Mgx Resources Limited · ASX:MGX
Mgx Resources — Mount Gibson Iron — Shareholder Meeting (November 2008)
26 slides from Mgx Resources's shareholder meeting presentation, Nov 18, 2008
Slide 1: AGM Presentation
AGM Presentation For personal use only 18 November 2008 1 18/11/2008
Slide 2: Disclaimer
Disclaimer For personal use only This Document is Confidential and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person, or published, in whole or in part, for any purpose without prior written approval from Mount Gibson Iron Limited. This Document is not a
Slide 3: Contents
Contents For personal use only 1 Industry Context 2 Implications for MGI 3 Proposals for Shareholders 4 Impact on the Future 3 18/11/2008
Slide 4: Capital markets
Capital markets For personal use only The downturn has affected global equities significantly – particularly in China Major equity market indices 2007 – 2008 160 S&P 500 FTSE 100 Shanghai Composite S&P/ASX 200 150 140 130 120 110 Index to 1/7/07 100 90 80 70 60 50 40 30 01-Jul-07 01-Oct-07 01-Jan-08
Slide 5: Steel prices
Steel prices While initially robust over the same period, steel prices have rapidly declined ~45-50% since July 2008 For personal use only Steel prices 2007 – 2008 200% China Domestic Slab China Export Hot Rolled Coil 180% 160% 140% Index 120% 100% 80% 60% 40% 01-Jul-07 01-Oct-07 01-Jan-08 01-Apr-08
Slide 6: Iron ore Fines prices CIF China
Iron ore Fines prices CIF China For personal use only Chinese delivered Iron Ore prices have been affected; the spot price is now below benchmark (CIF) prices Iron ore Fines price – CIF China Jul – Nov 2008 200 Spot CIF China Benchmark - 63%Fe (Converted to CIF) 180 160 140 US$ per tonne 120 100 80
Slide 7: Impact on share prices
Impact on share prices For personal use only Mid cap iron ore producer/developer share prices have decreased ~75% since 1 July 2008 Indices of Australian mining companies – majors vs. midcaps Jul – Nov 2008 120% Metals and Mining S&P/ASX 200 Mid-Cap Iron Ore Companies Mount Gibson Iron 100% 80% Inde
Slide 8: Supply side reaction
Supply side reaction For personal use only The larger producers are not immune Company Date Commentary “As a result of the reduced demand from customers and reduced 10 Nov 08 shipments, the annualised run rate of iron ore production from the Pilbara mines will be reduced by approximately 10%.” “We a
Slide 9: Long term outlook
Long term outlook For personal use only Few question longer term growth in steel, however material price pressure likely to continue for near term • The Chinese economy has proven not to be immune from the Global credit crisis and expectations of widespread recession • China’s own economy has been a
Slide 10: Contents
Contents For personal use only 1 Industry Context 2 Implications for MGI 3 Proposals for Shareholders 4 Impact on the Future 10 18/11/2008
Slide 11: Impact on Mount Gibson
Impact on Mount Gibson For personal use only • Production and sales were on schedule for first quarter of FY08/09 • A substantial majority of outstanding debtors at the end of June 2008 was collected by September 2008 whilst only approximately 5% is in dispute • In second quarter, significant reques
Slide 12: Defaulting customers
Defaulting customers For personal use only Defaulting customers have put the Company under significant pressure • As announced on 3 November 2008, three customers defaulted on legally binding offtake agreements • Acceptable accommodation was reached with two others FY08/09 Planned Production Planned
Slide 13: Historic production growth and current forecast
Historic production growth and current forecast For personal use only Production in 2009 and 2010 has been significantly impacted by the defaults Current Forecast Pre-Default Historic 12 10 Ore Sold (million WMT) 8 6 4 2 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Financial Year end 30
Slide 14: Foreign exchange hedge book
