IMX Resources Ltd

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IMX Resources Ltd (IXR) 8 June 2012 Andrew Shearer Bringing African Nickel Assets Back Into The Stable [email protected] +613 8601 2624

Iron Ore Production + nickel + + Recommendation Buy

• Iron ore producer with expanding production profile and Previous Recommendation Initiation production of a DSO grade magnetite/copper ore from Risk Rating High central South Australian mine. Current Share Price $0.20 • The move by IXR to bring the nickel assets back into the fold is a positive move. Prior to the consolidation IXR had 12 Month Price Target $0.37 effective 53% ownership but no control. The assets also Price Target Methodology NAV strengthen IXR’s project pipeline by adding midterm projects NAV / Share $0.37 which compliment the timing of the iron ore operations. IXR will also become dual ASX/TSX listed. Market capitalisation $53m • OZL continuing to spend significant exploration dollars on Liquidity – Daily Value $0.0m IXR tenements that adjoin the Prominent Hill Mine.

• New Management has the required operational and development skills to develop the project portfolio. Financial Forecasts & Valuation Metrics Management and customer changes both positivpositiveeee Y/e Jun ($m) 20112011AAAA 20122012FFFF 20132013FFFF 20142014FFFF

IXR is an iron ore producer with a diverse portfolio of Revenue 61 192 219 243 exploration projects. The stock has suffered from their sole NPAT -8.6 1.1 22.4 28.9 customer halting shipments, a limited exploration program EPS (cps) -3.3 0.4 8.5 11.0 and management changes. We feel that IXRIXRIXR are well EPS Growth 10% 112% 2,004% 29% advanced in the process of oovercomingvercoming these problemsproblems and are positioned to add value to their projects. DPS (c) 0.5 0.0 0.0 0.0 Successfully attracting new customers is positive for IXRIXRIXR.IXR . EV / EBITDA (x) na 5.9 0.8 0.6 The recent announcement that ownership of Continental Nickel PER (x) -6.1 49.3 2.3 1.8 (TSX:CNI) will be consolidated, gives effective control over the Dividend Yield 2.4% 0.0% 0.0% 0.0% Tanzanian nickel assets to IXR and bolsters their asset base. Gearing -6% -7% -25% -28% An investment into IXR is not without risk as the big upside to Interest Cover (x) na na na na the stock will come from exploration success. We have based our valuation on the assumption that the CNI merger proceeds Source: Octa Phillip Securities estimates and that IXR will have 100% of the nickel assets, 51% of the producing Cairn Hill iron ore mine, 100% of the Mount Woods iron ore rights and a substantial holding in UNX. IXR is stepping up their exploration spend in 2012 with a budget of $3 to $4m of their own money and exposed to ~$10m through JV expenditure. IXRIXRIXR Share Price Chart The identification of a 569Mt magnetite resource at Snaefell highlights the potential for the 100% IXR projects to deliver a economically viable magnetite operation. IIInvestmentInvestment Overview IXR have done the hard yards in getting the Cairn Hill Mine into production. This now provides a solid platform from which to grow. A criticism of IXR is that to date they have been focused on the mine at the detriment of building a project pipeline. The new management team is focused on strengthening the portfolio to enable growth beyond Cairn Hill. The consolidation of CNI is the first step.

With a producing mine, no debt, new management and good Source: Iress data JV partners IXR are well positioned to grow. With cash of A$17m (30 March 2012) and operations returning to cash flow positive IXR is starting to turn the corner.

Octa Phillip Securities IMX Resources Ltd (IXR)

Overview

IXR main value add potentials: 1. Iron Ore - IXR is a junior iron ore producer from their 51% owned Cairn Hill Mine located in South . Outside of the Cairn Hill mine lease IXR retains 100% iron ore rights over the Mount Woods tenements. 2. Nickel & Copper Development/Exploration – the consolidation with Continental Nickel (TSX:CNI) will give IXR formal control over the assets for the first time since they spun out CNI. The nickel and copper projects still have significant exploration upside potential. 3. OzMinerals ((OZLOZLOZL)))) JVJVJV - IXR have a well funded JV with OZL for the tenements immediately adjacent to the Prominent Hill copper and mine. 4. Retained exposure to uraniuuranium m through the investment into Uranex. The most prospective exploration projects in Tanzania are located in the same geological setting as nearby significant uranium deposits.

Iron Ore Producer --- The Cairn Hill Mine located in central , is currently producing at the rate of 1.7Mtpa, exporting through Port Adelaide using purpose built containers. The ore is unique in Australia as it is a DSO magnetite with associated copper credits. The current in pit resource of 7.9Mt @ 50.5% Fe and 0.30% Cu supports the remaining 3.5-4 year mine life. Nominal extensions of the mine life are a possible with the inclusion of material currently outside of the pit design.

Iron Ore Explorer - Outside of the Cairn Hill mining area IXR has 100% of the iron ore rights. The area includes a number of targets geologically similar to the Cairn Hill deposit. A resource of 569Mt @ 27.1% iron has been identified at the Snaefell deposit, in addition IXR has outlined an exploration target of between 200-380Mt @ 25-35% Fe for the region.

