image resources nl (ima) - hartleys...the company is currently generating solid cash flow from its...

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Image Resources NL (IMA)

Min

era

ls S

and

s:

Pro

ducer

IMA.asxSpeculative Buy

Share Price

Valuation $0.26

Price Target (12 month) $0.33

Brief Business Description:

Hartleys Brief Investment Conclusion

Chairman & MD

Top Shareholders

Murray Zircon Pty Ltd 19.7%

Vestpro International 17.8%

Orient Zirconic Resources (Australia) Pty Ltd 5.3%

Company Address

Issued Capital 972.0m

- fully diluted

Market Cap

- fully diluted

Cash (30 Jun 19a) A$35.2m

Debt (30 Jun 19a) A$64.7m

EV

FY18a FY19e FY20e

EBITDA -8.6 59.5 106.8

Op Cash Flw -2.4 44.6 90.4

Norm NPAT 3.3 42.6 86.0

CF/Share (cps) -0.3 4.6 9.3

EPS (cps) 0.4 4.4 8.8

P/E 65.7 5.4 2.7

Michael Scantlebury

Associate Analyst

Ph: +61 8 9268 2837

E: [email protected]

Trent Barnett

Head of Research

Ph: +61 8 9268 3052

E: [email protected]

A$262.8m

A$241.9m

A$233.3m

1007.8m

Analyst has a beneficial interest in IMA shares.

West Perth, W.A. 6005

16 Sep 2019

$0.240

Patrick Mutz (MD)

Robert Besley (Chairman)

High grade mineral sands producer, with operations

80km north of Perth. The Boonanarring zircon dominant

project commenced production in December 2018 and

has successfully ramped up to nameplate capacity.

The Company is currently generating solid cash flow

from its operations which have been assisted by higher

than expected grades.

Ground Floor, 23 Ventnor Avenue

IMAGE RESOURCES NL (IMA)

Picturing higher grades at Boonanarring Image Resources NL (“Image”, “IMA”, “the Company”) owns the high-grade

Boonanarring mineral sands project, 80km north of Perth. The project was

commissioned in December 2018, quickly ramping up to full nameplate

production in the MarQ CY19. Approximately 85% of the Company’s revenue

is from zircon with the remaining mostly ilmenite. The Company has guided

production of 240-260kt HMC (Heavy Mineral Concentrate) in CY19, implying

102-122kt HMC in 2HCY19. The decrease in production in 2H is due to the

high-grade core not being as prominent within the southern portion of mining

block B (see Fig.4 within). Production is forecast to increase to 280-300kt in

CY20, which Image believes will generate between A$55-65m (CY19) and

A$90-100m (CY20) EBITDA; we model ~A$60m and ~A$107m. We expect

the Company to be net cash by early CY20 assuming it achieves its

production guidance.

Eastern strand high grade core to lift HM reserve grade The initial Ore Reserve drill spacing for the Boonanarring deposit was 15-20m

wide. This drilling largely missed a high-grade core of Heavy Mineral (HM)

located in the eastern strand as the highest-grade core appears to be <20m

wide. The high-grade core became evident to the Company in the MarQ as

the HM ore feed grade was 76% higher than the budgeted grade (mining was

predominantly from the Eastern strand). YTD HM grade has been 43% above

budget. Over a 6-day period in March, a section of the eastern strand was

mined and the HM grade averaged 19% compared to a budgeted grade of

8%. Subsequent to these results the Company commenced a close spaced

(5m) infill drill program in early April to delineate the high-grade core. The

Company has delayed the announcement of the updated Mineral Resource

and Ore Reserve to the DecQ (previously SepQ) due to additional infill drilling.

CY21 and beyond in focus We forecast the Company to generate free cashflow of ~$85m in CY20, with

the Company processing 11% HM material through its plant. In CY21, IMA’s

mine plan forecasts a HM grade of 6% which will reduce cashflow. The Ore

Reserve upgrade should improve grade this year. The Company has

numerous dredge and strand style deposits in the North Perth Basin, amongst

these is the Atlas deposit. Atlas is due to come online after Boonanarring is

depleted and has a mine life of 3 years with potential for extensions. Atlas will

require capex of ~A$21m to relocate the processing facility. It has a relatively

low strip ratio of 1.4:1 compared to Boonanarring’s 6:1, offsetting the lower

value HMC product value. We have modelled a combined mine life of 10

years (7 years at Boonanarring and 3 years at Atlas).

Initiate coverage with a Speculative Buy recommendation We initiate coverage of IMA with a Speculative Buy recommendation. We

have a valuation of 26cps and a price target of 33cps. Our valuation is based

largely on the most recent Company guidance, along with the DFS throughput

and grade schedule. Our 12-month price target is based on blended

weightings from various scenarios and valuation methods, including HM ore

reserve grade uplift of 10% and 15%, spot commodity and fx prices, 3 and 5

times 1-year forward EV/EBITDA and net cash backing. Post the end of the

JunQ the Company had A$35.2m in cash and A$64.7m in debt.

Hartleys Limited ABN 33 104 195 057 (AFSL 230052) 141 St Georges Terrace, Perth, Western Australia, 6000

Hartleys does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the

firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single

factor in making their investment decision. Further information concerning Hartleys’ regulatory disclosures can be found on Hartleys

website www.hartleys.com.au

0.00

0.05

0.10

0.15

0.20

0.25

0.30

0.35

.

5.

10.

15.

20.

25.

30.

Sep-19May-19Jan-19Oct-18

Volume - RHS

IMA Shareprice - LHS

Sector (S&P/ASX SMALL RESOURCES) - LHS

A$ M

Image Resources NL

Source: IRESS

http://www.hartleys.com.au/

Hartleys Limited Image Resources NL (IMA) 16 September 2019

of 26

SUMMARY MODEL

Image Resources NL

IMA Speculative Buy

Key Market Information Directors Company Information

Share Price $0.240 Robert Besley Chairman Ground Floor, 23 Ventnor Avenue

Market Capitalisation - ordinary A$233m Patrick Mutz Managing Director West Perth, W.A. 6005

Net Debt (cash) $30m George Sakalidis Executive Director +61 8 9485 2410

Market Capitalisation - fully diluted A$242m Chaodian Chen Non-Executive Director www.imageres.com.auEV A$267m Aaron Chong Veoy Soo Non-Executive Director

Issued Capital 972.0m Peter Thomas Non-Executive Director

Options 35.8 Fei (Eddy) Wu Non-Executive Director

Issued Capital (fully diluted inc. all options) 1007.8m Huang Cheng Li Non-Executive Director

