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ISSUE 250 12th October, 2016

Gold

What a week for the yellow metal. Prices plunged by 3% on Tuesday last week, driven by speculative

manipulation. If you read the newswires they’ll try and proffer all manner of explanations for the decline –

interest rate speculation, US dollar strength, ECB uncertainty - the list goes on and we’ve heard it all before

- but the simple fact of the matter is that there was not one sound, single, logical reason for a price fall of

that magnitude in such a short space of time. The reasons for owning gold had not changed, the world

economic situation had not changed, and the overall level of uncertainty had certainly not changed.

The gold price fall was driven by speculative short-selling by traders that were able to take advantage of the

fact that market volumes were thin as a result of a Chinese public holiday. We saw a similar situation with

an inexplicable 6% plunge in the value of the British pound in just 2 minutes last week. The fall effectively

triggered stop-losses and further tactical selling. These days, financial markets are increasingly run not by

humans but by robots.

There was certainly no rhyme or reason to the sell-off, a fact underlined by the release of Bloomberg data

on the same day that interestingly showed that despite the selloff in physical gold prices, holdings of gold

exchange-traded funds (ETFs) had climbed by 3.1 metric tons to 2,036.5 tons on Tuesday – representing

the highest level since 2013.

Let’s examine the ongoing US rate circus. As we’ve stated for some time now, the US Fed has been a

laggard on interest rates – with just one rate rise of 0.25% - since the GFC. It’s tried to jawbone rates

higher, without actually doing anything. Markets have surely factored in a rate rise at some point?

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Remember the Fed in late 2015 indicated that there would likely be 3 – 4 rate rises during the next 12

months, but we’re yet to see a single one. Hardly a ringing endorsement of the US economy is things are as

robust as the Fed guesses.

We MIGHT see a Fed rate rise before the end of 2016 – but then again the market has been playing this

endless speculation game for several years now. The Fed’s inaction speaks volumes.

As we’ve previously discussed, there are various reasons as to why a Fed rate rise won’t automatically lead

to a weakening in gold prices. For starters, there’s likely to be more physical buying, as bargain-hunters in

the form of consumers, long term investors and central banks, take advantage of price weakness.

Just as importantly the economic landscape remains unchanged - low and negative interest rates, coupled

with continuing political, economic and policy uncertainty - are all positive factors for gold.

There’s also the commonly-held misconception that rising interest rates are bad for gold. As we’ve

discussed in previous gold commentary, it’s not about rising rates per se, but the REAL INTEREST RATE

LEVEL. In the US at the present time even if rates rise, they will still be well below the overall level of

inflation.

What we’ve witnessed is that over the past six decades or so, when real US rates have been negative, gold

has also risen even when rates have increased. So forget the rising rate/lower gold baloney that’s typically

trotted out by the media when the possibility of a rate rise is discussed. There is no clear evidence that gold

should fall when rates rise (in fact it’s typically quite the opposite) – it’s all about the REAL interest rate.

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The WGC supports our view that consumers and investors are likely to view the price decline as a good

buying opportunity. It points out that many have been waiting for a price pull-back before entering the

market. If we look at recent history, Q3 2015 serves as a good example, when a 7% decline in the gold

price triggered a sharp increase in demand for jewellery, bars and coins.

In fact some data already points to an uptick in consumer interest. The top five countries where consumers

were searching for gold following the price drop were in the Middle East, with the UAE being number one.

Anecdotal evidence suggests that consumers had been holding off purchases in previous months, so this

could well trigger an increase in demand.

The price correction also comes at a good time for Indian consumers. With a good monsoon, the upcoming

wedding season and Diwali and Dhanteras festivals, demand could pick up after subdued activity year-to-

date. I retain our very optimistic price outlook with respect to gold of $1200-$1500 for 2016/17.

