Keras Resources (KRS.L)

22 March 2016

Metals & Mining The Only Way to Play the Perfect Storm

1.2

1.1 1.0 Keras Resources is an AIM-quoted resource development company with a diverse suite of 0.9 assets in Australia and Africa. Given the iron ore sector downturn, Keras has stepped back 0.8 from its African iron ore projects to focus on near-term gold production assets in Western 0.7 Australia. Keras plans to commence gold production in Q2 2016, with a plan to build into a 30- 0.6 40koz producer. This new strategy drives shareholder value by acquiring access to permitted 0.5 projects with low capex and opex, and the potential for near-term cash flow. 0.4

0.3 Jan 2015 Apr 2015 Jul 2015 Oct 2015 Jan 2016  Unique Strategy. Keras, previously known as Ferrex Plc, has secured three “Tribute”

Source: LSE, KRS.L share price (p) agreements in the Kalgoorlie region of Western Australia, one of the most prolific gold Market data: producing regions in the world. Tribute Mining involves the mining of resources owned by third parties, on existing mining leases, and sending the ore for toll treatment at a nearby Market London (AIM) EPIC KRS process plant. The deals are typically structured as profit share or royalty agreements. Price 1.09  Near-term Cash Flow. The advantage of a tribute deal is that because mining takes place on 12m High (p) 1.09 existing leases, there is no onerous permitting process. Furthermore, mining is normally 12m Low (p) 0.35 focused on orebodies forming remnant resources below existing open pits, or previously Shares (bn) 1.19 un-mined shallow deposits. The use of existing infrastructure and toll processing means Market Cap (£m) 10.5 Free Float (%) 72% that capital requirements to restart production are largely negligible, amounting to working capital only, allowing projects to be fast-tracked into production. Description Resource development company focused  Production Plan. Initial gold production will come from the Grants Patch Tribute project, primarily on gold projects in Western with first production and revenues due in Q2 2016. Throughout 2016, Keras plans to bring Australia. First gold production due in Q2 2016 from a number of low capex tribute projects. on-line several other open pit operations, steadily ramping up gold production. Longer term pipeline includes the Nayega Manganese project in Togo, where Keras  High-grade Upside. Cash flow from open pit mining will be used to develop high-grade awaits the granting of the Mining Licence. underground projects such as the Prince of Wales mine which previously produced 230koz www.kerasplc.com at 10g/t gold. Cash will also be directed towards new acquisitions in the WA gold space.

Directors  Best of the Best. Western Australia is ranked as the top jurisdiction in the world for mining Brian Moritz Non-Exec Chairman Dave Reeves Managing Director investment based on mineral policy, tax, geological prospectivity and other factors. James Carter Finance Director  The Perfect Storm. The devaluation of the A$ has caused the Aussie gold price to soar away Roy Pitchford Non-Exec Director from the US gold price, and in combination with lower input costs due to spare capacity, Russell Lamming Non-Exec Director Aussie gold miners are currently enjoying the perfect storm and sector-leading margins. Peter Hepburn-Brown Non-Exec Director  Pipeline. Keras could rapidly develop the Nayega manganese project in Togo within 9 months upon receipt of the mining permit, and subject to funding. Nayega is a low capital intensity project with good infrastructure. Manganese is a key ingredient in steel, and prices have sky-rocketed in 2016 due to limited stocks and a wave of Chinese demand.

Keras is the only way to gain pure-play exposure to the buoyant Australian gold sector either on AIM or the Main Market. We have not undertaken DCF valuation analysis due to the fluid nature of the production plan and lack of hard inputs (costs, schedules etc.) whilst Keras finalises mine plans. However, we see scope for a significant re-rating in the company’s shares upon making the transition to producer. With near-term cash flow on the horizon and an Analyst aggressive growth strategy in place, the shares offer a cheap entry point into a compelling gold Phil Swinfen +44 (0)207 186 9950 play, in our view.

22 March 2016

Contents

Keras: Gold and cash flow focus ...... 3 Directors and Management ...... 4 Company Structure ...... 5 Capital Structure ...... 5 A New Strategy – Refocus on Gold Tributes ...... 6 News Catalysts & Development Plan ...... 8 Funding & Financials ...... 9 Valuation Considerations – too early to peg ...... 9 Australian Gold – Exploiting the sweet spot ...... 10 Location – Western Australia is the No.1 Jurisdiction ...... 13 Processing capacity in WA, plenty of options ...... 14 Australian Gold Tribute Projects ...... 15 Keras – One of the only ways to play the sector on AIM ...... 15 Tribute 1: Grants Patch ...... 16 POW Underground – the high grade prize ...... 21 Tribute 2: Wycheproof ...... 23 Tribute 3: KalNorth ...... 24 Nayega Manganese - future potential ...... 28 Disclaimer ...... 30

22 March 2016

Keras: Gold and cash flow focus

Keras Resources plc (ticker: KRS) is an AIM-quoted resource development company with a diverse suite of assets in Australia and Africa. The company is focused on driving shareholder value by attaining near-term cash flow through the development of advanced stage, low capital expenditure mining projects in favourable jurisdictions. The company’s current commodity focus is gold and Keras plans to commence initial gold production from its portfolio of Australian gold assets in Q2 2016, taking advantage of the opportunity created by currently low input costs and a favourable Australian dollar gold price. Keras aims to become a 30-40kozpa gold producer. Keras anticipates directing the free cash flow towards further development of high- margin Australian gold opportunities in addition to subsidising the development of the company’s Nayega Manganese project in Togo, minimising equity dilution. . Gold: Keras has secured three “Tribute” agreements in Western Australia; Grants Patch, Wycheproof and KalNorth. The tribute agreements give Keras the right to mine existing gold deposits on third party mining tenements, utilising existing infrastructure and processing plants, typically in return for a profit share agreement based on gold production. Keras has secured tribute agreements over some of the most prospective areas in the prolific Western Australian Goldfields. Currently, Keras’ tribute agreements cover historical resources of c. 585koz, and management anticipate an initial production rate of 15-25kozpa from Q2 2016. The projects benefit from extremely low or negligible acquisition cost, coupled with minimal capex requirements with gold-bearing ore being processed through existing mills. . Manganese: Keras holds an 85% interest in the Nayega manganese permit in northern Togo. A bankable feasibility study has been completed and the grant of a mining permit is awaited. The BFS indicates that Nayega has potential to be a low- capex, open pit mine, producing 250ktpa of 38% manganese concentrate. . Other: Keras also holds a variety of iron ore and manganese assets in Gabon and South Africa. Given current iron ore market conditions, these projects are non-core and Keras is assessing ways to realise value from the assets. Keras’s share price has displayed a degree of weakness over the last two years, in-line with peers due to considerable commodity sector headwinds and weak sentiment. With mining and commodities approaching, or already at the bottom of a cyclical low, virtually all resource companies have suffered significant share price declines. In particular, iron ore prices have declined 75% since their peak in 2011. However, Keras’s shares have gained considerable traction since December 2015 as a direct result of refocusing the portfolio on Australian gold opportunities. Figure 1 - KRS 3 year share price (p) Figure 2 - KRS 1 year share price (p) 3.0 1.2

1.1 2.5 1.0

2.0 0.9

0.8 1.5 0.7 1st Gold acquisition 1.0 0.6

0.5 0.5 0.4

0.0 0.3 Jan 2013 Jul 2013 Jan 2014 Jul 2014 Jan 2015 Jul 2015 Jan 2016 Jan 2015 Apr 2015 Jul 2015 Oct 2015 Jan 2016

