Update

5 March 2010
Price 13p
EMED Mining Market Cap £43m
Year Revenue PBT* EPS* DPS P/E Yield
End (£m) (£m) (p) (p) (x) (%) Share price graph
12/07 0.0 (11.8) (9.5) 0.0 N/A N/A

12/08 0.0 (5.2) (3.7) 0.0 N/A N/A

12/09e 0.0 (7.1) (2.3) 0.0 N/A N/A

12/10e 0.0 (7.7) (2.1) 0.0 N/A N/A

Note: *PBT and EPS are normalised, excluding goodwill amortisation and exceptional items

Investment summary: Back on track

Share details
A revised permit roadmap for the restart of the Rio Tinto Mine was confirmed and
Code EMED
agreed in December 2009 and EMED is on track to commence production in 2011.
Listing AIM
Despite regulatory and permitting setbacks, EMED is well positioned to move the Sector Metals & Mining
project forward; it owns the mine, the plant and the mineral deposit and enjoys the Shares in issue 340.3m
support of the government, labour unions and the local community. EMED needs to
Price
follow the revised process and submit independently supported, detailed back-up
52 week High Low
plans to obtain the necessary operating permits before the authorities will approve
15.75p 3.62p
the mineral rights and mining operations. It is also reliant on compulsory property
acquisition procedures before operations can commence. The shares are trading at Balance Sheet as at 30 June 2009
a discount of 67% to our valuation of 39p/share for the Rio Tinto Mine alone. Debt/Equity (%) 53.2
NAV per share (p) 3.6
Timetable to production for the Rio Tinto Mine Net borrowings (€m) 5.1
While adhering to the roadmap, EMED is working to a timetable that is expected to
result in copper production at the Rio Tinto Mine by Q311. Much of the work being Business
EMED Mining owns 100% of the Rio
undertaken as part of the permitting process is of a technical nature and is directly Tinto copper mine in southern Spain. In
applicable to the production restart. Slovakia, the company is developing its
1.1Moz gold deposit. In addition, EMED
Refining cash costs for the Detva gold project has a 25% stake in AIM-listed KEFI
Minerals plc.
EMED is refining the recently released scoping study for Biely Vrch, its 1.1Moz gold
deposit in Slovakia. It is investigating ways to reduce cash costs from US$600/oz to Valuation
US$500/oz. This project is not included in our valuation. 2008 2009e 2010e

Valuation: Rio Tinto Mine worth 39p/share P/E relative N/A N/A N/A

We have revised our valuation since December 2009 based on recent modifications P/CF N/A N/A N/A

to the EMED base case financial model for PRT. On a conservative assumption that EV/Sales N/A N/A N/A

the Rio Tinto Mine is re-started in Q112 and provided production proceeds ROE N/A N/A N/A

according to the planned schedule, we estimate the value of the mine to be

Revenues on geography
39p/share on the basis of our discounted dividend flow model (a 10% discount rate)
UK Europe US Other
using an average, life-of-mine copper price of US$2.75/lb and a US$/€ exchange
0% 100% 0% 0%
rate of 1.35. Looked at alternatively, applying an NPV discount rate of 29% reduces
the value of the income stream to investors from 39p/share to the current share price Analyst
of 12p. Our valuation for PRT does not include the potential to increase reserves and Warren Johnstone 020 3077 5700
wjohnstone@edisoninvestmentresearch.co.uk
expand the processing plant at a relatively low capital cost.

EMED Mining is a research client of Edison Investment Research Limited

2 | Edison Investment Research | Update | EMED Mining | 5 March 2010

Permitting update
Changes to legislation in 2009 effectively delayed the restart of Rio Tinto Mine. The situation has
since been clarified and in December 2009 the Government of Andalucia (Junta de Andalucía)
confirmed the revised permitting process, which requires approval by four provincial regulatory
authorities: Industry, Environment, Culture & Heritage, and Water. The process is described as a
‘roadmap’ and has been revised to incorporate new regulations. The roadmap is specific to the
Proyecto de Rio Tinto (PRT) and specifies additional information needed to complete permitting. It
also sets out the process for review and consultation with the relevant authorities and with the
public. The company has established a team based at the Rio Tinto Mine, which, along with
independent due-diligence experts, is tasked with systematically working through the
requirements.

