This document summarizes a presentation about making money in resources given by John Deniz, co-founder of Paragon Funds Management. It discusses how different resource sub-sectors like lithium, zinc, and copper are experiencing diverging fortunes based on their supply and demand dynamics. It highlights three resource stocks - ORE, RWD, and RER - that offer attractive risk/reward opportunities due to their projects and proximity to production. The presentation aims to show investors opportunities in resources despite recent volatility in the sector.

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Making Money in Resources
Presented by
John Deniz
Co-Founder of Paragon Funds Management
&
Fund Manager of the Paragon Fund

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Making Money in Resources
+ With Resources making up 30% of the
Australian market, there is obviously more to
the sector than Iron Ore and the Big Australian.
+ I have lost count how many times I have heard -
“Resources bull market is over / is dead and
buried / is in a structural bear market”…
+ Instead I’ll highlight the diverging fortunes of
several sub-sectors and discuss 3 opportunities
for investors today.

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My background:
+ Last 11 years in financial markets, with a predominant focus in
Resources:
+ 2012 to present: Paragon > co-founded Paragon Funds Management and
established the Paragon Fund in March 2013.
+ The Paragon Fund is an Australian equities Long / Short fund, focusing
on core competencies in Resources and Industrials.
+ Since inception, the Fund has returned 20%+ net CAGR, half coming
from Resources, despite the sector being down -16%.
+ 2014 AsiaHedge “New Fund of the Year” across Asia-Pac - Finalist.
+ 2009 to 2012 : Eye Management, a global Resources absolute return fund
+ Over this period the Australian Long / Short equities component of the
fund returned 30% net CAGR (tripled the market).

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Diverging fortunes of Resources sub-sectors -
Supply-side dynamics dominate
+ Whilst demand is an important factor, the biggest driver for Resource
markets is supply.
+ Bull markets are typically undersupplied with inventory levels in or
approaching sustained deficits.
+ On the flipside, bear markets are typically oversupplied with
inventory levels in sustained surpluses.
+ The respective performance of Iron Ore, Coal & Oil (down >50% off
recent highs) vs Lithium & Zinc (strengthening prices) captures the
divergent supply side dynamics very clearly.
+ Iron Ore, Coal – oversupplied, surplus markets - poor fundamentals.
+ Lithium, Zinc - balanced to deficit markets - strong fundamentals.

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Making money in Resources
+ Despite the volatility over the last two years, profitable stock picks across the
Resources spectrum and across the Resource S-curve have been achieved.
+ What we have made money in:
+ US Shale Gas revolution (LNG)
+ Electric Vehicles revolution (Lithium – ORE, Graphite – SYR, KNL)
+ Resource Discovery & Delineation (TON)
+ Pre-production plays (POS)
+ What have we avoided / shorted:
+ Bulks commodities - Iron Ore, Metallurgical & Thermal Coal
+ Mining Services, Oil & Gas and Gold up until 2015
+ Materially overpriced stocks with asymmetric risk:reward to the downside

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Resources sub-sectors we like
+ Lithium – Strong long term fundamentals, negligible new supply outside
ORE’s Olaroz.
+ Zinc – Moving into multi-year deficits and a major bull-market cycle from
CY16-19.
+ Sulfate of Potash – Unrivalled fundamentals and price strength. Limited
new supply candidates.
+ Copper – Balanced markets likely to enter into deficits again from CY16.

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Resources stocks we like
+ ORE – world-class Olaroz Lithium-brine project ramping up production to
17.5ktpa, with medium-term low capex expansion capacity to 30ktpa+.
+ RWD - delineating and derisking a likely world-class Sulfate of Potash
brine resource at its Lake Disappointment project in WA.
+ RER – Kalongwe the lowest capex and opex Copper project on the ASX
that’s potentially <12 months away from production.
All three stocks offer attractive risk/rewards to the upside.
Paragon has an interest in all of the above.

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Questions?
p. +61 3 9663 4415 m. 0412 395 004 e. j.deniz@paragonfunds.com.au
Paragon Funds Management Ltd, Suite 2, Level 2, 1 Little Collins Street, Melbourne VIC 3000
Paragon, its directors and employees do not accept any liability for results of any actions taken or not taken on the basis of information in this
presentation. This presentation does not constitute advice and is not intended for public use or distribution.