JV with OZL - In late 2009 OZL entered into a JV agreement with IXR to explore the extensive land package adjacent to Prominent Hill for similar copper/gold mineralisation. Under the terms of the JV OZL must spend A$20m over 5 years to retain a 51% interest in the tenements. In conjunction with the JV OZL has 13% holding in IXR. IXR retains the iron ore rights to the tenements. The OZL JV provides IXR with exposure to a significant exploration spend that would be beyond their affordable budget if retained 100%.

Continental Nickel - In mid 2007 IXR listed their Tanzanian nickel assets on the TSX via Continental Nickel (CNI). Currently IXR retain an effective 53% interest in the projects. Recently a friendly merger between IXR and CNI has been proposed, resulting in the assets being brought back into the IXR portfolio and the dual listing of IXR. The merger is scheduled to be completed by mid/late August 2012. The current Measured and Indicated Resource at Ntaka Hill is12.78Mt @ 1.21% nickel for 154,700t contained nickel, and additionally an inferred resource of 45Mt @0.3% nickel for 135,000t contained nickel. Taking the total resource to ~195,000t contained nickel. The mineralisation remains open in all directions and at depth. Outside of this the exploration potential for the surrounding tenement remains high. The nickel assets are of high quality however whilst they were held in CNI a restrictive register (top 5 held ~80%) posed liquidity issues for CNI. By amalgamating CNI back into IXR there is significant scope to improve liquidity and add value for IXR and CNI holders.

Uranium - IXR maintains a 25% interest in uranium explorer Uranex (UNX). UNX’s project in Tanzania is a very promising early stage project that has seen little exploration across the tenement. The long term position of IXR in relation to UNX is unsure with the options including; monetising the investment or retaining exposure to an emerging project. We feel that realising the value soon is in line with IXR’s new direction of streamlining and re-focussing the company. On current market prices the investment is worth ~A$7.4m, or $0.2/share

Catalysts • Reaching steady state production at Cairn Hill and reducing operating costs, resulting in positive

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cash flow. • Monetising the Uranex investment and completing the CNI merger. • Exploration success for both iron ore and nickel Management - The new management team at IXR is focussed on turning around the Cairn Hill Mine and reducing costs to the target $80/t. Previous management did well to get the mine in production but now the challenge is to streamline IXR, reduce production costs and develop the project pipeline.

Valuation

In our valuation we have assumed that the CNI merger will proceed and that IXR will need to issue ~100m new shares as part of the transaction, taking the number of shares on issue to 263m. We have modelled a 3.5 to 4 year mine life at Cairn Hill with costs coming down to the $80/t range as guided by IXR. FY13e EBITDA $37m (51% attributable to IXR) and an EBIT margin of ~$20/t Cairn Hill Given the short mine life of Cairn Hill and relatively high operational costs the NPV is a modest $28m or $0.77/share. In addition to a positive cash flow ~$10m pa to IXR an advantage of Cairn Hill is that the established infrastructure can be utilised in the conventional magnetite operation, providing a potential capital saving. Nickel Assets Our valuation of the Nickel assets is based on the NPV undertaken as part of the 2011 PEA. The upside to this is that a revised PEA is currently in progress which will incorporate the treatment of the lower grade ore into the model. This is likely to reduce the operational costs and improve the project NPV.

IXRIXRIXR Sum of Parts Valuation

Value RaRangenge (A$m) Per Share Unrisked (A$) Per Share Risked Cairn Hill 10 0.03 0.03 Nickel Assets 200 - 300 0.55 - 0.83 0.14 Magnetite Assets 75 - 140 0.21 - 0.39 0.21 Corporate -24 -0.07 -0.07 Debt 0 0.00 0.00 Cash 15 0.04 0.04 UNX holding 7 0.02 0.02 TTTotalTotal 284 - 449 0.78 - 1.24 0.37

Source: Octa Phillip Securities estimates Magnetite valuation The following chart shows EV per iron unit for selected ASX listed iron ore juniors. The sample set we have chosen is a mix of and magnetite companies, where the common factor is that all ores will require upgrade prior to use. We have based our valuation on an average EV/iron unit then applied this to the current resource at Snaefell (569Mt) and also incorporated in the exploration target, lifting total resources to an estimated 1.0Bt. Point of difference It should be noted that IXR is the only producer on this chart, as the larger picture for IXR on the iron IXR is a producer ore front is in developing the magnetite projects we feel that it is a valid comparison.

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EV/Fe unit for selected ASX peers

Source: Octa Phillip Securities estimates

Catalysts

Takeover Potential Exploration success by OZL as part of the JV, could see OZL make a bid for IXR if a IOCGU discovery is made. UNX An improvement in the UNX share price would add more value to IXR and also put pressure on the IXR board to return the value back to the shareholders. CNI Currently the CNI holding is not being recognised by the ASX market in the share price of IXR, we believe the strategy to bring CNI back into the IXR fold will benefit the project development flowing into greater market recognition of the story. A successful outcome on the PEA leading into commencement of feasibilities studies is likely to be a positive step for Nachingwea. Graphite The Nachingwea tenements are located adjacent to and has similar geology to one of Syrah Resources (SYR) projects. SYS’s Nachingwea graphite project is not their main project, Balama, where they have enjoyed recent success. However SYR have reported visual grades of up to 60% coarse grained flake graphite and strike length of 2.8km from their Nachingwea project.

