Cline Mining Corporation T.CMK

Jennings Capital review of CMK

[Numerus]

Cline Mining offers investors a pure-play on metallurgical coal, with fully-financed near-term production

anticipated from the New Elk Mine in Colorado, as well as significant mid-term production growth

potential. More specifically, we like CMK at current levels for the following reasons:

1) Near-Term, Fully-Financed Production Potential

?? Awaiting MSHA Approval – As of writing, management is awaiting approval from the Mine Safety

and Health Administration (MSHA) as the last milestone before beginning production. While we

note that the regulatory environment in the United States has tightened considerably since the

disaster at Massey Energy’s (NYSE-MEE) Upper Big Branch Mine in April 2010, we remain

optimistic that CMK will receive approval and commence production in the very near-term.

?? Financed to 3.0 Million Metric Tonnes/Year (mtpy) – Following the recent completion of a

$57.6 million equity financing at $1.95/share, we believe CMK should be able to reach its target

production rate of 3.0 mtpy in 2013 without requiring additional equity financing. Post-financing

and related debt repayments, we estimate that CMK has net cash of approximately $45.0 million.

2) Additional Production Growth and M&A Possibilities

?? New Elk Resource Offers Upside – The May 2008 technical report reported Measured &

Indicated coal resources of 315.0 million short tons. This could support eventual expansion of the

New Elk Mine to a production rate of 6.0 mtpy, as well as a likely transition from room-and-pillar

to longwall mining.

?? M&A Potential – In addition to the New Elk Mine, we do not rule out the possibility of

CMK acquiring/developing other metallurgical coal projects. We also note that the Company has

other assets (coal assets in British Columbia, iron ore assets in Madagascar and a gold asset in

Northern Ontario) that could be monetized at some point.

3) Significant Valuation Upside Potential with Near-Term Catalysts

?? Leverage to Met Coal Pricing – We use a long-term benchmark coal price of US$170/tonne,

which we then quality-adjust for ash content. We estimate that each US$10/tonne change in this

long-term price assumption implies an approximate
.70/share in our NAV estimate. The latest

pricing for the relevant benchmark (Energy Publishing’s Coking Coal Hampton Roads Index

CCH-High) is US$219.75/tonne, approximately US$50/tonne above our long-term price.

?? Western Coal Implied Valuation – Walter Energy’s (NYSE-WLT) offer to acquire Western Coal

(TSX-WTN) implies a per share value for CMK of $5.70, based on a per tonne of production

valuation approach.