Dundee: Eagle’s Nest PEA Results Disappoint

Conclusion: The upward revision to capital and operating costs for the Eagle’s Nest Project, when compared to our initial assessment, has reduced our net asset valuation for the Company significantly. We adjust our recommendation to NEUTRAL, Speculative Risk (from BUY, Speculative Risk) with a 12-month target price of C$1.40 (was C$2.90).

Event: Noront Resources Ltd. has released results of its Preliminary Economic Assessment (“PEA”) for a stand alone nickel, copper, platinum group metal (“Ni-Cu-PGM”) mine and mill complex for its 100% owned Eagle’s Nest deposit situated in McFaulds Lake, James Bay Lowlands, Ontario.

Eagle’s Nest Project Definition has Changed: The Company has departed from its original project definition, which included initial direct shipping of high grade ore on a winter road with toll milling in northern Ontario, to a fully integrated mine-mill operation in the vicinity of the deposit.

Capital Intensity Reduces our NAV: The life-of-mine capital cost in the PEA is C$870 - $975 million, which in our view, is highly capital-intensive for a project with a current implied mine life of 12 years. Our original valuation for a smaller-scale operation included a life-of-mine capital requirement of C$350 million. The Company has assumed a portion of the capital will be borne by governments or other companies that would share access to regional infrastructure developed for Eagle’s Nest. The additional capital requirements have significantly reduced our net asset valuation for the project. We have not adjusted our valuation for the Blackbird chromite deposit.

Q4-2010 News Flow Could be Positive: We are anticipating results from the deep drilling program at Eagle’s Nest. The program is designed to test the possible confluence of the Eagle’s Nest and Blackbird deposits at depth. If the two massive sulphide deposits come together, we could see some impressive drill results. In addition, the regional exploration program is ongoing and is testing a host of targets in the vicinity of Eagle’s Nest. A revised resource estimate is expected based on the results of this field work.

The Company’s press release of September 9 included only a high level summary. Details of the report will be filed on SEDAR (www.sedar.com) within 45 days. We will review our valuation after we review the detailed report, and perhaps with the benefit of a revised resource estimate.

Highlights of the PEA Include:

- After tax NPV at a 6.0% discount factor of approximately C$540 million;

- After tax IRR in excess of 20%;

- Using today’s spot metal prices, the after tax NPV increases by approximately $250 million and the IRR by 5%;

- Initial capital investment estimated to fall between C$600-$625 million;

- Sustaining capital estimated to be between C$270-$300 million;

- Operating costs estimated to be between C$120-$130 per tonne;

- Project life of 12 years.

- Capital expenditure payback between 3-4 years; and

- Average operating cost estimate of approximately US$3.00 per pound equivalent nickel based on the Assumed Metal Prices

Project Definition

- 1.0 million tonne per year throughput rate;

- Underground mining of the Eagle’s Nest Ni-Cu-PGM deposit;

- All major facilities (including the mill) would be located underground;

- Tailings would be stored underground as cemented fill;

- Minimal surface disturbance;

- Construction aggregate would be sourced from underground waste rock;

- The existing winter road from Pickle Lake Webequie and a transmission line would provide power to the mine site;

- A diesel power plant would be located near Webequie and a transmission line would provide power to the mine site;

- A slurry pipeline would be used to transport concentrate from site to a filter plant located near Webequie;

- Initial mine production would be from an internal ramp; and

- A winze (internal shaft) will be developed by year three to access the lower levels of the deposit.

While the PEA recognizes the need for an all-season road, power line, and winter roads during construction, it attributes only a fraction of the costs to the Project (25% for the all-season road and 50% for the power line and winter roads). The Company anticipates cost sharing opportunities with undisclosed beneficiaries.

The costs developed encompass operating costs to operate the mine, process plant, market a bulk concentrate product, provide environmental monitoring and management of the proposed operation. Closure costs are factored in the cash flow analysis. The operating costs of ($120-$130 per tonne) are broken down in the following manner: 1) 60% for underground mining; 2) 25% attributed to on-site processing; and 3)15% to cover G&A costs.

Projected mine production is based on recovery of 95% of the resource defined in the Golder resource April 23, 2010 resource estimate. Further, production includes 10% external mining dilution at zero grade.

Metallurgical recoveries were derived from preliminary test work and estimated at 89.1% for nickel and 90.8% for copper.