Risks

Commodity Pricing IXR is exposed to changes in the price for copper and iron ore. As a relatively high cost producers a prolonged reduction in commodity prices will impact on the viability of the Cairn Hill operation. The diversification of customers helps reduce the risk associated with supplying a sole customer. Operational Risk The Cairn Hill Mine is a relatively high cost producer, increases in production costs from unexpected production issues present a risk to the operation. Exploration Risk As the majority of our valuation is based on exploration potential for the Tanzanian and South Australian projects there is a high level of risk associated with variations in geology impacting on exploration success. Political Risk Despite IXR operating in some of the more stable African countries there remains an underlying level of political risk in the dynamic African continent. Financial Risk Cash flow from Cairn Hill is likely to support near term exploration for the development of either the

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nickel assets or the magnetite assets project financing will need to be sourced.

Projects

IXR has a diverse range of projects located in Australia and Africa. The core projects are the iron ore operations in South Australia and the nickel assets in Tanzania.

IXR and CNI project locations

Following the CNI merger IXR will have a diverse project portfolio.

Source: Octa Phillip Securities estimates

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Mount Woods - South Australia

The Mount Woods project area includes the Cairn Hill iron ore mine and surrounding exploration tenements, it consists of seven granted exploration tenements and one mining lease. The project area is located ~700km north-west of Adelaide in South Australia and is adjacent to the Prominent Hill Mine.

Mount Woods and Cairn Hill locality

Location of the Cain Hill mine lease in relation to the surrounding Mount Woods tenements. TThehe project area is well positioned to infrastructure including road, rail and town of Coober Pedy and the Prominent Hill Mine.

Source: Company Report

Cairn Hill Mine (51% IXR, 49% Taifeng) Overview The Cairn Hill Mine is operated under a JV with the Chinese company Sichuan Taifeng Group (IXR 51%, Taifeng 49%). The mine is well positioned close to support infrastructure being 55kms south-east of the regional centre of Coober Pedy and close to the Darwin - Adelaide railway. The mine is currently exporting a coarse grained magnetite DSO product at a rate of 1.7Mtpa and with cash costs trending towards $80/t. DSO production: The Cairn Hill Mine produces an unique magnetite, copper DSO product (50.5% Fe, 0.3% Cu). Mine life is ~4 years from a 7.9Mt in pit resource, with small extensions possible from selective mining of the 8.4Mt @ 46.7% Fe material located along strike. The grade of the material shipped to date has been 53.8% Fe and 0.51% Cu, implying that the grade will drop in the later years of production. Logistics The crushed ore is transported on a dedicated haul road (58km) to IXR’s rail siding at Rankin Dam then transported 880km to Port Adelaide on the existing public access Tarcoola-Darwin railway line. Port Adelaide Due to the lack of a deep water port in South Australia IXR utilise custom built shipping containers to rail the ore to Port Adelaide, then the ore is emptied into Panamax sized bulk carriers. Whilst not the most cost effective export option it does allow IXR to be in production whilst the debate on establishing a deep water port in South Australia continues and the company develops their other projects. As part of the project financing a life of mine sales off-take agreement was put in place with JV partner Sichuan Taifeng Group. In late 2011 Taifeng ran into problems with their plant and stopped taking the ore. Recently IXR has announced that 50% of the ore will now be sold to another Chinese company, Vingo Resources. Vingo are linked with two significant Chinese steel producers and operate two plants in China incorporating copper flotation circuits that can process the Cairn Hill ore. Ore Processing The ore is relatively coarsely ground (80 - 150µm) then a conventional float circuit recovers the copper followed by processing to separate the magnetite, producing separate concentrates grading 18% copper and typically 70-71% iron content.

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Production Costs Production costs in mid-late 2011 had been approaching the target range of $70-$75/t FOB. Then during the period when the sales with Taifeng broke down (August 2011) the previous management commenced an advanced pre-stripping program, resulting in the cost of production reaching over $100/t and the operation was not cash flow positive. Progression of financing To fund the completion of the Cairn Hill Mine and associated infrastructure IXR entered into an project agreement in 2010 with Taifeng, totalling A$47m. Taifeng invested A$23 million to become a 50% equity partner in the development of the Cairn Hill Mining Lease and subscribed A$24.1 million to become a 19.9% equity holder in IXR. The placement was done at $0.484/share, a premium of 25% to the VWAP at the time. Selling to new customers To maintain exports and cash flow IXR was forced to find new customers, initially the sales were done at fire sale prices to maintain cash flow. As new management took control the sales process has been retrieved. Setting contracts with new customers provides IXR with a more diverse customer base and reduces the risk of future defaults

Mount Woods Magnetite (100% IXR) IXR retains 100% of the iron ore rights to the area surrounding the Cairn Hill Mining Lease. With resources approaching 1.0bnt of magnetite and developed infrastructure IXR is well positioned to move from exporting a modest amount of DSO to a larger tonnage magnetite concentrate. The Snaefell deposit (100% IXR) is located only 12kms away from the Cairn Hill Mine, providing operational and infrastructure synergies. In addition to the resource of 569Mt @ 27% Fe at Snaefell an exploration target of 200-380Mt in the range of 25% -35%Fe has been identified by IXR. Given the number of targets remaining to be drill tested this exploration target would seen conservative.