Foreign exchange hedge book For personal use only • Consistent with company policies and minimum bank mandated hedging requirements, MGI entered foreign exchange forward contracts to cover approx 40% budgeted USD for FY08/09 and FY09/10: – Hedge was prudent. Normal practice that the banks mandate a
Slide 15: Steps taken by Mount Gibson
Steps taken by Mount Gibson For personal use only • Koolan Island – Main pit and Sea Wall development activities deferred until July 09 – Contractors and hire equipment demobilised (MGI equipment retained) – Increased specification through high grading (lower Si) with reduced production capacity • T
Slide 16: Contents
Contents For personal use only 1 Industry Context 2 Implications for MGI 3 Proposals for Shareholders 4 Impact on the Future 16 18/11/2008
Slide 17: Transaction Summary
Transaction Summary For personal use only The proposed transaction is comprised of offtake agreements, a rights issue and a placement 1. Proposed entry into Offtake agreements with APAC and Shougang Concord – subject to shareholder approval Medium Term Offtake – January to June 2009 Long Term Of
Slide 18: Shougang Concord
Shougang Concord For personal use only • Shougang Concord International Enterprises Co. Ltd (“Shougang Concord”) is a Hong Kong listed company (HKEx: 0697) with current market capitalisation of ~ HK$6 Bn • 6 month revenue to 30 June 2008 was HK$8.2 Bn • Areas of operations are: – Steel manufacturing
Slide 19: APAC Resources
APAC Resources For personal use only • APAC Resources Ltd (“APAC”) is a Hong Kong listed company (HKEx: 1104) with a current market capitalisation of ~ HK$1.3 Bn • 6 month revenue to 30 June 2008 was HK$402m • Invests in resources assets, either through corporate investments or direct project intere
Slide 20: Offtake overview
Offtake overview For personal use only • Short term Offtake: – November & December 2008 APAC (50%) and Shougang Concord (50%) purchase available production up to limit without shareholder approval (current estimate 325kt) – Priced at FOB US$40 per wet metric tonne for fines & lump – No shareholder a
Slide 21: Specification and logistics
Specification and logistics For personal use only MGI ore presently has a lower spec and higher shipping costs than “Benchmark” ores • KooIan Island & Tallering Peak short term Fe SiO2 P Al2O3 production lower specification than (%) (%) (%) (%) Hamersley Benchmark Lump – Lower iron content Koolan –
Slide 22: Rights issue – key details and timetable
Rights issue – key details and timetable For personal use only Key Details Provisional Timetable1 Date • Renounceable pro rata rights issue Offer document lodged with ASIC 1 Dec 08 • 1 new share for every 5 existing shares • Issue Price - $0.60. 103% premium to close Shares quoted on an “ex” basis 3
Slide 23: Rights Issue & Placement Pricing
Rights Issue & Placement Pricing For personal use only Transaction price relative to MGI share price Transaction Price Premium (Discount) to VWAP Close prior to trading halt 48% 10 day VWAP to 17 Nov 49% VWAP since 9 Oct announcement 21% 30 day VWAP to 17 Nov (2%) 60 day VWAP to 17 Nov (40%) Source:
Slide 24: Contents
Contents For personal use only 1 Industry Context 2 Implications for MGI 3 Proposals for Shareholders 4 Impact on the Future 24 18/11/2008
Slide 25: Summary of selected broker comments
Summary of selected broker comments For personal use only Broker Date Commentary “After due consideration to the risks involved, we consider that the iron ore business is trading at an unreasonable discount to underlying Bell Potter 5 Nov 08 value. In view of this we are upgrading our recommendation
Slide 26: SC / APAC shareholding post rights issue
SC / APAC shareholding post rights issue For personal use only SC/APAC will own between 28.5% and 40.4% if the underwriting and placement are approved If shareholders subscribe for 100% of rights... Post Rights Issue and Placement # of Shares1 % Shougang Concord 110,000,000 10.2% APAC 196,977,773 18
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