CZR Resources Limited (CZR) 05 May 2021 Iron ore CZR is moving to develop its Robe Mesa iron ore project in the Pilbara of WA. Its PFS was conservatively based on haulage to Port Hedland for export, yet concludes that the project is nevertheless commercially robust. However, a much closer alternative port at Onslow is now under consideration with ongoing discussions. Matau estimates that CZR could save A$20/t in haulage costs, by hauling to Onslow. Matau has valued CZR base initially on use of Pt Hedland port and on the use of Onslow, showing an improvement on the already attractive valuation of CZR. Matau’s valuation target for CZR based on the PFS at $0.030/shr is an attractive premium to share price. Matau’s value target for shipping from Onslow is $0.045/shr. Investment Thesis Recommendation BUY • CZR Resources (CZR) is an emerging iron ore producer, planning to develop DCF value $0.037 Robe Mesa, a low strip ratio, low cost, direct shipping, CID (channel iron ore) 12mo Price Target $0.030 deposit located in the west Pilbara. CZR holds an 85% interest in the project. F'cst 12mo Return 153.3% • The Pre-Feasibility Study (PFS) on development, completed in December 2020, shows the project has potential to generate strong financial returns after Security Details preproduction capital of AUD 51m, and life-of-mine (LoM) C1 cash operating ASX Code CZR costs of A$65/t fob(excl royalties) with total cash costs of ~A$72/t fob. The PFS Share Price ($) $0.012 was based on an assumed conservative iron ore price of USD 90/t cfr China. Issued Cap.(dil) (m) 2,853.1 • The PFS underpins a maiden Probable Ore Reserve at Robe Mesa of 8.2 Mt at Market Cap ($m) 34.2 56% Fe, based on a 62% Fe Index. 30-Jun-21 forecast • The PFS conservatively assumed iron ore from its project would be shipped out P/E (x) -12.9 of Utah Point facilities in Port Hedland using quad road trains. This is a 420 km CFM (x) -121.4 trucking distance. Yield (%) 0.0 • Matau’s initial modelling is based on the PFS assumptions, including a long term EPS growth (%) -2.2 iron ore price (cfr China) of USD 90/t cif. CFPS growth (%) -259.3 • Since reporting the PFS, CZR discussions with the port of Onslow (trucking Cash ($m) 1.5 distance of 180 km), has brought forward agreement between the Onslow Marine Debt + CN ($m) 0.0 support base to consider shipping from Onslow, barging ore out for offshore Debt+CN / Equity (%) 0.0 transhipment. Interest Cover (x) -371.4 Debt+CN/Cashflow (x) -0.5 • The PFS assumes road haulage costs of AUD 35.10/tonne, or ~0.084/t.km to Port Hedland. Matau assumed the same unit haulage rate to Onslow which gives 30-Jun-20 actual a haulage rate of AUD 15.20/tonne, a marked saving. P/E (x) -18.7 • Matau estimates that bank funding is likely to provide approximately 60% of CFM (x) 274.0 capital funding needs and CZR will therefore need to raise equity of Yield (%) 0.0 approximately AUD 35m (before issue expenses). Matau’s valuation per share EPS growth (%) 2.3 been diluted for that estimate. CFPS growth (%) -88.4 • Based on the PFS inputs Matau derived an unrisked DCF value of $0.037/share Cash ($m) 5.3 and a 12 mo fwd (stage-risked) Price target of $0.030/share. Debt + CN ($m) 0.3 • If the Onslow port consideration can be achieved the unrisked DCF increases to Debt+CN / Equity (%) 1.9 A$0.050, and the 12 mo forward Price target increases to A$ 0.045/share. Interest Cover (x) -479.9 Debt+CN/Cashflow (x) -0.1 • In the Dec20Qtr surface sampling and mapping programmes were also completed during the quarter over prospective gold targets on the Croydon, Shepherds Well and Buddadoo projects as a precursor for drilling. Further work is also planned for the Yarrie iron ore