Alara Resources Limited · ASX:AUQ
Alara Resources — Non-Deal Roadshow (June 2014)
38 slides from Alara Resources's roadshow presentation, June 2014
Slide 1: Resource Developer Transitioning to Mine Builder and Operator
Resource Developer Transitioning to Mine Builder and Operator ASX: AUQ PHILIP HOPKINS, MANAGING DIRECTOR INVESTOR ROADSHOW SYDNEY & MELBOURNE JUNE 2014
Slide 2: Disclaimer and Statements
Disclaimer and Statements FORWARD LOOKING STATEMENTS This Presentation has been prepared as a summary only and does not contain all information about the Company’s assets and liabilities, financial position and performance, profits and losses, prospects and rights and liabilities. The information in
Slide 3: Corporate focus
Corporate focus … “To develop and operate a world class Zinc mine in a 10 year high Zinc metal price “up cycle” while progressing a high potential Copper-Gold prospect to a Definitive Feasibility Study as rapidly as practical.” www.alararesources.com 3 © Alara Resources Limited
Slide 4: Company Overview
Company Overview www.alararesources.com 4 © Alara Resources Limited
Slide 5: Market Profile: ASX: AUQ
Market Profile : ASX: AUQ Stock (AUQ) Announced HRH Announced Announced MD Prince Abdullah Announced JV delay with JV Issued Capital purchase of 1M appointed to Alara revised equity revised equity shares Board agreement agreement – Ordinary Shares (1) 242M 12 Aug 2013 29 Oct 13 14 Mar 2014 4 Jun 201
Slide 6: Board of Directors
Board of Directors Ian Williams, AO Philip Hopkins John Hopkins HRH Prince Abdullah bin Chairman Managing Director Non-Executive Director Mosaad bin Abdulaziz Al > BE (Elec), FAusIMM, FIEAust > BSc (Mining Engineering); MBA; > LLB; FAICD Saud > Over 40 years’ experience in P.Eng; MAusIMM; MCIM > Ove
Slide 7: Management Team
Management Team John Watkins Elle Macdonald Chief Financial Officer Corporate Affairs Manager > Highly credentialed and experienced mining industry > Highly experienced corporate administrator executive with commercial and geoscience qualifications > Over 30 years’ experience including Company Secre
Slide 8: Current Company Projects Overview
Current Company Projects Overview Khnaiguiyah Daris/Washihi (Zinc-Copper) (Copper-Gold) Project Project (Saudi Arabia) (Oman) Head Office (Perth) Project Resources Ownership Location Status Khnaiguiyah Zinc-Copper 50% Saudi Arabia Finance Washihi Copper-Gold 70% Oman Scoping Study Daris Copper-Gold
Slide 9: Zinc Cycle & Saudi Zinc Project
Zinc Cycle & Saudi Zinc Project www.alararesources.com 9 © Alara Resources Limited
Slide 10: Think Zinc – Bullish Outlook
Think Zinc – Bullish Outlook > Zinc market entered into supply deficit in 2013 > Zinc market deficits are forecast for the next 5-7 years > 1.69Mt or 11.3% of global 2013 Zinc production forecast to drop off by 2017 > Only 0.89Mt or 6.5% of new Zinc supply forecast to commence by 2017 > Analysts are
Slide 11: Think Zinc – Supply Coming Off
Think Zinc – Supply Coming Off MAJOR ZINC MINE CLOSURES (2013-2016) Annual Mine Production Perseverance Lisheen Century 500 kT Brunswick Brunswick 200 kT Lisheen 167 kT Skorpion 162 kT Perseverance 128 kT Skorpion Century Others 540 kT TOTAL 1,697 kT “11.3 % of current world Zinc production in 2012
Slide 12: Think Zinc – Supply Coming On
Think Zinc – Supply Coming On ZINC NEWCOMERS & EXPANSIONS (2013-2017) Annual Citronen Mine Year Production NEW MINE Lalor Lake Dugald River 2017 200 kT Aguas Tenidas Perkoa 2013 90 kT Lalor Lake 2014 40 kT Perkoa Khnaiguiyah Citronen 2015 185 kT Khnaiguiyah 2017 80 kT EXPANSIONS McArthur River McArt
Slide 13: Zinc Supply Drops Off as Demand Rises
Zinc Supply Drops Off as Demand Rises ZINC DEMAND VS DEFICIT • Zinc demand has increased steadily from prior to 1995 • Zinc demand does not include possible emerging uses: • Fertiliser (estimated 500kt/year) • Continuous galvanizing (estimated 400kt/year) June 2014 www.alararesources.com 13 © Alara
