BRR - Straight from the source

PRESENTATION BY MIKE ROSENSTREICH, MANAGING DIRECTOR OF BASS METALS LTD (BSM)

“Excellence in Mining and Exploration Presentation”

http://www.brr.com.au/event/51309

TUESDAY, SEPTEMBER 16, 2008, 1:00 PM.

            BSM    Good afternoon. Barry (inaudible) (00:00:03) was saying this morning, he was describing the….he had the term gloom-in-the-boom, and he said that he

10                    couldn’t see a lot of happiness out there. So I just like to start off my presentation by saying quite emphatically that I am very happy. I’m very happy where our company is positioned, given the current market, but I’m not happy about where our share prices. What I’d like to do now is give you the strategy that our company has, which is essentially high-grade mine

15                    production to fund the development of our advanced, polymetallic, high-grade projects.

                        I have a Disclaimer, I have a Competent Person’s attribution, and I have a technical detail, so checks the boxes with the ASX.

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                        So there’s our strategy. We own a 100% of the Que River Bass Metal Mine, it’s a small scale but high margin mining operation. It generates the cash that will fuel our growth. We have advanced exploration projects which have excellent potential to go on and be largest gold developments, and that cash

25                    flow from the Que River Mine also funds our corporate and our business development activities.

                        The outline of the talk, what I’ve structured to do here is to basically give people a sense of that cash flow, show me the money and it comes from Que

30                    River, and then give you an overview of how that cash flow fits into our budget because that has an impact on our shareholders and our prime focus is on our clients or on our shareholders. The next thing, it’s all very well having that cash and having that money, but what do you do with it? I want to demonstrate to you that we have a series, a wonderful pipeline of

35                    opportunities, to actually grow the asset base of the company and in particular our focus on Hellyer Mine Project, and then I’ll wrap up with the… what I hope will become then…our rhetorical question on why buy Bass Metal shares. Simply the answer is because we’re self funding and we’ve got an exciting pipeline of projects, and I guess I’m hoping that our share price will

40                    be a little bit like a rubber band that’s pushed down at the present, but when we can demonstrate some of this value or bring it out, it will ping back up.

                        Little bit overview of the company, we float in October of 2005. We’ve had the glory days of 56-cent share price, $45- to $50-million market cap, and we’re

45                    bouncing off our bottoms at the moment of around $10-million market cap.

                        Our company is focused in the northwest of Tasmania. We’re a largest tenement holder in that area, it’s quite a compact area, as you can see that whole area’s about 200 sq km. It’s a good place to be, very supportive government, and blessed with an excellent infrastructure network.

                        It’s also “Elephant Country.”  If you see that green band through there that’s

5                      the Mount Read Volcanic Belt and it’s hosts to some world class, large scale, high-grade polymetallic deposits, and the names like Hellyer and Que River, which actually sit on our licenses, but then also Rosebery. Something like a resource down there to something like 50 million tonnes at probably 15% to 20% combined lead-zinc. The rest of the list, the Mt. Lyell copper-gold, Mt.

10                    Bischoff Tin, and Avebury, but you can see there a very strong in diamond in terms of high-grade, multi-metal deposits and that’s what we’re looking for.

                        That is a view of our PQ pit, and you can see it’s a very conventional open pit mining operation. We have an alliance management structure with the group

15                    called Mancala and they’re doing a terrific job with us, and I’m very proud of our zero loss time injury record to date.

                        So, if I’m going to make a case that was self funding, then I really have to go through some of the metrics of our Que River mining operation. We are

20                    mining polymetallic ore, zinc, lead, copper, silver, and gold, and we get paid for each one of those metals. You can see in the financial year ending June of 2008, we mined just over 40,000 tonnes of ore and look at the grades, 11% zinc, 6% lead, a little bit of copper, 5 ounces silver, and nearly 3 g gold. Have a look what we’ve mined in last two months, 12,000, nearly 13,000 tonnes of

25                    ore at a grade in excess of 30% combined lead-zinc with the silver grade’s 255 g and nearly 6 g gold. All in that, gold grade is higher than most WA gold mines.

                        So, a very strong technical performance in terms of the ore production

30                    coming out at Que River, and what’s the outlook? Have you ever looked at those reconciliation trends, we’re actually mining 50% more tonnes than we had expected. Our grades are considerably higher than what we had expected, zinc is 20% over, and then we’ve overshooting by at least 50% for lead, silver, and gold; don’t worry about the copper, it’s a very modest part of

35                    our revenue and of a very low base, so that’s looking terrific. I don’t think we got it particularly wrong here. We are mining in an area that’s been mined previously, so there’s a remnant mining issue and quite simply we don’t want to be overconfident in terms of what they had mined here historically, so hence, our conservative base case.