Proximity of magnetite projects to Cairn Hill Mine

IXRIXRIXR has a large number of magnetite exploration targets.

Source: Company Report The grind size of the Snaefell ore is a key to the operational and capital costs associated with developing the resource. With a grind size at a relatively coarse ~200 microns the potential cost savings over other magnetite projects with a grind of 30 microns is large. The following diagram represents the grind size of a number of magnetite projects, highlighting the coarse grind size of the Snaefell ore. As grind size decreases production and capital costs increase.

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Grind size and concentrate grade for selected magnetite occurrences

Source: Company Report We envisage a conventional wet style magnetite plant producing a magnetite concentrate. Future production objectives are for ~5mtpa, our estimate of capital costs would be in the vicinity of $750m to $1bn. Initial metallurgical test results show that a high grade concentrate can be produced with a relatively coarse grind. The next step will be for IXR to complete the current concept study and then commence feasibility studies. The concept study is due to be released in mid CY12. Longer Term Port By our estimates the absence of a cape size port at Pt Bonython adds between $8 to $10 per tonne to Options the FOB costs. Rapid progress on the development of Pt Bonython, or other port options, is essential for the expansion of Cairn Hill and for longer term viability of the iron ore industry in South Australia. It is however understood that IXR are advancing discussions for an interim transhipping operation to be based out of Port Pirie With rail distances to Port Adelaide of 880km compared to 620km to Pt Bonython even a definitive development plan for Port Bonython, or similar port, would be positive for IXR. Given the ongoing delays in establishing a multi user bulk export port in South Australia it is likely that IXR will need to pursue alternative development options, such as the proposed Port Spencer development being progressed by Centrex Metals (CXM).

Mount Woods Copper Gold JV (49% IXR 51% OZL) JV Agreement The Mt. Woods JV with OZ Minerals (OZL) covers all minerals excluding iron ore, to date OZL has spent ~60% of their committed $20m (over 5 years) to retain a 51% interest. IXR can contribute to maintain its 49% interest or dilute to minimum 25% pre development by OZL funding the minimum $20m. The OZL JV benefits IXR by providing leverage to a large exploration budget and experience in exploring for Prominent Hill style ore bodies.

Nickel Copper - Tanzania

IXR spun out nickel In August 2007, IXR spun off 70% of the Tanzanian Nachingwea Nickel-Copper project into the TSXV- assets listed Continental Nickel Limited (CNI). At present IXR retains a 37% equity position in CNI and a 25% contributing JV interest in Nachingwea, resulting in an effective 53% interest in the project.

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Earlier this month IXR and CNI announced they had entered into a definitive agreement where IXR would acquire the remaining stock in CNI that they do not already own.

Nachingwea Nickel – Copper Project At the Nachingwea Project the main focus has been the Ntaka Hill nickel/copper deposit. At Ntaka the discovery hole drilled at the Sleeping Giant Deposit was drilled in late 2010 and returned an impressive 9.3m at 5.01% nickel. Since then the follow up drilling has defined a high tenor nickel-copper zone surrounded by a lower grade halo. A Preliminary Economic Assessment (PEA) was completed in October 2011. The PEA was based on two scenarios; firstly a base case of an open pit operation and an expanded scenario of an open pit followed by underground mining. Plant capacity was based on a 1mtpa size for the first 4 years then expanding to a 2.5mtpa size for 8 years, a total mine life of 12 years. Production was estimated to commence in 2015, given the changes to management a revised date has yet to be released. NPV $310m prior to The after tax NPV (8% discount) before tax was US$310m and after tax US$207m. The NPV was 150% increase in based on US$10/lb nickel, US$3.50/lb copper and US$20/lb cobalt. Processing would be by resource size in 2012. conventional flotation methods and produce on average 31Mlb Ni and 7Mlb Cu pa. Capital costs were estimated at US$217m for the initial plant and then US$297m for the expansion and operational costs were estimated at US$4.24/lb Ni and sustaining capital at US$1.48/lb Ni for a total opex of US$5.72/lb. Revised PEA due in A revised PEA based on recoveries of the lower grade material surrounding the measured and 3QCY12 indicated resource is in progress. The results are due to be released in August 2012. It is anticipated that the economics of the project will improve based on the expanded resource and changes to the proposed operation. The Ntaka Hill geology is consistent with a primary magmatic sulphide body that has undergone partial secondary remobilisation. The sulphides range from disseminated to massive, with the massive zones typically formed at the base of the intrusion. The deposit lies within the larger ultramafic Ntaka intrusion, which is ~3x5km in size. Beyond the current resource the exploration potential remains high with numerous targets yet to be drilled.