Top Shareholders m shares %

Valuation $0.26 Murray Zircon Pty Ltd 192 19.7%

12month price target $0.33 Vestpro International 173 17.8%

1 Orient Zirconic Resources (Australia) Pty Ltd 52 5.3%

P&L Unit 31 Dec 18 31 Dec 19 31 Dec 20 31 Dec 21 2

Net Revenue A$m 0.0 158.9 223.0 143.1 3

Total Costs A$m -8.6 -99.4 -116.2 -109.3 4

EBITDA A$m -8.6 59.5 106.8 33.8 5 Reserves & Resources Mt HM% Ilm% Rut% Zr%

- margin 37% 48% 24% Boonanarring + Atlas Resource 61.6 5.7% 48% 3.8% 15.6%

Depreciation/Amort A$m -0.4 -9.5 -9.6 -9.6 6 Boonanarring + Atlas Reserves - Aug 2017 29.3 7.5% 51% 4.2% 18.4%

EBIT A$m -8.9 50.0 97.2 24.2

Net Interest A$m -0.5 -7.4 -4.3 -1.0 7 Total Dredge Deposit Resources 236 2.1% 74% 2.9% 8.6%

Pre-Tax Profit A$m -9.4 42.6 93.0 23.3 Total Strand Deposit Resources 103 6.2% 55.7% 4.0% 13.2%

Tax Expense A$m 12.7 0.0 -7.0 -7.0 8

Normalised NPAT A$m 3.3 42.6 86.0 16.3

Abnormal Items A$m 0.0 0.0 0.0 0.0 9

Reported Profit A$m 3.3 42.6 86.0 16.3 Production Summary Unit Dec 18 Dec 19 Dec 20 Dec 21

Minority A$m 0.0 0.0 0.0 0.0

Profit Attrib A$m 3.3 42.6 86.0 16.3 Mill Throughput Mt 0.00 3.09 3.60 3.70

HM grade % 0.0% 9.1% 11.0% 6.0%

Balance Sheet Unit 31 Dec 18 31 Dec 19 31 Dec 20 31 Dec 21 Zr production kt 0.0 53.6 73.6 48.5

Cash A$m 11.9 41.3 88.8 101.8 Rutile production kt 0.0 5.0 4.6 3.5

Other Current Assets A$m 14.9 35.3 44.6 34.9 Ilmenite production kt 0.0 91.3 154.0 86.6

Total Current Assets A$m 26.8 76.6 133.3 136.7 Total HMC kt 0 254 352 204

Property, Plant & Equip. A$m 101.1 94.6 88.0 81.5 Revenue to Cost ratio yr 0.0 1.7 2.0 1.4

Exploration A$m 0.0 2.2 2.8 2.8 Mine Life yr 10 9 8 7

Investments/other A$m 9.5 9.5 9.5 9.5 Costs Unit Dec 18 Dec 19 Dec 20 Dec 21

Tot Non-Curr. Assets A$m 110.6 106.3 100.3 93.8 Rev milled tonne $A/t - 51.4 61.9 38.7

Total Assets A$m 137.4 182.9 233.7 230.5 Total Cost / milled tonne $A/t - 22.3 22.4 20.7

Total Cost / produc - 270.7 229.4 375.1

Short Term Borrowings A$m 12.6 37.1 15.0 - EBITDA / tonne milled ore $A/t - 19.2 29.7 9.1

Other A$m 12.1 25.0 29.1 27.4 C1: Operating Cash Cost = (a) $A/t final product - 339 284 473

Total Curr. Liabilities A$m 24.7 62.1 44.1 27.4 (a) + Royalty = (b) $A/t final product - 369 314 507

Long Term Borrowings A$m 51.4 15.0 0.0 0.0 C2: (a) + depreciation & amortisation = (c) $A/t final product - 376 311 520

Other A$m 4.5 4.5 4.5 4.5 (a) + actual cash for development = (d) $A/t final product - 339 284 473

Total Non-Curr. Liabil. A$m 55.9 19.5 4.5 4.5 C3: (c) + Royalty $A/t final product - 406 341 554

Total Liabilities A$m 80.6 81.6 48.6 32.0 (d) + Royalty $A/t final product - 369 314 507

Net Assets A$m 56.8 101.2 185.0 198.5 Price Assumptions - CIF Bunbury Unit Dec 18 Dec 19 Dec 20 Dec 21

Net Debt A$m 52.1 10.9 -73.7 -101.8 AUDUSD A$/US$ 0.734 0.692 0.695 0.700

Ilmenite US$/t 180 203 203 204

Cashflow Unit 31 Dec 18 31 Dec 19 31 Dec 20 31 Dec 21 Zircon US$/t 1394 1503 1505 1510

Operating Cashflow A$m -2.6 52.0 101.6 41.8 Rutile US$/t 945 1029 1106 1186

Income Tax Paid A$m 0.0 0.0 -7.0 -7.0

Interest & Other A$m 0.2 -7.4 -4.3 -1.0 Avg selling price / HMC produced A$/t - 625 634 701

Operating Activities A$m -2.4 44.6 90.4 33.8 US$/t - 433 440 491

Sensitivity Analysis

Property, Plant & Equip. A$m -64.1 -3.0 -3.0 -3.0 Valuation FY20 NPAT

Exploration and Devel. A$m -1.4 -2.2 -2.8 -2.8 Base Case 0.27 86.0

Other A$m 0.0 0.0 0.0 0.0 Spot Prices 0.29 (8.0%) 80.9 (-6.0%)

Investment Activities A$m -65.6 -5.2 -5.8 -5.8 Spot USD/AUD 0.69, Ilmenite $173/t,Zircon $1500/t,Rutile $1050/t.

AUDUSD +/--10% 0.18 / 0.37 (-31.5% / 38.5%) 65.0 / 104.0 (-24.4% / 20.9%)

Borrowings A$m 0.0 -11.8 -37.1 -15.0 Ilmenite +/--10% 0.29 / 0.25 (7.8% / -7.8%) 86.6 / 78.5 (0.7% / -8.8%)

Equity or "tbc capital" A$m 23.6 1.8 0.0 0.0 Zircon +/--10% 0.33 / 0.20 (24.0% / -24.0%) 97.1 / 68.0 (12.9% / -20.9%)

Dividends Paid A$m 0.0 0.0 0.0 0.0 Rutile +/--10% 0.28 / 0.26 (2.9% / -2.9%) 83.2 / 81.9 (-3.2% / -4.8%)

Financing Activities A$m 74.9 -10.0 -37.1 -15.0 Leucoxene +/--10% 0.27 / 0.27 (0.0% / 0.0%) 82.5 / 82.5 (-4.0% / -4.0%)

Operating Costs +/--10% 0.21 / 0.33 (-21.0% / 21.0%) 73.3 / 91.8 (-14.8% / 6.7%)

Net Cashflow A$m 7.0 29.4 47.4 13.0 Unpaid Capital

Shares Unit 31 Dec 18 31 Dec 19 31 Dec 20 31 Dec 21 Year Expires No. (m) $m Avg price % ord

