Grange Resources Limited · ASX:GRR
Grange Resources — AMEC Conference 2008
41 slides from Grange Resources's conference presentation, Aug 23, 2008
Slide 1: Pursuing the most attractive niche in iron ore
Pursuing the most attractive niche in iron ore Southdown Magnetite and Kemaman Pellet Project AMEC Conference 23 August 2008 Russell Clark Managing Director and CEO Grange Resources Limited (GRR) Level 11, 200 St Georges Terrace Perth, WA 6000, Australia Phone + 618 9321 1118 Fax + 618 9321 1523 www
Slide 2: Disclaimer
Disclaimer • 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 (“GRR”) nor does it form the basis of any contract or commitment. GRR makes no representation or w
Slide 3: Pursuing the most attractive niche in iron ore
Pursuing the most attractive niche in iron ore The niche…..DR pellets Steelmaking 101: Integrated vs Electric Arc Furnace Supply & Demand DR pellet price and premium Grange - positioned to capture the DR Pellet opportunity Southdown magnetite project in Australia Kemaman pellet plant i
Slide 4: The most attractive niche in the iron ore industry: DR Pellets
The most attractive niche in the iron ore industry: DR Pellets We all understand the China boom – massive, growing demand for iron ore to China. In Australia that demand is being met by Rio, BHP, FMG and some Juniors primarily with DSO. Less understood is an iron ore opportunity that Grange co
Slide 5: Steelmaking 101
Steelmaking 101 • As pricey as it’s become, iron ore has no inherent value: it is only valuable as a feedstock for steelmaking • So, the attractiveness of supplying iron feedstocks to the steel industry starts with the competitiveness of the steelmaking process to which they contribute • There are 2
Slide 6: Integrated Steelmaking process
Integrated Steelmaking process • End-to-end, the Integrated Steelmaking route (the traditional and still dominant route for steel) is both capital intensive and environmentally unattractive Feeds for standard (carbon) steel: DSO Mining Sintering Ironmaking Steelmaking • Fines Sinter plant Iron • Lum
Slide 7: Electric Arc Furnace process
Electric Arc Furnace process • In contrast to integrated steelmaking, the Electric Arc Furnace steelmaking route is less capital-intensive and more environmentally attractive Feeds for standard (carbon) steel: Mining/ DR pellet production Ironmaking Steelmaking concentrating Grange Direct-reduced ir
Slide 8: Feedstock for DRI and EAF
Feedstock for DRI and EAF 72% 71% 70% Cumulative content 69% 68% 67% CaO+Mgo 66% SiO2+Al2O3 65% Fe 64% 63% 62% Southdown Carajas DR Carajas BF Typical HG Typical HG DR Pellet Pellet Pellet Lump Fines Source: CVRD, Grange Resources EAFs require suitable high grade pellets (pre-processed to DRI) or sc
Slide 9: Scrap steel vs DRI for the EAF steelmaker
Scrap steel vs DRI for the EAF steelmaker • Historically, scrap steel < US$200/t. • The price of scrap steel has increased hugely, due to overwhelming steel demand from China and other emerging economies: SCRAP STEEL PRICE HISTORY Source: Iron Age Scrap Price Bulletin • The demand and price implicat
Slide 10: Growing shortage of DR pellets
Growing shortage of DR pellets Credit Suisse Brazil─in the heartland of world DR pellet supply─sees DR pellet undersupply increasing for the foreseeable future. Seaborne Pellet Supply and Supply/Demand balance 180 4.0% Over Supply 3.2% Supply 2.2% 2.0% 160 140 0.0% (mt) Under Supply -1.5% -0.5% -1.9
Slide 11: Demand for DR Pellets
Demand for DR Pellets DR pellet demand is projected to increase significantly in SE Asia and the Gulf Region. SE Asia 70 +94% Perwaja Steel Mega Steel 60 Krakatau Steel 50 Gulf 40 +50% Hadeed SE Asia Qasco Mt +130% Gulf Shadeed 30 Al-Tuwairqi 20 Others 10 0 2005 2008 2012 2017 Driver
Slide 12: Prices…the Pellet opportunity is attractive