Nachingwea Resource Figure

Tonnes (m) %Ni %Cu %Co ContainContaineded Ni (kt(kt)))) Measured 1.66 1.71 0.29 0.05 28.4 Indicated 11.12 1.14 0.25 0.03 126.3 Meas + Ind 12.78 1.21 0.25 0.03 154.7 Inferred 45.03 0.30 0.07 0.01 135.0 Source: Company Report Copper Potential In late 2011 a 5 hole regional exploration program reported promising copper intercepts from broad spaced drilling. Copper sulphides were reported over a 1km strike length with grades of up to 5.27% copper, 15.05g/t silver and 0.41% zinc over a 0.4m interval in one of the drill holes. The extent of high grade copper mineralisation can be inferred from the artisanal mining of the copper mineral malachite taking place on the tenement. Based on the drilling results and a number of geophysical targets still to be drilled CNI had outlined a work program for 2012. At this stage we are unsure if that program will continue following the merger. Work planned for 2012 includes: see release from yesterday • A detailed 50x50m drill program designed to upgrade the resource • Step out drilling to test for down plunge to test depth extensions of the high grade zone • Revised PEA.

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See update diagram

URANEX – Southern Tanzania

The UNX uranium project in Tanzania is a high quality early stage uranium project that is in the same geological setting as the Mukuju Project recently purchased from Mantra for ~$1.2bn and also similar to the Kayelekera Deposit currently being mined by Paladin (PDN) Whilst the maiden resource announced in April 2012 was modest at 6.1Mlbs U3O8 and at low grade of 237ppm U3O8 there remains significant exploration potential as only a small section of the prospective regions have been drill tested. Should IXRIXRIXR return the In August 2011 IXR proposed to distribute their holding in UNX to shareholders, this idea was shelved investment to at the time and it will be interesting to see what the new management team decides to do with the shareholders? strategic holding. Given the recent slide in the UNX share price and the upside potential of the project there would be merit in IXR retaining their shareholding.

Mibango (Tanzania) 100% IXR

The Mibango Project is located in western Tanzania and is prospective for nickel sulphide, copper and PGE mineralisation associated with the layered ultramafic intrusions. IXR is currently assessing the regional potential of their large land holding in the region. Recent exploration work undertaken has focussed on geological mapping, and geophysical surveys to define drill targets. Progress has been slow due to delays in permitting and also the focus of IXR being on Cairn Hill. Now with the CNI merger and a refocussing on the Tanzanian assets we would expect work at Mibango to either intensify or the project dropped as Nachingwea becomes the main target.

Milange Project (Mozambique) IXR 100%

The Milange Project is an early stage project targeting nickel, copper and platinum group elements (PGE’s) associated with ultramafic intrusions. Most of the outcropping areas have now been sampled with rock chip sampling confirmed that sulphides are present and that the area warrants additional exploration. An airborne geophysical survey was conducted in late October 2011, targets were identified from this survey and are proposed to be followed up during the current field season.

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NW Tasmania (96% IXR) Copper/Gold, Nickel

We see the Tasmanian Progress on the grass roots NW Tasmania ProjeProjectct locality projects as interesting greenfield project in NW but too early to be of Tasmania has been slow as IXR’s value to IXR at present. focus has been on the development of Cairn Hill. The project consists of 5 tenements in the Rocky Cape region, the project is in JV with private company Barrett Exploration (4%). Sporadic exploration conducted since 2007 has involved VTEM surveys, soil sampling and limited drilling. The early results have returned some elevated levels of indicator metals and alteration but no economic discoveries. The ground package is prospective for copper, gold, nickel and tin.

Source: Company Report

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Board

Board & Management John Nitschke --- Non John Nitschke is a highly experienced mining engineer with over 35 years’ experience in the Executive Chairman resources industry. He has previously held senior executive roles with Normandy Mining, Oxiana Limited and OZ Minerals. Whilst at OZL John was instrumental in the development of Prominent Hill and this experience is important for IXR in as they push forward with their magnetite projects. He is a non-executive Director of ASX listed Toro Energy Limited, Venturex Resources Limited and Chairman of TSX listed Continental Nickel Limited. Neil MeMeaaaadowsdows ––– Most recently Mr. Meadows has worked with the Australian Premium Iron Ore Joint Venture on mine Managing Director infrastructure. Prior to that, he was the Chief Operating Officer and a Director of Queensland Nickel, subsequent to the sale of the business by BHP Billiton. He was the Managing Director of Gladstone Pacific Nickel whilst the company was listed on the London AIM and was also the General Manager of the Yabulu Refinery site for BHP Billiton. Mr. Meadows holds a Master of Applied Science in Metallurgy, is a Member of the Australasian Institute of Mining and Metallurgy . His technical qualifications are supported by a Graduate Diploma of Business Administration from Charles Sturt University, along with a Diploma of the Australian Institute of Company Directors. Stephen Hunt ––– Mr. Stephen Brian Hunt is an Independent Non-Executive Director of IXR Resources NL. He has Non Executive Director more than 20 years experience in the minerals marketing industry, 16 of which were gained BHP. Song Yuangang ––– Mr. Song Yuan Gang is the Non-Independent, Non-Executive Director of IXR Resources Limited. He Non Executive Director is the Chairman of privately owned Chinese company Sichuan Taifeng Group. Cao Xiang Kui ––– Mr. Cao Xiang Kui is a Non-Executive Director of IXR Resources NL. He has considerable experience Non Executive Directo in steel manufacturing and is Vice President of IXR’s recently acquired off-take partner and largest shareholder, Jilin Tonghua Iron & Steel (Group) Mining Co Ltd (Tonghua Mining). He has worked for the Jilin Tonghua Iron & Steel Group for 20 years in a variety of roles ranging from environmental technician, Deputy Chief of No 3 Steel Making Plant at the Tonghua steelworks, Secretary of Board of Directors, and Director of Investment Department. Mr. Cao was recently appointed Vice President of Jilin Tonghua Iron & Steel Group Mining Co. Ltd. He has a Masters of Business Administration. Caroline Rainsford --- Caroline has a Bachelor of Economics from Adelaide University, a Graduate Diploma in Business Company Secretary Administration from University of South Australia and a Certificate in Mineral Economics from Curtin University in Western Australia.