Source: LSE Source: LSE

22 March 2016

Directors and Management Brian Moritz - Non-Executive Chairman Brian is a Chartered Accountant and former Senior Partner of Grant Thornton, London. He formed Grant Thornton’s Capital Markets Team which floated over 100 companies on AIM under his chairmanship. In 1995 he retired from Grant Thornton to concentrate on bringing new companies to the market. Brian was formerly chairman of African Platinum PLC (Afplats) and Metal Bulletin PLC as well as currently being chairman of several junior mining companies. Dave Reeves - Managing Director Dave holds a first class honours degree in mining engineering from the University of New South Wales, a graduate diploma in applied finance and investment from the Experienced management team Securities Institute of Australia, and a Western Australian first class mine managers with operating experience in a certificate of competency. He has over 25 years’ experience and has operated in wide range of commodities and Australia, Africa and Europe in gold, precious metals, mineral sands, bulks and copper. multiple continents He is non-executive Chairman of ASX and AIM listed European Metals Holdings. James Carter - Finance Director James is a CPA with 17 years’ experience in the mining industry. James was most recently CFO of Straits Resources, a diversified metals group listed on the ASX. Prior to this James was CFO and Company Secretary of SGX-listed Straits Asia Resources and was integral to its development as a 10Mtpa coal producer in Indonesia. His work at Straits included debt and equity capital markets, tax strategy, M&A and corporate governance. James is a board member of Worldwide Energy, an aspiring Indonesian coal company and PTT Asia Pacific Mining. Roy Pitchford - Non-Executive Director Roy, a Charted Accountant, has more than 25 years’ senior management and executive experience. Previously CEO of Cluff Resources Zimbabwe Ltd, Delta Gold Zimbabwe (Pvt) Ltd, Zimplats, Afplats and African Minerals Ltd. Roy currently sits on numerous public and private mining companies’ boards, and is CEO of Vast Resources. Russell Lamming - Non-Executive Director Russell Lamming is a qualified geologist with an honours degree in geology from the University of the Witwatersrand and a Bachelor of Commerce in Economics from the University of Natal. Russell has a broad range of experience including directorship of a South African mining consultancy and precious metals analyst for a leading international broker. Russell was also the CEO of AIM listed Chromex Mining and Goldplat Plc. Peter Hepburn-Brown - Non-Executive Director Peter Hepburn-Brown is a qualified mining engineer with over 35 years of international mining experience, having managed gold mines in Australia and internationally. Peter will be responsible for establishing gold production and assisting with the development of Keras's other projects. Peter George – Chief Operating Officer Peter George is a qualified mining engineer with a First Class Western Australian Mine Managers Ticket. Peter has over 22 years operating in gold and base metals company in Australia and overseas. Peter has most recently managed an underground contracting firm based out of Kalgoorlie.

22 March 2016

Company Structure Keras has a relatively simple structure. The company is registered in England and Wales, with the company’s shares quoted on AIM. In December 2015, the company changed its name to Keras Resources Plc from Ferrex Plc, with the ticker changing to KRS from FRX to reflect the move away from the iron ore as a result of a strategic review and focus on near-term cash flow opportunities and Australian gold. Keras holds various interests in its mining assets via a wholly owned Guernsey subsidiary, with operations in four countries; Australia, Togo, South Africa and Gabon, as detailed in the figure below. The 74% ownership of the South Africa reflects BEE requirements in the country. The Australian tribute operations are wholly-owned, and although Keras does not own the mining tenements, it has exclusive right to mine in certain defined areas, with each tribute agreement having its own economic structure; typically, a 50:50 profit share agreement. Keras’s first tribute agreement and foray into Australian Gold was precipitated by the acquisition of Chaffers Mining, a private company, in November 2015. Keras has aggressively grown its foot print in Western Australia and now holds three tribute agreements; Grants Patch, Wycheproof and KalNorth. We expect the company to identify further low-capex, high-margin opportunities with the potential to increase production and grow cash flow. Figure 3 -Simplified Company Structure

Source: Shard Capital and Keras Resources Capital Structure Keras had 1.19bn shares on issue as of the end of February 2015. The company’s shares are largely held by management, along with a variety of retail investors. Institutional holdings are limited at present, due to the size of the company. Directors and management hold a c.25% interest in the company, insuring alignment with shareholder interests, in our view. Free float is 72%. In February 2016, Keras closed a position with YA Global of 45.8m shares and continues to be cognizant of the need to manage equity dilution. As such, working capital required to commence gold production in Q2 2016 was raised via a non-dilutive loan note in February 2016.

22 March 2016

A New Strategy – Refocus on Gold Tributes Taking advantage of opportunities The stuttering of China’s growth engine, oversupply and general weak sentiment have weighed considerably on both metal prices and mining equities. In particular, iron ore prices have seen significant declines as major producers such as BHP Billiton and Rio Tinto continue to ramp up production against a backdrop of fundamentally weak A change of direction towards demand. Iron ore prices have decreased from $190/t to $60/t currently. In addition, Australian gold reflects a many companies in the sector are saddled by a considerable debt burden built up due to continued focus on driving shareholder returns over-leveraging during the last commodities bull cycle, necessitating an inward-looking focus on servicing debt, attempting to maintain dividends, cost optimisation, project disposals, and of course drastic cuts in exploration expenditure. This situation necessitated a strategic change of direction for Ferrex Plc, changing its name to Keras Resources and re-focusing on advanced gold projects as the Board deemed that iron ore in Africa would not deliver maximum value for shareholders. The current cyclical downturn in commodities has created opportunities to acquire interests in advanced stage projects with a direct route to production and near-term cash flow. Small, but perfectly formed The inward-looking focus of larger producers means that numerous opportunities have emerged for smaller, more agile operators to investigate mining previously defined orebodies on third party licences that are either too small, or for various reasons do not meet senior company hurdle rates, including lack of management time and focus on projects with a longer mine life. Thus smaller, short LOM projects are often neglected even though they offer low capex and potentially attractive margins, especially for operators with low overheads (low corporate G&A) and a streamlined structure. What is a Gold Tribute Agreement? A tribute is simply a type of project structure that gives the tribute holder an Tributes are a unique style of entitlement to work a mine, deposit, or portion of, under an agreement with the mining agreement, providing fast track licence holder. Typically, the tribute holder will mine existing orebodies, either access to advanced near term production assets with minimal comprised of remnant resources below historic pits or previously un-mined near-surface or no upfront capex. The deposits. Ore mined by the tribute holder is usually processed in the third party’s mill, downside, is that they do not akin to toll treatment, with the tribute holder receiving payment based on the contained capture 100% of the economics gold less metallurgical recovery at the prevailing gold price. Tribute holders typically pay of a deposit royalties to the licence holder or enter into a profit share agreement. Fundamentally, this is a win-win for both parties, although the downside is that the tribute holder does not capture 100% of the economic benefit – this is mitigated by access to near-term cash flow and an attractive IRR, given zero upfront capex and existing infrastructure. Figure 4 -Advantages of Tribute Agreement style projects

Source: Shard Capital

22 March 2016

As projects are located on existing mine sites, minimal capex is required as there is no need to permit and construct a processing plant. Subsidising future development to minimise dilution Revenue from Grants Patch, the most advanced gold tribute should position Keras to acquire larger projects, taking advantage of current valuations at the bottom of the cycle. Cash flow will be utilised to bring the other tribute projects into production. In Cash flow will be directed towards expanding production additional funds will be directed towards re-starting the Prince of Wales underground from high-grade underground mine on the Grants Patch licence, and also for development of the Nayega manganese deposits or new acquisitions project in Togo. This is likely to significantly reduce equity funding requirements and reduce future dilution. Leap-frogging the high risk / high cost stages The rationale for the strategy of moving the company’s focus to advanced stage gold tribute projects can be seen by reference to our conceptual resource life-cycle / value curve below. The nature of the tribute agreements; mining previously identified orebodies and processing at existing operations, effectively means that Keras by-passes the high risk and high cost exploration and evaluation stages. The benefit of this strategy is that Keras does not have to expend significant funds testing and evaluating potential deposits. Rather, expenditure is limited to due diligence and confirmatory drilling, in actual fact, essentially only grade control and blast-hole drilling to directly support the commencement of mining. Keras also skips the high cost and long time lines associated with feasibility studies and permitting.