Crude Oil

What a turnaround in the oil market. Brent crude prices have risen to their highest level in a year this week

after Russia said it was ready to join a proposed deal to cap oil output. Global benchmark Brent crude

futures hit their highest level since October 2015 at $53.22 a barrel. Last month in Algiers, OPEC agreed

modest oil output cuts. The goal is to cut production to a range of 32.50-33.0 million barrels per day (bpd),

from OPEC's current output of 33.6 million bpd.

   

OPEC's top oil producer, Saudi Arabia, believes a global production deal to limit supplies could be reached

by the group's next formal meeting in November, when an invitation to join cuts could be extended to non-

OPEC nations such as Russia. "OPEC needs to make sure we don't crimp too tightly and create a shock to

the market. We are going to be very responsible," Saudi Arabia's Energy Minister Khalid al-Falih told the

World Energy Congress in Istanbul, adding that OPEC needed to behave in a balanced and responsible

manner.

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Non-OPEC oil producer Russia's President Vladimir Putin welcomed the global cut invitation, saying

Moscow was ready to join the proposed cap on oil output by OPEC members. Putin said low oil prices had

led to underinvestment in the global energy sector which would turn into a deficit at some point and trigger

new "unpredictable jumps" in prices. This is something that we’ve believed would be inevitable.

However, the delicate and critical issue of how much each of the 14 OPEC members will produce is to be

decided at the November formal OPEC meeting. Iran, with a heavily oil-reliant economy, believes its fair

production share in OPEC should be higher than its current output and has accelerated its efforts to reach

its production before 2012, when the European Union imposed additional sanctions on the country for its

nuclear activities.

Between 2012 and 2016, Saudi Arabia and other Gulf OPEC members have raised output to compete for

market share with higher-cost producers such as the United States. Saudi output has risen to 10.7 million

bpd from 10.2 million in recent months due to local needs for summer cooling. No decision is expected in

Istanbul, OPEC sources have said, but it is a chance for officials to discuss the next steps after the Algiers

deal, which was agreed after intensive shuttle diplomacy.

One of the biggest issues for OPEC however is that of US shale. Shale production swamped international

oil markets over recent years, being the primary contributor to the current oversupply situation. Now, there

are justifiable fears that any significant and hard-won price increase would simply trigger a rebound in

previously uneconomic North American shale oil output.

OPEC, led by Saudi Arabia, adopted a policy over recent years of pumping without limits to try and squeeze

higher-cost production from the market, particularly targeting US shale output. As a result of the OPEC-led

assault, US crude production slumped to 8.43 million barrels a day in September from 9.42 million the

previous year, based on IEA data.

Some US producers have already stepped up operations, with the number of active oil-drilling rigs in the US

climbing from 328 in early May to 428 last week, according to data supplied by industry experts, Baker

Hughes. If oil prices reach $60 and stay there, US shale drillers could find it commercially viable to revive

production at some mothballed wells and boost output by more than 1 million barrels a day by early 2018,

according to Vienna-based consultant JBC Energy.

What we’ll discover over the next few months is exactly how viable US shale production is – and how much

can the industry recover from the devastation wreaked by OPEC’s full-on assault of recent years.

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In this week’s report we’ve elected to focus on two of our current emerging Portfolio plays – Cardinal

Resources (ASX: CDV) and Incremental Oil & Gas (ASX: IOG), with exposure to gold and oil-gas

respectively. Given our discussion above with respect to gold and oil, these two companies represent a

couple of the best junior exposures to both commodities.

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Incremental Oil & Gas (IOG) – Coverage Began @ $0.055 in May 2016

The company owns and operates four oil and gas fields in the USA, with a new management team that’s

implemented a strategy of extracting maximum production and efficiencies, whilst also lowering costs.