Prices…the Pellet opportunity is attractive… With increasing demand, future price forecasts continue to look strong, with a good premium for BF pellets over DSO… Iron Ore and pellet Prices US$/t FOB Europe 200 180 160 Settlement 140 US$/tonne 120 100 80 60 BF Pellets Lumps 40 Fines 20 0 2006 2014 20
Slide 13: …but the DR Pellet opportunity is even more attractive
…but the DR Pellet opportunity is even more attractive with a further 10% premium for DR pellets over BF pellets. Iron Ore and pellet Prices US$/t FOB Europe 200 180 160 For DR pellets expect a Settlement premium of: 140 US$/tonne 120 US$17/t over BF 100 US$20/t over Lump (DSO) US$40/t over Fines (D
Slide 14: Price – this year's result
Price – this year’s result Prices 2007 ==> 2008 $180.00 $160.00 +86.67% $140.00 $120.00 2007 +71% US$/tonne FOB * $100.00 2008 $80.00 $60.00 $40.00 $20.00 $0.00 Carajas lump DR pellets Iron feedstock * Benchmark prices in US¢/dmtu, translated to US$/tonne FOB @ 67% Fe for ease of understanding. 14
Slide 15: In Summary
In Summary: Iron Ore consumption is increasing worldwide, particularly in China. With abundant gas and expanding infrastructure, demand for DR grade pellets is increasing exponentially in the Middle East and South East Asia Supply is not matching demand in the DR market Prices in the DR mark
Slide 16: Grange – Southdown/Kemaman overview
Grange – Southdown/Kemaman overview 1 Grange Resources Limited 2 The Southdown and Kemaman Project 3 The Southdown Magnetite Deposit 4 Project Infrastructure 5 Markets 6 Economics 7 Recent Developments and Current Status 16
Slide 17: Grange Overview
Grange Overview Board of Directors Shares Anthony Bohnenn Non Executive ASX Code: GRR Chairman Current shares on Issue: 115,201,099 Russell Clark Managing Director Unlisted Options on Issue to Rio Tinto: 17,500,000 Alex Nutter Technical Director Share price (19 August 2008: ~A$2.00 Richard Krasnoff
Slide 18: Grange – Southdown/Kemaman overview
Grange – Southdown/Kemaman overview 1 Grange Resources Limited 2 The Southdown and Kemaman Project 3 The Southdown Magnetite Deposit 4 Project Infrastructure 5 Markets 6 Economics 7 Recent Developments and Current Status 18
Slide 19: Project Highlights
Project Highlights Advanced Project Initial Feasibility Study Completed Infrastructure Solutions in Place Ability to produce High Quality (DR Grade) Pellets with very low Phosphorus content Growing DR Pellet Market in SE Asia & Middle East Pellet Plant Close to Key Markets Joint Venture
Slide 20: Project Overview
Project Overview Dual Location PELLET PLANT PRODUCING 4. DIRECT REDUCTION AND Southdown Open pit mine operation BLAST FURNACE PELLETS Magnetite concentrate production 6.6mtpa @ 69% Fe Slurry pipeline to existing port Shipping in Capesize vessels Kemaman Pellet production ~7mtpa Deep wate
Slide 21: Grange – Southdown/Kemaman overview
Grange – Southdown/Kemaman overview 1 Grange Resources Limited 2 The Southdown and Kemaman Project 3 The Southdown Magnetite Deposit 4 Project Infrastructure 5 Markets 6 Economics 7 Recent Developments and Current Status 21
Slide 22: Tenement & Deposit Location
Tenement & Deposit Location 70% Grange / 30% Sojitz JV 100% Grange Resources Ltd 22
Slide 23: Southdown Resource
Southdown Resource Mining Leases (Western Area) Over 230 drill holes to date Indicated and inferred resources: 479 MT at 37.3 % magnetite Exploration Licence (Eastern Area) Only 23 drill holes to date Target Potential Resources: Approximately 500 MT (est) Total Southdown open cut mineable resource p
Slide 24: Metallurgical & Pelletising Testwork
Metallurgical & Pelletising Testwork Kobelco Kobelco Concentrate Pellets Comprehensive programme of metallurgical % % test work completed, culminating in the successful production of high quality DR Fe 69.76 67.23 and BF grade pellets from Kobelco (Japan) and SiO2 1.00 1.24 Lurgi (Germany) Al2 O3 1.