Major Shareholders (Pre Merger with CNI)

Holder No. of Shares (m) Ownership (%) Taiefeng 51.77 19.8% Oz Minerals Investments Pty Ltd 33.91 12.9% Jilin Tonghua Iron & Steel (Group) Mining Co., Ltd. 16.39 6.2% Anglo American Investments Australia Limited 9.15 3.5% Haggarty (Anthony James) 7.06 2.7%

Source: Company Reports

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COMPANY SUMMARY FINANCIAL SUMMARY

IMX Resources Ltd Year End --- Jun FY10 A FY11 A FY12 F FY13 F FY14 F IXR.AX KEY METRICS Price Information EPS Growth (%) 10 112 2,004 29 Price ($/share) 0.20 PER (x) -5.5 -6.1 49.3 2.3 1.8 Mkt Cap ($m) 53 Dividend Yield (%) 0.1 2.4 0.0 0.0 0.0 Enterprise Value ($ m) 47 EV/EBITDA (x) na na 5.9 0.8 0.6 EV ($m) 23.8 48.7 46.9 29.1 26.1 Share Pr ice & Volume Chart ROE (%) -30.4 -16.6 1.4 26.0 30.4 ROA (%) -21.7 -13.6 1.2 26.2 34.2 ROIC (%) -30.1 -11.9 1.4 30.5 40.5

PROFIT & LOSS ( AUD $m) Revenue 1 61 192 219 243 EBITDA -10 -7 8 35 44 Depreciation & Amortisation 0 1 4 3 3 EBIT -10 -8 4 32 41

Net Interest Expense 0 -1 0 0 0 Commodity / FX forecasts Commodity / FX forecasts Income Tax Expense 2 0 -3 -10 -12 FY12 F FY13 F LT NPAT Reported -7 5 1 22 29 Iron Ore Fines(US$/t 62% 144.69 128.44 105.76 NPAT Adjusted -8 -9 1 22 29 benchmark FOB) Iron Ore Fines(USc/% Fe PER SHARE DATA (cps) 233.37 207.16 170.59 benchmark FOB) Shares on Issue (m) 231 263 263 263 263 Exchange Rate (AUD:USD) 1.02 0.98 0.85 EPS Reported -3 2 0 9 11 EPS Adjusted -4 -3 0 9 11 DPS 0 0 0 0 0

Production / Costs BALANCE SHEET (((AUD $m) FY12 F FY13 F FY14 F Cash 22 20 26 23 26 Production - 100% JV (Mt) 1.7 1.7 1.7 Debtors & Inventory 3 48 21 21 22 Production - IMX(Mt) 0.8 0.9 0.9 PP&E 18 33 56 54 52 EBIT Margin (A$/t) 4.2 21.5 24.8 Intangibles 0 0 0 0 0 Total Assets 57 115 114 110 112 Borrowings 0 16 21 0 0 Creditors 6 26 11 11 12 Total Liabilities 7 47 35 16 17 Net Assets 51 68 78 94 95

BALANCE SHEETS RATIOS Gearing - Debt/Equity (%) -62.9 -5.6 -7.2 -24.9 -27.7 Interest Cover (x) na na na na na NTA per Share (cps) 22.0 26.0 29.8 35.9 36.3

Business Summary CASH FLOW (((AUD $m) IMX Resources is a junior iron ore producer from their EBITDA -12 -13 22 18 27 51% owned Cairn Hill Mine located in South Australia. Interest & Tax 1 2 -2 -9 -12 The mine production rate is designed at 1.7mtpa with Working Capital Change 0 0 0 0 0 exports th rough Port Adelaide. As cash costs come Operating Cash Flow -11 -16 11 -1 5 down to the targeted $80/t the positive cash flow will be Maintenance Capex 0 -1 -3 -1 -1 used for exploration in Australia and Tanzania. Free Cash Flow -11 -16 7 -2 4 In Tanzania IXR has several high quality nickel projects, Expansion Capex -12 0 -9 0 0 the most advanced being Nakata Hills where a revised Equity Issues / (Bu y Backs) 29 17 0 0 0 PFS is nearing completion Proc eeds from Borrowings 0 0 9 0 0 Other -1 -3 8 -1 -1 Net Cash Flow 5 -3 16 -3 3

