Investment Analysis on Mining Exploration, Molybdenum

Investment Analysis for Intelligent Investors

Siddharth Rajeev, B.Tech, MBA, CFA Analyst

Michelle Wu, B.A.Sc

Research Associate-Mining

Sanna Zhu, MA, MBA Research Associate

February 11, 2011

2011 Fundamental Research Corp. www.researchfrc.com Siddharth Rajeev, B.Tech, MBA, CFA

PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT

Bard Ventures Ltd (TSXV: CBS) – PEA States Measured & Indicated Resources of 146 Mt Containing

189 Mlb Mo and 65 Mlb Cu

Sector/Industry: Junior Mining/Exploration www.bardventures.com

Market Data (as of February 10, 2011)

Current Price C$0.07

Fair Value C$0.35

Rating* BUY

Risk* 5 (Highly Spec)

52 Week Range C$0.05 - C$0.20

Shares O/S 101.64 mm

Market Cap C$7.11 mm

Current Yield N/A

P/E (forward) N/A

P/B 1.09

YoY Return -46.2%

YoY TSXV 59.6%

*see back of report for rating and risk definitions

-

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

11-Jan-10 22-May-10 30-Sep-10 8-Feb-11

$0.00

$0.05

$0.10

$0.15

$0.20

$0.25

Investment Highlights

• The newly released PEA stated measured and indicated resource of 146 million tonnes containing 189 million pounds of recoverable molybdenum and 65 million pounds of recoverable copper.

• The proposed mine will be a conventional open-pit mining operation with an annual throughput of 14 million tonnes of ore. Expected mine life is 12 years. 40,000 tonnes per day of mill feed at full production.

• Initial CAPEX (including contingencies) is estimated at $435 million.

• The company acquired four new properties in the Thunder Bay mining division in November 2010.

• Currently, the company has $0.30 million in the treasury.

Key Financial Data (FYE September 30)

(C$) 2009 2010

Cash and Cash Equivalents 142,548 332,585

Working Capital 975,891 421,448

M ineral Assets 5,350,563 6,057,653

Total Assets 6,400,705 6,593,575

Net Income (Loss) (878,692) (850,933)

EPS (0.01) (0.01)

Bard Ventures Ltd. is a Vancouver based exploration company focusing on exploration and development in British

Columbia. The company’s flagship property is the Lone Pine Molybdenum project located in central B.C., Canada. The

latest PEA stated that the measured and indicated resources at Lone Pine are 146 million tonnes containing 189 million

lbs of recoverable molybdenum and 65 million pounds of recoverable copper.

Bard Ventures Ltd. (TSXV: CBS) - Update

Page 2



Lone Pine

Project

Preliminary Economic Assessment On January 21, 2011, Bard announced the results of the Preliminary Economic Assessment (PEA). The PEA provided an updated resource estimate and life-of-mine metal production taking into consideration mine dilution and losses. The results are listed in the following table.

Table 1 Updated Resource Estimate (Mine Dilution and Losses Included)

Mineral Resource

Classification

Ore

Tonnes

Mo

%

Cu

%

Recovered Mo

Pound (millions)

Recovered Cu

Pound (millions)

Measured &

Indicated 146,365,000 0.069 0.034 189.3 65.2

Inferred 16,679,000 0.081 0.034 25.3 7.4

Source: Company

The recovered amounts in the above table are the amounts contained in the concentrate from the on-site processing plant. Smelter payables are 98.5% for molybdenum and 85% for copper. For the Net Present Value (NPV) estimate, the PEA used a base case molybdenum price of US$19.00/lb, which is the 3-year trailing average price. The current price of Mo is US$17.92/lb. A sensitivity analysis of the pre-tax NPV was provided by the company for molybdenum prices over US$19/lb. We were able to extrapolate the sensitivity graph to calculate the pre-tax NPV for lower molybdenum prices to obtain a wider range. The results of the extrapolated sensitivity analysis are given in the following table and graph.

Table 2 Sensitivity Analysis of Pre-Tax 7PV to Molybdenum Price

Mo Price (US$/lb) 0% 5% 7% 10%$10.00 -800 -813 -801 -739$12.00 -348 -520 -552 -550$15.00 330 -81 -178 -266$17.00 781 212 71 -77$19.00 1,233 505 320 112

$20.00 1,459 651 445 206

$22.50 2,024 1,017 757 443

$25.00 2,589 1,383 1,068 679

$27.50 3,153 1,749 1,380 915

$30.00 3,718 2,115 1,691 1,152

Pre-Tax NPV ($, mm)

Source: Company & FRC


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Other Projects

Sensitivity Analysis

-1500

-1000

-500

0

500

1000

1500

2000

2500

3000

3500

4000

5 10 15 20 25 30 35

Mo Price ($/lb)