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                        What’s the outlook for this Que River Mine production? Whereas at the end of June of this year, that summarizes what’s remaining from our stage 1 mine plant. We set this planning for this mine out in small increments because it’s smaller. It’s easier to get a modest, sensible scale mining operation up and

45                    permitted with the Tasmanian Government particularly when in those days they don’t know you and you’re from Western Australia. So we’re taking this project on in several stages and this depicts what we’ve got left for stage 1. Look at the grade on those ROM stocks well over 30% lead-zinc and some very handy silver and gold credits. My financial controller who’s sitting over here (inaudible) (00:06:32), he can’t wait to get the check for that. Also, just worth pointing out that our current mining activities focused on that PQ pit. According to those sorts of tonnages, we got six months to go if we get the reconciliation trends persisting and, as every expectation, we will. We’ll be

5                      there for quite a bit longer than that.

                        We’re actually mining to make money. It’s fun watching trucks and diggers move around but we’re actually in this to make money. Our shareholders earn us to make money and I assure you that their company is trying to make

10                    money. So, how are we going in that regard? Let’s just have a look at the 2008 figures, the value per tonne of ore sold that we get from our customers around $250 a tonne. If we add up all of our operating costs to around about $188 a tonne there’s an operating margin of $60 a tonne in there. If we add in that, the gains that we get month-on-month from our hedge book that adds

15                    another $38, so it gives us a total Que River operating margin of around $97 a tonne or a margin of 52% on costs. It’s not quite where we wanted to be in terms of our origin budget forecast, but I won’t argue, it’s okay.

                        What about the all in cost? Michael Anderson this morning from Exco used

20                    the phrase all in cost, and….sorry, actually it was Chris (inaudible) (00:08:02) and also there was an excellent way to term what we’re describing here which is our net realizable value which where bring all of the costs together and also estimate all of the revenues, that’s taking to account the revenues we expect to get from our stockpiles. So if we ever look at financial year

25                    2008, we made an operating margin of around $33 a tonne, not terribly exciting, but you got to remember it’s part of a continuum quite of from open pit projects get better as you go down. Have a look at 2009, it’s just two months. The value of the ore has gone from $250 a tonne to $410 a tonne. That’s a margin of $200, that’s exciting and that’s our outlook for the next six

30                    or seven months. That doesn’t include any revenues from any hedging books and that’s at current prices. That’s more than okay, I think that’s very acceptable.

                        If I’m going to make a case that was self-funding, I got to give you some

35                    insight into our budget assumptions, so let’s just have a look at where does the revenue come from. We sell a polymetallic ore to OZ Minerals down at Rosebery and they pay us for all of the 5-contained metals. The revenue makes us around 42% of the revenue from zinc but 25% from gold and silver and 31% from lead, so we’re not just a zinc miner, we’re actually a

40                    polymetallic ore producer.

                        The other assumption is what prices are we using? Mike, you saying you’re going to be self-funding, what’s your price assumptions? Well, for our current financial year budget, we issuing the prices that were prevailing at the end of

45                    June and we make sure that we pick those prices in a sensible manner with respect to the broad consensus of commentary or forecast in terms of commodity prices. So you can see there in the top line there are budget prices at 96-cent exchange rate around $1,900 a tonne for zinc and $2,200 a tonne for lead, and you can see copper, silver, and gold there. Since that time, yes, prices have dropped somewhat but so has the Aussie dollar. The Aussie dollar in that time has come off nearly 20% and so the net impact on Bass Metal’s Australian dollar cash flow, given our mix of revenues, is virtually nothing. So, when people are talking about…. when Australian

5                      producers are talking about declining revenues they should get a bit of a grip and keep in mind what the Aussie dollar has been doing. So I would say in our case no impact, no adverse impact.

                        So where are we going with Que River? We’re going to focus on the PQ pit,

10                    it’s got very high grade, very positive reconciliation trends, and that’s all about high margins. We’ve got other pits that we’d like to evaluate and resources around Nico and QR32, and we’ll get into the process of getting EPA approvals for those.

15                    So what’s our vulnerability? Like current metal prices, Que River, as I hope I’ve just illustrated, generates significant margins from the operation and from the hedge settlements at these prices, because our hedge contracts are much higher prices than where our spot prices are today.

20                    What does that mean to Bass Metals? That means cash in. What happens if prices fall? They’ve got to fall a long way before we contemplate closing the mine, however, if we do have to do that, and it’s not a decision we will take lightly, we will close out the hedge book and what’s the impact to that? More cash in. So either way, we have the funding to complete our objectives for

25                    this financial year. Ideal scenario, metal prices rocket away, we leave our hedging behind, and we just make terrific margins on the metal and diamond that we have at Que.

                        So what I’ve been trying to get across so far is that we have sound, technical

30                    performance, we’ve got good financial performance, we’ve been conservative in terms of our forward assumptions. What’s all that driving at? Where’s the upside in that for our shareholders?

