Fundamental Research Corp.

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• 
  Fundamental
  Research Corp.
• Outlook on Commodities and Top Picks
• January 20, 2009

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Disclaimers and Disclosure

• Fundamental Research Corp. (FRC) does not
  own any shares, or have any investment banking
  business with the companies mentioned in this
  presentation. FRC may have fee-based business
  with companies mentioned in this presentation. In
  such cases, FRC takes steps to ensure
  independence including setting fees in advance
  and utilizing analysts who must abide by the CFA
  Institute Code of Ethics and Standards of
  Professional Conduct. Additionally, analysts may
  not trade in any security under coverage.
  Forward-looking statements regarding the
  companies and/or stocks performance inherently
  involve risks and uncertainties that could cause
  actual results to differ from such
  forward-looking statements.

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Agenda

• About Fundamental Research Corp.
• Outlook on Commodities and Price Forecasts
• Attractive trends/basins in North America
• Identifying juniors with potential
• Top Picks
• Companies to track
• QA

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About Fundamental Research Corp.

• Fundamental Research Corp., founded in 2003,
  is an equity research firm which does not engage
  in investment banking or brokerage operations. We
  provide our subscribers with the highest quality
  fundamental research on smaller cap companies
  from a value-based perspective.  We are
  registered as a securities adviser with the
  British Columbia Securities Commission
  (registration is in no way an endorsement from
  the BCSC). Our performance can be found on
  Investars.
• All our research, a complete list of
  companies we cover, and subscription options are
  available on our website www.researchfrc.com.

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Global GDP Growth Forecasts

• The global economic slowdown will affect demand
  for most commodities

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Outlook on Oil Factors Affecting the Price of
Oil

• Global GDP Growth
• Global supply surplus/deficit Production from
  OPEC

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Factors Affecting the Price of Oil GDP

• High correlation between economic growth and oil
  consumption
• Our research found that during 1970 2008, 58
  of the changes in oil consumption could be
  explained by changes in global GDP

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Factors Affecting the Price of Oil OPEC
Production

• How important is OPEC?
• Supply from OPEC is still important
• OPEC currently accounts for over 40 of world
  crude oil supply
• OPEC adjusts its production to influence price
• We found a much stronger negative correlation
  between oil prices and OPEC production than oil
  prices and Non-OPEC suppliers

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Factors Affecting the Price of Oil OPEC
Production
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Factors Affecting the Price of Oil OPEC
Production

• OPECs Spare Capacity is tight
• Spare capacity averaged 2.8 million bbl/d during
  1998-2008
• Spare capacity forecast at 3.95 million bbl/d in
  2009, and 4.56 million bbl/d in 2010

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Short Term Outlook on Oil

• Consumption is forecast to decline in 2009 in
  light of the current economic slow down
• However, production cuts are expected to result
  in a supply deficit in 2009
• Consensus oil price forecast is US51/bbl for
  2009

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Long Term Outlook on Oil

• Price is expected to recover in 2010, and stay
  above US80/bbl from 2013 to 2018 (consensus
  forecast)
• We believe oil prices should stay above
  historical averages in light of increasing
  finding and development costs

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Long Term Outlook on Oil
Forecast
Historical
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Outlook on Copper - Factors affecting the Price
of Cu

• Global GDP growth (consumption)
• Global copper production growth
• Global copper supply surplus/deficit
• The U.S.

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Outlook on Copper - Short-term Price Forecast

• The ICSG estimates the global refined copper
  supply surplus will increase from 0.11 mm tonnes
  to 0.28 mm tonnes in 2009, an increase of 154
• Surplus expected to increase further in 2010
• We expect prices to stay soft in 2009

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Outlook on Copper - Long-term Price Forecast

• 
  Source FRC
• Our research shows that supply disruptions, high
  cash-costs, and long-term demand growth will be
  the major price drivers in the long-term

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Outlook on Gold - Factors affecting the Price of
Gold

• The US
• Inflation
• Geopolitical Tensions
• Financial Crisis
• High Oil Prices

