Grange Resources Limited · ASX:GRR
Grange Resources — Investor Presentation (July 2009)
30 slides from Grange Resources's investor presentation, Jul 31, 2009
Slide 1: Grange Resources – Australia's leading magnetite producer
For personal use only Grange Resources – Australia’s leading magnetite producer Investor Presentation Grange Resources Limited (GRR) Level 11, 200 St Georges Terrace Perth, WA 6000, Australia Phone + 61 8 9321 1118 Fax + 61 8 9321 1523 60 Wilmot Street, Burnie, Tasmania July 2009 Phone +61 3 6430 02
Slide 2: Important Notice
Important Notice For personal use only • The material in this presentation (“material”) is not and does not constitute an offer, invitation or recommendation to subscribe for, or purchase, any security in Grange Resources Limited (ABN 80 009 132 405, “Grange”, “GRR” or “the Company”) nor does it for
Slide 3: Iron Ore Value
Iron Ore Value For personal use only Vale/Nippon Steel FOB Tubarao • Direct reduction pellet US$125.23 per dmtu • Blast Furnace Pellet US$113.8 per dmtu Value & price Quality • Direct Shipping Lump US$100.94 per dmtu • Magnetite concentrate • Direct Shipping Fines US$89.87 per dmtu 3
Slide 4: Pellet Price
Pellet Price Rising rapidly with economic recovery For personal use only This year’s iron ore price settlement saw …. but the spot market has since Increasing steel prices also signal the a large drop in benchmark pricing… reverted to pre-settlement levels… start of economic recovery in China 160 10
Slide 5: Investment Highlights
Investment Highlights For personal use only Grange is Australia’s largest magnetite producer, formed by a merger between Grange and Australian Bulk Minerals (ABM) in 2009. 9 Australia’s only current exporter of iron ore pellets, producing 2.5Mtpa from the Savage River operations in Tasmania 9 Cost c
Slide 6: Company Snapshot
Company Snapshot For personal use only Key statistics (A$) Ownership Structure Ordinary shares on issue 30 Jul 09 495m 23.08% Shagang - China’s largest private Share price (current) 30 Jul 09 $0.41 steel producer Stemcor – London-based trading Market capitalization 30 Jul 09 $203m 7.67% major 15 day
Slide 7: Jiangsu Shagang
Jiangsu Shagang A strong partnership For personal use only Shagang Overview • Grange’s largest shareholder • Demonstrated continuing support for Grange with attractive LOM offtake contracts agreed for both Savage River and Southdown at benchmark prices • Shagang’s investment in Grange represents a s
Slide 8: Leading Magnetite Producer
Leading Magnetite Producer For personal use only Grange’s position as Australia’s leading magnetite producer is supported by quality assets in Tasmania and Western Australia. Southdown Project (70%) Savage River (100%) • 90km northeast of the Port • Northwest Tasmania of Albany • Producing 2.5Mtpa b
Slide 9: Key Information
Key Information Profitable even during economically hard times For personal use only FY09 – Quarterly Breakdown Q1 Q2 Q3 Q4 FY09 Actual Actual Actual Est. Est. Total volume mined (‘000 bcm) 4,406 4,030 4,342 4,490 17,268 Total ore mined (‘000 bcm) 155 165 130 465 915 Concentrate produced (‘000 tonne
Slide 10: Financial Position Overview
Financial Position Overview For personal use only • As at 31 Dec 08, Grange had net assets of A$90m, with liabilities of A$7m and an 115m shares on issue • Effective 2 Jan 09, the Savage River operations were acquired through the issue of 380m Grange shares to the owners of ABM, giving a total consi
Slide 11: Savage River Overview
Savage River Overview For personal use only Ownership • Grange 100% • Mineral Resource of 316Mt magnetite at Resources and 50.7% DTR Reserves • Ore Reserve of 124Mt magnetite at 49.2% DTR • 2.5Mtpa blast furnace pellets (annualised basis) Production • Potential to expand to 3.0Mtpa LOM Operating • U
Slide 12: Savage River Historical Performance
Savage River Historical Performance For personal use only Historical Mining and Production Ore Mined (000 BCM) 2.5 2,500 Pellet Production (Mt) 2.0 2,000 1.5 1,500 1.0 1,000 0.5 500 0.0 0 2004 2005 2006 2007 2008 Production (Mt) Ore Mined (000 BCM) EBITDA (A$m) EBITDA (A$m) 100.0 80.0 60.0 40.0 20.0
Slide 13: Large Scale Operations
Large Scale Operations For personal use only 13
Slide 14: Own Downstream Infrastructure
Own Downstream Infrastructure For personal use only 14
Slide 15: Own Port and Shiploading Infrastructure
Own Port and Shiploading Infrastructure For personal use only 15
Slide 16: Savage River Outlook
Savage River Outlook For personal use only 5 year production outlook Increasing production in the long run • Production will be increased with Pellet Production (Mt) 2.8 Mill shell replacements replacement of mill shells for both 2.4 autogenous mills, scheduled to occur in 2.0 2014 • Replacement all