Figure 5 - Resource value curve: Gold tributes well positioned

Source: Shard Capital

22 March 2016

News Catalysts & Development Plan We expect increased news flow in 2016 for Keras as the company moves towards maiden gold production at its Australian Tribute projects. Based on Keras’s current schedule, first gold production is on track for Q2 2016 from two deposits (Anomaly 22 and Accord), part of the Grants Patch tribute. From mid-2016 onwards, we believe Keras will hit its stride as production starts to ramp up from multiple deposits. Bent Tree and Royal Standard North will be the next cabs off Transitioning to become a gold the rank in the Grants Patch Tribute, followed by production from Wycheproof in Q3 producer in Q2 2016 with an 2016. Following on, Keras then plans to expand the production base by mining open pits aim to be producing 30-40 koz on the KalNorth project, the company’s third tribute, from Q3 2016. per annum by 2017 Building towards a 30-40koz pa gold producer From 2017 onwards the production plan has not been finalised but it is likely to see the introduction of underground mining into the mix, targeting Parrot Feathers (part of KalNorth) and then the larger prize of the Prince of Wales underground (Grants Patch). Ultimately, Keras’s vision in the near-term is to become a 30-40koz pa producer with operations centred in Western Australia. We do not expect a significant volume news flow from the company’s manganese asset in Togo, although this remains an important project for Keras. We also anticipate that Keras will enter into more tribute style deals and project acquisitions in Western Australia. Figure 6 - Conceptual development and production timeline

Source: Shard Capital estimates. Yellow blocks – potential production rate (annualised)

Based on the above, Keras anticipates the following production profile:  2016. Annualised 15-25koz. 15kozpa from Grants Patch and Wycheproof with 10kozpa coming on line from Lindsay’s open pit (KalNorth) from Q3.  2017. Annualised 30-40koz. 10kozpa from Lindsay’s underground, 15-20kozpa from POW underground. Target run-rate 30-40kozpa.

22 March 2016

Funding & Financials The Board has considerable skin in the game Ferrex (pre-Keras name change) completed a fund raising in February 2015 for £815,000 (127m shares at 0.5p) with significant support from the Board, increasing the alignment of Director’s interests with Keras shareholders. The proceeds from the placing were earmarked at the time for working capital as Ferrex evaluated financing options for the construction of its 250ktpa manganese project in Togo. In February 2016, Keras raised £563,889 through the issue of an unsecured loan note, in order to provide the working capital required to commence production in Q2 at the Grants Patch tribute project. Dave Reeves, Managing Director of Keras, and Peter Hepburn-Brown, Non-Executive Director, subscribed for £194,444 and £50,000 nominal value Notes respectively, considered to be a related party transaction under AIM rules. The debt nature of the funding provided the advantage of not issuing equity and diluting shareholders, in addition to further demonstrating the Board’s commitment to new focus on Australian gold. Keras is also looking at ways to realise value from non-core assets (all African iron assets and the Leinster Manganese Project), with any funds from assets sales being directed to the gold projects, or Nayega manganese project. Fast-tracked open pits will subsidise further development Keras does not require significant funding at this stage, as we believe once Grant’s Patch is in production, cash flow will be used to ramp up production at other deposits according to the mining plan and provide funds to potentially acquire further projects. Once Keras has the open pit operations up and running, the company plans to investigate development of higher grade underground opportunities such as Parrot Feathers and the Prince of Wales. However, Keras may take the option of a small raise to fast-track POW or KalNorth depending on the development schedule. Keras has not disclosed the potential capital cost of developing POW or Parrot Feathers, as the internal feasibility study has not been finalised yet. Thus is not possible to make any assumptions about further fund raising plans for capital projects. However, we believe that given existing underground infrastructure in place at POW, it is likely that cash flow from the open pits has the potential to contribute a significant portion to the capital outlay required to re-start underground mining. Valuation Considerations – too early to peg We usually value gold developer and producers using a blend of NAV derived from Focus on margins and cash flow discounted cash flow analysis (our preferred valuation technique) and forward cash flow at present. We will revisit valuation once multiples. mine plans are finalised and the However, given the early stage of the gold projects, the lack of publically disclosed data is available to build a DCF production, operating cost, and capital cost schedules, and the fluid nature of the model production timeline over the coming year, it is not possible for us to build an accurate DCF model and forecast Keras’s financials. Once Keras has completed and disclosed the results of internal feasibility studies and set out a firm development plan, we will re-visit a DCF valuation. Near-term focus on cash flow Until formal valuation is possible, we can only look at the potential for margins and cash flow and the very low capex requirements associated with tribute mining. If Keras manages to mine at an AISC in the range of A$1,000-$1,200/oz, then we believe that the current tribute operations have the potential to kick of considerable cash flow, even after royalties and profit shares are taken into account.

22 March 2016

Australian Gold – Exploiting the sweet spot It is important to understand the opportunity currently presented to Australian gold producers as a result of the gold price and US Dollar / Australian Dollar FX rate. Despite the wider commodity sector remaining in the doldrums, the Australian gold sector is thriving on the back of robust margins. Keras Resources is thus set to make a well-timed and potentially lucrative entry into a buoyant sector which is currently offering above trend returns. The chart below shows the divergence of gold prices denominated in Australian dollars and South African Rand, from the primary US Dollar gold price. Figure 7 -Gold prices – Australian Dollar and Rand prices diverge from USD 2,000 22,000

20,000 1,800 Gold price currency divergence 18,000 1,600

16,000 ZAR/oz

AUD/USD /oz AUD/USD 1,400 14,000

1,200 12,000

1,000 10,000

Gold (AUD) Gold (USD) Gold (ZAR)

Source: Shard Capital, Gold.org, Kitco

Over the last three years in particular, a significant gap has opened up (Fig 8) between the US Dollar Gold Price and the Australian gold price. This has been driven by the partial breakdown in the relationship between the Australian Dollar and the US gold price, which up until late 2014 tended to have a positive correlation, and the marked depreciation of the Australian dollar. This is illustrated in Fig 9 which shows that from Q4 2014 the US gold price trended flat or down, with a falling, but not perfectly correlated AUD-USD FX rate, and a strongly rising gold price in Australian dollar terms. Figure 8 - Gold: Australian vs US Dollar Price Figure 9 - Gold price vs AUD-USD FX

1,800 1,800 1.10

1.00 1,600 1,600

0.90 1,400

1,400 FX USD -

0.80 AUD

1,200 Gold (A$ amd US$/oz) amd (A$Gold 1,200 0.70

1,000 1,000 0.60

Gold (AUD) Gold (USD)

