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AIM Chaos is the research branch of a private investment vehicle named Sons of Ulster. Investment ideas

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AIM CHAOS

Ferrum Crescent Ltd

Ticker: FCR 25 July 2017 Buy-in Price (p): 0.120 Market cap (m): 2.96 Rationale: Significant positive news due;

Companys value not recognized Company snapshot Ferrum Crescent Ltd (FCR or the Company) is focussed on lead-zinc exploration and development in Europe. The Company was founded in 2001: its flagship asset was the Moonlight Iron Ore Project, a large, high grade magnetite project located in South Africa. FCR listed on the ASX in 2005, and attained an additional listing via its AIM IPO in December 2010, during which it raised 10m gross at a post-new money valuation of 29.9m. In 2011 FCR attained a tertiary listing on South Africas JSE. Last year, the Company underwent extensive restructuring both on a corporate and operational level. Corporate-wise, there were a number of Board reshuffles, the most notable being the appointment of a new executive chairman. Operationally, the Company opted to diversify its asset base, given the relatively slow progress made at Moonlight in the six years since listing on AIM. In September, the Company exercised an option to acquire 100% of GoldQuest Iberica S.L. for 0.33m in cash and 100m new ordinary shares in FCR. GoldQuest owns 100% of two lead-zinc exploration projects in the adjacent provinces of Len and Galicia, Northern Spain. The more advanced of the two projects, namely Toral, comes with significant amounts of historical geological and exploration data. This includes a NI 43-101 Technical Report estimating an 8.71 Mt resource at a zinc equivalent (Zn Eq.) grade of 10.7%. This resource is at a depth of circa 300m to 500m. FCR has commenced a work programme at Toral, which is focussed on proving up a new hypothesis regarding the deposit: namely, that historical drilling despite having delineated a sizeable, high grade resource at depth was inefficient, and entirely missed out the potentially large, high grade, near surface mineralisation. Fieldwork (including soil sampling and rock chip sampling) over the winter months yielded encouraging results, which led to the decision to commence a short but highly targeted drill programme. Drilling commenced in late May, and assay results are due in the next few weeks. The second project, Lago, is less developed than Toral but nonetheless also demonstrates promising signs of high grade zinc mineralisation. Recent market sentiment, dealings in shares and share price movement In February, FCR terminated the farm-in and joint venture (JV) agreement with its South African-based partner for the Moonlight Iron Ore Project. Earlier this month, it then disposed of

AIM CHAOS

@AIM_Chaos info@aimchaos.com

AIM Chaos is the research branch of a private investment vehicle named Sons of Ulster. Investment ideas

shared are neither solicitations to buy nor offers to sell securities to 3rd parties.

Ferrum Crescent Ltd 25 July 2017

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the project entirely for a nominal sum. Managements rationale for doing so was based on a depressed iron ore market, coupled with the project's high capital cost and infrastructure requirements. It should also be noted that in the current market, magnetite deposits come a distant second to haematite deposits in terms of commercial attractiveness. Indeed, to our knowledge no new magnetite projects have come on line globally in the past three years. The withdrawal from South Africa and the iron ore market, and the rebirthing of the Company as a European-focussed lead-zinc pure play was, in our opinion, a shrewd move. The supply / demand dynamics of the zinc market are becoming increasingly attractive for the supply side, with the zinc price up over 85% in the past 18 months. However, the wide market did not share this opinion. Since the termination of the JV agreement in February, the Companys share price fell by as much as 60% in the subsequent months, from 0.20p to 0.08p. We believe that the sell-off was as a result of both traders who had bet on management generating near term value for shareholders from Moonlight via a new JV or a trade sale; and of long term investors in FCR who had been waiting for years on a definitive outcome for Moonlight. The executive chairman eroded market sentiment surrounding the stock still further by carrying out an equity placing in June at an all-time low share price of 0.07p. The share price has since recovered somewhat, but the Company is still only valued at 2.96m. Investment rationale In our view, 2.96m grossly undervalues FCR on account of its new zinc assets, particularly Toral. The resource delineated within the NI 43-101 Report alone justifies an immediate price tag of $9.6m (or 0.30p per share) for Toral, as we demonstrate using comparable company analysis in Appendix I. This is before any positive results from the soon-to-be completed near-surface drilling programme, which could add significantly more value to Toral in time. In June, the Company released an encouraging update with regard to the ongoing drilling at Toral: FCR's current drill programme at Toral is progressing on schedule. Visual identification of lead-zinc associated minerals in the core extracted from the completed holes to date, confirms the main precepts of the Company's new geological model with respect to the near-surface target zone. If the assay results do confirm high grade mineralisation and the above is strongly suggestive that they will then the Company intends to carry out a second, similar sized drilling programme in the autumn. It is likely that subsequent to the completion of phase II drilling, FCR will be in a position to announce a near-surface maiden resource by year end. Compounded with the ongoing resurgence of the zinc market, we believe that the development of Toral in H2 2017 could begin to generate renewed interest in FCR, especially as hostility towards the Company brought about by the Moonlight debacle continues to fade. Even if the current work programme for delineating a near-surface lead-zinc resource is disappointing, the Company is in a position to convert the NI 43-101 defined deep resource into a JORC code classified resource, which could then be more readily marketed to larger industry players. To summarise: our long position in FCR is based on its ownership of Toral a large, high grade (and crucially already proved up) lead-zinc resource and the market grossly undervaluing the asset; and on the potential for FCR to add significant further value to Toral in the next six months by expanding the resource base. A near-surface resource would also probably enhance the economics of a potential operation at Toral.

