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Lemur Resources: Revised Resource for Imaloto

Contributed by Fox-Davies Capital

Following completion of the Western Drilling programme at Imaloto, Lemur has released a revised JORC resource of 76.7Mt Measured, 41.6Mt Indicated and 29.2Mt Inferred Gross Tonnes in Situ (“GTIS").

The phase III drilling programme completed last July intended to upgrade the previous 176.6Mt Inferred resource to the Measured or Indicated categories. The revised resource incorporates both the 110 new boreholes drilled and the 293 samples analysed for coal quality. The upgrade represents an 80% conversion factor from Inferred to Measured and Indicated.

Significantly 50% of the total resource comes from the Main Seam which would form the bulk of any product at Imaloto. The final results of coal quality test work were released in October and gave an average yield from the Main Seam of 67.4% to produce an export quality thermal coal (5,600 kcal/kg NAR, 0.96% Sulphur and 16.9% ash). This would also produce a secondary product suitable for use as a power station feedstock, giving a theoretical yield of 100% for the entire Main seam. Of the current Main Seam resource 18.6Mt lies within 100m of surface and should be suitable for an open pit with the remainder within 368m from surface.

The revised resource will now be incorporated into the Mining Scoping Study. The results of this along with the already complete Port Scoping study and Land Logistics and Mining Infrastructure Scoping studies will be used in the construction of a financial model. This will look at all the development options available to Lemur. The Company will release these results once complete and available. Although the resource upgrade is positive, the real value to us is that it can now be incorporated in the Mining Scoping study which will give us an idea of the cost of the various development options available to the Company.

Meanwhile the Company's discount to its cash position has widened to 25.45%. Cash at the end of December A$18.07M vs a current Market Capitalisation of A$13.48M meaning the Company trades at a negative EV/t of -US$0.032.

We have updated our coal database and during the 2H'12 4 of the 74 companies in it have been acquired, three by Chinese companies. Based on companies at the same prescoping stage as Lemur, our revised valuation has fallen from US$0.07/t to US$0.04/t. Although the wider coal market has fallen, this in particular reflects the fall in value for Botswana Coal assets. On this basis we would value Lemur's resource at US$5.6M, however Lemur's resources are at a higher resource classification than these peers.