Corporate Details

Status: Small Producer

Size: Small Cap

Commodity Exposure: Oil & Gas

Share Price: $0.048

12-month Range: $0.03 - $0.195

Shares: 192m, Options: 5.4m

Top 20: 59%

Net Cash: $2m

Market Value: $9m

Key Parameters Rating (out of 5)Quarterly Statistics

Management Quality Q2 2016 Expl’n & Dev’t Spend: N/A

Financial Security Q2 2016 Administration Spend: N/A

Project Quality Exploration Spend N/A%, Admin Spend N/A%

Exploration / Resource Potential Q3 2016 Forecast Exploration Spend: N/A

Project Risk Q3 2016 Forecast Admin. Spend: N/A

Incremental Oil & Gas is a revamped, USA-focused oil explorer and producer that is managing to generate

solid investor interest (particularly within the context of the currently out-of-favour oil sector). The reason is

the company’s steady appraisal progress and efficiency drives with respect to its key oilfields. With strong

local management experience and know-how, the company is extracting maximum operating efficiencies

and margins from its fields, which is beginning to translate into an enhanced share price performance.

The company maintains 100% ownership and operation of four petroleum fields within the USA, all of

which are in production. It acquired what can best be described as its flagship field, the Silvertip Oil

and Gas Field in Wyoming’s Bighorn Basin, during June 2015. The Bighorn Basin lies to the west of

the larger Powder River Basin, with oil discovered way back during the late 1800’s. Since then more

than 50 oil and gas fields have been discovered, with the Silvertip Field discovered during 1948.

I have been impressed with Incremental’s management approach to the day-to-day running of the business,

as well as their bigger picture focus on growing reserves and production. During 2016 the baby had well

and truly been thrown out with the bathwater as far as the energy space is concerned – which provided

opportunity if one was prepared to look hard enough. Incremental Petroleum is seemingly in a rapid growth

phase and management has a history of managing low-cost assets in order to generate returns.

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Silvertip Project Update

Incremental has recently deployed a rig to its flagship Silvertip Field to commence its planned Phase II

Work Program. Historically, the majority of the wells within the Silvertip Field have been produced from the

Frontier Formation at a depth of approximately 5,000-6,500 feet. The Frontier Formation is the primary

target for production from the Silvertip Field, comprising an oil-bearing zone with associated gas.

The company has identified 24 wells that can be recompleted in order to access natural gas reserves within

two shallower formations - the Meeteetse and Mesaverde Formations - which are respectively between

2,500 feet (~750 metres) and 4,000 feet (~1,200 metres) below surface.

As part of this program, Incremental recently announced a 30-day average IP rate of 1,100 MCFD for the

recompletion of the 42-4F well, which was brought on to production on 1st September, 2016.

This well is the first Meeteetse formation recompletion within the company’s Phase II Work Program at

Silvertip, with the recompletion recording a five-day average (IP) rate in excess of 1,200 MCFD, with

greater than 400 PSI flowing casing pressure. The results indicate virgin reservoir conditions with excellent

flow characteristics.

Figure 1: Well recompletion rig and ancillary equipment, Silvertip Field

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Significantly, the gas from this well has resulted in gross sales of approximately $100,000 within the first 30

days, with Incremental holding a 100% working interest (WI) and a net revenue interest (NRI) of

approximately 82%. Incremental’s total capital expenditure on this well was approximately US$35,000.

Importantly too, infrastructure to capture and transport the gas from the well to market is already in place.

Gas is processed at Incremental’s gas plant and delivered directly to the purchasers’ pipeline. A further 15

gas well recompletions are due to commence in the second week of October and are planned be completed

before the end of 2016.

Figure 2: Incremental’s wholly owned gas processing plant, Silvertip

Technical Significance

The Phase II, 24-well recompletion program is forecast by Incremental to produce more than 3BCF of

natural gas from the Meeteetse and Mesaverde Formations. Existing well-bores that were drilled through

these formations to the Frontier Formation (about 3,000 feet deeper) will be perforated and acid stimulation

utilized in order to produce the gas at an estimated cost of $25,000 - $35,000 per well (compared with the

more expensive fracture stimulation in the order of $125,000 used by other operators). The 24 well re-

completions are projected to provide circa $7 million of future net cashflow.