Ordinary Shares - End m 957.2 972.0 972.0 972.0 31-Dec-19 0.0 0.0 0.00 0%

Ordinary Shares - W'ted m 909.3 964.6 972.0 972.0 31-Dec-20 0.0 0.0 0.00 0%

Diluted Shares - W'ted m 945.1 1000.4 1007.8 1007.8 31-Dec-21 0.0 0.0 0.00 0%

Ratio Analysis Unit 31 Dec 18 31 Dec 19 31 Dec 20 31 Dec 21 31-Dec-22 0.0 0.0 0.00 0%

Cashflow Per Share A$ cps -0.3 4.6 9.3 3.5 31-Dec-23 35.8 4.4 0.12 4%

Cashflow Multiple x -91.0x 5.2x 2.6x 6.9x 31-Dec-24 0.0 0.0 0.00 0%

EV / EBIT x -32.9x 5.1x 1.7x 5.8x 31-Dec-25 0.0 0.0 0.00 0%

EV / EBITDA x -34.3x 4.2x 1.6x 4.1x TOTAL 35.8 4.4 0.12 4%

Earnings Per Share A$ cps 0.4 4.4 8.8 1.7

Price to Earnings Ratio x 65.7x 5.4 2.7 14.3 Valuation Risked Est A$m /shr

Dividends Per Share AUD - - - - 100% Boonanarring (pre-tax NAV at disc. rate of 8%) 311 0.31

Dividend Yield % - - - - Other Assets/Exploration 62 0.06

Net Debt / Net Debt + Equity% 48% 10% -66% -105% Corporate Overheads -38 -0.04

Interest Cover X na 6.8 22.8 25.3 Net Cash (Debt) -30 -0.03

Return on Equity % 6% 42% 46% 8% Tax (NPV future liability) -49 -0.05

Options & Other Equity 3 0.00

Total 259 0.26

Analyst: Michael Scantlebury

+61 8 9268 3052

"tbc capital" could be equity or debt. Our valuation is risk-adjusted for how this may be obtained.

Sources: IRESS, Company Information, Hartleys Research

Last Updated: 16/09/2019

16 Sep 2019


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INTRODUCTION Image Resources NL (IMA.asx) is an ASX listed mineral sands producer operating in

the North Perth Basin. The Company commissioned its zircon dominant Boonanarring

mineral sands project in December 2018 and completed its first shipment in January

2019. The Company plans to export on average 240ktpa of HMC in the 5-year mine

life at Boonanarring, which will likely be extended by further drilling. Once the mine life

at Boonanarring is exhausted the Company plans to relocate its processing facility to

the Atlas deposit at an estimated capital cost A$21.1m, which currently has a 3-year

mine life and is still open along strike.

At the end of the JunQ the Company had A$25.7m in cash and A$67.2m in debt,

subsequent to the end of the quarter they received a further A$12m from a concentrate

shipment and repaid A$2.5m in debt leaving the Company with A$35.2m in cash and

A$64.7m in debt (net debt of A$29.5m). The Company had 38kdmt of HMC in

inventory which they value at A$22m and a further 2.7kt of high-grade DSO material

containing 78% HM with 61% of the HM being zircon. We estimate that the DSO

material could be worth ~A$3m. The Company is currently looking into pathways to

monetising the high-grade stockpile. We do not include the DSO material in our

valuation.

The Company upgraded guidance in July due to increased production in the 1H of

CY19, as a result of higher than anticipated HM ore grades, however 2H guidance is

unchanged and is based on reserve grade. Updated Ore Reserves could see

improved HM grades going forward, which could see guidance potentially upgraded

in CY20.

Fig. 1: Updated company guidance

Source: IMA 24/7/2019

Post the end of the JunQ in the Company’s half yearly accounts, updated shipment

information was released indicating that the Company is on track to achieve its

updated sales guidance.

Fig. 2: Latest shipment information


IMA commissioned its

Boonanarr ing mineral

sands project in

December 2018 and

completed i ts f irst

shipment in January

2019.


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HIGH GRADE CORE WITHIN THE EASTERN STRAND

The initial Ore Reserve drill spacing for the Boonanarring deposit was 15-20m wide,

this has appeared to largely miss a high-grade core of Heavy Mineral (HM) located in

the eastern strand as it is only <20m wide. The high-grade core became evident to the

Company in the MarQ as the HM ore feed grade was 76% higher than the budgeted

grade, mining was predominantly from the Eastern strand. Over a 6-day period in

March a section of the eastern strand was mined and the HM grade averaged 19%

compared to a budgeted grade of 8%. The high-grade core also contains higher than

expected zircon grades within the HM, with YTD zircon content being 12% above

budget which lifts the HMC value.

Subsequent to these results the Company commenced a close spaced (5m) infill AC

drill program in early April to delineate the high-grade core, with the Ore Reserve

update due to be announced in the DecQ. The Company delayed the announcement

of the updated Mineral Resources and Ore Reserve to the DecQ (previously SepQ)

due to additional infill drilling requirements. The Company has completed a total of

579 AC holes for ~24,400m across the project and was completed on the 6th of August.

The most recent drill results were released from mining Block B in the Eastern strand

and showed that a high-grade core (>30% HM) extends the entire 2Km length of the

mining Block.

Fig. 3: HM Ore Grade


YTD HM ore head

grade has been 10.1%

or 43% higher than

the Company’s

budget.


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Fig. 4: Boonanarring deposit grade thickness


Plan v iew of the inf i l l

dr i l l ing at

Boonanarr ing.


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Fig. 5: Cross section showing infil l drill ing


Cross sect ion of the

inf i l l dr i l l ing at

Boonanarr ing with in


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PRODUCTION GUIDANCE In our base valuation we model close to the most recent Company guidance and BFS

production schedule. In CY21 the Company has forecasted a head grade of 6% HM,

we expect the high-grade core to lift the head grade. We also assume exploration

success at Boonanarring extending the mine life by 2 years at the reserve grade of

7.2% HM for a combined mine life of 10 years (7 years at Boonanarring and 3 years

at Atlas).