Gold (AUD) Gold (USD) AUD/US FX Source: Shard Capital, Kitco, Reuters

22 March 2016

US Dollar strength good for Aussie Gold The recent strength in the US Dollar, with the dollar index up 23% over the last two years has put downward pressure on the Australian dollar. In mid-July 2013 the Aussie dollar was trading at parity with the US dollar, but is now at 0.78, having traded as low as A$0.70 to the dollar in late 2015. Invariably, this is good news for the Aussie gold price, with the weaker currency lifting demand for gold. Back in 2011 when the US gold price was peaking at $1,900/oz, the Australian dollar was also strong but… input costs remained high, negating much of the benefit of the rising gold price. Thus, the Australian gold industry has undergone a virtual renaissance over the last three years with the depreciation of the Australian dollar and resulting high Aussie gold price (only around $100 away from its all-time peak of A$1824/oz in August 2011) providing significant tailwinds. Cheap oil and spare capacity has driven down input costs However, the other main factor which has contributed to the “perfect storm” is the material decrease in input costs across the whole industry. As the iron-ore-led resources boom fizzled out, Australian miners have seen rates for labour, drilling, consumables (explosives, tyres, spare parts), freight rates, power and contracting fees decrease significantly. With high levels of spare capacity, miners have been able to negotiate deals on capital equipment purchases as well as raw material inputs. All this has also been helped along by the freefall in the oil price, a boon for energy intensive mining operations. This has led to Australian gold miners currently enjoying the some of the highest margins in recent history.

Figure 10 - Australian labour costs are falling Figure 11 - AUD-USD FX and Oil Price (Brent)

102.5 140 1.10

102.0 120 1.00

101.5 100 0.90 101.0 80 0.80

100.5 60 FX AUD/USD BrentCrude ($/bbl) 0.70 100.0 40

99.5 20 0.60

99.0 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 BRENT AUD/USD FX

Source: Australian Bureau of Statistics. Indexed 2008=100 Source: Shard Capital, Reuters

Labour costs cooling Labour costs in Australia have been steadily falling. Labour costs impact the cost structure of a mining operation significantly, with labour and wage costs representing between 30% and 50% for a typical mine. During the resource boom between 2009 and 2012, wages in the resource sector increased by over 40%, reflecting the high demand for labour as the industry expanded. However, mining employment fell by 19% in 2014, and according to BIS Shrapnel, the industry is likely to see up to 20,000 jobs fade by the end of 2018.

22 March 2016

The outperformance of Australian gold equities versus some of the largest global producers is marked. The two charts below show share prices indexed on 1st January 2015 and are presented using an identical scale for reference. The strong performance of the Australian producers is clear. Figure 12 - Australian Gold Producers Soar Figure 13 - World Gold Producers Flat line

350 350

300 300

250 250

200 200

150 150

100 100 50 50 0 0

Newcrest Alacer Gold Evolution Mining Regis resources Northern Star Goldcorp Barrick Newmont Yamana Kinross Eldorado Gold Fields

Source: Shard Capital, Reuters

To further illustrate the point as to why we believe Australian gold producers currently offer superior returns, we have analysed the margin between the average All-In- Sustaining Cost (AISC) for 2015, versus the actual realised gold prices for the same period, for a some of the largest Australian and Global gold producers. We have normalised the data to US dollars. AISC is a relatively new metric which seeks to measure more comprehensively the all-in cost of producing an ounce of gold, by including G&A and sustaining capital on top of the usually reported cash costs. The data is clear, with the Australian producers enjoying AISC margins of between $300- $450/oz or 30-40%, versus global producers returning margins markedly lower - below $300/oz and as low as $85/oz or 8-25%. Similarly, analysis of EBITDA margins taken from 2015 year-end financials indicate that in general, Australian producers have enjoyed much higher margins. Figure 14 - AISC margin (US$/oz and %) Figure 15 - EBITDA Margin (%)

500 41% 38% 39% 450 36% 50% 400 31% 31% 350 29% 40% 25% 300 24% 21% 22% 250 30% 200 12% 150 20% AISC Margin (US$/oz) AISC 8%

100 2015Margin (%) EBITDA 10% 50 0 0%

Australian Gold Producers Global Gold Producers Global Gold Producers Australian Gold Producers Source: Shard Capital, Company Annual Reports

The strong performance has been driven by more than just lower input costs and FX. Australian producers have shown good cost management discipline, sweating assets hard and undertaken major optimisation programmes in order to reshape assets and run much leaner operations. This has resulted in greater profitability allowing Australian producers to fix up their balance sheets, e.g. Newcrest reported free-cash flow of A$1bn in 2015 (up from A$133m in 2014) and was able to reduce net debt by $819m.

22 March 2016

Location – Western Australia is the No.1 Jurisdiction The latest Fraser Institute Survey of Mining Companies (2015) ranks Western Australia Western Australia ranked No.1 as the top jurisdiction in the world (1 out of 109) based on its Investment Attractiveness out of 109 jurisdictions based Index, an impressive accolade. Western Australia has demonstrated stability and the on: fact that it has generally been ranked in the top 5 since the survey began over 10 years Geological prospectivity, policy, ago is a considerable achievement. tax, government support and infrastructure amongst others Figure 16 -The Fraser Institutes’ Invest Attractiveness Index

Western Australia

Finland Quebec South Australia Sweden

British Columbia Kazakhstan

Greenland Burkina Faso Ghana Namibia

Mexico

Papua New Guinea

Russia Indonesia Ethiopia Madagascar Brazil New Mexico DRC

China South Africa Zambia Angola Philippines

Malaysia Fiji

Mali

Myanmar Niger Ecuador Bolivia

Zimbabwe

Kenya Solomon Islands Venezuela

0 20 40 Score % 60 80 100

Source: The Fraser Institute, Shard Capital

The ranking is based on a variety of extensive and wide ranging inputs encompassing geological prospectivity, policy potential and best practice Mineral Potential Index. These measures analyse the investment attractiveness taking in legislation, tax, stability, environmental and labour regulations, geological databases and quality of infrastructure to name only a few. Western Australia has been ranked No.1 and is deemed a best practice environment i.e. one that contains a world class regulatory environment, highly competitive taxation, no political risk or uncertainty, and a fully stable mining regime. Furthermore, Western Australia was deemed one of the jurisdictions where it is possible to permit and build a mine into production, faster than anywhere else in the world.

22 March 2016

Processing capacity in WA, plenty of options The opportunities for developing tribute agreements in Western Australia are numerous. With approximately 50 gold processing plants in the State there is no shortage of potential mills, some of which will be amenable to toll processing agreements and would welcome high-grade ore to blend into the mill.

