Competent Person’s Reports

Venmyn prepares independent techno-economic and valuation reports on a regular basis for internal use as well as for various stock exchanges. These reports are typically compiled in the format required for the exchange to which they will be submitted or on which the company is listed. For example documentation is compiled as a Competent Person’s Report for JSE or ASX or as a Qualified Person’s Report for the various Canadian exchanges. These reports are often used internally by companies requiring independent verification and valuations when either buying or selling mineral assets.

Our due diligence and valuation exercises are founded on the principles of professional best practice as established by the Australasian Institute of Mining and Metallurgy (AusIMM) to which our key personnel are registered as either Fellows or Members in good standing. Venmyn reports have been accepted by the Johannesburg , London , Toronto , New York and Australian securities exchanges together with Securities Regulation Panels in all these jurisdictions. Our personnel are also members of the various regulatory bodies in South Africa that enable us to report to the SAMREC Code under the auspices of the South African Institute of Mining and Metallurgy (SAIMM).

The AusIMM Guide for Consultants and the Valmin Code set out the minimum standards required for the due diligence process and current trends in technical and economic valuation of mineral properties. Our proprietary checklist is our method of ensuring that an internationally acceptable process and sign-off has been completed for each project and this underpins the report that we compile. Our final reports are marked up in full compliance with the requirements of the relevant exchanges in order to simply demonstrate their compliance.

Our reports are always concise and largely prepared as tables, bullet points and diagrams to ensure they are easily understood.

Venmyn professional obligations require the collaborative incorporation of any previous Competent Person’s work which has been prepared for and on behalf of the company. Our due diligence process will therefore consider existing work and ensure that all of the compliance requirements are met with respect to the final consolidating report. In this regard, obtaining permission and consulting with the other Competent Persons will be the joint responsibility of Venmyn and participating companies.

DUE DILIGENCE PROCESS

In order for us to complete our due diligence exercise we will use our standard checklist of all technical and financial issues that might influence the transaction. These issues will require the involvement of the company’s legal and auditing advisors. Venmyn will be responsible for reviewing and compiling all historical reports into the Independent Techno-Economic Competent Person’s Report. Our report will clearly state the positive or negative outcome of our investigations on a property by property basis.
Venmyn will require a site visit to each property. The due diligence process will include the following:-

• all mineral resource and mineral reserve statements will be assessed to determine compliance with the relevant Code (i.e. SAMREC, JORC, etc.). We will satisfy ourselves that grade, tonnage and mineable quantities have been defined in accordance with standard procedures required;

• the reporting standards call for fully-diluted and delivered to plant mineral reserves and all the technical production flow sheets will be investigated to determine whether the dilution calculations are appropriate in accordance with the relevant code;

• since the mineral resources provide the basis of future cash flows, any risks or limitations that might influence the value of the projects will be defined in the report;

• the historical performance of the mineral assets will be reviewed particularly with respect to the planned production levels and in relation to the envisaged plant specifications;

• all production cost estimates, revenue budgets and actual statistics will be reviewed in order to satisfy ourselves that profitability forecasts for future cash flows are fair and reasonable. The commodity price estimates will be critical in generating a revenue stream for the project;

• the environmental liabilities will be assessed in light of local legislation and the liabilities and provisions will be reviewed with respect to IAS 37 which is the accounting standard for this issue;

• the situation of security of tenure of titles, mining licences and surety of mineral asset value will be assessed in consultation with Venmyn’s and the company’s legal advisors. This will consider the likelihood of potential expropriation or nationalisation of private property;

• Venmyn will provide an up-to-date assessment of the commodity market in order to look at the market risk that could face the future sales from these projects;

• an evaluation of country risk will be prepared for the country in question as a general commentary on the risks to the investment. This will be incorporated into the discount rate;

• Venmyn will build a cash flow valuation model, where appropriate, for each of the mineral assets, incorporating management forecasts as well as our own assumptions. This will be used to prepare an independent valuation of each property for the purpose of calculating a Net Present Value (NPV). Where possible, transactions of a similar nature will be used to provide a comparative valuation; and

• we will consider the likelihood of any contingent liabilities and identify any additional value that may have been overlooked by the existing owners. In this regard, we require assistance from the property owner’s auditors.

For further information, please contact Catherine Telfer at info@venmyn.com or +27 11 783 9903.