Fig. 6: Hartleys vs Company’s guidance

Source: Hartleys Research & IMA

Fig. 7: Boonanarring production forecast


Production Summary Unit Dec 19 Dec 20 Dec 21 Dec 22 Dec 23 Dec 24 Dec 25 Dec 26 Dec 27 Dec 28

Hartleys Production forecast Boonanarring Atlas

Mill Throughput Mt 3.1 3.6 3.7 3.8 3.5 3.7 3.7 3.2 3.2 3.2

HM grade % 9% 11% 6% 8% 11% 7% 7% 12% 7% 6%

HMC production kt 254 352 204 279 351 234 234 329 185 147

Zr production kt 54 74 48 66 53 50 50 27 13 10

Ru production kt 5 5 4 6 13 10 10 13 7 6

Ilm production kt 91 154 87 123 159 102 102 151 81 58

Company Production forecast Boonanarring Atlas

Mill Throughput Mt 3.1-3.3 3.6-3.8 3.7 3.8 3.5

HM grade % 8% 11% 6% 8% 11%

HMC produced kt 240-260 280-300 168 227 343 190 220 220

Zr production kt ~65 ~85 40 71 42 27 20 16

Ru production kt ~5 ~6 5 5 13 14 17 15

Ilm production kt ~120 ~175 115 118 125 99 110 99


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Fig. 8: Boonanarring production forecast (old guidance greyed out)

Source: 24/9/2018

DEBOTTLENECKING THE PLANT The Company has also initiated plans to debottleneck the plant largely to

accommodate for higher than expected HM grades. These work programs include,

expanding the HMC cleaning and dewatering circuit, and enhance oversize screening

at the ore feed preparation plan. These improvements are currently underway

however we have not assumed any increase in throughput in our valuation.

Debott leneck

improvements are

current ly underway

however we have not

assumed any increase

in throughput in our

valuation.


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BOONANARRING NORTHERN EXTENSION The Company gained access for drilling in a 1.3km section of the Northern Extension

Area (NEA), which is located across the Brand Highway. Previous drilling by the

Company intercepted what is believed to be the northern extension of the eastern

strand high grade core, extending it 5.6km north of the Boonanarring deposit (ASX

announcement 13/3/2019). The current Boonanarring ore reserve has a mine life of

5.5years and a strike length of 13.2km. The Company is currently in negotiations for

access to other parts of the NEA. Pending approval from the Department of Mines,

the Company will commence drilling this 1.3km section. We note that areas of the NEA

have substantial infrastructure including gas pipelines, powerlines and the Brand

highway which would need to be relocated if mining was to take place. We assume

that the Company will be able to gain access to a portion of this area and have

extended mine life at Boonanarring by 2 years at the current reserve grade with a

capex of $10m in our model.

Fig. 9: Boonanarring Northern Extension area


We assume that the

Company wi l l be able

to gain access to a

port ion of th is area

and have extended

mine l i fe at

Boonanarr ing by 2

years.


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Fig. 10: Mineral Resource and Ore Reserves (update expected in the DecQ)



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Mineral sands geology and mining The Boonanarring deposit consists of two parallel mineralised strands both of which

are 80-100m in width and between 0 and 50m apart. Both strands are 10-15m thick

and extend over a strike length of 13.6Km in a south-southeast direction.

Boonanarring is hosted in the Perth Basin, in the Pleistocene Yoganup Formation on

the eastern margin of the Swan Coastal Plain. The Yoganup Formation is a buried

pro-graded shoreline deposit, with dunes, beach ridge and deltaic facies. This

formation lies unconformably over the Lower Cretaceous Leederville Formation and is

overlain by the Pleistocene Guildford Formation and the Quaternary Bassendean

Sand. The Yoganup Formation consists of unconsolidated poorly sorted sands and

gravels, with local interstitial clay and heavy minerals that occur sporadically along the

Gingin Scarp, which is interpreted to be an ancient shoreline that was stable during a

period of marine regression.

Valuable heavy minerals (VHM) in mineral sands deposits were sourced from the

erosion of intrusive or volcanic rocks rich in heavy minerals. Once released from the

parent rock the minerals were transported and redeposited into beaches, dunes,

estuaries or offshore sand bars along modern and ancient coastlines. Wind and wave

action further concentrated the heavy minerals forming concentrated lens like bodies

within the larger sand deposit. In some areas where sea level has dropped these

deposits can be located hundreds of metres, to kilometres, to tens of kilometres inland.

Mineral sands deposits can generally be classified in to two different types: strand or

dunal. Strand deposits are generally finite with well-defined edges, can be several

kilometres long and hundreds of metres wide. Strands are often covered by

overburden and can occur in large numbers marking the gradual retreat of the sea.

Dunal deposits are usually broader more recent deposits that occur at or near surface

with less overburden.

Fig. 11: Development of heavy mineral sand deposits

Source: Hou, B, et al Mesa Journal, May 2005

The Boonanarr ing

deposit consists of

two paralle l

mineralised strands

both of which are 80-

100m in width and

between 0 and 50m

apart. Both strands

are 10-15m thick and

extend over a str ike

length of 13.6Km in a

south-southeast

direction.


of 26

The concentration of heavy minerals within mineral sand deposits can vary widely.

The majority of deposits grade between 1% and 5% total heavy minerals (THM) but a

few are higher. Of the THM assemblage the most important minerals in terms of value

are, in descending order, zircon, rutile, leucoxene and ilmenite. Ilmenite is usually the

most abundant mineral with the other VHM occurring in smaller amounts. The THM

assemblage will also include a percentage of ‘trash’ minerals such as magnetite,

quartz, kayanite, and staurolite.

IMA produces a bulk HMC and does not conduct mineral separation which separates

the concentrate into individual products and waste. Separation of heavy mineral

concentrates is the most complex part of zircon and titanium feedstock production

requiring multiple processes, not having these facilities enabled IMA to reduce their

upfront capex.

Fig. 12: Common mineral sands physical properties and chemistry

Source: ILU


of 26

GEOGRAPHIC EXPOSURE All of IMA’s mineral sand projects are located in the North Perth Basin in Western

Australia with the Company exporting through the Bunbury port. There is substantial

infrastructure including gas pipelines, powerlines and the Brand highway all within

close proximity to the project.

Fig. 13: Other deposit locations


PEERS AND COMPETITORS

Fig. 14: Listed mineral sand companies

Source: Various

Various. *Market cap is quoted ordinary shares from IRESS. It does not dilute for

options, escrow shares, performance shares, non-ASX listed shares, convertible notes, recent

placements etc. These can be meaningful adjustments that should be taken into account.

Company Ticker Last Quot. Mkt CapStatus

Rio Tinto Limited RIO 93.885 34,631 Producer (titanium focus)

Iluka Resources Limited ILU 7.585 3,253 Producer

Tronox Holdings plc TROX.nys 9.65 US 1,304 Producer

Base Resources Limited BSE 0.23 280 Producer (mainly ilmenite)

Image Resources NL IMA 0.25 238 Producer (mainly zircon)

Sheffield Resources Limited SFX 0.4 112 Developer

Strandline Resources Limited STA 0.11 41 Developer

Diatreme Resources Limited DRX 0.013 19 Developer


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DEBT FACILITY At the end of the JunQ IMA has a senior secured debt facility with Pala Investments

Limited (“Pala”), Castelake IV, L.P. and CL V Investment Solutions LLC of

US$38,865,000 + capitalised interest of US$6,481,821 (for a total debt of

A$64,661,088 at 30 June 2019). Interest rate is 14% for the first fifteen months

following draw down on 25 May 2018 and 13% thereafter for the balance of the loan.

