Southgobi Resources Ltd. · TSXV:SGQ
Southgobi Resources — Investor Presentation (March 2012)
42 slides from Southgobi Resources's investor presentation, March 2012
Slide 1: Investor Presentation March 2012
TSX: SGQ HKEx: 1878 MARCH 2012 INVESTOR PRESENTATION
Slide 2: Disclaimer
Disclaimer Forward-looking statements This presentation includes certain “forward-looking statements.” All statements, other than statements of historical fact, are forward-looking statements that involve various risks and uncertainties. There can be no assurances that such statements will prove acc
Slide 3: Company Snapshot
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Slide 4: Company snapshot: capitalization and shareholders
Company snapshot Capitalization and shareholders Capitalization summary Share price performance (last 12 months) 18 Share price (at Feb 29, 2012) C$7.55(TSX)/HK$56.45(HKEx) 16 Share Price (C$/share) Share price US$7.32 14 Shares outstanding 181.9m 12 Market capitalization US$1,331m 10 Cash* (at Dec
Slide 5: Company snapshot: our mines and resources
Company snapshot Our mines and resources Assets location Resources summary and 2011 production Resources (Mt) 2011 production (Mt) Measured Indicated Inferred Total Ovoot Tolgoi 4.6 199.1 103.2 86 388 Complex1 3 Soumber - 57.9 79.3 83 220 Deposit1 Zag Suuj - - 17.0 66 83 Deposit1 Tsagaan Tolgoi - 23
Slide 6: Update on Markets
me. % = SouthGobi Resources UPDATE ON wnt
Slide 7: Mongolia to China trade is the core coking coal theme
Mongolia to China trade is THE core coking coal theme Seaborne proponents are right that China is key but wrong about everything else! They said… What’s actually happening? Why Mongolia? World (excl. Mongolia) Mongolia Mongolia has all coking coal China coking coal demand qualities available wit
Slide 8: Current market environment
Current market environment Mongolia’s better nexus with the fastest growing importer provides better market conditions Market conditions for North American and Mongolia continues with robust volumes Australian exporters are weak and pricing “Obviously the prices have “Market conditions deteriorate a
Slide 9: SouthGobi Core Investment Highlights
03 SOUTHGOBI CORE INVESTMENT HIGHLIGHTS
Slide 10: Strategic location: closest coal to China
1 Strategic location Closest coal to China Comparing major coking coal basins – SouthGobi’s Key assets – proximity to China closeness to China Ovoot Tolgoi 45km Tavan Tolgoi, Mongolia 235km Bowen Basin, Australia 7,000km Hunter Valley, Australia 8,000km Greenhills (Canada) 10,000km Central Basin (So
Slide 11: Strategic location: infrastructure advantage
1 Strategic location Infrastructure advantage Rail access within 50km of Ovoot Tolgoi New road Rail loading facility at Ceke License to build heavy road from Ovoot Tolgoi to Mongolia-China border granted 2011 to SouthGobi JV Construction 2012-2013 >20mtpa capacity Material reduction in shipp
Slide 12: Premium quality coals
Premium quality coals 2 SouthGobi’s attributable resource base is predominantly high quality coking coals (hard and semi-soft) Company coal resources split by coal type Global pure-play premium coal benchmarks1 Ovoot Tolgoi (48%) (Semi-soft coking) Soumber (27%) (Low-vol hard coking) Zag Suuj (10%)
Slide 13: Premium quality coals: new processing facilities
2 Premium quality coals New processing facilities to upgrade raw coal Dry coal handling facility (DCHF) at Ovoot Tolgoi Wet washing 9mtpa DCHF commissioned February 2012 Ejin Jinda wet washing facility at Ceke (<10km inside China) Ovoot Tolgoi DCHF operating (February 2012) — To be commissioned
Slide 14: Sustainable volume growth
3 Sustainable volume growth SouthGobi is only about 25% through its growth potential SouthGobi actual and prospective growth in coal sales 20 Actual growth executed Aspire’s Ovoot project (Attributable) 15 Coal sales (million tonnes) Growth from resource development / Underground 10 Soumber hard cok
Slide 15: Expanding margins
4 Expanding margins Continual margin expansion has happened regardless of market conditions Margin per tonne Sources of future margin expansion (US$/t) $15.11 $12.39 $13.91 $30.02 Improved infrastructure 60 efficiency $54.03 50 Sales-mix improvement Washed vs raw coal at 40 $34.61 Expanding Ovoot
Slide 16: Exploration edge: most exploration focused among peers
5 Exploration edge The most exploration focused among peers Comparison of exploration activities 2008-2011 Exploration spending as % Exploration area (ha) Exploration spend (US$m) of market cap2 349,045 $82 6.2% Regional peers 1 exploration right n/a n/a Shougang Fushan n/a n/a n/a 302,507 $33.91 4.
