41 slides from Erdene Resource Development's investor presentation, September 2011
Slide 1: Corporate Presentation September 2011
Corporate Presentation September 2011
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS Certain information regarding Erdene ("the Company") contained herein may constitute forward-looking statements within the meaning of applicable securities laws. Forward-looking statements may include estimates, plans, expectations, opinions, forecasts, projections, guidan
Slide 3: Market Facts
Market Facts (Sep-9th, 2011) Capital Structure Share Performance Trading Info TSX: ERD 4,000,000.0 $2.0 $1.8 Shares Outstanding 90.3 M 3,500,000.0 $1.6 Volume (millions) 3,000,000.0 Shares Fully Diluted 97.9 M $1.4 Price (CAD) 2,500,000.0 Working Capital CDN ~$4.2 M (1) $1.2 2,000,000.0 $1.0 52 Week
Slide 4: Management and Directors
Management and Directors Management Directors Peter C. Akerley, President, CEO & Director William B. Burton Seven years with Rio Tinto, 24 years of exploration and mining Over 30 years experience in the mining industry operating experience in 7 different countries, discovering projects that resource
Slide 5: Investment Highlights
Investment Highlights DONKIN PROJECT (25% ERD / 75% Xstrata) Pre-feasibility completed on 2.75 Mtpy coking coal project Strategically located near a deep water port in eastern Canada Among the lowest transport & operating costs in the industry ZUUN MOD MOLYBDENUM-COPPER PROJECT One of the largest mo
Slide 6: me n colliery bhenal ih 1987 and
me n colliery bhenal ih 1987 and evco began developing a $600 . Piich mine at Donkin, projected to be the largest underground | mine in: Nee America”? ry | ,*
Slide 7: Donkin Coal Project
Donkin Coal Project 25% Erdene / 75% Xstrata Coal (Manager) Located on Deep Tidewater Significant Infrastructure in Place Exclusive Port Access Large Resource – Long Mine Life High Quality Coal (Coking & Thermal) Low Operating & Transportation Cost Experienced Workforce 7
Slide 8: Global Coking Coal Market
Global Coking Coal Market The world remains in the early stages of a long period of major coal demand growth, with so-called onetime events in the industry that constrain supply now occurring each quarter China-led demand for steel has prompted a sixfold price increase in coking coal over the last d
Slide 9: Ideally Located on Deep Tidewater
Ideally Located on Deep Tidewater Cape Breton, Nova Scotia No. 26 Colliery 9
Slide 10: Large Resource – Long Life
Large Resource – Long Life 20 year initial mine life based on saleable reserves only 48 Mt saleable reserves Indicated Probable Mineable Probable Saleable Inferred Seam Resource Resource Reserve Reserve (Mt) (Mt) (Mt) (Mt) Project economics are Lloyd Cove 53 n/a n/a 82 based on probable Hub 73 28 23
Slide 11: Coal Quality Peer Comparison
Coal Quality Peer Comparison High Volatile Producers (washed coal, adb) Solid Company ERDENE Cline Consol Energy Gloucester Mine Donkin New Elk Bailey Stockton Duralie Location NS, Canada CO, USA PA, USA NZ NSW, Aus CSN 8.5 7 7.5 9 8 VOLATILES % 37 35 37 32 35 ASH % 3.5 9.3 7 3.5 10 MOISTURE % 1.9 u
Slide 12: Strategically Located
Strategically Located Distance to Port Operating & Transport Cost 1,400 120 1,200 100 1,000 80 800 US$ Km 60 600 40 400 200 20 0 0 Cline Grande Cache Western Erdene Grande Cache Western Cline Erdene Transport Cost / Tonne Operating Cost / Tonne USA Russia Average Global Cash Cost South Africa Compar
Slide 13: Donkin – Going Forward
Donkin – Going Forward Permits in place for initial production to a maximum of 620,000 tonnes/annum ROM 3rd Quarter 2011 – Environmental Assessment process initiated 4th Quarter 2011 – Public consultation period 2011-12: Donkin management determines timing for feasibility and initial underground dev
Slide 14: Capital Expenditure & Cash Flow