AIM CHAOS

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AIM Chaos is the research branch of a private investment vehicle named Sons of Ulster. Investment ideas

shared are neither solicitations to buy nor offers to sell securities to 3rd parties.

Ferrum Crescent Ltd 25 July 2017

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Appendix I Valuation for Toral

Toral was drilled extensively by various previous owners over the past four decades circa 42 km of drilling has been carried out on site to date, which would usually be considered more than sufficient for a bankable feasibility study. Indeed, in 2011 a NI 43-101 Report was published by a former owner of Toral (and reissued in 2012). [A NI 43-101 Report, which is a national instrument for the Standards of Disclosure for Mineral Projects used by mining companies listed in Canada, is roughly the equivalent to Australias JORC Code, although considered more stringent.] The NI 43-101 Report delineated the following mineral resource at Toral:

Exhibit 1: NI 43-101 Report for Toral

Indicated Inferred

Mt Pb (%) Zn (%) Cu (%) Ag

(g/t) (Pb + Zn)

(%) Mt

Pb (%)

Zn (%)

Cu (%) Ag

(g/t) (Pb + Zn)

(%)

4.04 5.30 6.50 0.11 41 11.8 4.67 4.44 5.40 0.14 32 9.8

Indicated Inferred

Pb (t) Zn (t) Cu (t) Ag (t) (Pb + Zn)

(t) Pb (t) Zn t) Cu (t) Ag (t)

(Pb + Zn) (t)

214,416 262,562 4,285 165 476,978 207,316 252,348 6,447 149 459,664

Source: Company data The total resource (indicate and inferred) amounts to 8.71 Mt. At todays metal prices, we calculate a Zn Eq. grade for this total resource of 10.7%. We utilise the existing NI 43-101 Report for the deep resource in order to demonstrate the substantial discount that the Company is already valued at, relative to its peer group. In Exhibit 2 overleaf, we have compiled a list of primary zinc plays listed in Australia, Canada and the UK in order to understand how investors across the globe are generally valuing zinc pure plays.

Exhibit 2: comparable company analysis for lead-zinc pure plays

Source: AIM Chaos, using various company data and reports

Company Project Location Listing Stage Zinc Equivalent Resource Company

EV (US$m)

Ownership of project

EV/t Zn Eq. (US$/t)

Tonnage (Mt)

Zn Eq. (%)

Zn Eq. (000t)

Trevali Mining Corp Santander; Caribou

Peru, Canada

TSE In production 50.44 8.90% 4,489 461.3 100.0% 102.76

Griffin Mining Caijiaying China AIM In production 47.90 5.5% 2,639 176.4 88.8% 75.24

Heron Resources Woodlawn Australia ASX BFS complete 17.50 10.2% 1,785 14.7 100.0% 8.25

Ironbark Zinc Citronen Greenland ASX BFS complete 70.80 5.7% 4,036 31.2 100.0% 7.74

Aldridge Minerals Yenipazar Turkey CVE BFS complete 29.17 4.6% 1,348 49.5 100.0% 36.75

Red River Resources Thalanga Australia AS