Slide 17: Exploration edge: exploration versus acquiring resources
5 Exploration edge Exploration delivers versus acquiring existing resources SouthGobi’s resources derive from our aggressive in-house exploration campaign Recent coking coal M&A indicates a much higher SouthGobi exploration spending (2005 to 2011) resources cost in acquisitions $35 $32 Announce Acqu
Slide 18: Milestones
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Slide 19: Milestones
Milestones Historical and future milestones Near term milestones Oct 21, 2009 Nov 19, 2009 Mar 19, 2012 CIC invested 1 Commission of toll wet washing at Ceke (2012 Q2) Maiden NI 43- Maiden NI 43- 101 compliant US$500m in form 101 compliant resource for of convertible resource for Zag 2 Border upgrad
Slide 20: Undervalued!
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Slide 21: SouthGobi is undervalued compared to peers
SouthGobi is undervalued compared to peers Attributable Resources (Mt)1 EV/Resources (US$/t)2 900 853 $12 Large resources 803 800 $10.03 737 $10 700 600 $8 $7.06 500 Low valuation US$/t Mt $6 400 $4.63 $4.67 300 $4 197 203 200 $2.31 149 $1.76 $2 100 0 $0 Shougang Shougang MMC MMC Fushan3 Fushan Note
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Slide 23: Appendices
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Slide 24: Near-term indicative processing route
Appendix 1 Near-term indicative processing route Indicative 2012F production plan Ovoot Tolgoi open pits (raw Ovoot Tolgoi DCHF Ceke WCHF coal mining) In situ low-ash 95% yield to finished semi- (8-10% ash) soft coking coal Sunset Pit 15-20% of ROM (8-10% ash, $20-25/t cost) In situ high-ash 70% yie
Slide 25: Board of Directors and Senior Management
Appendix 2 Board of Directors and Senior Management Name and Position Background Directors Peter Graham Meredith Chairman of the board since October 2009 Chairman and Deputy chairman of the board of Ivanhoe Mines since May 2006 Non-Executive Director Has 13 years experience in managerial and a
Slide 26: Board of Directors and Senior Management (cont'd)
Appendix 2 Board of Directors and Senior Management (cont’d) Name and Position Background Directors Raymond Edward Jr. Flood Director of SouthGobi since August 2003 Non-Executive Director Director of Ivanhoe Mines since 1994 Chairman of the board of TSX-V listed Western Lithium Canada Corp and
Slide 27: Board of Directors and Senior Management (cont'd)
Appendix 2 Board of Directors and Senior Management (cont’d) Name and Position Background Directors Gordon Lancaster Appointed as a Director of SouthGobi in May 2010 Independent Non-Executive Director of TSX listed Ainsworth Lumber Co Ltd and TSX-V listed Realm Energy International Director Corp
Slide 28: Senior Management
Appendix 2 Board of Directors and Senior Management (cont’d) Name and Position Background Senior Management Curt Church Joined SouthGobi as Manager of Mining in January 2008 Chief Operating Officer Six years’ experience working in Mongolia; previously with Boroo Gold Mine of Centerra Gold Corp,
Slide 29: Senior Management (cont'd)
Appendix 2 Board of Directors and Senior Management (cont’d) Name and Position Background Senior Management Jess Harding Joined SouthGobi as Vice President of Evaluations and Project Development in March 2009 Vice President, Evaluations and Has also acted as the Vice President of Evaluations and
Slide 30: History and corporate structure