project. • The iron ore market continues to be strong with ongoing strong demand from China. At a recent Fastmarkets iron ore conference participants were bemused by Chinese participant forecasts that iron ore price would reduce to USD 100/t Andrew Pedler cif., and also at China’s stated targets of capping or reducing steel output yet maintaining ongoing forecasts for +6% yr-on-yr economic growth. Matau Advisory Pty Ltd • Matau notes that iron ore offtake excl China is also recovering, and growing post +61 412 122 778 the market impact in early-2020 depths of the covid-19 pandemic. [email protected] Catalysts • Further recovery of steel production, currently led by emerging economies and China, and ongoing demand from China, leading to continued robust iron ore prices. Risks • Further impact of the covid-19 pandemic may subdue demand but is also likely in Brazil and West Africa to subdue production and planned developments. page 1 Table of Contents Financial Summary & Valuation 3 Financial Summary Ratios 4 Investment Highlights 5 Sensitivities 11 Risk 12 Industry Factors 12 Company / Project Risk Factors 13 SWOT Analysis 14 Corporate Overview 15 Summary Financials 17 Board of Directors & Management 18 Major Shareholders 20 Key Commodity Price Assumptions 21 Commodity Market Overview 21 Review of Operations 28 Yarraloola: Robe Mesa & Robe East 28 Buddadoo - Au 34 Croydon - Au 36 Shepherd’s Well – base metal 39 Yarrie – iron ore 41 CZR Work Schedules 43 Appendix - Kilburn 44 Disclaimers & Disclosures 49 page 2 Financial Summary & Valuation Production Prof & Loss $m yr end June 2020 2021 2022 2023 2024 yr end June 2020 2021 2022 2023 2024 Fe Ore 000 t 0.0 0.0 0.0 552.5 1,700.0 Sales Rev. 0.0 0.0 0.0 59.9 184.3 Copper 000 t 0.0 0.0 0.0 0.0 0.0 Oper. Profit -2.4 -2.6 -4.8 15.6 66.2 Zinc 000 t 0.0 0.0 0.0 0.0 0.0 Other Income 0.0 0.0 0.0 0.0 0.0 Lead 000 t 0.0 0.0 0.0 0.0 0.0 EBITDA -2.4 -2.6 -4.8 15.6 66.2 Nickel 000 t 0.0 0.0 0.0 0.0 0.0 D & A 0.0 0.0 0.0 1.8 6.3 Cobalt 000 t 0.0 0.0 0.0 0.0 0.0 EBIT -2.4 -2.6 -4.8 13.8 59.9 Gold 000 Ozs 0.0 0.0 0.0 0.0 0.0 Int Income 0.0 0.0 0.1 0.1 0.2 Silver 000 Ozs 0.0 0.0 0.0 0.0 0.0 Int Expense 0.0 0.0 0.0 1.0 0.9 PreTax Profit -2.4 -2.6 -4.7 12.9 59.2 Forecast Tax 0.0 -0.2 -1.5 3.8 17.7 yr end June 2020 2021 2022 2023 2024 Minor/Prefs 0.0 0.0 0.0 0.0 0.0 AUDUSD 0.671 0.747 0.760 0.750 0.750 Equity A/C 0.0 0.0 0.0 0.0 0.0 Fe Ore 62% USD/t cif 108.8 152.9 105.0 90.0 90.0 Net Profit -2.4 -2.4 -3.2 9.1 41.5 Copper USD/t 5,696 7,423 7,793 7,385 7,385 Abnormals -1.2 0.0 0.0 0.0 0.0 Zinc USD/t 2,204 2,610 2,820 2,820 2,820 Net Profit (rpt) -3.6 -2.4 -3.2 9.1 41.5 Lead USD/t 1,906 1,975 2,100 2,100 2,100 Nickel USD/t 14,043 16,561 18,425 18,425 18,425 Cashflows $m $m $m $m $m Cobalt USD/t 32,613 36,740 46,297 46,297 46,297 yr end June 2020 2021 2022 2023 2024 Gold USD/oz 1,562 1,866 1,700 1,700 1,700 Oper. CF 0.2 -0.3 -3.3 11.9 50.4 Silver USD/oz 16.87 25.24 27.00 27.00 27.00 Dev. Capex 0.0 0.0 0.0 -42.1 0.0 Valuation @ 8.00% 12 mo Maint. Capex 0.0 0.0 0.0 -0.4 -0.9 DCF Valuation DCF Jun 20 Stage fwd Jun 21 Expln, R&D -3.2 -3.9 -4.0 -4.0 -4.0 yr end June A$m A$/sh Risk % A$m A$/sh Asset (acq)disp 0.0 0.0 0.0 0.0 0.0 Other 0.0 0.0 0.0 0.0 0.0 Yaraloola Fe 149.5 0.026 80% 129.1 0.022 Investing CF -3.2 -3.9 -4.0 -46.5 -4.8 Yarrie Fe 7.2 0.001 50% 3.6 0.001 Croydon Au-Ag 11.1 0.002 50% 5.6 0.001 Share Issues 9.5 0.7 9.6 23.9 0.0 Buddadoo Au 7.2 0.001 50% 3.6 0.001 Debt draw(paid) -1.8 -0.3 0.0 26.2 -26.2 Shepherds Well 0.8 0.000 50% 0.4 0.000 C/N iss.(red) 0.0 0.0 0.0 0.0 0.0 Investments 0.0 0.000 100% 0.0 0.000 Divs paid 0.0 0.0 0.0 0.0 -10.3 Expl'n & Eval'n 0.2 0.000 0.1 0.000 Other Finance 0.0 0.0 0.0 0.0 0.0 Corp.