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In all, 40 existing wells have been identified as having potential behind-pipe gas reserves that can be

accessed from re-completions. The gas production from the Meeteetse and Mesaverde formation

recompletions will be co-mingled with the Frontier oil and gas production, so there is no additional operating

expenditure required to produce the increased volume of hydrocarbons.

The cost of the recompletions, which use existing well bores, is significantly lower than the drilling of any

new wells. Testing has shown that acid-stimulation is sufficient to increase production of gas from the target

formations. Acid stimulation is less expensive, requires less regulatory approvals and is a quicker process

than hydraulic fracture stimulation. This is a further cost saving to this program.

Figure 3: Graphic Showing Meeteetse and Mesaverde Formations

Importantly too, the timing of the recompletion program will also ensure that the increased gas production

coincides with the seasonal increase in natural gas prices in the northern winter period.

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Oil Production Opportunities

In our previous coverage we’ve highlighted the fact that technical analyses of the older Paleozoic oil

horizons below 8,600 feet within the Silvertip Field in Wyoming (Phosphoria, Tensleep and Madison) had

been completed. Incremental estimates that the remaining recoverable oil resource within these reservoirs

lies somewhere between 2.1 and 3.6 million barrels - with a best estimate of 2.9 million barrels. The

company’s NRI in this resource is 82.5%, with the resource classified as a 1C Contingent Resource

(Development Unclarified or On Hold).

Figure 4: Stratigraphic representation of the Silvertip Field

The Phosphoria/Tensleep Formations have historically produced 3.7 million barrels of oil and 24 billion

cubic feet of gas within the Silvertip Field. These formations, together with the deeper Madison Formation,

hold an estimated-initial-oil-in-place (STOIIP) of more than 17 million barrels. The oil produced from the

Phosphoria/Tensleep formations is light (45 degree API) “sour” crude, which receives a lower price than

sweet light crude produced from other formations within the field.

The assessment of this Contingent Resource has been based on interpretations of historical production,

core data, and petrophysical analysis from wells and seismic within the field. Development of these

resources will require the implementation of a secondary recovery program, due to reduced reservoir

energy caused by past production. Incremental will continue to explore the best practices to potentially

monetize these resources in the future. Furthermore, economic modeling will be performed to determine the

commercial feasibility.

Madison Recompletion

The Madison Formation produces light sweet oil and has produced from two wells within the Silvertip Field,

one of which remains in production. These two wells have together produced more than 300,000 barrels.

The potential for increasing oil production from the Madison Formation will be tested through a recompletion

of an existing Madison well, which has cumulative production of more than 200,000 barrels. This

recompletion will involve the perforation of three additional intervals within the Madison Formation. If the

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recompletion is successful, an existing Frontier Formation well may be deepened to intersect the Madison

Formation to explore productive limits.

Project Overview

Incremental has a 100% working interest (WI) in and operates four fields in Wyoming, Colorado and

California, in the USA. The company’s strategy is to identify and acquire low-risk, underperforming oil and

gas fields and apply modern technology and expertise to increase production and enhance hydrocarbon

recovery.

The most important is the Silvertip field in the Bighorn Basin in Wyoming, which was acquired in June 2015

and encompasses an area of approximately 5,500 acres. Oil was discovered in the Bighorn Basin during

the late 1800’s and more than 50 oil and gas fields have since been discovered, with the Silvertip Field

being discovered in 1948.

The company’s strategy is to optimize wells and increase production by focusing on behind-pipe

opportunities previously bypassed by other operators. IOG purchased the Silvertip Field, located in the

Bighorn Basin, in June 2015.

The Silvertip Field produces a mixture of gas and oil. Proven hydrocarbons are present in six reservoirs

ranging in depth from 450 metres (1,500 ft) to 2,750 metres (9,000 ft), with the shallower reservoirs

predominantly gas-bearing while the deeper zones are mainly oil-bearing. Many of the wells have been

drilled within the last 10 years and surface facilities within the field are modern.