Slide 17: Southdown Project
Southdown Project High grade magnetite project with advanced infrastructure For personal use only Ownership • Grange 70%, Sojitz Corporation 30% Resources and • Mineral Resource of 654Mt magnetite at 36.5% DTR1,2 Reserves1 • Ore Reserve of 388Mt magnetite at 35.5% DTR1,3 • 6.6Mtpa magnetite concentr
Slide 18: Solid Customer Base
Solid Customer Base Long term offtake agreements – providing revenue stability For personal use only Agreements are in place for both Savage River and Southdown production at benchmark prices or better. • China’s largest private steel mill, producing 22 Mtpa of pig iron • Grange’s largest shareholde
Slide 19: Resources and Reserves
Resources and Reserves Supporting Long Mine Lives For personal use only Grange has 774Mt of attributable Mineral Resources and 396Mt of attributable Ore Reserves. Mineral Resources (inclusive of reserves) Ore Reserves Tonnes Grade Tonnes Grade (Mt) (%DTR) (Mt) (%DTR) Savage River 4 Savage River Meas
Slide 20: Market Capitalisation (A$m)
For personal use only Market Capitalisation (A$m) 0 200 400 600 800 1000 1200 Gindalbie Metals Australasian Resources Grange Resoures Brockman Resources producing juniors. Aurox Resources Ironclad Mining Ferrowest Fortescue Aquila Resources $13.7b $1.4b Mount Gibson Iron $1.2b Atlas Iron Murchison M
Slide 21: Relative Performance
Relative Performance For personal use only One Year Performance (re-based to $1.00) One Year Percentage Change $1.40 Grange is relatively undervalued Share Price (A$) -16% Gindalbie compared to its peers, making it $1.20 an attractive time to invest -23% Brockman -26% Atlas $1.00 -39% Murchison $0.8
Slide 22: Comparison with other mid-tiers
Comparison with other mid-tiers For personal use only Grange is attractively priced compared to its (mostly non-producing) peers. Enterprise Value – Comparison with peer companies EV/FY09 Production – Inexpensive compared to peers 1,400 700 A$/t A$m 1,200 $17b 600 1,000 500 800 400 600 300 400 200 2
Slide 23: Grange Resources – Summary
Grange Resources – Summary For personal use only • Australia's leading magnetite producer • Australia’s largest iron ore pellet producer • High grade quality products • Consistent cash margins • Solid customer and revenue base • Long life assets • Low sovereign risk • Extensive magnetite technical a
Slide 24: Grange Board
Grange Board For personal use only Grange has a strong board with a diverse range of experience. Xi Zhiqiang: Chairman Neil Chatfield: Deputy Chairman • Extensive experience in the Chinese steel industry • Recently Executive Director and CFO of Toll Holdings, a position • Baosteel employee for 30 ye
Slide 25: Management Team
Management Team For personal use only Grange has one of Australia’s most experienced magnetite operations teams. Ross Carpenter: General Manager Projects Wayne Bould: Chief Operating Officer • Joined the Savage River Project in 2004 • Joined Grange in 2008 • 31 years of professional experience as a
Slide 26: Pellet Market
Pellet Market Attractive long term fundamentals For personal use only Demand – Driven by China: • Dominant buyer of iron ore: Currently taking advantage of low prices to build up strategic inventories • Successful steel-intensive fiscal stimulus package: • Blast furnace output growth up by 3.2% YTD
Slide 27: Pellet Prices
Pellet Prices Future price upside driven by niche market For personal use only Iron Ore and Pellet Price Settlements – Brazilian brands (USc/mtu FOB) Pellets are the highest quality iron ore product and sell Increases in pellet prices will predominantly be at a premium to fines (and even lumps) driv
Slide 28: Competent Person Statement
Competent Person Statement For personal use only • Southdown Project • The information in this presentation which relates to the Mineral Resources of the Southdown Project is based on information compiled by James Farrell who is a full-time employee of Golder Associates Pty Ltd and a Member of the A
Slide 29: Appendix A – Southdown Project
Appendix A – Southdown Project For personal use only In situ Mineral Resource Estimate Classification Measured Resources Indicated Resources Inferred Resources Total Resources Tonnes (Mt) 219.7 210.3 224.4 654.4 DTC wt% 37.4 38.9 33.4 36.5 DTC Fe% 69.2 69.3 69.1 69.2 DTC SiO2% 1.72 1.94 2.07 1.91 DT
Slide 30: Appendix B – Savage River
Appendix B – Savage River For personal use only Mineral Resource and Ore Reserve Estimates Mineral Resource Tonnes (Mt) Grade (%DTR) Ore Reserve Tonnes (Mt) Grade (%DTR) Measured 88.01 52.7 Proved 52.39 49.6 Indicated 135.96 51.7 Probable 72.00 48.9 Inferred 92.22 47.2 Total 124.40 49.2 Total 316.20