of open pit tonnes albeit at lower grades(for now) than the current open pit resource.

For a simple comparison of margins/earnings I used a 340usd APT price, ignored the difference in concentrate grade and used 77% of the APT price to compensate for the concentrate vs APT discount. This gets a price of 272usd. Multiply this by .68 to convert 88%APT to 60%concentrate =178USD per MTU of concentrate.

Keep in mind any changes to the price of tungsten will give greater impacts to EQR than G6M as it is expected to be producing more MTUs of concentrate than G6M. In the later years IF EQR can maintain its 800,000 MTUs vs G6Ms 430,000 MTUs the impact from price movements is almost double.

Market Cap

Currently the Market Cap of EQR is 77mil and G6M is 161mil. Investing $1000 dollars in EQR will get you twice as much ownership of the company than investing $1000 dollars in G6M.

Other noteworthy factors

-Proximity to market. The distance between the port of Grassy and the port of Cairns by sea is 3650km. EQR is a lot closer to asian/US/Europe markets.

-Tungsten mines are not the easiest of mines. EQR has been in production for over 12 months and has been providing their customers with concentrate. Customers like the style of concentrate and the concentrate process has been fine tuned considerably already. G6M still has a lot of the production side streamlining to be done.

-Impact of sea water on infrastructure and vehicles. Mt Carbine is inland whilst the Dolphin project is right on the ocean. This may have a considerable impact to ongoing maintenance and costs due to the salt water impact. I would also expect the costs for everything to be higher due to transport requirements to King Island vs Mt Carbine.

-FIFO/Accommodation needs. Mt Carbines workers can be located in one of the many towns not far away. Port Douglas is a 1 hour drive. Dolphins workers will need to FIFO which comes with accommodation/living costs for G6M or workers must relocate to the small island if they are happy too.

-The Quarry.

Thanks for reading. Good luck to all in both G6M and EQR.