The 1P Reserves within the Silvertip Field represent 73% of Incremental’s total 1P Reserves, so it is now

the company’s key growth asset. The multi-stacked reservoirs within the field provide opportunities to

access untapped oil and gas that is currently behind pipe in existing well-bores. This method of extraction is

highly profitable, as the capital cost to produce the additional oil or gas is minimal compared to a new well

cost.

US Gas Price Outlook

A recent Reuters report highlighted the fact that “The U.S. natural gas market is on an unsustainable

trajectory as consumption grows rapidly while domestic production is falling.” According to the latest Energy

Information Administration (EIA) data, US gas production had fallen by nearly 4% during the month of July,

compared with the same period a year earlier.

Marketed dry gas production amounted to 2,212 billion cubic feet during July 2016, compared with 2,304

billion cubic feet in July 2015. Low gas prices have impacted production economics – in turn discouraging

drilling of gas-rich formations and leading to a production decline - after rapid growth during 2014 and 2015.

To put things into perspective, there were just 86 rigs drilling for gas at the end of July, compared to 209 at

the end of July 2015, according to oilfield services company Baker Hughes.

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Higher productivity levels on the part of drillers, has not been enough to offset the drilling downturn. And

simultaneously, gas consumption is reaching record levels, especially for electricity generation, where

cheap gas has captured market share from coal.

The situation is reflected in power production data – with power producers burning a record 1,184 billion

cubic feet of gas during – up 9% on the same period a year earlier and comfortably exceeding the previous

record of 1,118 billion cubic feet set during July 2012.

Climate policy is encouraging power producers to retire old and inefficient coal-fired generation plants and

replace them with more efficient and cleaner burning combined cycle gas units. At the same time low gas

prices have accelerated the switch by encouraging power producers to reduce run rates at coal units and

maximise run rates at gas-fired plants instead.

Power producers have burned their way through most of the surplus of gas left over at the end of the record

warm winter 2015/16. Working gas stocks in underground storage stood at 3,600 billion cubic feet on Sept

23, an increase of just 90 billion cubic feet or 2.6 percent compared with a year ago. The year-on-year

storage surplus shrunk from 1,017 billion cubic feet - or 70% - back on March 23, according to EIA data.

Summary

We initiated coverage of Incremental Oil & Gas around $0.055 during May 2016. Until recently, our

only other energy exposure has been Strike Energy (ASX: STX) - due to the volatile nature of the oil

sector over recent times, uncertain market conditions and soft overall investor sentiment. In truth,

there hasn’t been a lot to get excited about in the oil space. Incremental Oil & Gas however

represents a solid value argument and measured growth story, with key operational experience that

is targeting low-cost production that could sustain earnings - even during a low oil/gas price

environment. There will be growing interest in the company’s current work-over and recompletion

program, aimed at boosting gas production levels in time for the Northern Hemisphere winter.

Accordingly, Incremental Oil & Gas will remain firmly held within our Portfolio.

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Cardinal Resources (CDV) – Coverage Initiated @ $0.29 in June 2016

The company maintains three highly-prospective gold exploration projects in Ghana, West Africa – with the

Namdini project as the current stand-out, where a JORC Resource is due to be announced this quarter.

Corporate Details

Status: Advanced Explorer

Size: Small Cap

Commodity Exposure: Gold

Share Price: $0.64

12-month Range: $0.099 - $0.72

Shares: 303m, Options: 126m

Top 20: 71%

Net Cash: $27m

Market Value: $194m

Key Parameters Rating (out of 5)Quarterly Statistics

Management Quality Q2 2016 Expl’n & Dev’t Spend: $1.421m

Financial Security Q2 2016 Administration Spend: $0.321m

Project Quality Exploration Spend 82%, Admin Spend 18%

Exploration / Resource Potential Q3 2016 Forecast Exploration Spend: $0.755m

Project Risk Q3 2016 Forecast Admin. Spend: $0.2m

Cardinal Resources is a recent addition to our coverage universe, maintaining three gold exploration

projects in the West African nation of Ghana. We’ve followed the stock for some time and we’ve had

regular meetings and received project updates with the company’s African-based Managing Director,

Archie Koimtsidis. The company has invested a considerable amount of time and money in de-risking

its flagship Namdini project to an appropriate level, which in turn has driven strong investor interest.