Permitting progress in 2010

EMED has made several announcements in February 2010 to demonstrate progress since
agreeing to the roadmap. In early February the Department of Culture and Heritage (“Culture &
Heritage”) along with the Water Authority of the Junta de Andalucía (“Water”) reported the
outcomes of their preliminary reviews of the company’s plans. Later that month the Provincial
Delegation of the Ministry of Environment (“Environment”) of the Junta de Andalucía set out its
conclusions from the preliminary review of the company’s plans. Environment and the Ministry of
Innovation, Science and Companies (“Industry”) are responsible for coordinating the overall
permitting process. The Ministry of Environment concluded that once the plans, including the
Unified Environmental Authorisation (AAU) and EIA, are in final form, the company will be required
to re-submit them for final assessment. It has also set preliminary conditions for expanding the
restoration plan and the waste storage plan, and will have to provide reports supporting the
classification of the tailings deposits because this affects the level of consequential third party
insurance and bonding to be provided by the company.
Exhibit 1: Summary of responses by relevant authorities of the Junta de Andalucía
Authority Responsibility Response / Requirements
The Department of Culture Permitting Positive evaluation of plan provided there is provision to
and Heritage conserve heritage items which depict the mining history
(“Culture & Heritage”) of the site.
The Water Authority Permitting The company to provide detailed documentation to
(“Water”) demonstrate that, once in operation, PRT will be
maintained as a closed system with comprehensive
management of water levels, filtration, water control run-
off, and treatment.
The Ministry of Environment Coordination Accepted the AAU submission. The company to expand
(“Environment”) & Permitting the restoration and waste storage plans, and to provide
classification of the tailings deposits.
The Ministry of Innovation, Coordination The company to provide supplementary reports and a
Science and Companies & Permitting rectified legal document. Industry will examine
(“Industry”) documentation pertaining to the technical and financial
capacity of the company.
Source: EMED Mining

The company is also required to obtain a number of permits before the Junta de Andalucía will
approve the mineral rights and mining operations. Deliverables include the mining assessment and
operational plans, the AAU and EIA, the tailings dam and waste dump assessments, OH&S
3 | Edison Investment Research | Update | EMED Mining | 5 March 2010

procedures, a final rehabilitation plan, contract documents, mill refurbishment and other
permissions.

Compulsory land acquisition

While the company owns the mine, the plant and the mineral deposit, a number of land areas that
form an integral part of mining and waste management operations are privately owned and will
need to be acquired before operations commence. The company is working with the Junta de
Andalucía and seeks its support to engage the process under compulsory acquisition procedures.

Resolution of legacy issues

A number of recent court rulings in relation to disputes between various previous stakeholders in
PRT have all been in favour of the project. While not directly part of the formal approval process for
the restart of the Rio Tinto Mine, these rulings close certain legacy issues and remove some
potential complications and delays to the process. Neither EMED Mining nor any of its subsidiaries
were a party to any of the proceedings.

Start up preparation
While the company is working through the permitting requirements, the PRT team on-site at Rio
Tinto Mine is preparing for start up and production. Detailed planning is underway as is the
assessment of upside potential. The team’s objective is to advance their knowledge of the orebody
early in the project life so as to optimise mine design. Management also feels it important to
maximise production as early as possible so as to capitalise on what it predicts will be high copper
prices over the next five to 10 years. Much of the work being undertaken as part of the permitting
process is of a technical nature and is directly applicable to the production restart. This includes
operational planning, which is being carried out in collaboration with independent due diligence
experts and specialist consultants. The Rio Tinto Mine is an established facility on care and
maintenance so lead time is expected to be short and re-commissioning carries low technical risk.
The company has also turned its attention to workforce recruitment and is preparing to recruit
more than 300 personnel. To support this the company intends to appoint a personnel manager
whose role will be integral to planning the organisational recruitment, training and induction
programmes for recruits. The company has already engaged with labour unions and reached an
agreement with the main union to formally open negotiations for a workplace agreement.

Resource upside
EMED Mining has defined a JORC compliant resource estimate of 205Mt at 0.46%Cu for 940Kt of
contained copper for Rio Tinto Mine. Of this 123Mt at 0.48%Cu for 585Kt of contained copper is
classified in the reserve category. The on-site team is planning to assess the upside potential of the
resource by means of a 60,000m drilling campaign for which €8.5m has been budgeted. Drill holes
are planned to test extension targets around the periphery of the existing pit. These priority near-
surface targets could increase the open pit resource by up to 120Mt. With no historical exploration
or mining activities having taken place below 250m from surface, there is also significant
underground potential at Rio Tinto Mine. In order to test this potential, the company is collating
historical data from existing underground workings as part of a data compilation programme which
involves validating and capturing historical data into electronic format. By applying modern
industry-standard tools the company will be able to interpret this data to better understand the
4 | Edison Investment Research | Update | EMED Mining | 5 March 2010

controls on copper mineralisation. This will enhance the design and planning of drilling campaigns
aimed at increasing the current resource estimate.

Exhibit 2: PRT resources and reserves (upside potential)

Operation Classification Current (Mt) Potential (Mt) Total (Mt)
Open Pit Resource 205 120 +300
Reserve 123 100 +200
Underground Resource - 65 65
Reserve - untested untested
Source: EMED Mining

Expansion potential
Planning based on reserves yields a 14 year life-of-mine at an annual production rate of 9Mtpa. An
increase in the size of the reserve by as much as 40% will require a commensurate increase in
production and processing capacity to 15Mtpa to facilitate extraction. Expansion can be partly
accommodated by the existing processing facilities provided all mills are utilised, but provision will
need to be made for additions to the flotation circuit as well as more screens and the addition of
tank cells. The expansion of the plant and tailings facilities will depend on the company being able
to increase the reserves, expand tailings storage capacity, and obtain the necessary permitting
permissions. The capital cost of this potential expansion to 15Mtpa is expected to be relatively low.
Preliminary estimates are €75m.