NPV (m

illions $

)

NPV @ 10%

NPV @ 0%

NPV @ 5%

NPV @ 7%

Figure 1 Sensitivity Graph of Pre-Tax 7PV to Molybdenum Price (Source: FRC)

Exploration Update The company completed a soil geochemical survey and geological mapping program in 2010 covering the 61 zone, the recently identified new zone of mineralization located to the west of discovery holes BD-10-61 to BD-10-66. The results of the soil samples showed elevated molybdenum content further to the west of the discovery holes. The grab samples also returned positive results showing 0.05% to 0.26% molybdenum. These results support the

potential for extending the 61 zone to the west and expanding the existing resources. Encouraged by the PEA results, and the exploration progress on the Lone Pine property, the company is planning another drill program consisting of 5,000 meters of diamond drilling in March 2011. A summer field exploration program consisting of soil sampling, prospecting and surface mapping was completed on the company's Grouse Mountain property located to the immediate north of the company's Lone Pine project near Houston, BC. Several trends of geochemical anomalies with elevated Cu, Pb, Zn and Ag assays can be defined by the combined geochemical results from the past two years. These anomalies closely parallel historic structures of mineralized zones located to the northeast of the 2010 survey area. New zones of geochemical anomalies were also discovered in the northern part of the survey area during the 2010 summer field program. The new zones of anomalies are open to extension to the north. We believe that the positive results from the 2010 exploration

program increases the potential for additional mineralization on the Grouse Mountain

property. It is anticipated that drilling targets be identified by further exploration efforts on the property in order to confirm the mineralization.


Page 4



Management

Update

Outlook on

Molybdenum

Bard made a series of acquisitions in the Thunder Bay mining division in November 2010 to diversify the company’s development portfolio. The projects acquired are the Little Bear Lake gold property, the Little Steel Lake gold-silver-lead-zinc property, the Owl Lake Molybdenum property and the Jackfish Lake gold-copper-silver-nickel property. These projects are in relatively early exploration stages and the company plans to compile available historic data on these projects and design appropriate field programs to further explore the properties. In November 2010, the company appointed Mr. Michael Taylor, BSc, as Technical Advisor. His biography, as provided by the company, follows.

Mr. Michael Taylor has 30 years experience in managing gold and base metal projects in

Canada. He has served on the board of SLAM since founding the Company in 1996. He

directed SLAM through the private and IPO stages to its current listed status on the TSX-V

Exchange. Under his tenure, SLAM has made significant gold and base metal discoveries in

Ontario and 7ew Brunswick. Prior to SLAM's incorporation, Mr. Taylor was involved in the

exploration and development of gold and base metals for various mining companies mainly

in Eastern Canada. He was responsible for discovery of the former-producing Farley Lake

gold mine near Lynn Lake, Manitoba and a number of gold occurrences at Keezhik and

Opikeigen Lakes near the former gold-producing town of Pickle Lake, Ontario. Mr. Taylor is

also a director of Beatrix Ventures Inc., a Vancouver based resource company exploring for

gold in Canada. He is a director of the Prospectors and Developers Association of Canada,

a member of the Association of Professional Engineers & Geologists of 7ew Brunswick and

the Association of Professional Geologists of Ontario. He holds a Bachelor of Science

degree from the University of 7ew Brunswick.

Molybdenum prices have experienced a slow and steady increase in the past two years (see chart below) with the global economic recovery and drop in the US$. Molybdenum is currently trading at US$18/lb versus US$8/lb two years ago, reflecting a 125% increase.


Page 5



Financials

Valuation

We continue to maintain a positive outlook on Mo based on the following factors:

• Demand from BRIC countries especially China - China is estimated (by the US Geological Survey) to have accounted for about 35% of global production in 2010 and continues to be a net importer of the metal.

• Demand from the oil sector

• Increasing capital expenditures and higher production costs

• Continued Mo export restrictions by China (China is estimated to have produced about 40% of the global supply in 2010)

• Longer lead times to build new molybdenum mines

• Not easily substitutable due to its unique characteristics, availability and versatility

The global demand for Mo, we estimate, was about 500 mm lbs in 2010. CRU estimates global demand will be about 600 mm lbs in 2015 (reflecting a CAGR of 3.7% from 2010 to 2015) and about 700 mm lbs by 2020 (CAGR of 3.1% from 2015-2020).

We have raised our long-term (2014+) price forecast from US$10 to US$15 per pound

since our previous report in May 2010.

As of September 30, 2010, the company had $0.33 million in cash and cash equivalents. Working capital was $0.42 million. The company reported a net loss of $0.85 million (EPS: -$0.01) in FY2010 (ended September 30, 2010). We estimate the company had a burn rate (spending on operating and investing activities) of $0.06 million per month in FY2010. The following table shows the company’s cash and liquidity position at the end of 2010.