NPV by parts

A$m Per Share Cairn Hill 10.22 0.03 Nickel Assets 50.00 0.14 Magnetite Assets 75.00 0.21 Corporate -23.82 -0.07 Debt 0.00 0.00 Cash 15.00 0.04 UNX holding 7.38 0.02 Total NAV 133.78 0.37

Page 12 Octa Phillip Securities IMX Resources Ltd (IXR)

Research Steve Morris +613 9618 8262 Head of Research

Andrew Shearer +613 8601 2624 Resources Analyst Lawrence Grech +612 9233 9635 Senior Resources Analyst Cameron Bell +613 9618 8283 Equities Analyst Nicholas Wirubov +613 9618 8251 Oil and G as Analyst Conor O’Prey +612 9233 9638 Senior Equities Analyst Paul Jensz +613 8601 2068 Agribusiness & Energy Analys t David Barilla +612 9233 9652 Equities Analyst Pieter Bruinstroop +613 9618 8275 Resources Analyst Ken Wagner +612 9233 9612 Equities Analyst

Corporate Finance & ECM James Green +61 2 9233 9613 Head of Corporate Finance Andrew Champion +61 2 9233 9647 Executive Director Malcolm Ezzy +61 2 9233 9658 Executive Director Brooke Picken +61 3 8633 9831 Associate Malcolm M cComas +61 2 9233 9659 Senior Advisor Craig Stranger +61 3 8633 9832 Head of Australian ECM Michael Beer +61 3 9618 8222 Executive Director David Pryles +61 3 9618 8269 Associate Michael Laletas +61 3 9618 8234 Executive Director, H ead of International ECM Jae Yoo +61 2 9233 9656 Analyst Paul Levitt +61 2 9233 9626 Associate Jonathan Buckley +61 3 9618 8244 Executive Director Sackville Kempton +61 3 9618 8258 Head of Corporate Services Leith Wale +61 3 9618 8253 Bus iness Development Manager, Sean Kennedy +61 3 8633 9836 Associate Director Energy Yehuda Gottlieb +61 3 8633 9838 Associate

Institutional Sales Bruce Rolin +61 2 9233 9651 Head of Institutional Sales Adam Muston +61 2 9233 9601 Hedge Fund & Derivative Sales James Wilson +61 2 9233 9607 Institutional Research Sales Chris Chia +61 2 9233 9605 Head of Asian Institutional Sales Mark Pashley +61 2 9233 9641 Senior Sales Trader Colin Eichenberger +61 3 9618 8214 Institutional Research Sales Matthew White +61 3 8633 9882 Institutional Sales Trading Craig Stephens +61 3 8633 9881 Trader Michael Cori +61 2 9233 9640 Head of Hedge Fund Sales Gavin Todd +61 2 9233 9639 Institutional Research Sales Robert Wood +61 3 8633 9880 Institutional Sales Graeme Philipson +61 2 9233 9610 Institutional Sales Trading William Cleland +61 3 9618 8223 Institutional Research Sales

