21 November 2014

ABN 85 121 511 886

Ground Floor, 1205 Hay St, WEST PERTH WA 6005

PO Box 1259, WEST PERTH WA 6872

Phone 61 8 9226 4455 Fax 618 9226 4255

CHAIRMAN'S ADDRESS AT THE ANNUAL GENERAL MEETING - 21 NOVEMBER 2014

Looking back to the previous year, Shaw River described itself as an exploration junior. As a mining company exploration is part of our DNA, but for Shaw River it is no longer our purpose.
During the current financial year Shaw River is being transformed into a producer and for the time being the role of exploration on the Otjo leases will be to identify viable and sufficient ore bodies ahead of mine development.
Shaw River has new funding, a major shareholder directly committed and striving to bring the Otjo project into production, and a mining engineer as its new Managing Director.
Management, and the major shareholder, recognise that the Otjo project can be cost competitive, even in today's challenging market environment, provided variable costs are managed closely and overheads are minimal.
From the minority shareholder's point of view, these developments are reflected in the confidence of those people buying the company's stock and of those choosing to hold. Interestingly we have noted institutional investors entering the company's share register.
At the beginning of the 2013/2014 financial year the share price was under half a cent. At its lowest, the share price was below 0.4cents. Recently the price reached a high of 4 cents, and today's price values your company at over $30m.
From a minority shareholder's point of view there is the added benefit that for the time being that their investment is being funded by borrowings and since these loans are from the new major shareholder, in effect providing the minority shareholders with a free carried interest, albeit supported by the company's assets as collateral.
How did we get to this point?
The last major fund raising of approximately $8m was in August 2012 and, in accordance with the prospectus, that money was intended for and applied to exploration.
At the latter end of the 2012/2013 financial year the Board could see that the cash resources of the company would be exhausted in the first quarter of the 2013/2014 financial year.
The company's stockbroking adviser made it plain that the share market was unfavourable for an adequate capital raising, and, specific to Shaw River, there were outstanding legacy issues that would hobble any fund raising.
In particular, there was a $5m claim from Eramet S.A. for work done examining the Otjo project. This work had been done prior to Shaw River taking up its stake in Otjo and moreover the liability was warranted by the former shareholders. However, the claim was to be transacted via Otjozundu Mining, and therefore was seen to be an impediment.
To bridge the time to when an alternative capital raising might be possible, a loan was entered into in July 2013 with then major shareholder Atlas Iron. At the SRR AGM last year, one shareholder was critical of this loan, suggesting that Atlas would take the project if the loan was not recovered. The then Chairman noted that the loan was unsecured and was on commercial terms.
In September 2013, when SRR was faced with auditor's enquiries regarding going concern, Atlas again assisted the Company by expressing on-going support for Shaw River. For the loan, and this support, we are grateful to Atlas.
The matters with Eramet, and some matters with the former owners, were resolved in the first quarter of 2013/2014.
In the first quarter of 2013/2014 management conceived the idea of opening the mine at Otjo on a scale at which geological continuity and plant recovery could be tested. The Board received presentations on this proposition and could see that it offered the prospect of earlier value for shareholders than by following the more costly and time consuming Feasibility Study course of action.
In evaluating this course - a basic operation with a jig as the centrepiece - the forecasts showed that fresh capital for equipment and working capital would be required, but that returns would begin to cover the company's costs.
This approach was adopted by the Board and towards this end the Company in November 2013 announced that it would undertake a blast hole drilling program with the intention of identifying a start-up inventory.
With the capital figures to hand, the question of how to obtain the necessary funding for equipment and working capital was uppermost in our minds.
Over the course of the second quarter of the financial year discussions were held with Atlas regarding the direction the Company was taking.
In the course of these discussions we were given to understand that Atlas was focussed on investment in its iron ore mines and would not participate in a rights issue. Instead, it was recommended, Shaw River should look to attract a new cornerstone investor.
An important issue arose in December when the Namibian Minister for Mines & Energy wrote to the
Company, in essence querying the apparent lack of progress in developing a mine on the Otjo leases, given expectations that had been documented in the past.