(C$) 2009 2010

Working Capital 975,891 421,448

Current Ratio 25.18 6.19

LT Debts/ Assets - -

Burn Rate/Month (incl exploration costs) (117,957) (63,601)

Cash from financing activities - 953,250 Stock options and warrants: At the end of December 31, 2010, there were 17.24 million stock options and 12.37 million warrants outstanding. All of them are currently out of the money. Conclusion: The company currently has about $0.30 million in cash. Management's CAPEX budget for 2011 is $1 million - indicating the company will have to raise close to $1 million in the next 6-12 months. Our revised DCF model (based on base case operating and capital costs, recovery rates and annual production estimates used by the PEA) gave a negative NPV based on our long-term molybdenum and copper price forecasts of US$15/lb and US$2.03/lb, respectively (long-term C$/US$ estimate - 1.1). Our previous DCF valuation on the company was $0.34 per share. The following table shows the assumptions used in our model.


Page 6



DCF Valuation

Mineral Resources (in tonnes) 163,044,000

Grade (Mo) 0.070%

Grade (Cu) 0.034%

Recovered Mo (lbs) 213,937,259

Recovered Cu (lbs) 72,716,834

Throughput (tpd) 40,000

Mine Life (years) 12

Discount rate 11.63%

Capital Costs $435,000,000

LT Molybdenum Price (US$/lb) $15.00

LT Copper Price (US$/lb) $2.03

C$/US$ 1.10

The sensitivity of our valuation to changes in our long-term molybdenum price forecast is shown below:

Mo Price VPS

US$/lb 0

$9.00 ($3.41)

$11.00 ($2.31)

$13.00 ($1.21)

$15.00 ($0.11)

$17.00 $0.98

$19.00 $2.08

$21.00 $3.18

As our DCF model gave a negative NPV, we built a real options valuation model as it also accounts for the value associated with management's option to pursue/abandon/expand the project and volatility in commodity prices. Our real options valuation on the company is

$0.73 per share.

Estd.Value of Minerals if extracted today (C$) $268,180,634Annualized Standard Deviation of Mineral prices 25%

PV of Capital Investment $280,133,829Time to Maturity (years) 5

Risk-free Rate 3.50%

Stock Price $268,180,634 T.Bond rate 3.50%Strike Price $280,133,829 Variance 0.06Expiration (in years) 5 Annualized div yield -

d1 = 0.515 Value of Option ($) $73,605,316

N(d1) = 0.697 Working Capital - LT Debt (C$) $300,000d2 = -0.047 No of shares (Dil.) 101,641,849

N(d2) = 0.481 Value per share $0.73

Real Options Valuation

Inputs relating to the underlying asset

Output

Our comparables valuation on the company increased from $0.09 per share to $0.32 per

share as the peer average EV to resource ratio increased from $0.03/lb to $0.12/lb of Mo


Page 7



Rating

Risks

equivalent since our previous report in May 2010. Based on our three valuation models, we maintain our fair value estimate at $0.35 per share. We reiterate our BUY rating (Risk 5: Highly Speculative).

Valuation Summary

DCF -$0.11

Real Options $0.73

Comparables $0.32

Average $0.31 The following risks, though not exhaustive, may cause our estimates to differ from actual results:

• The success of drilling, expansion and determination of favourable resource estimates are important long-term success factors for the company.

• The value of the company depends heavily on molybdenum and copper prices.

• Access to capital and share dilution.


Page 8



Fundamental Research Corp. Equity Rating Scale:

Buy – Annual expected rate of return exceeds 12% or the expected return is commensurate with risk Hold – Annual expected rate of return is between 5% and 12% Sell – Annual expected rate of return is below 5% or the expected return is not commensurate with risk Suspended or Rating I/A— Coverage and ratings suspended until more information can be obtained from the company regarding recent events. Fundamental Research Corp. Risk Rating Scale:

1 (Low Risk) - The company operates in an industry where it has a strong position (for example a monopoly, high market share etc.) or operates in a regulated industry. The future outlook is stable or positive for the industry. The company generates positive free cash flow and has a history of profitability. The capital structure is conservative with little or no debt. 2 (Below Average Risk) - The company operates in an industry where the fundamentals and outlook are positive. The industry and company are relatively less sensitive to systematic risk than companies with a Risk Rating of 3. The company has a history of profitability and has demonstrated its ability to generate positive free cash flows (though current free cash flow may be negative due to capital investment). The company’s capital structure is conservative with little to modest use of debt. 3 (Average Risk) - The company operates in an industry that has average sensitivity to systematic risk. The industry may be cyclical. Profits and cash flow are sensitive to economic factors although the company has demonstrated its ability to generate positive earnings and cash flow. Debt use is in line with industry averages, and coverage ratios are sufficient. 4 (Speculative) - The company has little or no history of generating earnings or cash flow. Debt use is higher. These companies may be in start-up mode or in a turnaround situation. These companies should be considered speculative. 5 (Highly Speculative) - The company has no history of generating earnings or cash flow. They may operate in a new industry with new, and unproven products. Products may be at the development stage, testing, or seeking regulatory approval. These companies may run into liquidity issues, and may rely on external funding. These stocks are considered highly speculative.