Capital Management Ben Hughes +61 8 9324 5122 Principal

Private Wealth Tony SmSmith ith +61 3 8633 9900 Head of Private Wealth Allan Moffatt +61 8 7202 1112 Private Wealth Mark Schwarz +61 2 9233 9642 Private Wealth Amanda Fanning +61 3 9618 8247 Private Wealth Mark O'Brien +61 3 8633 9919 Private Wealth Andrew Sekely +61 2 9994 5507 Private Wealth Mark Wiseman +61 3 9618 8228 Private Wealth Ben Ikin +61 3 9618 8231 Private Wealth Matthew Carey +61 2 9233 9602 Private Wealth Charlie Heerey +61 3 9618 8240 Private Wealth Michael Jeffery +61 2 9233 9619 Private Wealth Chris Walker +61 3 8633 9928 Private Wealth Nathanial Doust +61 2 9233 9646 Private Wealth Craig Baillie +61 3 9618 8279 Private Wealth Nicholas Pereza -Mathews +61 3 8633 9921 Private Wealth Dane Parsons +61 7 3149 8627 Private Wealth Nick Madden +61 2 9994 5502 Private Wealth Daniel McFarlane +61 3 8633 9917 Private Wealth Nigel Ormiston +61 7 3149 8628 Private Wealth Daniel Rees +61 3 8633 9922 Private Wealth Ok sana Wainwright +61 2 9994 5501 Private Wealth Darren Levy +61 3 9618 8252 Private Wealth Ow en Beattie +61 2 9233 9621 Private Wealth David Dwyer +61 2 9233 9643 Private Wealth Patricia Harrison +61 2 9994 5505 Private Wealth Enzo Salvatore +61 3 8633 9924 Private Wealth Patrick Trindade +61 3 8633 9926 Private Wealth Graham Johnstone +61 3 9618 8246 Private Wealth Patrick Verhoeven +61 3 8633 9927 Private Wealth Greg Lidicky +61 2 9994 5522 Private Wealth Paul Lambrecht +61 8 9324 5144 Private Wealth Lenny Gross +61 3 9618 8215 Private Wealth Peter Moussa +61 2 9233 9636 Private Wealth Howard Elton +61 3 9618 8233 Private Wealth Peter Semaan +61 2 9233 9649 Private Wealth James Pears on +61 8 9324 5155 Private Wealth Peter Addison +61 3 9618 8226 Private Wealth Jason Norval +61 2 9233 9625 Private Wealth Philip Rhead +61 2 9994 5509 Private Wealth Joe Durak +61 2 9994 5513 Private Wealth Prasanna Wickram atunge +61 3 9618 8270 Private Wealth John Aldersley +61 2 9233 9617 Private Wealth Ryan Hoffman +61 2 9233 9672 Private Wealth John Miles +61 7 3149 8629 Private Wealth Samuel J ames +61 2 9233 9657 Private Wealth John Axsentieff +61 3 8633 9902 Private Wealth Simon Winter +61 8 9324 5133 Private Wealth Jonathan Di Maggio +61 3 8633 9904 Private Wealth Stuart McClure +61 7 3149 8630 Private Wealth Josh G raham +61 2 9233 9645 Private Wealth Sue McDonald +61 3 9618 8211 Private Wealth Kate Hanrahan +61 3 8633 9909 Private Wealth Tim Moffatt +61 8 7202 1110 Private Wealth Laurie Elliss +61 2 9233 9654 Private Wealth Tom Fairchild +61 3 9618 8255 Private Wealth Luke Pavone +61 3 8633 9920 Private Wealth Xiaoming Huang +61 3 8633 9912 Private Wealth Luke Ro binson +61 3 9618 8210 Private Wealth

Page 13 Octa Phillip Securities IMX Resources Ltd (IXR)

OFFICOFFICEE LOCATIONS AND DISCLOSURE Melbourne Sydney Perth Gold Coast Adelaide Level 12, 15 William St Level 9, 56 Pitt Street 21/140 St Georges Tce Level 9, 1 Corporate Ct Level 1, 16 Vardon Ave Melbourne VIC 3000 Sydney NSW 2000 Perth WA 6000 Bundall QLD 4217 Adelaide SA 5000 Phone: 613 8601 2000 Phone: 612 9233 9600 Phone: 618 9324 5111 Phone: 1300 331 098 Phone: 1300 658 906 Fax: 613 9600 1138 Fax: 612 9251 9368 Fax: 618 6316 4425

Recommendation Criteria

Investment View Octa Phillip Securities Investment View is based on an absolute 1-year total return equal to capital appreciation plus yield.

Buy Hold Sell >20% 20% – 5% <5%

A Speculative recommendation is when a company has limited experience from which to derive a fundamental investment view.

Risk Rating Octa Phillip Securities Limited has a four tier Risk Rating System consisting of: Very High, High, Medium and Low. The Risk Rating is a subjective rating based on: Management Track Record, Forecasting Risk, Industry Risk and Financial Risk including cash flow analysis. Disclosure of Economic Interests The views expressed in this research report accurately reflect the personal views of Andrew Shearer about the subject issuer and its securities. No part of the analyst's compensation was, is or will be directly or indirectly related to any recommendation or view expressed in this report. An associate of Octa Phillip Securities Ltd and his clients have a significant interest in the shares of IMX Resources Ltd. The following person(s) do not hold an economic interest in the securities covered in this report or other securities issued by the subject issuer which may influence this report: • the author of this report • a member of the immediate family of the author of this report

Disclaimer/Disclosure This publication has been prepared solely for the information of the particular person to whom it was supplied by Octa Phillip Securities Limited (“Octa Phillip”) AFSL 246827. This publication contains general securities advice. In preparing the advice, Octa Phillip has not taken into account the investment objectives, financial situation and particular needs of any particular person. Before making an investment decision on the basis of this advice, you need to consider, with or without the assistance of a securities adviser, whether the advice in this publication is appropriate in light of your particular investment needs, objectives and financial situation. Octa Phillip and its associates within the meaning of the Corporations Act may hold securities in the companies referred to in this publication. Octa Phillip believes that the advice and information herein is accurate and reliable, but no warranties of accuracy, reliability or completeness are given (except insofar as liability under any statute cannot be excluded). No responsibility for any errors or omissions or any negligence is accepted by Octa Phillip or any of its directors, employees or agents. This publication must not to be distributed to retail investors outside of Australia. Disclosure of Corporate Involvement Octa Phillip Securities Limited has not in the previous 12 months been involved in a publicly-announced transaction involving the payment of a fee to Octa Phillip Securities Limited by the corporate issuer described in this report. Octa Phillip Securities does and seeks to do business with companies covered in its research. Octa Phillip Securities reports are available on Bloomberg, ReutReuters,ers, FactSet and www.www.OctaPhillipOctaPhillipOctaPhillip.com.com

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