Goldman Sachs Investor Research - Discovery Metals Limited

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7 October 2010 Discovery Metals Limited and may perhaps be considered conservative once full steady-state operations are established. DML assumed mining recovery rates of 68% and unplanned dilution of 5% in the scoping study. We have included the proposed underground mining operation into our base case, as we think it is highly likely that this will proceed. Processing DML proposes a conventional copper concentrator plant incorporating 3-stage crushing and single-stage milling (and a regrind milling circuit) followed by two separate concentrate circuits. DML plans to first float the sulphide material with the tails (including oxide material) then reporting to an oxide circuit. Each concentrate circuit incorporates 3-stage concentrator; rougher, secondary and cleaner circuits. Recoveries will vary from ~60% in oxide to +92% - 95% for the sulphide to give the overall ~84% recovery. Given the mineralogy (chalcocite and bornite), DML anticipates producing a very high grade concentrate grading ~41% copper. Timeline DML anticipates completing the project finance in 2010 with construction to commence shortly thereafter and 1st production early in 2012. Source: Company data Goldman Sachs & Partners Australia Investment Research All figures in A$ unless otherwise advised 10
7 October 2010 Discovery Metals Limited Boseto Headline Outcomes DML released the outcome from the BFS and Development plan in late August 2010 with the key parameters as follows: Source: Company data DML has entered into an offtake agreement with Transamine for 100% of the concentrate produced for the first five years, based on normal arms length terms. In return for the offtake agreement, DML undertook a share placement to Transamine of 25m shares at A$0.76/share ( a 11% premium to the 4-week VWAP share price at the time) to raise A$18m in March 2010. DML plans to truck the concentrate to Gobabis in neighbouring Namibia (520km) then rail to the port of Walvis Bay (650km). DML has provided a table of the key sensitivities for the development, which is included below. In our view, the key issue for this development is the actual mining cost per tonne and, coupled with this, the strip ratio. Whilst we see some upside risk to the planned US41.35/t mining costs, we do see the ability for DML to limit the strip ratio with more ore being mined from underground and, given the strike extent of the ore zones, the ability to replace deeper open pit ore with additional shallower ore for the open pit mining. Source: Company data Goldman Sachs & Partners Australia Investment Research All figures in A$ unless otherwise advised 11
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Goldman Sachs Investor Research - Discovery Metals Limited

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