valuation

Key Points & Analysis
�� AIM recently exercised its option to purchase 100% of the high grade Perkoa Zinc Project in Burkina Faso, West Africa from BHP Billiton and Metorex Limited with BHP Billiton becoming a significant shareholder in AIM.
�� The price of zinc has increased significantly on improving fundamentals with the major application in the galvanizing of steel to prevent corrosion. Perkoa has the ability to provide a high grade and importantly clean concentrate which should attract a strong premium.
�� Perkoa is a high grade resource of 7.06 million tonnes grading 17.7% Zn (at a 10% Zn cut off) including silver credits which give the resource a zinc equivalent grade of 18.6%. AIM has engaged Snowden Mining Industry Consultants, who have independently confirmed the resource, to immediately commence a Bankable Feasibility Study (BFS).
�� AIM has listed on the Alternate Investment Market in the UK raising £1.45 million (approx A$3.5 million) to help fund the bankable feasibility study at Perkoa.
�� AIM offers investors exposure to zinc at a considerably lower price than other listed players. Based on the enterprise value (EV) per tonne of zinc in the ground it is at a significant discount to other producers and Herald Resources, which is completing a BFS on its US$135m Dairi project in North Sumatra, is valued at twice that of AIM.
�� A pre-feasibility undertaken by BHP Billiton in 1998 provided for a 0.35million tonne per annum operation giving a mine life of some 15 years with good recoveries. ECM’s estimate of capital costs for an underground mine and infrastructure for a slightly enlarged 0.5million tonne per annum operation is US$122m over the life of the project. Recoveries are expected to be high at some 95% producing some 150,000 tonnes of clean concentrate. Operating cash cost pre debt is estimated at US$41 cents per pound of zinc.
�� The project’s NPV equates to 25 cents per AIM share. Taking into account the company’s other assets the total potential value comes to 33 cents per share.


Perkoa Drill Intersections
�� AIM has entered into a Joint Venture Agreement with BHP Billiton to earn a 70% interest in the Mumbwa Prospecting Licence in central-western Zambia covering an area of approximately 5,192 km2. The area is prospective for iron oxide copper-gold deposits similar to Olympic Dam and Ernest Henry. Past geophysics and geochemistry identified the Kitumba Project where 9 holes into 3 defined targets were drilled with encouraging low grade copper mineralisation intercepted. BHP Billiton has recently completed flying an 8,725 km Falcon survey initially focused on the Kitumba Project where 23 anomalies were detected. Drilling should commence on the first of 12 targets in the September 05 quarter.
�� AIM owns the Mokopane Platreef platinum project in South Africa. This 40 million tonne resource has been independently valued by Snowden Mining Consultants at $18.5m. Future development is likely to be a large scale low strip ratio mine selling concentrate to nearby smelters.
�� AIM is settling on the purchase of 76.84% of the Mooiplats platinum project in South Africa with the major mining house Anglovaal owning the remaining interest. This is a high grade but deep deposit containing some 10million ounces of combined platinum group metals and gold. A major drilling program is planned to further delineate the deposit and prove up its economic viability.
Conclusion
The financial numbers above show a modest profit for the first year of operation of the Perkoa zinc project due to the cost of 100% debt funding. The EV/EBITDA more clearly shows the high level of cash flow relative to AIM’s current share price. The Bankable Feasibility Study has commenced to confirm the projects viability.
Equity Capital Markets