                        Well, I’m going to….it’s not often you see this but I’m going to share with you

35                    our corporate budget plan, and you can see that we effectively started the year with about $3.5 at bank, we’re expecting revenues through the course of this year of just under $14 million, that’s from mining operation. You can see we’ve got our cost there, we’re planning to spend about $4.2 million on exploration, that’s more than we spent last year. It covers our corporate

40                    admin and also quite a significant business development budget, and guess what? We finish next year and we still will have just over $3 million at bank. I won’t argue that for a junior in this market, that is an excellent place to be.

                        So you accumulate the money, but can you trust us to actually do something

45                    worthwhile with it? It’s all very well getting cash flow but you’ve actually got to use that cash to grow the asset base. What I’d like to do once we do a range of activities, early stage exploration, a range of things which we will be doing through this year…I just like to focus on the fact that we are focusing on polymetallic high-grade advanced projects, so we have a variety of these and they comprise historic, large-scale mines where we have drill-ready targets, but I’d just like to come in now and focus on the Hellyer Mine Project.

                        Here’s an aerial shot of Hellyer looking to the south. In the middle there, you

5                      can see in the distance that’s the Que River mining area, you can see the Hellyer Plant site in the middle that’s owned by a company called Intec, it’s now on care and maintenance. You can see there in the blue ellipse that’s the sort of a trace of the Hellyer Orebody. It comes to within about 60 or 80 m of surface, where the red circle is, and then plunges with depths in underneath

10                    the hill. That red area is the new Fossey Zone, it comes up to about 100 m of surface. Just to the right there, you can see the historic portal for the Hellyer Mine entrance.

                        So what is Hellyer? I’m hoping that Hellyer represents the next “meaningful”

15                    growth stage for our company to take us to that next production level. It’s a resource. We have a resource in it around the Hellyer infrastructure of around 3.75 million tones,  a good grades of zinc, lead, silver, copper, and gold, and we have this new zone, the Fossey Zone where we’ve been releasing some wonderful high-grade polymetallic intercepts which is not yet in the resource

20                    category. It’s sitting in around all of those infrastructure and we’re targeting a significant production profile in here of around 150 to 250,000 tonnes a year.

                        That’s what it looks like in long section. The colored shapes show the resource outlines. You can see the infrastructure, the development, and then

25                    off on the left hand side is the unmined Fossey Zone. This is a long section of Fossey. That’s the southern extent of the Hellyer Orebody. This is a long section of the Fossey Zone. We’ve had two drill rigs drilling this for the last eight months. We have two there at the moment, and just the other day, we announced a new result just in this middle part, 24 m of 12% zinc, 4% lead,

30                    and some good silver and gold credits, and that is actually a pretty typical sort of results. It’s not the best but it’s pretty typical.

                        I’d like to just have a quick look at two cross-sections to give you an idea as to what the geometry is. The central area, what we call the discovery section,

35                    you see we’ve got a triangle, sort of barite-gold-silver zone and within that we have this high-grade, massive sulphide zone. Kind of grades that we’re getting in there, 13 m at 19% zinc, 9% lead, 370 odd grams of silver, and nearly 3 grams gold, and see 20 m down the bottom there at 7% zinc, 4% lead, 65 g silver, they’re all good widths, all good grades. 50 m to the north,

40                    similar situation…..high-grade lead, zinc, silver, gold, copper over good widths. I am very comfortable this will turn into a mining operation. Look at that bottom one, 21 m at 17% zinc, 8% lead, 3.4 g gold.

                        So, how are we going on our mine study? We expect to have a mineral

45                    resource for Fossey up before the end of September. We’re in the process of doing all of the other things in terms of metallurgy and mining studies that you need to do. We released some very encouraging metallurgical results to the market on Friday.

                        We have two process and options for this ore. One, we could theoretically sell it to Zinifex or OZ Minerals at Rosebery, but ideally we would like to be able to process these ourselves.

5                      So really, in concluding what are we looking to do to get our shareholders excited again, to really try and maximize those shareholder returns? We’ve achieved step 1, we’ve got Que River up and running and it is funding our business. We’ve got the Hellyer Mine Project, which has got the scale to add some “meaningful” production to our business and we’re looking to bring that

10                    online in a sort of a 12 to 18-month timeframe, and we got a wonderful series of advanced exploration opportunities that we are also continuing to work on.

                        So finally, why buy Bass Metals stock? I think the answer to that quite simply is because the team at Bass Metals has been in this sort of a market before

15                    and in some ways we anticipated it. So, whilst other companies suddenly declare that they are now becoming cautious I would argue that our company has always been prudent and cautious. We’re focused on high-grade polymetallic projects, we’re focused on safety and sustainable management systems, we’re focused on cash flow underpinned with sensible hedging

20                    structure and now in this tough market, we’re actually in the position we want to step out and exploit the opportunities. We’re optimistic about metal demand and prices, and we are self-funding and we’re leveraging off that production experience and that cash flow to not only develop our own projects, but also to seek out new projects and activities. What for? Why

25                    we’re doing it at the end of the day? Because we’re focused on shareholder returns and we want to bring the value back to each of our shareholders.

                        Thank you very much.

PRESENTATION CONCLUDED

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