Slide 14: Zinc Supply/Demand vs. Price
Zinc Supply/Demand vs. Price kT Price USD/lb 600 1.6 > Previous market deficits resulted in Zinc price rising to 400 1.4 >US$2.00/lb (2006) 200 1.2 > Brook Hunt forecasts Zinc to rise 0 1 to US$1.24/lb this year and climb ‐200 0.8 steadily thereafter ‐400 0.6 > Wood McKenzie forecasts ‐600 0.4 avera
Slide 15: Saudi Arabia: Khnaiguiyah Zinc-Copper Project
SAUDI ARABIA Khnaiguiyah Zinc-Copper Project www.alararesources.com 15 © Alara Resources Limited
Slide 16: Ownership & Partners
Ownership & Partners > Joint Venture (‘JV’) Partners: United Arabian Mining Company LLC (Manajem), privately owned Saudi Arabian mining company. > JV Company: Khnaiguiyah Mining Company LLC (KMC) > Current JV Equity Arrangement: 50:50 (Alara: Manajem) > Future JV Equity Arrangement: Formal agreement
Slide 17: JV Agreement Status
JV Agreement Status > March 2014 - signed Heads of Agreement (‘HoA’) amending the Khnaiguiyah Zinc-Copper Project JV arrangement from 50:50 equity to 60:40 > HoA currently delayed due to a lack of compliance with the HoA by Manajem (announced 4 June 2014) > HRH Prince Abdullah bin Mosaad bin Abdulaz
Slide 18: Why Saudi Arabia? - Technical
Why Saudi Arabia? - Technical > 1970’s BRGM review – 5,300 deposits (Saudi Geological Survey) > Deputy Ministry of Mineral Resources (DMMR) +4,000 maps > New mining code 2004 – ease of operation > Resource Potential in the Arabian Shield i. 40 fully identified resources ii. 15 ready to progress iii.
Slide 19: Why Saudi Arabia? - Commercial
Why Saudi Arabia? - Commercial > 2014 Saudi mining budget – SAR$228B (~AU$70B) > Saudi government focus i. Petroleum ii. Mining iii. Financial services > Corporate tax – 20% > Personal tax – nil (staff) > Royalties – nil > Saudi Investment Development Fund (SIDF) up to 75% funding (low rates <4%) >
Slide 20: Khnaiguiyah Project Overview
Khnaiguiyah Project Overview > Joint Venture agreement to move: > Alara to 60% > Manajem to 40% > 170km SW of Riyadh – Capital city > Reserves of 26.08Mt at 3.3% Zn & 0.24% Cu*. > Resource note*: > Zone 2 - Zn rich = 5.48% Zn > Zone 3 – Cu rich = 0.64% Cu > Base case 2 Mtpa process plant throughput
Slide 21: Khnaiguiyah Project - Licences
Khnaiguiyah Project - Licences The Khnaiguiyah Zinc- Copper Project covers around 225km2 and comprises: > A Mining Licence > Five Exploration Licences (under application) www.alararesources.com 21 © Alara Resources Limited
Slide 22: Khnaiguiyah Project DFS Summary
Khnaiguiyah Project DFS Summary PRODUCTION HIGHLIGHTS > Zinc & Copper concentrates produced > Average production @ 2Mtpa throughput years 1 - 7 > 80 ktpa Zn > 5.8 ktpa Cu > Peak production year 4 > 99 kt Zn > 8.3 kt Cu > Low cash costs of US$0.46/lb for years 1-7 > Upside potential given plant rated
Slide 23: Khnaiguiyah Project DFS Summary
Khnaiguiyah Project DFS Summary FINANCIAL HIGHLIGHTS > Project revenue: A$2,074M > Project operating costs : A$1,201M > EBITDA: A$873M > Capex: US$257M > Cash flow (post Capex and Tax): A$467M > Project NPV: A$170M > IRR: 23% > Weighted Avg cost of capital: 9.1% > Payback: 2.8 years > Cash costs (wi
Slide 24: Potential Project Upsides
Potential Project Upsides Potential Capex Reductions: $10-12M Change SAG mill to cone crushers $10M Bulk concentrate shipping $40-60M Smaller plant – Heavy Media Separation (HMS) $3M Mine camp redesign $63-85M Potential Opex Reduction: $9-12M Power to the crushing circuit – LOM saving $10M Reduced g
Slide 25: Heavy Media Separation (HMS)
Heavy Media Separation (HMS) > Capex <$15M > Opex ~$1.00-1.25/tonne feed > Coarse feed crush @ ~6.5mm diameter > Removes the “light” silica based rock (minor metal) > Can potentially increase feed grade to: > +6.0% Zn from reserve grade of 3.3% Zn > +0.4% Cu from reserve grade of 0.24% Cu > Options
