| If my valuations of NAU and a couple of peers are prudent, the NAU share price today of NOK 12.25 at OSE looks excessive discounted. Key data from my assessments: * A share price of NOK 12.25 reflects an implicit risking discount on unrisked DCF for Kaunisvaara of 73% * In addition you get the value of Hannukainen completely free (100% risking discount) * Fair value (risked DCF) as per mid-2011: NOK 22.50 (by applying 43 % risking discount on unrisked DCF as fair for Kaunisvaara and 70 % risking discount for Hannukainen) * Unrisked DCF as per mid-2011: NOK 38 (If Hannukainen is excluded: NOK 27, i.e. Hannukainen contributes with NOK 11) * NAU's in-line pricing with peers: Fictive NAU share price today to get in line with Dannemora's (share price today)/(risked DCF mid-2011): NOK 15.35, and corresponding for Gindalbie (Australia): NOK 22. I.e. NAU's share price today should have been 25% higher to match a fair pricing with Dannemora (Sweden), and 80 % higher to match a fair pricing with Gindalbie. * My base case DCF-calculations referred above are based on long term real price of iron ore 62 % Fe CFR China of USD 104.3/dmt, and long term real price of copper of USD 3.17/lb, and USD 1000/oz for gold. * Mark-to-market unrisked DCF as per mid-2011: NOK 120 per NAU share (by applying todays spot iron ore price for 62 % Fe CFR China of USD 178/dmt as long term real price, and todays spot price for copper of USD 4.33/lb as long term real price for copper, and todays spot price for gold of USD 1660/oz as long term real price for gold) * Price decline in my base case vs. today's spot prices: iron ore -41%, copper -27%, gold -36% * Unrisked DCF as per mid-2011 according to my base case, but with iron ore price lifted by 15% (to USD 120/dmt as real price for 62 % Fe CFR China): NOK 55 (instead of NOK 38 in my base case) Other awaited milestones which is expected to be passed soon, and which will represent de facto derisking of the NAU-case: - NAU signals that the complete financial package for the Kaunisvaara CapEx is expected to be in place in September. - There are ongoing efforts to get in place partners for the logistics chain, and a solution may be here soon. ------ Derivation of implicit risking factors as per mid-2011 reflected in today's share price: Share price Aug. 3, 2011: NOK 12.25 (Marked Cap: NOK 12.25/USDNOK 5.37*no. of shares 224.4m= USDm 512) Implicit risking of NAU as per today of 26.7 % (i.e. 73 % risking discount) for Kaunisvaara and 0 % (i.e. 100 % risking discount) for Hannukainen: + USDm 250: Cash as per Dec. 2010: USDm 250 * risking 1.00 = USDm 250 + USDm 10: Barsele: unrisked DCF USDm 10 * risking 1.00 = USDm 10 + USDm 252: Kaunisvaara: unrisked DCF as per Dec. 2010 USDm 900 * discounted to mid-2011 by a half year nominal discount rate (1+10%/2) * implied risking reflected in the current share price 0.267 = USDm 252 + USDm 0: Hannukainen: unrisked DCF as per Dec. 2010 USDm 600 * discounted to mid-2011 by a half year nominal discount rate (1+10%/2) * implied risking reflected in the current share price 0.00 = USDm 0 = USDm 512: Market Cap as per Aug. 3, 2011
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