Interest for the first fifteen months is added to the loan amount and thereafter paid

quarterly in arrears. If early repayment of loan is made, interest for full loan term is

due, less any interest the Loan Note Holders might receive if the repaid funds were

held on bank deposit.

The key terms of the loan include a loan period of three years from draw down, an

interest rate of 14% for the first fifteen months following draw down and 13% thereafter

for the balance of the loan. Interest for the first fifteen months is added to the loan

amount and thereafter paid quarterly in arrears. The principal is to be repaid in seven

equal instalments starting in the 18th month following drawdown. Drawdown occurred

on 25 May 2018.

KEY SUPPLIERS & CUSTOMERS All of IMA’s HMC is sold under offtake contract to two parties each taking 50% of the

HMC produced. The off-take contracts are with Hainan Wensheng High-Tech

Materials Co., Ltd (“Wensheng”) and Shantou Natfort Zirconium and Titanium Co., Ltd

(“Natfort”) both located in China. The contracts are based on general terms and

conditions and market-based pricing model. Each shipment departs the Bunbury port

and the offtake partners process the HMC into separate final products. Full payment

for the shipments is usually received by IMA ~1 week after the ship leaves the Bunbury

port.

The mine contract is with Piacentini & Son who are well experienced in the mineral

sands industry.

Qube Bulk is responsible for the road transportation of the HMC to the Bunbury port.

Electricity is supplied from the south-west grid, with the Company singing a heads of

agreement with Sunrise Energy Group (ASX announcement 23/4/2018) which would

supply ~25% of Boonanarring’s energy requirements.

The Company has

A$35.2m in cash and

A$64.7m in debt (net

debt of A$29.5m).


of 26

MANAGEMENT, DIRECTORS AND

MAJOR SHAREHOLDERS

Directors (as summarised from Company website)

Robert Besley, Chairman

Robert Besley is a Director of KBL Mining Limited (ASX:KBL) and Chairman of Silver

City Minerals Ltd (ASX:SCI) and has more than 40 years’ experience in the mining

industry. Mr Besley has served in a number of Government advisory roles including

several years as Deputy Chairman of the NSW Minerals Council. He holds a BSc

(Hons) in Economic Geology from the University of Adelaide and he is a Member of

the Australian Institute of Geoscientists. He managed the creation, listing and

operation of two successful mining companies; CBH Resources Limited which he led

as Managing Director from a small exploration company to Australia’s 4th largest zinc

producer; and Australmin Holdings Limited (acquired by Newcrest) which brought into

production a gold mine in WA and mineral sands mine in NSW. More recently he was

a founding Director of KBL Mining Limited which operates the Mineral Hill copper-gold

mine in NSW, is Chairman of Silver City Minerals Limited, which is actively exploring

for silver-lead-zinc in the Broken Hill District and has been a Non-Executive Director

of Murray Zircon from commencement of development and production from the

Mindarie Mineral Sands Project. Prior to this Mr Besley’s early career was involved in

the exploration and development of mineral deposits for Unocal’s (now Chevron)

mineral activities in S.E. Asia, North America, Latin America, Australia and the Pacific.

His activities have covered projects in precious metals, base metals, ferroalloys,

mineral sands, speciality metals, uranium and coal. Through his corporate

management roles Mr Besley has played a central role in project and corporate

financing covering a wide range of capital structures as well as acquisitions, mergers

and asset sales.

Patrick Mutz, Managing Director

Patrick Mutz has more than thirty years of international mining industry experience in

technical (metallurgist), managerial, consulting and executive roles in all aspects of

Economic Exposure of Board and Key Management Total

Performance Rights Shares Economic

# Exposure

Position millions Rank

Directors

Robert Besley Chairman 0 566,667 566,667 8

Peter Thomas Non-Executive Director 0 2,104,306 2,104,306 5

Chaodian Chen Non-Executive Director 0 0 0 9

Aaron Soo Non-Executive Director 0 12,473,000 12,473,000 2

Fei Wu Non-Executive Director 0 0 0 9

Li Huang Cheng* Non-Executive Director 0 136,445,311 136,445,311 1

Chaodian Chen Non-Executive Director 0 0 0 9

George Sakalidis Executive Director 0 4,806,655 4,806,655 3

Patrick Mutz Managing Director 0 1,900,671 1,900,671 6

Key Management Personal

John McEvoy CFO 0 2,425,887 2,425,887 4

Todd Colton COO 0 716,860 716,860 7

*Li Huang Cheng holdings includes Vestpro International Limited holdings as he is a director.

Board of Directors

have a d iverse

range of exper ience

throughout Austral ia

and International ly

and mining projects,

including Mineral

Sands


of 26

the industry from exploration through project development, mining and mine

rehabilitation. He has operational experience in open cut, underground, and in-situ

mining and related processing, on projects in the USA, Germany, Africa and Australia.

Since his arrival in Australia from the USA in 1998, he has served as CEO / Managing

Director of a number of publicly listed and private mining companies based in South

Australia, Victoria and Western Australia, primarily involved with project development

and company transitioning from exploration to production. Mr Mutz is a Fellow of the

AusIMM and a member of the Australian Institute of Company Directors. He holds a

Bachelor of Science (Honours) and an MBA from the University of Phoenix in the US.

Patrick joined Murray Zircon as a senior advisor in early 2012 and served as its Chief

Operating Officer during the pivotal transition period from development to operational

status in the latter part of 2012. In February 2013 he was invited to take on the role as

CEO and to lead the company on its goal of becoming South Australia’s newest

mineral sands mining company.

George Sakalidis, Executive Director

George Sakalidis is an exploration geophysicist with over 30 years’ industry

experience. His career has included extensive gold, diamond, base metals and

mineral sands exploration. Mr Sakalidis has been involved in a number of significant

mineral discoveries, including the Three Rivers and Rose gold deposits, the Dongara

Mineral Sands Deposits, the Boonanarring-Gingin South-Helene Mineral Sands

Deposits in Western Australia and he was involved in the tenement applications over

the Silver Swan nickel deposit. He was also involved with the tenement application for

the recently discovered Monty Copper mineralisation adjacent to the Degrussa Copper

deposit. He is a founding Director and is currently an Executive Director of Image

(since listing on 4 July 2002) and Meteoric Resources NL (since listing on 16 July

2004). Mr Sakalidis has also been a founding director of ASX listed companies Emu

NL, Magnetic Minerals Limited (taken over by Ticor in 2003), Magnetic Resources NL

and Potash West NL.

Chong Veoy (Aaron) Soo, Non-Executive Director

Mr Soo has been a long term supporter and shareholder in Image. Mr Soo is an

advocate and solicitor practising in West Malaysia with 16 years of experience in legal

practice and is currently a partner in Stanley Ponniah, Ng & Soo, Advocates &

Solicitors.