Ghana has a low sovereign risk rating and has enjoyed over 20 years of continuous democratic rule. It

is one of the most developed and affluent countries in Africa, with a well-developed Mining Code,

infrastructure and a population with the technical skills to support modern mining projects. Political

stability in Ghana has made the country one of the most attractive new mining investment areas in

Africa. After South Africa, Ghana is Africa's second-largest gold producer.

Cardinal’s flagship Namdini Gold Project is located within the Bolgatanga region, 6km southeast of the

operating Shaanxi underground goldmine and 12km from Cardinal’s Ndongo East Prospect. Extensive

mining activities occur all around the Namdini licence, reflecting the gold-bearing potential of the entire

area. Many industry participants see potential for the discovery of further significant deposits in Ghana, as

large parts of the country, particularly in the northeastern region, remain relatively under-explored.

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Latest Activity

Namdini Exploration Update

Cardinal recently announced that a diamond drilling program would commence by mid-October (weather

permitting) in order to test the up‐dip width extensions to the known gold mineralisation at its Namdini Gold

Project, along with two infill holes within the original Phase 1 framework drilling program.

The eastern-most drill-holes within the initial Phase 1 framework drilling program returned strong gold

intercepts over a strike length of more than 720 metres, suggesting that the broad mineralised zone

appears to be open up‐dip and to the east of the current drilling coverage.

Figure 1: Location of the planned drill holes relative to the Namdini deposit drilling

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Cardinal plans to undertake an initial 17‐hole diamond drilling program in order to test this ‘up‐dip’ potential.

In addition, a further two diamond ‘in-fill’ holes will be drilled in order to assist in providing improved

coverage within the current framework drilling program. In total, approximately 3,500 metres of diamond

drilling is planned to be undertaken.

Technical Significance

The company has up to this point been highly focused on its framework drilling program, with the aim of

providing the necessary input data to allow for the calculation of an initial resource estimate. This has now

been completed and a maiden Resource Estimate is expected before the end of 2016.

The new drilling program will focus on the potential shallow up-dip extensions to the existing Phase 1

Framework-derived gold mineralisation, as well as providing new data for a first-pass assessment of the

potential for more near‐surface mineralisation to the east of known mineralisation.

Figure 2: Example of the up‐dip extension planned drill holes

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Initial Resource Estimate Due Q4 2016

In our previous research coverage, we’d highlighted the fact that Cardinal Resources was working towards

an Exploration Target during Q3 2016 for its Namdini gold discovery. But things have in fact progressed so

rapidly on the exploration front that the company is now set to report an initial JORC Resource Estimate at

Namdini.

The company had previously expected to report an Exploration Target, followed by a JORC Resource

Estimate – however Cardinal is now confident that it has sufficient information to allow for the estimation of

an initial JORC Resource Estimate during Q4 2016.

Since discovering the large Namdini gold system during late 2015, the company has moved rapidly to better

define its dimensions and controls via an ongoing drilling campaign, which was stepped up substantially

during April this year through the addition of a further two diamond drill rigs.

Cardinal has now drilled 33 diamond holes for ~13,000 metres of drilling, as well as and 100 RC/diamond

holes for ~12,000 metres of drilling. It has now established a solid database of information that Project

Technical Manager, Dr Julian Barnes, is working through to form an initial JORC Resource Estimate with

his team of independent consultants.

Figure 3: View through the Namdini deposit

The Namdini Project has been defined as spanning over 1,000 metres of strike, averaging between 200

metres and 300 metres in width, with the mineralisation consistently traced to a vertical depth of at least

350 metres from surface.