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Slide 26: Grange – Southdown/Kemaman overview
Grange – Southdown/Kemaman overview 1 Grange Resources Limited 2 The Southdown and Kemaman Project 3 The Southdown Magnetite Deposit 4 Project Infrastructure 5 Markets 6 Economics 7 Recent Developments and Current Status 26
Slide 27: Project Infrastructure – Southdown & Albany
Project Infrastructure – Southdown & Albany All key infrastructure in place or well advanced Water Pit dewatering, site water harvesting, retreating Albany waste water, groundwater Power Premier Power (Wesfarmers) (coal and natural gas potentially augmented by wind power) Power Transmission We
Slide 28: Project Infrastructure – Southdown & Albany
Project Infrastructure – Southdown & Albany Slurry Pipeline Optimal transport method Finalising easements with landowners Power Western Power Networks 220kv line from Muja (150MW capacity). No EPA Assessment Interconnected to SWIS1 Transmission line easement progressing 1 South West Interc
Slide 29: Project Infrastructure – Port of Albany
Project Infrastructure – Port of Albany Concentrate Storage Shed & Channel to be Filter Plant dredged and widened Proposed Berth 7 (170,000 DWT vessels) Existing Berth 6 (woodchips export) • Work advancing on port design and pre-development engineering • Heads of Agreement signed with Albany Port Au
Slide 30: Project Infrastructure - Kemaman
Project Infrastructure - Kemaman All key infrastructure in place Deep Water Port Existing Wharf at Kemaman (West Wharf) Suitable for Capesize vessels Transport Conveyor corridor between Port and pellet plant Power, Gas & Water Power – TNB (substation adjacent to site) Gas – Petronas, Water – m
Slide 31: Project Infrastructure – Kemaman Site
Project Infrastructure – Kemaman Site 31
Slide 32: Project Infrastructure – Kemaman Port
Project Infrastructure – Kemaman Port 32
Slide 33: Grange – Southdown/Kemaman overview
Grange – Southdown/Kemaman overview 1 Grange Resources Limited 2 The Southdown and Kemaman Project 3 The Southdown Magnetite Deposit 4 Project Infrastructure 5 Markets 6 Economics 7 Recent Developments and Current Status 33
Slide 34: Kemaman Pellet Plant – Proximity to Customers
Kemaman Pellet Plant – Strategic Position Proximity to Customers DR PELLET CONSUMERS COUNTRY 1 Perwaja Steel Malaysia 2 Amsteel Malaysia 3 Krakatau Steel Indonesia 4 Megasteel Malaysia 5 Qasco Qatar 6 Hadeed Saudi Arabia 7 Various UAE 8 Various India BF PELLET CONSUMERS COUNTRY A China Steel Corp. T
Slide 35: Kemaman Pellet Plant – Freight Advantage
Kemaman Pellet Plant – Strategic Position Kemaman Freight Advantage Kemaman has distinct freight advantages over South American pellet producers • Close to key markets hence reduced shipping costs • Panamax size vessels can economically deliver smaller quantities to ports not able to handle capesize
Slide 36: Grange – Southdown/Kemaman overview
Grange – Southdown/Kemaman overview 1 Grange Resources Limited 2 The Southdown and Kemaman Project 3 The Southdown Magnetite Deposit 4 Project Infrastructure 5 Markets 6 Economics 7 Recent Developments and Current Status 36
Slide 37: Operating and Capital Costs
Operating and Capital Costs Project costs are well understood and are the product of a detailed feasibility study (Note: Costs below are as at June 2007) Operating & Capital Costs US$ Operating Costs (US$/t pellets) Southdown Mining & Processing1 35.4 Shipping to Malaysia (incl. handling) 10.6
Slide 38: Grange – Southdown/Kemaman overview
Grange – Southdown/Kemaman overview 1 Grange Resources Limited 2 The Southdown and Kemaman Project 3 The Southdown Magnetite Deposit 4 Project Infrastructure 5 Markets 6 Economics 7 Recent Developments and Current Status 38
Slide 39: Project Status
Project Status The Southdown & Kemaman projects are well advanced with feasibility complete, most infrastructure in place and approvals in progress. Item Status Expected Timing Initial Feasibility Study Refinement of process flowsheet work underway with Metso Minerals (Q3 2008) Kemaman Environment
Slide 40: Summary of Grange's DR Pellet opportunity
Summary of Grange’s DR Pellet opportunity An advanced Iron Ore Project for the Direct Reduction Pellet Market Grange has the ore, the land and access to infrastructure. Grange’s Pellets will be a premium Direct Reduction grade. Our pellets will be sold into a niche market: Geographically adv
Slide 41: Key Contacts
Key Contacts Russell Clark Managing Director & CEO, Grange Resources Limited Tel: +61 8 9321 1118 rclark@grangeresources.com.au 41