Project progress to date

Despite setbacks in 2009 EMED has made significant advancements towards bringing the Rio
Tinto Mine back into production. It has:

• defined JORC code compliant resources and reserves,

• completed a base case to extract these reserves over a 14 year life-of-mine,
• acquired 100% of PRT and now owns the mine, the plant and the mineral deposit,
• initiated planning for the extension of the resource and the expansion of the operations,
• settled with the principal creditor of the vendor company,
• obtained the support of the government, labour unions and the local community, and
• agreed a revised roadmap with the relevant regulatory authorities.

As a result the company is targeting restart of the Rio Tinto Mine in Q311 according to the
timetable to production shown in Exhibit 3.
Exhibit 3: PRT timetable to production
  2010 2011

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Public Permit Project restart

hearing restart
Operating licences

Formal rights to operate on third party lands

Production

Source: EMED Mining

5 | Edison Investment Research | Update | EMED Mining | 5 March 2010

Financials
Based on our forecast of net debt, the funding requirement for PRT will reach a peak of €74m in
2011. This is in line with the company’s stated finance strategy in which it expects to apply funding
of €64m to progress both Biely Vrch and PRT. In Slovakia €4m will be used to support permitting
and advances on the project, while in Spain €11m will be required for counterparty settlements and
€49m will be required for repairs, capex and working capital. The company intends to source
funding through equity, debt and product offtake related facilities.
6 | Edison Investment Research | Update | EMED Mining | 5 March 2010

Exhibit 4: Financials
€'000s 2007 2008 2009e 2010e
Year end 31 December IFRS IFRS IFRS IFRS
PROFIT & LOSS
Revenue 0 0 0 0
Cost of Sales (8,814) (1,362) (4,660) (4,660)
Gross Profit (8,814) (1,362) (4,660) (4,660)
EBITDA (11,740) (4,916) (6,686) (6,686)
Operating Profit (before GW and except.) (11,794) (5,001) (6,771) (7,171)
Intangible Amortisation (104) (9,333) 0 0
Exceptionals 0 0 0 0
Other 88 (2,481) 403 0
Operating Profit (11,810) (16,815) (6,368) (7,171)
Net Interest (25) (243) (290) (479)
Profit Before Tax (norm) (11,819) (5,244) (7,061) (7,650)
Profit Before Tax (FRS 3) (11,835) (17,058) (6,658) (7,650)
Tax 0 453 427 0
Profit After Tax (norm) (11,731) (7,272) (6,231) (7,650)
Profit After Tax (FRS 3) (11,835) (16,605) (6,231) (7,650)

Average Number of Shares Outstanding (m) 122.5 196.8 265.5 365.9

EPS - normalised (c) (9.5) (3.7) (2.3) (2.1)
EPS - FRS 3 (c) (9.6) (8.4) (2.3) (2.1)
Dividend per share (c) 0.0 0.0 0.0 0.0

Gross Margin (%) N/A N/A N/A N/A

EBITDA Margin (%) N/A N/A N/A N/A
Operating Margin (before GW and except.) (%) N/A N/A N/A N/A

BALANCE SHEET
Fixed Assets 974 11,824 12,019 14,964
Intangible Assets 0 3,820 3,820 3,820
Tangible Assets 277 7,505 8,062 11,577
Investments 697 499 137 -433
Current Assets 5,782 3,745 7,945 58,471
Stocks 106 0 0 0
Debtors 1,238 2,325 2,502 2,502
Cash 4,438 1,420 5,443 55,969
Current Liabilities (1,212) (4,145) (3,871) (3,871)
Creditors (802) (1,735) (1,461) (1,461)
Short term borrowings (410) (2,410) (2,410) (2,410)
Long Term Liabilities (3,007) (308) (5,458) (60,458)
Long term borrowings (3,007) (308) (5,458) (60,458)
Other long term liabilities 0 0 0 0
Net Assets 2,537 11,116 10,635 9,106

CASH FLOW
Operating Cash Flow (10,028) (13,227) (6,164) (6,116)
Net Interest 3 93 (290) (479)
Tax 0 0 427 0
Capex (256) (2,112) (642) (4,000)
Acquisitions/disposals 0 (251) 226 0
Financing 9,664 13,109 5,316 6,120
Dividends 0 0 0 0
Net Cash Flow (617) (2,388) (1,127) (4,475)
Opening net debt/(cash) (1,638) (1,021) 1,298 2,425
HP finance leases initiated 0 0 0 0
Other 0 69 0 0
Closing net debt/(cash) (1,021) 1,298 2,425 6,899
Source: Company accounts/Edison Investment Research

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