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To see this in context it was noted that similar versions of this letter were sent by the Minister to other holders of mineral leases in Namibia.
The Company was able to respond quickly, citing its program and development plans, and as result the
Ministry provided the company with a letter of release from the implied sanction.
The campaign to identify a cornerstone investor got underway and by the end of January, and despite it being the holiday season, around 10 interested parties including mining companies, commodity traders, and capital funds, had signed Non-Disclosure Agreements with the company, and the list of parties interested in supporting SRR's Otjo project was growing.
Some difficulties in obtaining commitment from interested parties were becoming apparent.
Importantly, to be able to meet equity requirements of an in-coming party, an understanding was reached with Atlas that Atlas would be prepared to relinquish part or all of its equity in SRR.
Not least because of the anticipated intertwining of equity and loans, the process of accommodating the ideas of potential cornerstone investors and/or financiers was recognised for its unusual complexity, and PCF Capital was retained to manage and drive the process. PCF's support included the establishment of a data room.
Indicative term sheets were received from some parties in January and February.
Early on, several interested parties signalled that the minority shareholder in the Otjo project, Oreport, was an impediment to their participation.
There had been issues between the Company and Oreport for over a year. Of financial significance, Oreport had not been contributing its proportionate share of funding for Otjozondu Mining.
Shaw River management had invested considerable time and effort trying to re-engage Oreport, but to no effect.
In the second quarter of the financial year Oreport had been invited to put forward terms under which it would relinquish its holding. Despite several exchanges of opinion it was not possible to mould these terms to a deal acceptable to Shaw. A process of dilution of Oreport's equity began.
Matters with Oreport were brought to a head when, in March, Bank Windhoek called on overdraft guarantees and Oreport was obliged to make payment of Rand6.125m. This galvanised Oreport to return to the negotiating table and Oreport's exit was finalised in May. SRR now owned 100% of Otjo and had removed an impediment to funding.
Following site visits by selected parties, advanced term sheets were evaluated and a shortlist chosen.
Negotiations with the party at the top of the list reached agreed terms, and since these involved Atlas'
equity, the terms were submitted to Atlas.
A period of negotiation between the interested party and Atlas ensued, with PCF representing SRR
interest, and final terms were signed in August.
The terms are a matter of public record, and include a sequence of loans and loan draw downs, and appointment of new management.
The acquiring party, Bryve Resources, made an immediate injection of $1.4m into SRR, and last week shareholders approved the various options integral to the deal.
At an early stage, a detailed investigation of cost within SRR and OM has been conducted to ensure the maximum value of this $1.4m injection is applied to bringing the project into production.
Three months since the deals with Bryve and Atlas were signed, and we can report that the new MD Peter Cunningham and the principal of Bryve have been in Namibia most of that time, pursuing every aspect of the project.
The priorities include infill drilling to consolidate geological information; and then mining an initial 'bulk sample' of 95-100,000t of ore, with a target of shipping 30,000t of DSO over the following 3-4 months. In parallel the design and size of jig has been finalised and an order placed.
To facilitate the initial shipments, interim logistical arrangements have been established. For the future, discussions are underway with Government entities on the evolution of product transport to and through the port.
Looking forward, your company is in the hands of management and a majority shareholder determined to bring the Otjo project into production in a manner that will add further value to the Company.
From an investment point of view, Shaw River could be described as a pure manganese play, and this brings us to the manganese ore market.
In the past there have been commentators that link the fortunes of manganese ore to that of iron ore. It is clear from recent events however that there is no direct correlation. Iron ore has declined in price by over 30% over a period when manganese ore price has held steady and even showed modest improvement. Exchange rate influences are the same for both commodities, and the end users are largely the same, so we can say that manganese ore price marches to a different drum.
Actually manganese ore prices had slipped earlier in 2014. The price having stabilised is verification that manganese ore prices are now at levels that are a challenge for marginal producers. So from the point of view of Shaw River, if the company sees that it can achieve costs that will see profitability at today's
market levels then the future is promising.

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