Appendix 3 History and corporate structure History and Milestones COMPANY (Prior to Acquisition of the Coal Assets) COMPANY Dec 31, 2008 Nov 19, 2009 Mar 19, 2002 2003 2004 2005 2006 Announced sale of metals CIC invested US$500m in 2012 division to Ivanhoe. form of convertible debenture Maiden NI Tr
Slide 31: History and corporate structure (cont'd)
Appendix 3 History and corporate structure (cont’d) Corporate Structure SouthGobi Resources Ltd. (British Columbia) 100% 100% 100% 100% Asia Gold International SGQ Coal Investment SouthGobi Resources SGQ Dayarcoal Mongolia Holding Company Ltd. Pte. Ltd. (Hong Kong) Ltd. Pte. Ltd. (BVI) (Singapore) (
Slide 32: Financials – balance sheet
Appendix 4 Financials – balance sheet As at As at (in US$m) Dec 31, 2011 (in US$m) Dec 31, 2011 Cash and cash equivalents 123.6 Trade and other payables 52.2 Trade and other receivables 80.3 Current portion of convertible debt 6.3 Short term Investments - Total current liabilities 58.5 Inventories 5
Slide 33: Financials – income statements
Appendix 4 Financials – income statements 12 months ended 12 months ended (in US$m) Dec 31, 2011 Dec 31, 2010 Revenue 179.0 79.8 Cost of Sales (127.3) (69.9) Gross profit 51.7 9.9 Other operating expenses (29.2) (12.6) Administration expenses (28.7) (25.4) Evaluation and exploration expenses (31.8)
Slide 34: Non-IFRS financial measures disclosure
Appendix 4 Non-IFRS financial measures disclosure Adjusted net income/(loss) Adjusted net income/(loss) excludes share-based compensation, net impairment loss/(recovery) on assets, unrealized foreign exchange losses/(gain) on the fair value change of the embedded derivatives in the CIC convertible d
Slide 35: Non-IFRS financial measures disclosure: cash costs
Appendix 4 Non-IFRS financial measures disclosure Cash costs The Company uses cash costs to describe its cash production costs. Cash costs incorporate all production costs, which include direct and indirect costs of production. Non-cash adjustments include share-based compensation costs, depreciatio
Slide 36: Key terms of CIC Debenture
Appendix 5 Key terms of CIC Debenture Terms Description Transaction US$500 million principal amount of senior debentures convertible into shares (US$485 million net of advisory fees) Maturity 30 years Interest Interest of 8.0% per annum — A cash coupon of 6.4% per annum; and — Additional inter
Slide 37: Key terms of CIC Debenture (cont'd)
Appendix 5 Key terms of CIC Debenture (cont’d) Terms Description CIC Conversion At any time after 12 months from closing at the Conversion Price Rights There are no lock-up arrangements on shares to be issued to CIC upon conversion. There are no early redemption rights granted to CIC SouthGobi E
Slide 38: Fungibility and share transfers between markets
Appendix 6 Fungibility and shares transfers between markets Transfer Steps Standard Express Document to be Submitted Comment Hong Kong to Canada Step 1: Hong Kong Registrar 10 Hong Kong business days 1 Hong Kong business days with Share certificates and Form Shares must be registered on (“HK
Slide 39: Selected photos
Appendix 7 Selected photos Liebherr 996 excavator operating with MT4400AC haul truck 39
Slide 40: Selected photos (cont'd)
Appendix 7 Selected photos (cont’d) Ovoot Tolgoi open pit mine Terex MT 4400AC haul truck Mining operations 40
Slide 41: Selected photos (cont'd)
Appendix 7 Selected photos (cont’d) Mongolia – truck weighing bridge China – rail loading facility at Ceke border Shivee Khuren-Ceke Mongolia-China border crossing China railway infrastructure only a few km from border 41
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