Peter Thomas, Non-Executive Director

Peter Thomas having served on ASX listed company boards for some 30 years, has

been a non-executive director of Image since 10 April 2002. He resigned as Chair on

29 October 2014. For over 30 years until June 2011, Mr Thomas ran a legal practice

on his own account specialising in the delivery of wide ranging legal, corporate and

commercial advice to listed explorers and miners. Mr Thomas currently a director of

listed companies Emu NL and Middle Island Resources Limited and recently of

Magnetic Resources NL (resigned July 2013) and Meteoric Resources NL (resigned

September 2014).

Chaodian Chen, Non-Executive Director

Mr Chen founded Orient Zirconic in 1995 and has built the company into a leading

company in the zirconium industry. He served as President and Chairman of the

company until mid-2013 when China National Nuclear Corporation (CNNC) became

the largest shareholder in Orient Zirconic. He became the Chairman of Murray Zircon

when the company was founded in 2011 as a result of Orient Zirconic’s first investment

in mining in Australia. Mr Chen is the Vice President of China non-ferrous metals

industry association titanium zirconium & Hafnium Branch. He holds an EMBA degree


of 26

and is a Certified Engineer. He also owns a number of patents involving the processing

of zircon.

Fei (Eddy) Wu, Non-Executive Director

Mr Wu has solid operational experience in the Australian resource and mining

industry. He specialises in combining the strengths of Australian upstream mining with

Chinese downstream processing and end use to optimise the strategy for resource

development and maximise the resource value. As the first CEO of Murray Zircon, he

built and led the team to complete the development and start-up at the Mindarie

mineral sands project in late 2012. Mr Wu was appointed as a Non-Executive Director

of Murray Zircon in early 2013. He is currently the CEO and a Director of Queensland

Mining Corporation Limited and the CEO of WIM Resources Pty Ltd. Eddy graduated

from the University of Science and Technology, Beijing. He holds a Master’s Degree

in Commerce (Finance) from the Australian National University and a Master’s Degree

in Science from Cass Business School, City University London.

Huang Cheng Li, Non-Executive Director

Mr Li is an investor from Taiwan, with more than 30 years of experience investing in

various industries ranging from the general merchandising, precious stones and

certification businesses. Mr Li graduated from Tamkang University and in 1981

founded Leecotex International Limited in Taiwan and Capital 88 International Limited

in Hong Kong in 1993 where he served as the Managing Director. In 2015 Mr Li

acquired a 49% ownership interest in Giochi Preziosi Group (“GP Group”) and served

as the Vice President. GP Group is a leading global toy company and has undergone

a process of diversification and has expanded into new sectors and markets where it

has successfully operated. Currently, Mr Li is the co-founder of Lee & Wu Company

Limited, a company focusing support towards high-tech industries in the development

of new material applications.

John McEvoy, Chief Financial Officer

Experienced CFO & Company Secretary with over 25 years post qualification

experience. Mainly mining focussed career for listed & unlisted entities on ASX, TSX

and AIM markets. Over $1 Billion in debt and over $300M in equity during career.

Member of ICAEW and Australian Institute of Company Directors.

All stages of mining projects from early stage exploration through to production

Experience in setting up and managing finance systems and managing finance teams.

Whole of business risk review systems. Implementation and management of hedging.


of 26

MAJOR SHAREHOLDERS There are three substantial shareholders.

Fig. 15: Production forecasts

Source: IMA

OPTIONS, CONVERTIBLES AND UNPAID CAPITAL The main holders of the warrants are Jett Capital Advisors LLC Pala Investments

Limited, CLV Investment Solutions and Castlelake IV LP.

There is currently 21.5m warrants exercisable on or before the 24th of May 2023 at

11.385cps and a further 14.3m warrants exercisable on or before 20th of May 2023 at

13.65cps.

FINANCIALS

PROFIT & LOSS Fig. 16: Profit and Loss

Source: Hartleys Research Estimates

Top Shareholders m shares %

Murray Zircon Pty Ltd 192 19.7%

Vestpro International 173 17.8%

Orient Zirconic Resources (Australia) Pty Ltd 52 5.3%

P&L Unit 31 Dec 18 31 Dec 19 31 Dec 20 31 Dec 21

Net Revenue A$m 0.0 158.9 223.0 143.1

Total Costs A$m -8.6 -99.4 -116.2 -109.3

EBITDA A$m -8.6 59.5 106.8 33.8

- margin 37% 48% 24%

Depreciation/Amort A$m -0.4 -9.5 -9.6 -9.6

EBIT A$m -8.9 50.0 97.2 24.2

Net Interest A$m -0.5 -7.4 -4.3 -1.0

Pre-Tax Profit A$m -9.4 42.6 93.0 23.3

Tax Expense A$m 12.7 0.0 -7.0 -7.0

Normalised NPAT A$m 3.3 42.6 86.0 16.3

Abnormal Items A$m 0.0 0.0 0.0 0.0

Reported Profit A$m 3.3 42.6 86.0 16.3

Minority A$m 0.0 0.0 0.0 0.0

Profit Attrib A$m 3.3 42.6 86.0 16.3


of 26

BALANCE SHEET

Fig. 17: Balance Sheet


Gearing ratios

Fig. 18: Gearing Ratios


Balance Sheet Unit 31 Dec 18 31 Dec 19 31 Dec 20 31 Dec 21

Cash A$m 11.9 41.3 88.8 101.8

Other Current Assets A$m 14.9 35.3 44.6 34.9

Total Current Assets A$m 26.8 76.6 133.3 136.7

Property, Plant & Equip. A$m 101.1 94.6 88.0 81.5

Exploration A$m 0.0 2.2 2.8 2.8

Investments/other A$m 9.5 9.5 9.5 9.5

Tot Non-Curr. Assets A$m 110.6 106.3 100.3 93.8

Total Assets A$m 137.4 182.9 233.7 230.5

Short Term Borrowings A$m 12.6 37.1 15.0 -

Other A$m 12.1 25.0 29.1 27.4

Total Curr. Liabilities A$m 24.7 62.1 44.1 27.4

Long Term Borrowings A$m 51.4 15.0 0.0 0.0

Other A$m 4.5 4.5 4.5 4.5

Total Non-Curr. Liabil. A$m 55.9 19.5 4.5 4.5

Total Liabilities A$m 80.6 81.6 48.6 32.0

Net Assets A$m 56.8 101.2 185.0 198.5

Net Debt A$m 52.1 10.9 -73.7 -101.8

Shares Unit 31 Dec 18 31 Dec 19 31 Dec 20 31 Dec 21

Ordinary Shares - End m 957.2 972.0 972.0 972.0

Ordinary Shares - W'ted m 909.3 964.6 972.0 972.0

Diluted Shares - W'ted m 945.1 1000.4 1007.8 1007.8

Ratio Analysis Unit 31 Dec 18 31 Dec 19 31 Dec 20 31 Dec 21

Cashflow Per Share A$ cps -0.3 4.6 9.3 3.5

Cashflow Multiple x -94.7x 5.4x 2.7x 7.2x

EV / EBIT x -34.0x 5.3x 1.8x 6.2x

EV / EBITDA x -35.5x 4.4x 1.7x 4.4x

Earnings Per Share A$ cps 0.4 4.4 8.8 1.7

Price to Earnings Ratio x 68.5x 5.7 2.8 14.9

Dividends Per Share AUD - - - -

Dividend Yield % - - - -

Net Debt / Net Debt + Equity% 48% 10% -66% -105%

Interest Cover X na 6.8 22.8 25.3

Return on Equity % 6% 42% 46% 8%


of 26

CASH FLOW

Fig. 19: Cash Flow Statement


Capex requirements We assume A$6m of sustaining capex for CY20 and A$10m to extend the mine life at

Boonanarring NEA.