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The opinions expressed in this report are the true opinions of the analyst about this company and industry. Any “forward looking statements” are our best estimates and opinions based upon information that is publicly available and that we believe to be correct, but we have not independently verified with respect to truth or correctness. There is no guarantee that our forecasts will materialize. Actual results will likely vary. The analyst and Fundamental Research Corp. “FRC” does not own any shares of the subject company, does not make a market or offer shares for sale of the subject company, and does not have any investment banking business with the subject company. Fees were paid by CBS to FRC. The purpose of the fee is to subsidize the high costs of research and monitoring. FRC takes steps to ensure independence including setting fees in advance and utilizing analysts who must abide by CFA Institute Code of Ethics and Standards of Professional Conduct. Additionally, analysts may not trade in any security under coverage. Our full editorial control of all research, timing of release of the reports, and release of liability for negative reports are protected contractually. To further ensure independence, RPM has agreed to a minimum coverage term including an initial report and five updates. Coverage can not be unilaterally terminated. Distribution procedure: our reports are distributed first to our web-based subscribers on the date shown on this report then made available to delayed access users through various other channels for a limited time. The performance of FRC’s research is ranked by Investars. Full rankings and are available at www.investars.com. The distribution of FRC’s ratings are as follows: BUY (74%), HOLD (7%), SELL (4%), SUSPEND (15%). To subscribe for real-time access to research, visit http://www.researchfrc.com/subscribe.php for subscription options. This report contains "forward looking" statements. Forward-looking statements regarding the Company and/or stock’s performance inherently involve risks and uncertainties that could cause actual results to differ from such forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, continued acceptance of the Company's products/services in the marketplace; acceptance in the marketplace of the Company's new product lines/services; competitive factors; new product/service introductions by others; technological changes; dependence on suppliers; systematic market risks and other risks discussed in the Company's periodic report filings, including interim reports, annual reports, and annual information forms filed with the various securities regulators. By making these forward looking statements, Fundamental Research Corp. and the analyst/author of this report undertakes no obligation to update these statements for revisions or changes after the date of this report. A report initiating coverage will most often be updated quarterly while a report issuing a rating may have no further or less frequent updates because the subject company is likely to be in earlier stages where nothing material may occur quarter to quarter. Fundamental Research Corp DOES NOT MAKE ANY WARRANTIES, EXPRESSED OR IMPLIED, AS TO RESULTS TO BE OBTAINED FROM USING THIS INFORMATION AND MAKES NO EXPRESS OR IMPLIED WARRANTIES OR FITNESS FOR A PARTICULAR USE. ANYONE USING THIS REPORT ASSUMES FULL RESPONSIBILITY FOR WHATEVER RESULTS THEY OBTAIN FROM WHATEVER USE THE INFORMATION WAS PUT TO. ALWAYS TALK TO YOUR FINANCIAL ADVISOR BEFORE YOU INVEST. WHETHER A STOCK SHOULD BE INCLUDED IN A PORTFOLIO DEPENDS ON ONE’S RISK TOLERANCE, OBJECTIVES, SITUATION, RETURN ON OTHER ASSETS, ETC. ONLY YOUR INVESTMENT ADVISOR WHO KNOWS YOUR UNIQUE CIRCUMSTANCES CAN MAKE A PROPER RECOMMENDATION AS TO THE MERIT OF ANY PARTICULAR SECURITY FOR INCLUSION IN YOUR PORTFOLIO. This REPORT is solely for informative purposes and is not a solicitation or an offer to buy or sell any security. It is not intended as being a complete description of the company, industry, securities or developments referred to in the material. Any forecasts contained in this report were independently prepared unless otherwise stated, and HAVE NOT BEEN endorsed by the Management of the company which is the subject of this report. Additional information is available upon request. THIS REPORT IS COPYRIGHT. YOU MAY NOT REDISTRIBUTE THIS REPORT WITHOUT OUR PERMISSION. Please give proper credit, including citing Fundamental Research Corp and/or the analyst, when quoting information from this report. The information contained in this report is intended to be viewed only in jurisdictions where it may be legally viewed and is not intended for use by any person or entity in any jurisdiction where such use would be contrary to local regulations or which would require any registration requirement within such jurisdiction.

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Investment Analysis on Mining Exploration, Molybdenum