Figure 17 - Western Australian Gold Processing Operations

Production Name State Company Status Capacity (ktpa) Location Process type 1 Boddington WA Newmont Mining Corporation Operating 36,000 Boddington Cu-Au 2 KCGM - Super Pit WA Barrick Gold Corp/Newmont Corp Operating 12,200 KCGM Gravity-CIL-roaster 3 St Ives WA Gold Fields Operating 4,800 St Ives Gravity - CIP 4 Garden Well - Erlistoun WA Regis Resources Limited Operating 4,000 Lav-Duke CIL 5 Granny Smith (YilgSthOps) WA Gold Fields Operating 4,000 Granny Smith CIP 6 Sunrise Dam WA Anglogold/Ashanti Operating 3,600 Sunrise Dam Gravity - CIL 7 Paddington WA Norton Gold Fields Limited Operating 3,300 Paddington Gravity - CIP 8 Edna May WA Evolution Mining Limited Operating 2,800 Edna May 9 Jundee WA Newmont Mining Corporation Operating 2,500 Jundee Gravity - CIP - 10 Moolart Well WA Regis Resources Limited Operating 2,500 Moolart Well CIL 11 Carosue Dam WA Saracen Mineral Holdings Limited Operating 2,400 Carosue Dam Au 12 Kanowna Belle WA Barrick Gold Corporation Operating 1,900 Kanowna Belle CIP - CIL 13 Scuddles WA Minmetals Resources Limited (MMG) Operating 1,800 Golden Grove Poly Met 14 Checker Mill WA Ramelius Resources Limited Operating 1,700 Mt Magnet Gravity - CIL 15 Nullagine WA Millennium Minerals Ltd Operating 1,500 Nullagine CIL 16 Golden Eagle WA Millennium Minerals Ltd Operating 1,500 Nullagine 17 Trident Plant WA Metals X Operating 1,350 Higginsville CIL 18 Agnew WA Gold Fields Operating 1,300 Lawlers CIP 19 Sons of Gwalia WA St Barbara Limited Operating 1,200 Leonora Au 20 Randalls (Salt Creek) WA Silver Lake Resources Operating 1,200 Salt Creek CIL 21 Greenfields Mill WA FMR Investements Operating 1,000 3 km E Coolgardie CIL 22 Lakewood WA Silver Lake Resources Limited Operating 1,000 South Kal Au 23 Darlot WA Gold Fields Operating 700 Darlot CIL 24 Lawlers WA Gold Fields Operating 700 Lawlers CIL 25 Paulsens WA Northern Star Resources Limited Operating 450 SW Pilbara CIL 26 Burbanks Mill WA Ramelius Resources Limited Operating 200 Coolgardie CIL 27 Tropicana WA AngloGold Ashanti Limited Commenced Sep 2013 5,800 Tropicana CIL 28 Curara Well WA Mount Magnet South NL(MMS) Refurbishment?? 1,200 Kirkalocka CIP - CIL 29 Fortnum WA Resource and Investment NL Refurbishment 1,000 Peak Hill CIL 30 White Well WA Cobra Mining-MutinyGold ? 900 Tuckabianna Gravity - CIL 31 Nimbus WA McPhersons Reward Gold Limited Refurbishment 490 SE Kalgoorlie Poly Met 32 Andy Well (Processing Plant) WA Doray Minerals Commenced 2013 200 Nth of Meekatharra 33 Blue Bird WA Reed Resources Limited Care and Maintenance 3,000 Meekatharra CIL 34 Thunderbox WA Saracen Mineral Holdings Care and Maintenance 2,500 Leonora CIL 35 Marvel Loch WA St Barbara Limited Care and Maintenance 2500 Marvel Loch 36 Bronzewing WA Metaliko Resources Care and Maintenance 2,300 Yandal 37 Barnicoat WA Focus Minerals Limited Care and Maintenance 1450 Laverton CIL 38 Plutonic Plant WA Northern Star Resources Care and Maintenance 1,200 Marymia CIL Oxide Plant 39 Wiluna WA Apex Minerals NL Care and Maintenance 700 Wiluna Biox - CIP 40 Bullant WA Norton Goldfields Care and Maintenance 700 Bullant 41 Sandstone WA Southern Cross Goldfields Limited Care and Maintenance 600 Sandstone CIP 42 Minjar (at M1) WA Minjar Gold Pty Ltd Care and Maintenance 600 Yalgoo CIP 43 Coyote WA Tanami Gold NL Care & Maintenance 350 Tanami CIP 44 Brightstar WA Stone Resources Australia Limited Care and Maintenance 300 SE Laverton 45 Burnakura WA Kentor Gold Limited Care and Maintenance 260 Burnakura CIL 46 Bamboo Creek WA Haoma Mining NL Care & Maintenance 150 Pilbara Gravity 47 Nicholsons WA Bulletin Resources Limited Care & Maintenance 120 Lamboo CIL 48 Mt Holland WA Convergent Minerals Limited Care and Maintenance 0 Forrestania CIL Source: Geoscience Australia

22 March 2016

Australian Gold Tribute Projects

Keras Resources currently has three gold tribute agreements in Western Australia; Grants Patch, Wycheproof and KalNorth, all located in the Western Australian Goldfields. In total, the tribute agreements cover known historical resources of 585koz. Grants Patch will be the first tribute to go into production. Figure 18 - Keras’s tribute projects are all located in the prolific Kalgoorlie District

Keras currently has three tribute agreements: Grants Patch Wycheproof KalNorth

Source: Keras Resources Comment [P1]:

Keras – One of the only ways to play the sector on AIM If all goes to plan and Keras is successful in its plans for maiden gold production by Q2- No other mining company on 2016, then the company will be become somewhat of a rare breed on the AIM market. either AIM or the LSE Main List Despite the dominance of mining companies on AIM (c.140 companies out of 1000), provides exposure to the only 36 of those are gold mining, and none of those have producing gold mines in Australian gold sector. Australia. We believe that Keras will soon become the only Australian gold producer on

Keras will soon be the only AIM and the only way to gain pure-play exposure to this buoyant sector. It is also worth Australian gold producer on the noting that this is also the case for the eight gold miners listed on the LSE’s Main UK market Market. As far as AIM goes, the only other companies with exposure to Australian gold have very early stage exploration projects; Greatland Gold (Ernest Giles gold project, WA, early stage exploration. Wishbone gold (Queensland, early stage and moved focus to trading operations in Dubai) and SolGold (idle projects in Queensland).

22 March 2016

Tribute 1: Grants Patch Keras acquired the Grants Patch gold project in late 2015 through the acquisition of Tribute with Norton Goldfields. 100% of Chaffers Mining, a private company. Chaffers Mining had negotiated a five-year Ore mined by Keras will be tribute agreement with Norton Goldfields to mine defined gold deposits located on processed in Norton’s Norton’s leases, covering both open pit and high-grade underground deposits. Keras Paddington Mill commenced mining at the project in late March 2016 and expects first production and revenues from Q2. Norton’s leases are located 30km north of Kalgoorlie, centred on the Paddington mine complex. Keras plans to transport ore to Norton’s Paddington processing plant, located 25km away. Infrastructure is good, with an existing road network meaning that additional expenditure on infrastructure is not required. Figure 19 -Grants Patch – Regional Location – in the heart of the Goldfields

Source: Keras Resources, Chaffers Mining Comment [P2]:

Low acquisition cost Keras acquired 100% of Chaffers for an initial consideration of £465k in shares (93m shares at 0.5p), with an additional consideration of £465k (at the 30day VWAP) on production of 10koz gold. This represents an extremely low acquisition cost by industry standards, in our view, equating to c.$4/oz resource based on historic resources of 350koz, well below current EV/oz valuations of c$25/oz for gold developers. Based on anticipated production of 30kozpa, this equates to $48/oz annual production ounce, significantly below the average $1000/oz we assess for non-producers.