Free cash flow The Company should generate solid cash flow given the modest amount sustaining

capex required.

Dividends We see the potential for dividends in CY21 once the debt has been repaid.

EQUITY ISSUANCE We assume no new equity is required given the expected cash flows should retire all

debt.

Cashflow Unit 31 Dec 18 31 Dec 19 31 Dec 20 31 Dec 21

Operating Cashflow A$m -2.6 52.0 101.6 41.8

Income Tax Paid A$m 0.0 0.0 -7.0 -7.0

Interest & Other A$m 0.2 -7.4 -4.3 -1.0

Operating Activities A$m -2.4 44.6 90.4 33.8

Property, Plant & Equip. A$m -64.1 -3.0 -3.0 -3.0

Exploration and Devel. A$m -1.4 -2.2 -2.8 -2.8

Other A$m 0.0 0.0 0.0 0.0

Investment Activities A$m -65.6 -5.2 -5.8 -5.8

Borrowings A$m 0.0 -11.8 -37.1 -15.0

Equity or "tbc capital" A$m 23.6 1.8 0.0 0.0

Dividends Paid A$m 0.0 0.0 0.0 0.0

Financing Activities A$m 74.9 -10.0 -37.1 -15.0

Net Cashflow A$m 7.0 29.4 47.4 13.0


of 26

SENSITIVITIES

FX exposure Debt is dominated in USD along with commodity selling prices.

Interest Rate exposure IMA’s interest rate exposure is meaningful, but reducing quickly given we expect

retirement of debt in CY20.

Commodity price exposure IMA is exposed to mineral sands prices, mostly the zircon price although titanium

prices are also meaningful (ilmenite and rutile). About 85% of revenue is from zircon

at current prices.


of 26

VALUATION CONSIDERATIONS AND

PRICE TARGET METHODOLOGY

VALUATION We assume a production profile in line with the updated guidance from the Company,

plus some exploration success at Boonanarring extending the mine life by 2 years at

the reserve grade of 7.2% HM for a combined mine life of 10 years (7 years at

Boonanarring and 3 years at Atlas). We assume total costs slightly above Company

guidance and modest sustaining capex. We have a valuation of 26cps.

Fig. 20: Hartleys Sum of Parts Valuations for IMA

Source: Hartleys Research

PRICE TARGET We have 12-month price target blended weightings from various scenarios and

valuation methods, including our base case valuation, HM ore reserve grade uplift of

10% and 15%, spot commodity and fx prices, 3 and 5 times 1-year forward EV/EBITDA

and net cash backing. We have a 12-month price target of 33cps.

Fig. 21: IMA Price Target Methodology


Valuation Risked Est A$m /shr

100% Boonanarring (pre-tax NAV at disc. rate of 8%) 311 0.31

Other Assets/Exploration 62 0.06

Corporate Overheads -38 -0.04

Net Cash (Debt) -30 -0.03

Tax (NPV future liability) -49 -0.05

Options & Other Equity 3 0.00

Total 259 0.26

Price Target Methodology Weighting Today 12 mth out

NPV base case prices 62% $0.26 $0.30

NPV with a 10% ore reserve grade increase 15% $0.34 $0.40

NPV with a 15% ore reserve grade increase 10% $0.37 $0.43

NPV at spot commodity and fx prices 10% $0.29 $0.34

3.0x 1yr fwd EV / EBITDA 1% $0.34 $0.27

5.0x 1yr fwd EV / EBITDA 1% $0.53 $0.38

Net cash backing 1% $0.00 $0.00

Risk weighted composite $0.29

12 Months Price Target $0.33

Shareprice - Last $0.240

12 mth total return 38.1%

We have a valuat ion

of 26cps and a 12-

month price target

of 32cps.


of 26

RECOMMENDATION & RISKS

INVESTMENT THESIS & RECOMMENDATION We initiate coverage of IMA with a Speculative Buy recommendation. We have a

33cps price target. On our estimates, IMA trades on CY20 EV/EBITDA of 1.7x and

FY21 EV/EBITDA of 4.4x, with an eight-year visible mine life (we assume ten years).

The Mineral Resource and Ore Reserve update due out in the DecQ has the potential

to increase our valuation.

RISKS The key risks for Image Resources (like most mining companies) is earnings

disappointments given the industry is volatile and earnings can disappoint due to

commodity prices, cost overruns, project delays, environmental regulations,

taxation/royalties changes, cost inflation or lower production. Although some earnings

disappointments can be short term and only a timing issue, other disappointments can

be materially value destructive and can sometimes overhang stocks for a long period

of time (for example environmental mismanagement). Such disappointments can be

very difficult to predict and share price reactions can be severe and immediate upon

disclosure by the company. High financial leverage (if it exists at that time) would add

to the problem. Another key risk for miners is maintaining and extending mine life or

making the prudent decision to close a mine, given mines are depleted and many have

reasonably short lives and often with reducing economics.

Fig. 22: Key assumptions and risks for valuation Assumption Risk of not realising

assumption Risk to valuation if

assumption is incorrect

Comment

Remaining mine life of 10 years

Low Upside We assume remaining mine life of 10 years, versus current mine plan life of 8 years.

Commodity prices Moderate High We assume relatively stable zircon, rutile and

ilmenite prices.

No adverse movements in exchange rates

Moderate Moderate IMA has labour and power costs denominated in AUD, with revenue and debt denominated in

USD.

Debt can be repaid

Moderate Moderate Based on our assumptions, the debt can be repaid easily.

Exploration success

Moderate

Low

We attribute a modest value to exploration

potential beyond our assumed mine life extension.

Model parameters Moderate Meaningful We have made a large number of assumptions in our valuation of IMA, changes in these

assumptions can change our valuation to both the upside and downside.

Conclusion We believe our IMA assumptions are realistic.