Our research showed that During Jan 1980
Nov 2008, 15 of the changes in monthly gold
prices could be explained by changes in the
US Correlation b/w oil and gold increases
during high oil prices During 2005 08, 17 of
the changes in monthly gold prices was explained
by changes in oil prices (historically 2)
Correlation b/w inflation and gold prices
increases during high inflationary periods (eg
early 1980s)
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Short-term Outlook on Gold

• 1. The US is expected to depreciate -
• Slowdown in the U.S. economy
• Negative real interest rates
• Inflation
• 2. Increasing investment demand amidst decreasing
  physical demand (GFMS estimates 89 YOY increase
  in investment demand, and 11 YOY drop in
  jewellery demand, in 2009)
• 3. High cash costs (cash costs rose by 22 YOY to
  an average of 472/ounce for the nine months of
  2008) and relatively flat supply

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Outlook on Gold - Long-term Price Forecast

• Source
  FRC
• In the long-term, as the global economy recovers
  and the US improves, we expect the investment
  demand for gold will decrease resulting in
  softer prices

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Outlook on Uranium

• Long-term outlook remains strong
• - Concerns about global warming and strong
  long-term energy price forecasts will lead to
  increased demand for nuclear power plants
• - Global uranium requirements are estimated to
  grow at 2 per annum through 2030 (WNA)
• - About 35 new reactors are under construction,
  over 100 power reactors are planned and over 250
  are proposed
• - Global annual consumption of uranium is about
  180 million lbs versus production of about 100
  million pounds the deficit is filled up by
  stockpiles.
• - In the short-term, the uranium market is
  expected to be in balance

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Carlin Trend

• Sediment-Hosted gold deposits in Northern Nevada
• Future Potential
• Cortez Hills
• Simple one metal mineralization
• Low grade but can be massive in size
• Barrick Gold Corporation (NYSE/TSX ABX) is
  active in the area with its Turquoise Ridge joint
  venture project

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Greenstone-hosted Vein Deposits

• Grades generally range from 5 to 15 g/t Au with
  highly variable tonnage
• Red Lake District
• Mature deposits can maintain expansion potential
• Predominantly underground operations
• Hosts Goldcorps (NYSE GG TSX G) high grade
  Red Lake Mine

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Athabasca Basin

• Premium site for uranium exploration since the
  1970s
• Mineralized ore is formed in small pockets and
  veins of very high grade
• Camecos (NYSE CCJ TSX CCO) McArthur River
  commenced production in 1999 with an average ore
  grade of 20.7 U3O8
• Major discovery by Hathor Exploration (TSXV HAT)
  and joint venture partner Terra Ventures (TSXV
  TAS) in early 2008

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Western Canada Sedimentary Basin

• Bakken oil play, located in the south eastern
  region of the Western Canada Sedimentary Basin,
  is quickly becoming the most important oil
  discovery since the 1950s
• Hosts light sweet crude oil
• Very economic to transport and refine
• Encana (NYSE/TSX ECA) is an active player in the
  WCSB

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Identifying Juniors With Potential

• Projects are analysed based on
• Deposit Type
• Stage
• Infrastructure
• Location

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Identifying Juniors With Potential

• Company itself is analysed based on
• Management
• Technical Experience
• Experience in putting mines to production/generati
  ng prospects
• Track record in raising capital/working for
  public companies
• Experience in projects similar to the current
  project
• Teams focus on the company
• Any unusual insider trading in the past 12 months
• Financial Position

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Top Picks
FRC does not own any shares, and have any
investment banking business with the companies.
Fees of less than 30,000 have been paid by the
companies to FRC for research coverage.
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Great Plains Exploration (TSX GPX)
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Silvercrest Mines Inc. (TSXV SVL)

• Holds silver-gold properties in Mexico and El
  Salvador
• Recently completed pre-feasibility study on the
  Santa Elena project in Mexico indicated positive
  results
• Expects to commence production in Q3 2009
• Working Capital LT Debt (at the end of
  September 2008) - 4.9 mm, or 0.11 per share
• EV/Resources - 0.25/oz Average (Comparables)
  2.08/oz
• Stock Price C0.45 Fair Value Estimate C1.98

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Companies to track
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  Thank You
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