22 March 2016

Tribute structure – a win-win situation The tribute agreement has a simple structure whereby Keras will pay all mining and processing costs, plus a 22% royalty on gold recovered to Norton. The agreement is for a five-year period but we envisage scope for this to be extended, given that the agreement benefits both parties; providing access to near-term production projects for Keras, and an additional revenue stream for Norton at no cost. Furthermore, there are 80 known prospects across Norton’s tenement package. Norton Goldfields (ASX: NGF) was a mid-tier gold producer until the company was acquired by its majority shareholder, Zijin Mining Group in June 2015. Zijin is a large state-owned Chinese group – one of the largest gold producers and the largest copper producer in China. Norton became a wholly owned subsidiary of Zijin. Resources – robust grade Average resource grade 2g/t is The total historic resources for all the deposits within the Grants Patch Tribute amount well above the industry average to 363koz. Deposits comprise of remnant resources below previously mined open pits and underground, plus unmined near surface deposits. Chaffers estimated that 461koz of gold had previously been mined from the assets. The average grade of 2g/t Au compares well to other deposits in the region, in our view, and in particular against the average 0.82g/t grade of undeveloped gold projects worldwide. Figure 20 - Historical Resources (Non-JORC) Name of deposit Type Tonnes (kt) Grade (g/t Au) Contained Gold (ozs) Accord Open Pit 245 1.14 8,980 Bent Tree Open Pit 437 1.52 21,369 Anomaly 22 Open Pit 55 1.60 2,814 Golden Arrow Open Pit 199 1.60 10,237 Wendy Gully Underground 2,250 2.23 161,316 Regal Open Pit 635 1.80 36,748 Prince of Wales Underground 154 8.00 39,610 Tattersals North Open Pit 47 1.35 2,029 Tattersals South Open Pit 44 2.07 2,892 Coco Open Pit 5 6.53 1,000 Zsa Open Pit 364 1.59 18,608 Dark Horse Open Pit 1,307 1.38 57,998 Total 5,741 1.97 363,601

Source: Keras Resources, Chaffers Mining. Estimates at various cut-off grades

Geology - a highly prolific terrane Mineralisation in the Paddington area is typical of the shear-zone related lode gold style associated with the Archean Yilgarn Craton. The rocks form part of the extensive Kalgoorlie granite-greenstone belt, a highly prolific terrane with a >160Moz endowment. The gold at Paddington is mainly hosted within a granophyric quartz dolerite intruding and crosscutting a basic volcanic unit, with mineralisation hosted in sheeted quartz veins. Mineralisation also occurs within laterite as a supergene enriched zone. At Grant’s patch mineralisation is generally hosted entirely within a mafic sequence. The Keras will use a hire mining fleet key takeaway is that gold mineralisation is non-refractory and moderately high-grade. which arrived on site in early March 2016 Mining – simple, low cost, no pre-strip! Mining is straightforward, utilising conventional truck and shovel open pit techniques. Drilling is required for grade control and blast hole purposes only, with virtually all expenditure directly supporting the re-start of production. It is important to recognise that no pre-strip is required, i.e. it is not necessary to pre-mine significant tonnes of waste rock before gaining access to ore. Mining will immediately access ore, reducing working capital requirements and the time to first cash flow.

22 March 2016

Processing Keras will mine various deposits on the tribute ground and deliver the ore to the Paddington Mill, where it will be weighed and sampled using an installed Sample Plant. Keras will be paid on the tonnes delivered times the sample grade and % recovery from the Sample Plant within 30 days of ore delivery. Production Plan – First Gold in Q2 2016 Keras plans to develop the shallow laterite and oxide deposits first in order to generate cash flow. The first two deposits targeted as part of this strategy are Accord and Anomaly 22. Keras has verified historical data and undertaken in-house modelling which indicates that the two deposits collectively contain an estimated 164kt at 1.4g/t for 7.2koz Au. A small RC (reverse circulation) drill programme supports mine planning and Keras is aiming for a mining run-rate of 30,000tpm during Q2 2016. In conjunction with Wycheproof, Keras plans to produce at an annualised rate of 15koz pa. Starting off with a bulk sample Keras completed its first blast at Anomaly 22 on 17th March, an impressive achievement, coming only four months after signing the tribute agreement. An initial bulk sample of 10,000t will be mined in order to confirm grade continuity, mining practices and ore A 10,000t bulk sample will delivery mechanisms to the Paddington Mill. provide confidence in the grade and mining practices, plus have Keras believes that Accord and Anomaly 22 will provide enough ore to support four to the added advantage of five months of mining. The mining of these deposits forms the first step in achieving providing early cash flow Keras’s aim of establishing a c.30kozpa mining operation. The cost to commence production is limited to working capital only, which Keras anticipates to be a low $300k. Modelling of Bent Tree (21koz at 1.52g/t), a remnant open pit, previously owned by Barrick Gold, is ongoing with a view to scheduling the deposit after Anomaly 22 and Accord.

Figure 21 -Grants Patch deposit locations

Source: Keras Resources, Chaffers Mining

22 March 2016

All set and ready to commence mining The photos demonstrate the advanced stage of operations at the Grants Patch project. It is important to note the speed with which Keras can transition into a gold producer by targeting shallow deposits with little or no strip ratio, where gold mineralisation starts from surface.

Figure 22 - Clearing underway at Accord Figure 23 - First laterite pit cleared for mining

Figure 24 - Mining fleet en-route to site Figure 25 - Blasthole rig on-site

Source: Keras Resources

22 March 2016

Paddington – feeding a hungry mill – Keras has the grade to play The Paddington mining operation has a long history. A combined open pit and underground operation which produced 178koz in 2014, with Norton guiding 182- 190koz at a C1 cash cost of A$870-920/oz. The Paddington mill is located with Norton’s 1,105km2 tenement package. Norton’s strategy remains firmly on organic growth as part of a plan to increase production and reduce costs. The strategy remains focused on achieving base-load production from open pits mines such as Enterprise and Wattlebird, supplemented with higher grade ore from underground mines such as Homestead and Bullant. Paddington has 7Moz in JORC-compliant resources at 1.47g/t Au and 1.1Moz reserves at 1.86g/t Au. It is pertinent to note that the 1.1Moz reserves are sourced from 15 different deposits, and thus Paddington is the very definition of a regional processing hub which is set up to process ore from multiple deposits. This means that ore mined by Keras should seamlessly fit into the mill’s processing schedule.

Paddington Mill is crying out for Paddington’s LOM plan is based on supplementing base-load production with smaller high-grade feed higher grade open pit deposits and ore from third parties which are selected to meet ore-blending requirements, whether soft oxide or hard primary ores. Paddington already processes third party ore from Phoenix Gold (since taken over by Evolution Mining) and Excelsior Gold. Soft laterite-hosted ore is always in high-demand for mills as it is metallurgical simple to process and often higher grade. The mill has a nameplate capacity of 3.3Mtpa, but in 2014 record throughput of 3.7Mtpa was achieved. The average grade mined in FY14 was 1.31g/t for open pit and 5.6g/t from underground sources. The deposits covered in Keras’s tribute agreement have an average grade of 1.52g/t (open pit only) and Prince of Wales (underground) has a grade of 8-10g/t Au. This means that on a grade basis, ore mined by Keras should be sought after. Figure 26 - Paddington Mill location and infrastructure

Source: Norton Goldfields

22 March 2016

POW Underground – the high grade prize Keras has commenced an internal feasibility study focussed on assessing options for re- start of mining at the high-grade Prince of Wales (“POW”) underground mine. The mine operated historically but was closed in 1992 when cyclonic rains flooded the mine and made the headframe and winder unusable. POW produced 230koz at an average grade of 9.56g/t as detailed in the table below. Figure 27 - Prince of Wales – Historical Production Period Tonnes (kt) Grade (g/t Au) Contained Gold (ozs) 1987-1992 570 8.7 159,435 Pre-1971 184 12.2 72,440 Total 754 9.56 231,875

Source: Keras Resources

The long section below illustrates the extensive development and mine infrastructure already in place at POW. The mine is accessed by a shaft which connects down to the 7 Level. Before mining can re-commence, Keras plans to rehabilitate this existing shaft and install a new headframe and winder – a process which is expected to take 9-12 months, depending on the level of rehabilitation required. Due to the thin nature of the orebody (1.2m), narrow vein mining methods will be employed using hand-held machines, of which the Keras team has extensive experience.

