Summary from a Tolhurst report issued May 15 to keep everyone up...

Summary from a Tolhurst report issued May 15 to keep everyone up to date on research out there.

SRK
Completes $32 million capital raising

Event
Strike has completed a $32 million capital raising at $2.45 per share to UKand US based institutional investors. The placement was heavily oversubscribed and priced without discount. SRK made the issue under its existing 15% placement capacity and as such did not require shareholder approval.

As indicated in our initiating coverage report in February 2008, we are assuming SRK raises $100 million in equity in the short term to provide funding for:
�� exercise of option over iron ore project (c$40m)
�� Stage 1 DSO project (c$30m)
�� BFS and working capital (c$30m)
In addition, we assume Stage 2 is funded via equity and debt and Stage 3 is funded by internal cash flows. We also note that we have moved our expected completion date for SRK’s PFS to June 2008 (from March 2008).

Impact
Following the recent placement, we assume all equity is raised at a price of $2.45 per share rather than our previous assumption of $1.90. This has the impact of reducing our forecast number of shares on issue following Stage 2 to 306 million (from 364 million).
Our risked valuation has increased to $3.16 per share (from $2.65) which applies a 50% risk weighting to our base case DCF of $6.32 per share (previously $5.30 per share).

Following the increase in our risked valuation, we are upgrading our recommendation to Short-Term Accumulate / Long-Term Buy (from Short-Term Hold / Long-Term Buy).

Valuation and Recommendation
SRK is an interesting prospect with targeted production timing and volume in line with some of the major Australian developers (MMX; MIS; SDL) but a
significantly smaller market cap at c$300 million. It is also worth noting that both Apurimac and Cuzco are listed in the Peruvian government’s list of top 20 projects of national importance. While the recent increase in market volatility strengthens our preference for “producers” over “developers”, we believe the world-class scale of SRK’s projects and its steep discount to listed peers justifies some exposure. We also reemphasise that we have assigned a High risk rating due to the sentiment-driven sector, low liquidity and early stage of the project.
It is also worth noting that SRK recently indicated that it is in discussions with a major international miner regarding its iron ore assets. The implied value for SRK’s 68.15% interest is $3.91 per share after exercising the
option. While this is below our unrisked DCF valuation of $6.32 per share, it provides shareholders with an immediate return and removes risks associated with exploration and development, funding, construction and
operating the assets. At this stage no binding agreement has been reached