Junior Mining

My Heart Beats. Financing and M&A activity are among the leading indicators of an incipient recovery of the junior mining

sector. Given that the most significant news of last week was related to the acquisition agreement between New Gold (NGD)

and Rainy River Resources (RR), Canaccord Genuity Mining Analysts Joe Mazumdar and Nicholas Campbell reviewed the

financing activity in the sector over the past few months (>C$5 million). In their review (~$300 million) of equity financing

transactions (>$5 million), the majority are linked to companies with assets in stable geopolitical jurisdictions such as Canada

with access to flow-through shares, so location continues to play a role in the ability of junior mining companies to attract

financing in the current environment. Banro’s (BAA) financing ($100 million in total) for its projects in the DR Congo

included ~$67.8 million in common shares with the remainder involving gold linked preferred shares. If Banro's gold linked

preferred shares were removed from the total, 55% of the equity financing was directed to lower geopolitical risk jurisdictions

with over 70% related to gold exploration and development. In the most recent M&A transaction, New Gold viewed the Rainy

River Gold project as attractive due to its location (northwestern Ontario, proximity to infrastructure), sizeable reserve base (4

Moz of 2P reserves), and potential production profile (225 koz/y) of its principal asset, the Rainy River Gold Project (RRGP).

The transaction (~C$310 million), represented a 67% premium to Rainy River‘s 20d VWAP and values RRGP at $75-80 per

ounce of 2P reserve, $50 per ounce of M&I and $37 per global ounces including inferred material. In the junior space, Agnico

Eagle Mines (AEM) has also been very active. The intermediate gold producer recently announced that it has entered into an

agreement with Probe Mines (PRB) pursuant to which Agnico has agreed to purchase 7,500,000 units of Probe at a price of

$1.50 per unit for total consideration of $11,250,000. Each Unit is comprised of one common share of Probe and three-quarters

of one common share purchase warrant of Probe, with each warrant entitling the holder to acquire one common share at a price

of $2.10 for a period of two years from the closing date. On closing of the transaction, AEM will hold 7,500,000 common

shares and 5,625,000 warrants, representing 9.94% of the issued and outstanding common shares on a non-diluted basis and

16.19% of the issued and outstanding common shares assuming exercise of the warrants. AEM's agreement with Probe

represents AEM‘s fifth strategic investment in juniors during 2013, with the other four being: Urastar (URS), Kootenay Silver

(KTN), Sulliden Gold (SUE) and ATAC Resources (ATC). Junior companies that can offer a combination of location,

potential for a significant resource base, and production profile may be able to attract an M&A bid in the current environment

and potentially financing.