Figure 28 - Prince of Wales Long Section

Source: Keras Resources

22 March 2016

Untapped Potential The POW orebody is developed as a steeply dipping siliceous lode hosted within meta- basalt and the orebody remains open to the east, west and down dip, representing an exciting opportunity for Keras to go back into existing workings and commence development without the need to sink a new capital intensive shaft or decline. As can be seen on the long section on the previous page, numerous high-grade intercepts have been identified below the current stoping level (Level 10), including 6m at 11g/t Au and 0.42m at 126g/t Au. POW could produce 15-20koz per annum Keras believes that the POW lode may contain 650kt of ore, grading 8-12g/t Au which would equate to 167-250koz of contained gold. The company plans to re-access historical stopes to accelerate production whilst developing down to level 11 to access already delineated high-grade ore. Keras plans to produce at a rate of 5,000tpm, which based on an assumed head-grade of 10g/t Au, metallurgical recovery of 90%, but excluding dilution, equates to c. 17kozpa. It is too early-stage to estimate the capital cost to re-start mining at POW until Keras has completed the internal feasibility study. However, given the underground infrastructure already in place, we anticipate a significant component of initial capex to be funded from cash flow generated from the open pit tribute operations. Future underground sources being evaluated for the Paddington mill include Tuart (6.39g/t), Golden Kilometre (4.17g/t) and Federal (5.36g/t). Thus, POW at 8-10g/t Au looks attractive as a potential feed source.

22 March 2016

Tribute 2: Wycheproof Keras acquired the Wycheproof gold tribute agreement in February 2016, structured as a profit share agreement with Kalgoorlie Mining Associates, a private company. The tribute dovetails nicely with Keras’s existing Grants Patch tribute agreement and will contribute to the combined 15koz pa rate from both tributes. Small but potentially lucrative Wycheproof is a small high-grade shallow deposit located on an existing mining lease. The deposit has a non-JORC resource of 75kt at 2.87g/t Au for 6,974oz contained gold at a 1g/t cut-off. The deposit is well suited for a discrete open pit operation with low strip ratio. Wycheproof is located 18km from Norton’s Paddington mill. The majority of mineralisation is contained within a westerly dipping quartz porphyry which extends from surface to base of drilling and is open at depth. There are several cross cutting faults which seem to have increased the mineralisation in and around the intersection plane between these and the mineralised quartz porphyry. Complements Grants Patch Keras believes that Wycheproof could be brought into production within a short timeline, with mining to be undertaken alongside production from Grants Patch, utilising any idle standing time of the mining fleet and providing a useful stop gap in the mining schedule. Mining is anticipated to commence in Q3 2016, subject to approval of the Mining Proposal and Project Management Plans. Norton Goldfields has a first right of refusal to treat the ore and Keras is in the process of finalising an agreement in this regard. Another low cost acquisition The tribute agreement is structured as a profit share with minimal consideration paid upfront; 5% of the predicted profit is to be paid upfront to the permit holder, plus A$70k to the right-to-mine owner on first production. Once in production a 2% royalty is payable to Norton, with all profits then shared 50:50 between Keras and the right-to- mine owner.

22 March 2016

Tribute 3: KalNorth Keras entered into an option agreement for a third tribute in March 2016 with KalNorth Gold Mines Limited (ASX:KGM). KalNorth is an ASX-listed gold developer which holds a dominant 1,400km2 land position in the Eastern Goldfields, Western Australia. The agreement is structured as a profit share over the Lindsay’s Project, and Keras is targeting first production in Q3 2016. Location, Location, Location Lindsay’s project is located 65km NNE of Kalgoorlie, c.60km NE of Grants Patch, and is the largest project within the more extensive Lindsay’s Field area which is comprised of a contiguous package of two granted mining leases and several prospecting licences. Infrastructure is good with the tenements accessible via a network of sealed and gravel roads. The tenements are also covered by land access agreement with Central East Native Title Group. As the map below demonstrates, the Lindsay’s project is exceptionally well located with five gold processing plants located nearby, all of which have a history of treating toll ore. During Lindsay’s brief period of operation in 2013, ore was processed at Saracen’s Carosue Dam mill, 70km to the east, where a haul road still exists. Figure 29 - Lindsay’s Project map

Source: KalNorth Gold Mines

Tribute Structure The tribute structure is simple and critically has no upfront acquisition cost. The agreement is structured as a profit share. Gross revenue will be allocated in order as follows:  Payment of State or Government royalties, direct operating expenditure and working capital expenditure.  10% of operating cash flow deemed as a management fee payable to Keras.  Amount remaining after deducting the management fee to be split 49:51 between Keras and KalNorth for a gold price equal or lower than A$1,600/oz and 70:30 to Keras at a gold price above A$1,600/oz.

22 March 2016

Well-defined Resource JORC-compliant resources that form part of the tribute agreement amount to 3.9Mt at 1.7g/t Au for 215koz contained gold, of which 165koz or 77% sits in the indicated category, demonstrating the continuity and confidence of the resource estimate. The gold grade is variable, particularly at Parrot Feathers which displays marked nugget effect due to the vein-hosted nature. Mineralisation extends 0.5m from the vein into the wall rock at Parrot Feathers which should help reduce dilution. Figure 30 - Lindsay’s Mineral Resource Estimate – JORC-compliant (2004)

Indicated Inferred Total Deposit Tonnes (kt) Grade (g/t) Ozs Tonnes (kt) Grade (g/t) Ozs Tonnes (kt) Grade (g/t) Ozs Eastern Structure 1,479 1.6 76,000 203 1.6 10,500 1,682 1.6 86,500 Parrot Feathers* 140 4.0 18,000 261 4.3 36,000 401 4.2 54,000 Central Structure 1,315 1.1 46,500 48 1.1 1,700 1,363 1.1 48,200 Neves Prospect 491 1.6 24,900 38 1.3 1,500 529 1.6 26,400 Total 3,425 1.5 165,400 550 2.8 49,700 3,975 1.7 215,100 Source: Keras Resources. *Parrot Feathers is JORC-compliant (2012)

Geology and mineralisation – continuous vein with depth potential The project is situated in the Archean Kalgoorlie terrain, in the Eastern Goldfields, within a broad NW trending deformed sequence of basalts, dolerites and intercalated metasedimentary rocks. Mineralisation is typical of orogenic systems with a strong litho- structural control with gold associated with a series of moderately southwest-dipping shear zones, with the most robust gold mineralisation hosted within dolerite. High-grade mineralisation remains open to depth At Parrot Feathers, high grade gold mineralisation occurs in a zone of alteration and quartz-sulphide veining within the host shear. Mineralisation has been demonstrated to extend to considerable depths, with the main vein defined over a 300m strike length, down-dip for 440m, and mineralisation remains open at depth. The vein varies in thickness from 0.5m to 5m, but is generally 1-2m wide. The deepest intersection in the current wireframe at 440m returned 4m at 3.4g/t Au indicating the potential to expand the resource to depth, in our view. Mineralisation extends up to 200m below the current resource envelope with historic drill intercepts outside the resource including 1.15m @ 10.12g/t and 2.8m @ 4.41g/t. Furthermore, the width, grade, continuity and geometry of the Parrot Feathers vein exposed in the base of the stage 2 pit provides further confidence in extrapolating the structure to depth. Three diamond holes in 2015 targeted the vein below the pit and intersected mineralisation in the expected position. Figure 31 - Lindsay’s X-Section showing main vein Figure 32 - Schematic of potential underground operation