Capital Expenditure & Cash Flow As presented in Pre-Feasibility Study (Marine Transport Option) Erdene’s Donkin funding requirements Year 1 to end of Year 3: -$24.9 M Erdene’s total funding requirements to full production: $114.2 M Erdene’s payback period from point of initial contribution (mid-2012
Slide 15: Pre-Feasibility Study Completed
Pre-Feasibility Study Completed June 2011 Production rate of 2.75 Mt of saleable coal Financial Parameters (C$) Production rate of 2.75 FOB Cash Cost / Tonne Mtpy of saleable coal $51.8 (avg. over LOM) Capital Expenditure $497 M High recovery (yield) of Peak Funding $331 M 81% Initial Production 201
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Slide 17: Mongolian Exploration Summary
Mongolian Exploration Summary Significant Holdings Near a Massive Global Consumer Zuun Mod Mo-Cu New Au-Ag-Cu-Pb- Xstrata Deposit Zn Discoveries JV Khuvyn Khar Tsenkher Located on One of the Nomin Coal the Chinese- largest Mo- New high exploration Mongolia Cu deposits New Au-Ag- grade Cu-A
Slide 18: Mongolia Coal Xstrata Alliance
Mongolia Coal Xstrata Alliance PRIORITY TARGETS: High Quality Thermal & Coking (open pit, <5:1, 200 Mt+, >5800 kcal/kg GAR) XSTRATA TERMS: • Option to earn up to 75% of any coal opportunity in Mongolia • Must fund all work through to completion of feasibility study WORK PROGRAM: • Xstrata has invest
Slide 19: Zuun Mod Mo-Cu Project
Zuun Mod Mo-Cu Project Molybdenum and Copper Highlights Located on the China border, next to the world’s largest base metals and steel producing markets Image/map... Sexy shot of ZM High grade Cu-Mo zone discovered perhaps in 2010 Access to lower capex plant and equipment Growing local infrastructur
Slide 20: Oyu Tolgoi Copper – Gold Complex
Oyu Tolgoi Copper – Gold Complex Significant Mongolian Development 20
Slide 21: Zuun Mod Mo-Cu Project: Infrastructure Building
Zuun Mod Mo-Cu Project Infrastructure Building 21
Slide 22: China’s Role in the Moly Market
China’s Role in the Moly Market Ceased as major net importer of moly in 2008 Acted as swing supplier to work market in 2009 - 2010 2009 Hanlong formed, seeks overseas moly investments Greatest growth in moly usage came from China in 2010 Consumption was up from 119 M lbs in 2009 to 148 M lbs in 2010
Slide 23: Zuun Mod Mo-Cu Project
Zuun Mod Mo-Cu Project June 2011 NI 43-101 Resource Estimate Resource Mo Grade Cu Grade Contained Contained Category Tonnage (Mt) (% Mo) (% Cu) Mo (M lbs) Cu (M lbs) M&I 218 0.057 0.069 273.5 330.7 Inferred 168 0.052 0.065 191.8 240.5 23
Slide 24: Cross Section Through Deposit
Cross Section Through Deposit 2010 Drill Results Higlights Legend Zone of higher grade copper (highlighted in red below) Hole Interval Mo Grade Cu Grade ZMD-51 ext 432 m 0.061% 0.072% including 118 m 0.106% 0.098% 2010 Drill Program ZMD-115 300 m 0.071% 0.110% Highlights including 66 m 0.108% 0.129%
Slide 25: Project Timeline
Project Timeline 2011 2012 2013 2014 2015 2016 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Property Wide Exploration Economic Assessment Strategic Partner Evaluation Prefeasibility Feasibility Development Start-up Production 25
Slide 26: Zuun Mod Regional Target Areas
Zuun Mod Regional Target Areas Khuvyn Khar Cu-Ag Discovery Limited Drilling of Large Zuun Mod Mineral Complex Copper in Soil Anomaly Large mineralized Khuvyn Khar annular feature - Cu-Ag 12km circumference; Discovery ~ 80% of drilling over ZM deposit Cu in soil anomaly Zuun Mod Mo-Cu deposit 1 km 26
Slide 27: Khuvyn Khar Cu-Ag Discovery
Khuvyn Khar Cu-Ag Discovery Copper in soil anomaly with drill highlights Cu in Soil Anomaly 373m of 0.19% Cu (34m of 1.3% Cu & 9.24g/t Ag) 118m of 0.08% Cu ZMD-08 ZMD-121 152m of 0.16% Cu (32m of 0.22% Cu) 298m of 0.12% Cu KKMD-13 ZMD-128 Drill Hole 278m of 0.13% Cu 500 m (42m of 0.21% Cu) 27
Slide 28: Tsenkher Nomin Discovery
