LION SELECTION GROUP LIMITED. — AGM Information 2013

Dec 5, 2013

Lion Selection Group Limited Annual General Meeting 2013 Chairman’s Address

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This last year has been extremely challenging in Lion’s market segment, early stage exploration and mining companies, as we came off one of the biggest mining booms in history. Like all booms, it had generated unrealistic and over optimistic expectations, waste and excess, and had encouraged the entry of inexperienced and sometimes incompetent, management, boards, analysts and investors. The subsequent crash in the market for these companies has therefore led to widespread disappointment and disenchantment with the sector.

The current despondency stems largely from concerns about metal prices and in some cases, for example, gold, significant declines, failed stewardship of shareholders money, blow outs in capital and operating costs, resulting disappointing returns from many mining investments, and encroaching government take in many jurisdictions.

The Lion clock tells us, in regard to the mining cycle, that none of this is new; it has happened many times in the past and will happen repeatedly in the future. And while we all know that investment performance in the past is an uncertain guide to future performance, Lion’s long term performance and these events certainly provide some evidence that the best way to invest in the sector, through all periods in the cycle, is through Lion.

Indeed the last twelve months for Lion has been one of positioning the company for the future. During this time Lion has re-domiciled from the NSX to the ASX, raised $10 million and increased its investment in One Asia Resources with smaller follow on investments in other companies in our portfolio. The move to the ASX appears to have helped narrow the gap between Lion’s share price and NTA.

As a result, despite early stage mining markets having been deeply troubled, Lion is in a solid cash position, has a stable and experienced management group, and a portfolio of investments in well-credentialed teams and projects, and looks forward to better markets which will inevitably return.

The current stage of the cycle is both a threat and an opportunity. Clearly the risk at present relates to junior mining companies surviving the current downturn. Many more

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will and probably should fail. Their projects, prospects and management and boards are not up to the task, and we are probably in an extended period of consolidation and contraction of the sector. There have been some healthy consequences of the downturn: focusing attention to the very best projects, weeding out poor management and boards, reducing excessive salaries and costs, getting more bang for the buck out of contractors and consultants, and demonstrating once again to politicians and the public in large capital cities that mining is not a magic pudding. The resources industry generally appears to be improving its focus on providing meaningful returns, more transparent cost reporting, improved governance and capital management. In Australia the recent change to a more mining friendly government will certainly help, particularly once the exploration development credit arrangements are established. Ultimately sentiment towards commodities will need to improve before we see a return to better times.

However, the opportunity for the contrarian investor with experience, knowledge and skills is not just to survive, but to take advantage of the often irrational lack of confidence. Cultivating insightful investments at this point of the market provides some of the best fruits of the recovery to come and Lion is well positioned to do this, although the rewards may take time to emerge.

Several times in Lion’s history we have identified outstanding opportunities and weighted our portfolio towards these investments. In the fullness of time these investments, which have all been exposed to high levels of risk, be they technical, political or other, and which have required strong and sustained input from the Lion team to help them succeed, have provided some of our best returns. We believe that One Asia is a similar opportunity. The Lion team is fully focused on this investment which includes the appointment of Robin to the One Asia Board.

Lion has historically invested around 50% of its funds into gold opportunities, driven by the relative simplicity of gold projects and the number of gold opportunities available. In April 2013 the gold price crashed which appears to have been triggered by derivative based short sales, but quickly snowballed as exchange traded funds and other investors sought the exit door at the same time. The major cause of the gold price fall is likely to be the assessment by many investors in gold that widespread quantitative easing by the US, Japanese and European governments is not going to lead to run away debasement of those currencies, which may or may not prove to be correct. Where the gold price will go is anyone’s guess, but we believe the fundamentals remain positive. Equity valuations have clearly been impacted, but importantly most of our portfolio has robust projects that can withstand lower prices.

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Our strategy is to provide investors with three key elements:

• a management team with a track record of performance in investing in emerging miners,

• overall returns with costs that are competitive and carefully managed,

• shareholders to benefit from that performance through dividends and capital growth.

Although past performance can never be a guarantee of future success, Lion has reason to be proud of its annualised growth of 13% per annum since its inception outperforming its benchmark index and most other fund managers. We continue to invest for the long term, a mantra that we have always maintained.

Although Lion is not currently in a position to pay a dividend, Lion remains committed to paying sustainable dividends as returns are realised, subject always to the investment opportunities and commitments of the company.

In conclusion, Lion’s investment model of focusing on direct investments in early stage mining and exploration has stood the test of time and we are aiming to ensure that Lion continues to be an attractive proposition for investors seeking exposure to emerging miners.

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