We ini t ia te coverage

of IMA with a

Speculative Buy. We

have a 33cps pr ice

target .


of 26

SIMPLE S.W.O.T. TABLE Strengths Producing asset

Strong cash generation High grade High value HMC Relationship with customers Well located to port means low operating costs Tier 1 location

Weaknesses Modest mine life for mineral sands project Single asset company

Opportunities Exploration Development of dredge assets

Threats Still has net debt position Takeover Mineral sands price volatility



of 26

EV/EBITDA BANDS

Fig. 23: Using Hartleys base case commodity forecasts

Source: Hartleys Estimates, IRESS

Fig. 24: Using spot commodity prices

Source: Hartleys Estimates

.00

.10

.20

.30

.40

.50

.60

.70

.80

.90

1.00

IMA Actual

Hartleys Target

8x EV/EBITDA

6x EV/EBITDA

4x EV/EBITDA

2x EV/EBITDA

1x EV/EBITDA

Shareprice

.00

.10

.20

.30

.40

.50

.60

.70

.80

.90

1.00

IMA Actual

8x EV/EBITDA

6x EV/EBITDA

4x EV/EBITDA

2x EV/EBITDA

1x EV/EBITDA

Shareprice

of 26

HARTLEYS CORPORATE DIRECTORY Research Trent Barnett Head of Research +61 8 9268 3052

Mike Millikan Resources Analyst +61 8 9268 2805

John Macdonald Resources Analyst +61 8 9268 3020

Paul Howard Resources Analyst +61 8 9268 3045

Aiden Bradley Research Analyst +61 8 9268 2876

Oliver Stevens Research Analyst +61 8 9268 2879

Michael Scantlebury Junior Analyst +61 8 9268 2837

Janine Bell Research Assistant +61 8 9268 2831

Corporate Finance Dale Bryan Director & Head of

Corp Fin.

+61 8 9268 2829

Richard Simpson Director +61 8 9268 2824

Ben Crossing Director +61 8 9268 3047

Ben Wale Director +61 8 9268 3055

Stephen Kite Director +61 8 9268 3050

Scott Weir Director +61 8 9268 2821

Scott Stephens Associate Director +61 8 9268 2819

Rhys Simpson Associate Director +61 8 9268 2851

Michael Brown Executive +61 8 9268 2822

Registered Office

Level 6, 141 St Georges Tce Postal Address:

Perth WA 6000 GPO Box 2777

Australia Perth WA 6001

PH:+61 8 9268 2888 FX: +61 8 9268 2800

www.hartleys.com.au [email protected]

Note: personal email addresses of company employees are structured

in the following manner: [email protected]

Hartleys Recommendation Categories

Buy Share price appreciation anticipated.

Accumulate Share price appreciation anticipated but the risk/reward is

not as attractive as a “Buy”. Alternatively, for the share

price to rise it may be contingent on the outcome of an

uncertain or distant event. Analyst will often indicate a

price level at which it may become a “Buy”.

Neutral Take no action. Upside & downside risk/reward is evenly

balanced.

Reduce /

Take profits

It is anticipated to be unlikely that there will be gains over

the investment time horizon but there is a possibility of

some price weakness over that period.

Sell Significant price depreciation anticipated.

No Rating No recommendation.

Speculative

Buy

Share price could be volatile. While it is anticipated that,

on a risk/reward basis, an investment is attractive, there

is at least one identifiable risk that has a meaningful

possibility of occurring, which, if it did occur, could lead to

significant share price reduction. Consequently, the

investment is considered high risk.

Institutional Sales Carrick Ryan +61 8 9268 2864

Justin Stewart +61 8 9268 3062

Simon van den Berg +61 8 9268 2867

Digby Gilmour +61 8 9268 2814

Jayme Walsh +61 8 9268 2828

Veronika Tkacova +61 8 9268 2836

Wealth Management Nicola Bond +61 8 9268 2840

Bradley Booth +61 8 9268 2873

Adrian Brant +61 8 9268 3065

Nathan Bray +61 8 9268 2874

Sven Burrell +61 8 9268 2847

Simon Casey +61 8 9268 2875

Tony Chien +61 8 9268 2850

Tim Cottee +61 8 9268 3064

David Cross +61 8 9268 2860

Nicholas Draper +61 8 9268 2883

John Featherby +61 8 9268 2811

Ben Fleay +61 8 9268 2844

James Gatti +61 8 9268 3025

John Goodlad +61 8 9268 2890

Andrew Gribble +61 8 9268 2842

David Hainsworth +61 8 9268 3040

Murray Jacob +61 8 9268 2892

Gavin Lehmann +61 8 9268 2895

Shane Lehmann +61 8 9268 2897

Steven Loxley +61 8 9268 2857

Andrew Macnaughtan +61 8 9268 2898

Scott Metcalf +61 8 9268 2807

David Michael +61 8 9268 2835

Jamie Moullin +61 8 9268 2856

Chris Munro +61 8 9268 2858

Michael Munro +61 8 9268 2820

Ian Parker +61 8 9268 2810

Matthew Parker +61 8 9268 2826

Charlie Ransom

(CEO)

+61 8 9268 2868

Heath Ryan +61 8 9268 3053

David Smyth +61 8 9268 2839

Greg Soudure +61 8 9268 2834

Sonya Soudure +61 8 9268 2865

Dirk Vanderstruyf +61 8 9268 2855

Samuel Williams +61 8 9268 3041

Disclaimer/Disclosure

The author of this publication, Hartleys Limited ABN 33 104 195 057 (“Hartleys”), its Directors and their Associates from time to time may hold

shares in the security/securities mentioned in this Research document and therefore may benefit from any increase in the price of those securities.

Hartleys and its Advisers may earn brokerage, fees, commissions, other benefits or advantages as a result of a transaction arising from any advice

mentioned in publications to clients. This report was prepared solely by Hartleys Limited. ASX Limited ABN 98 009 642 691 and its related bodies

corporate (“ASX”) did not prepare any part of the report and has not contributed in any way to its content. The role of ASX in relation to the

preparation of the research reports is limited to funding their preparation, by Hartleys Limited, in accordance with the ASX Equity Research

Scheme. ASX does not provide financial product advice. The views expressed in this research report may not necessarily reflect the views of

ASX. To the maximum extent permitted by law, no representation, warranty or undertaking, express or implied, is made and no responsibility or

liability is accepted by ASX as to the adequacy, accuracy, completeness or reasonableness of the research reports. Any financial product advice

contained in this document is unsolicited general information only. Do not act on this advice without first consulting your investment adviser to

determine whether the advice is appropriate for your investment objectives, financial situation and particular needs. Hartleys believes that any

information or advice (including any financial product advice) contained in this document is accurate when issued. Hartleys however, does not

warrant its accuracy or reliability. Hartleys, its officers, agents and employees exclude all liability whatsoever, in negligence or otherwise, for any

loss or damage relating to this document to the full extent permitted by law.

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