Slide 26: Potential Project Upsides - Finance
Potential Project Upsides - Finance Debt Finance: Project modelled with discount factor of 9.1% Additional Finance: Off-take/Smelter contract finance Leasing finance Royalties Streaming – Cu EPC vendor’s credit Zinc Price: DFS uses $1.05/lb Zinc ($2,315/tonne) External Zn Price Forecasts: Wood Macke
Slide 27: Khnaiguiyah Project Strengths
Khnaiguiyah Project Strengths > Located adjacent to 4 lane national highway > Located on national power grid > Forecast positive Zinc price cycle > Early off-take/smelter funding possible > Strong financial options in Saudi Arabia > Government has mining as one of 3 economic pillars > Simple/traditi
Slide 28: Khnaiguiyah Project Risk Mitigation
Khnaiguiyah Project Risk Mitigation > AMAK (Al Masane) - 1.5 Mtpa Zn/Cu mine built in 2010 and operating for 4 years > Capex based on EPC “turnkey” quote > Al Masane EPC company bid on Khnaiguiyah Project > Potential to build in < 2 years > SIDF finance process target ~9 months to finance > Strong m
Slide 29: Khnaiguiyah Project Next Steps
Khnaiguiyah Project Next Steps Indicative Development Timeline 2014 2015 2016 2017 2018 Project Activity Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 1 SHA Completion 2 Project Finance 3 Project Construction 4 Commissioning 5 Full Operations www.alararesources.com 29 © Alara Resources Limit
Slide 30: Advancing the Project Pipeline - Oman
ADVANCING THE PROJECT PIPELINE - OMAN Daris/Washihi Project www.alararesources.com 30 © Alara Resources Limited
Slide 31: Oman - Daris/Washihi Project Overview
Oman - Daris/Washihi Project Overview Daris (50% - option to go to 70%) > 150 km west of Muscat > Measured and Indicated Resources of 0.24Mt at 2.4% Cu* Washihi (70%) > 160km south east of Daris > Indicated Resource of 6.84Mt at 0.9% Cu & 0.17g/t Au* > Mineralisation remains open > Largest Copper re
Slide 32: Daris/Washihi Project Development Options
Daris/Washihi Project Development Options Six Development Options Evaluated 1. Conventional flotation circuit 2. Heavy media separation followed by smaller scale conventional flotation circuit 3. Heavy media separation followed by larger scale (x2) conventional flotation circuit 4. Off-site ore toll
Slide 33: Summary: Way Forward
SUMMARY Way Forward www.alararesources.com 33 © Alara Resources Limited
Slide 34: Key Future Milestones
Key Future Milestones Resolve current HoA delays – key priority Pre-construction finance – DFS optimisation, Owner’s Team etc Project Director selected EPC company identified and contract finalised Project finance – SIDF & “Gap” finance Construction commences (mid 2015) Finalise way fo
Slide 35: What differentiates Alara from the rest?
What differentiates Alara from the rest? Right Metal Robust Zinc project in positive Zinc cycle Right ore body Additional mineralisation and potential resource extensions Right Team Restructured Board and Management Team in place with clear and defined strategy for next steps Right Time Mark
Slide 36: JORC Statements
JORC Statements Khnaiguiyah Zinc-Copper Project (Saudi Arabia) The information in these JORC Reserve and Resource tables was prepared and first disclosed under the JORC Code 2004. It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially cha
Slide 37: JORC Statements
JORC Statements Washihi-Mullaq-Al Ajal Copper-Gold Project (Oman) The information in these JORC Reserve and Resource tables was prepared and first disclosed under the JORC Code 2004. It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially
Slide 38: Alara Resources contact details
ABN: 27 122 892 719 Level 3, 35 Havelock Street, West Perth WA 6005 Telephone +61 8 6323 5900 I Facsimile +61 8 6323 5999 info@alararesources.com I www.alararesources.com ASX Code: AUQ www.alararesources.com 45 © Alara Resources Limited