Source: KalNorth

22 March 2016

History – Challenging mining but now an opportunity for Keras Mining commenced from the Parrot Feathers open pit in January 2013 with KalNorth planning to mine c.400kt over an 18-month period and produce 40koz gold. Ore was hauled in 170t trucks along a 72km haul road to Saracen’s Carosue Dam processing plant. Three open pits were developed, the largest being Stage 2 which focused on the Parrot Feathers Structure as described previously. However, due to a combination of low gold prices and technical challenges, only 132kt of ore was processed, yielding a mere 6,153oz, and mining operations were suspended in August 2013. Primarily, this was due to the challenges associated with mining a flat-dipping narrow mineralised structure, exacerbated by poor equipment availability, blasting issues and grade control problems with poor reconciliation to the geological model due to dilution. At the time it was difficult to make instant changes due to the 4 week turn-around time for sample assays. These are typical issues with mining narrow vein, nugget deposits but we believe that Keras’s approach and narrow vein mining knowledge should overcome these historical issues. Figure 33 - Lindsay’s Pit

Source: KalNorth Gold Mines, Ravensgate

Mining and Processing – new technology set to improve Keras plans to focus initially on the open pits, targeting near-surface mineralisation for early cash flow, the “low hanging fruit”. The gold mineralisation is hosted in quartz (white/transparent crystalline) whereas the host rock is basalt (a dense, dark-coloured mafic rock). Thus, Keras plans to mine, crush and then utilise an optical sorter to separate the mineralised quartz from the waste. This cost-effective and efficient technique will sort the crushed rock on the basis of colour and brightness to concentrate the quartz, minimising dilution (maintaining grade) and reduce the tonnage (and thus loading/transport costs). It is anticipated that ore will be treated in one of the five nearby mills, although given the existing haul road to Carosue Dam, we believe it makes sense to truck the ore here. Discussions with mills are underway.

It is not possible to accurately Production Plan – On track for Q3 forecast the level of gold Keras will compile a revised open pit mining plan to KalNorth and submit it to the production for the project at this stage as the mining plan is still Western Australian Mines Department for approval. All permits are in place and Keras being revised, but it is likely to anticipates that first production from Parrot Feathers will commence in Q3 2016. significantly boost Keras’s Subsequently, Keras has six months to prepare a plan for underground development to production profile, in our view. exploit the high grade 5-6g/t material in the vein at depth. The current Stage 2 pit Conceptually, Keras is aiming for 10koz pa from Lindsay’s open provides immediate access to commence a decline underground. Keras will decline and pit from Q3 2016, and then develop “on ore” to lower costs and kick-start cash flow. Parrot Feathers currently has a 10koz pa from Lindsay’s JORC-compliant resource of 401kt at 4.2g/t for 54koz. underground from 2017

22 March 2016

The annotated image below demonstrates the mine layout at Lindsay’s and Parrot Feathers and the significant infrastructure in place to support a low-cost restart of mining operations. Figure 34 - Parrot Feathers pit and mine infrastructure layout

Source: Keras Resources

22 March 2016

Nayega Manganese - future potential

Keras holds an 85% interest in the advanced-stage Nayega manganese project in northern Togo, West Africa, consisting of five Exploration Permits covering 92,390 hectares. Nayega is a low capex, open pit project at an advanced stage of development, with a Definitive Feasibility Study (DFS) completed in May 2015. However, mine development is dependent on the final receipt of the mining licence. Figure 35 - Nayega location map Figure 36 and 37 - Lomé Port and Togo road infrastructure

Source: Keras Resources

Good infrastructure and logistics The project site is located in Northern Togo, 30km from a main road with direct access to the regionally important deep-water port of Lomé 600km to the south. The project also benefits from the national power grid being located only 5km away. Togo has a large cement/clinker industry which exports approximately 800ktpa of clinker north to Burkina Faso. The trucks return empty and Keras has negotiated a low backhaul rate, with the plan to stockpile material at Lomé Port for bulk loading in 12m draft vessels. DFS indicates robust scalable project with a short construction time In May 2015, Keras completed a preliminary DFS in conjunction with defining a maiden reserve of 8.48Mt at 14% Mn based on the M&I resource of 11Mt at 13.1% Mn. The DFS also indicated a significant reduction in capital and operating costs from previous studies along with a plan for an accelerated start-up. The DFS envisions a 750ktpa ore mining operation and a simple scrubbing/screening and DMS process in order to produce 250ktpa of manganese grading 38% Mn. Mining is low cost and simple with an average mining depth of only 4m and no waste stripping or drilling and blasting required. Keras believes that Nayega could be developed to production in approximately 9 months from receiving the mining licence, subject to financing.

22 March 2016

Advanced discussions and waiting on permits Keras remains in advanced discussions with a number of parties in relation to financing the development of the project. The company has made significant progress in securing draft marketing agreements and key mining and trucking contracts. The Mining Convention for Nayega has been agreed and initialled, and the Environmental Permit has been Awarded. The only outstanding permitting hurdle is the award of the final Mining Permit. Manganese – essential ingredient in steel production Manganese is essential to iron and steel production by virtue of its sulfur-fixing, deoxidizing, and alloying properties. Steelmaking, including its ironmaking component, accounts for most domestic manganese demand, presently in the range of 85% to 90% of the total, according to the USGS. Manganese ferroalloys, consisting of various grades of ferromanganese and silicomanganese, are used to provide most of this key ingredient to steelmaking, and as such the construction, machinery, and transportation industries are the leading consumers of manganese. Finished steel products typically contain between 0.5% and 2% manganese, although austenitic stainless steels such as the 200 series where manganese is used a partial replacement for nickel require between 5% and 9% Mn. Manganese also is a key component of certain widely used aluminum alloys and, in oxide form, dry cell batteries. It also has numerous applications in the fertilizer and pigment industry. South Africa, Brazil, Ukraine and Austral host the largest manganese deposits in the world, with South Africa being the largest producer. Approximately 50Mt of Manganese ore is produced each year, according to the USGS. Manganese prices have gone through the roof recently Manganese prices saw a resurgence in March 2016, with the Metal Bulletin 37% Manganese (FOB Port Elizabeth) ore index reaching a two-year high at $3.59/dmtu, more than doubling from $1.41 at the end of 2015. The meteoric price rise is the result of producers raising prices into a renewed wave of demand from China, as concerns over falling supplies continued, compounded by a recent rise in iron ore prices. According to Platts, there are limited stocks of manganese at present and the “Chinese are scrambling to buy”. This trend has also been observed worldwide, with South Africa’s UMC reporting that it has no more April stocks and has moved on to marketing May stocks. According to market sources, reduced supplies of South African ore are available due to recent mine cut-backs as companies have optimised and scaled down non-core or high cost operations. Manganese ore stocks at Tianjin port in China are estimated at c.800kt-900kt currently, down from close to 2Mt at the end of 2015, according to Platts, and thus the supply squeeze looks likely to continue for the time being.

22 March 2016

Disclaimer

The information above is published solely for information purposes and is not to be construed as a solicitation or an offer to buy or sell any securities, or related financial instruments. It does not constitute a personal recommendation as defined by the Financial Conduct Authority ("FCA”) or take into account the particular investment objectives, financial situations or needs of individual investors. The information above is obtained from public information and sources considered reliable. This is a marketing communication document and has not been prepared in accordance with legal requirements designed to promote independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Although Shard Capital Partners LLP is publishing the research, it is not restricted from dealing in the stock. Please note risk warning section on our website with regards high risk small cap shares. If you are unsure of the suitability of share dealing specifically for you then you should contact an Independent Financial Adviser, authorised by the Financial Conduct Authority.