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Project Overview

In our previous coverage since our June initiation, we’ve outlined and emphasised the consistently-solid

drilling results generated from its Namdini project. All of these assay results have been utilised for structural

and geological modelling, along with resource estimation.

The highest-grade mineralised intervals so far were recently intersected in the final group of ‘framework

drilling’ drill-holes, which were released in August and included:

o NMRD451-776: 94m @ 4.53g/t from 33m depth and 13m @ 2.15g/t from 134m depth

o NMDD489-779: 44m @ 1.57g/t from 70m depth

o NMRD418-766: 23m @ 2.55g/t from 144m depth

Figure 4: Long section – View East. Drill-holes reported in this announcement are annotated with drill-hole name and gold grade

histograms. Intersections from previously reported holes displayed, colour coded by intersection gold grade (in grams per tonne)

Figure 4 above shows a ‘long section’ of the drilling to date, with a view towards the east and parallel to the

average strike of the Namdini deposit. The section confirms it as a major new discovery, with gold

mineralisation outlined over 1km of strike length and extending for 350 metres below the topographic

surface. The mineralised corridor is consistently greater than 250 and 300 metres in width, simultaneously

remaining open both at depth and to the south (with encouraging exploration potential to the north).

The additional drilling and structural and geological analysis confirms that Namdini is hosted within

intensely-deformed, strongly hydrothermally-altered granite, volcaniclastics and diorite. Typically, both wide

and multiple gold-mineralised intervals have been returned from the majority of holes drilled into the

Namdini deposit.

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The next stage of Namdini’s development is underway, with geological and structural modelling and

resource estimation studies underway, along with metallurgical test-work (based on more than 350kg of

core) being well advanced.

The Namdini project is located in a mineral-rich region of Ghana, where significant production has

previously taken place from a number of gold mines and from numerous artisanal gold workings. The

producing open-pit Youga gold mine, the historic Nangodi underground gold mine, the producing Shaanxi

underground gold mine and the Namdini Mining Licence are all located along or adjacent to a major

regional shear.

Figure 5: Plan View – Drill-holes with Gold Histograms

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Project Overview and Geology

The Namdini project is located in a mineral-rich region of Ghana, where significant production has

previously taken place from a number of gold mines and from numerous artisanal gold workings.

The producing open-pit Youga gold mine, the historic Nangodi underground gold mine, the producing

Shaanxi underground gold mine and the Namdini Mining Licence are all located along or adjacent to a

major regional shear.

The Bole-Bolgatanga Fault is a major regional fault zone trending ~NE from Cote d’Ivoire, through NE

Ghana, through Burkina Faso and into Niger. In Niger, the Samira Hill gold mine is located along the fault.

This fault zone is developed over ~6 km in the NW corner of the Kungongo tenement and along the ~18km

SE border of the Bongo tenement and constitutes long lengths of potential gold bearing exploration targets.

Summary

We initiated coverage of Cardinal Resources during June 2016 at around $0.29 – representing a

current gain of 121%.

The Namdini results so far point to a sizeable gold deposit with likely multi-million-ounce potential,

which is why the stock has performed so solidly from a share price perspective. What’s also

significant is that the mineralization occurs from surface to significant depths of almost 300 metres,

enhancing its potential commerciality from a mining perspective. We await the release of the

company’s initial JORC Resource estimate during Q4 2016. Accordingly, Cardinal Resources will

remain firmly held within our Portfolio.

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Disclaimer: Gavin Wendt, who is a director of Mine Life Pty Ltd ACN 140 028 799, compiled this document. It does not constitute investment 

advice. In preparing this report, no account was taken of the investment objectives, financial situation and particular needs of any particular 

person. Before making an investment decision on the basis of this report, investors and prospective investors need to consider, with or without 

the assistance of a securities adviser, whether the information is appropriate in light of the particular investment needs, objectives and 

financial circumstances of the investor or the prospective investor. Although the information contained in this publication has been obtained 

from sources considered and believed to be both reliable and accurate, no responsibility is accepted for any opinion expressed or for any error 

or omission in that information.