Tsenkher Nomin Discovery Southwest Mongolia N Shinejinst coal deposit Tsenkher Nomin Discovery Khuvyn Khar Voyager’s Cu-Au Cughur Cu-Ag Discovery Discovery ERD License (~250,000 ha) 25 km Zuun Mod Deposit 28
Slide 29: Tsenkher Nomin Discovery: Rock Chip Sample Survey Highlights
Tsenkher Nomin Discovery Rock Chip Sample Survey Highlights Soil survey outline Location of June ’11 Drilling Rock chip sample • 0.5m of 13g/t Au, 3% Cu, 3.2 g/t Au and 26g/t Ag 2.2% Cu 5.2 g/t Au 19 g/t Au 3.2% Cu 12 % Pb 11 g/t Au 41 g/t Au 11 % Pb 2.6% Cu 1% Zn 0.35% Mo 1.7% Cu 14% Cu 2 km 29
Slide 30: Tsenkher Nomin Discovery: Prospective Areas
Tsenkher Nomin Discovery Prospective Areas Soil survey outline Rock chip sample 3.2 g/t Au 2.2% Cu Prospect outline 5.2 g/t Au 19 g/t Au 3.2% Cu 12 % Pb 11 g/t Au 41 g/t Au 11 % Pb 2.6% Cu 1% Zn 0.35% Mo 1.7% Cu 14% Cu 2 km 30
Slide 31: Tsenkher Nomin Discovery: Altan Nar Prospect
Tsenkher Nomin Discovery Altan Nar 1 Prospect Sample No: 20 rock chip Average grade: 3.4 g/t Au Max grade: 19.2 g/t Au Area: 160m x 75m Geology: Epithermal vein/stockwork Altan Nar 3 Altan Nar 1 Altan Nar 2 Altan Nar 4 Epithermal veins 500 m 31
Slide 32: Tsenkher Nomin Discovery: Altan Nar Prospect
Tsenkher Nomin Discovery Altan Nar 2 Prospect Sample No: 11 rock chip Average grade: 5.2 g/t Au Max grade: 41.3 g/t Au Geology: Epithermal vein Altan Nar 3 Altan Nar 1 Altan Nar 2 Altan Nar 4 Epithermal veins 500 m 32
Slide 33: Tsenkher Nomin Discovery: Summary of Results
Tsenkher Nomin Discovery Summary of Results Multiple precious and base metal discoveries confirmed within prospective tectonic terrane over large area of Erdene license Multiple rock chip assays returned gold values in excess of 1 g/t Au (including 41g/t Au) over a 3.5 km x 2.5 km area Copper, lead,
Slide 34: Tsenkher Nomin Discovery: Future Exploration Plans
Tsenkher Nomin Discovery Future Exploration Plans Currently drilling at Nomin Tal prospect, targeting the Au-Cu-Ag mineralization along strike and at depth Drilling to commence at Altan Nar prospect by mid-September Geophysical crews on-site completing IP and magnetic surveys Additional property-wid
Slide 35: Market Cap Peer Group Comparison
Market Cap Peer Group Comparison For Donkin and Zuun Mod (assumes current market cap split 50/50; 09-Sept, 2011) Donkin Zuun Mod < 2 Mt/y met coal producer > 15 Mlbs/y primary Mo producer $800 $400 $700 $350 $600 $300 $500 $250 $400 $200 $300 $150 $200 $100 $100 $50 $0 $0 Erdene Corsa Cline Grande E
Slide 36: Erdene Resource Development: Project Summary
Erdene Resource Development Project Summary Developing a large export coking coal project with Xstrata Advancing a major Mo-Cu project on the China-Mongolia border Drilling underway on Tsenkher Nomin Au- Ag-Cu-Pb-Zn discovery followed by Khuvyn Khar Cu-Ag discovery 36
Slide 37: TSX: ERD
TSX: ERD
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Slide 39: Comparable Valuations: Coal
Comparable Valuations Coal Coal exploration & development companies are currently trading at 0.3x to 0.7x NAV Erdene’s 25% interest in Donkin represents an NPV (10%) of $200 million Based on a peer NAV comp, ERD’s 25% interest is valued at $100 million (US$ millions, unless otherwise noted) Market E
Slide 40: Comparable Valuations: Base Metals
Comparable Valuations Base Metals Erdene’s Zuun Mod project is a significant molybdenum-copper deposit containing 3.1 billion lb M+I copper equivalent resource Assuming a $0.02 Cu eq value, Zuun Mod would have a market value of roughly $60M (US$ millions, unless otherwise noted) Market Enterprise Re
Slide 41: Industrial Minerals
Industrial Minerals KAOLIN AGGREGATE INTERESTS • Majority ownership of TSX-V listed • Royalty arrangement with Advanced Primary Minerals Aggregates USA, spending $28M to – Current market cap of ~$5 million develop site – ERD controls 60% of common shares • East Coast and Caribbean Evaluations COMMOD