39 slides from Erdene Resource Development's investor presentation, September 2008
Slide 1: Investor Presentation
PETER AKERLEY Investor Investor Presentation Presentation
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: Overview
OVERVIEW Mongolia Mongolia Canada Canada U.S. U.S. Aggregate Aggregate Coal Coal Coal Coal Molybdenum Molybdenum DIVERSE MID-TIER RESOURCE EXPLORATION & DEVELOPMENT COMPANY 33
Slide 4: Erdene Projects
Erdene PROJECTS 4
Slide 5: Coal
COAL Target: >200M >200M tonnes tonnes ofof strategically strategically located, located, high high quality, quality, thermal thermal or or metallurgical metallurgical coal; coal; underground underground in in Eastern Eastern Canada Canada & & open open pit pit in in Mongolia Mongolia Market: China,
Slide 6: Coal Project Ownership
COAL PROJECT OWNERSHIP Donkin Coal Alliance Mongolia Coal Opportunities All coal opportunities fully funded Ownership: 75% Xstrata to development by Xstrata for 25% Erdene earn-in of 75% 66
Slide 7: World Coal Markets
WORLD COAL MARKETS Erdene’s Coal Project Locations Xstrata/ERD Alliance Mongolia U.S.A. Donkin Nova Scotia CHINA Consumption: Consumption: US US Consumption: Consumption: (Mt) China China (Mt) (Mt) 4215 4215 (Mt) 1402 1402 981 2457 2457 981 Erdene Properties Top Consumers Source: Energy Information
Slide 8: Donkin Coal Project
DONKIN COAL PROJECT Atlantic Seaborne Coal Trade 45 km from Pit DONKIN 3000 (10) to Port (3) 0 80 6) (1 00 18 1) 45 00 62 00 (2 (6) Puerto Bolivar Colombia 150 km from Pit to Port From NMi (days) South Africa 350 km from Pit to Port 88
Slide 9: Donkin Coal Project: Local Infrastructure
DONKIN COAL PROJECT Local Infrastructure No. 26 Colliery 9
Slide 10: Donkin Coal Project: Resources
DONKIN COAL PROJECT Resources – Indicated & Inferred Harbour Seam High volatile-A bituminous (12,000 - 14,000 Btu), Indicated Inferred Seam high sulphur, medium ash coal (Millions of Metric Tonnes) Lloyd Cove 53 82 Hub 73 57 Harbour 101 115 TOTAL 227 254 10 10
Slide 11: Donkin Coal Project: Coal Quality vs Competition
DONKIN COAL PROJECT Coal Quality vs Competition Average Coal Quality – World Coal Resources 16,000 15,000 14,000 13,000 12,000 11,000 10,000 9,000 8,000 7,000 Indonesia South Russia Venezuela Cerrejon, Powder Central North Donkin Africa Colombia River Appalachian Appalachian Basin 11 11
Slide 12: Donkin Stage Development Program: Continuous Miner
DONKIN COAL PROJECT 2 Stage Development Program: Continuous Miner Continuous Miner Conveyor Power Plant Truck 12 12
Slide 13: Donkin Stage Development Program: Longwall
DONKIN COAL PROJECT 2 Stage Development Program: Longwall Longwall Miner Conveyor Ship Train 13 13
Slide 14: Donkin Coal Project: Assumptions
DONKIN COAL PROJECT Assumptions 3.5 to 5 Mtpa high energy thermal coal for local & export markets Metallurgical spot market & wash plant remains option Initial capital $313M Projected cash costs – loaded on ocean-going vessel: Sydney international coal terminal - $23.12 >30 years of high productivit
Slide 15: Donkin Coal Project: Valuation
DONKIN COAL PROJECT Valuation Base Case Sensitivity Sensitivity Sensitivity Sensitivity $52/Mt Price Price Start-up Discount Discount Factor 2015 Start-up 10% Discount ($57/Mt) (2012) (8%) and Price NPV ERDENE (25%) (US$) $49M $68M $66M $78M $106M Erdene’s Net Cash Flow per annum $CDN after Taxes an
Slide 16: Donkin Coal Project: Timeline
DONKIN COAL PROJECT Timeline 2008 2009 2010 2011 2012 2013 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 DCA Approves CM Feasibility CM Longwall Decision Decision CM Longwall Construction Constructio n CM Longwall Production Production CM: Continuous Miner Evaluation & Developmen
Slide 17: Donkin Summary & Outlook
DONKIN SUMMARY & OUTLOOK Highest quality coal resource in close proximity to deep ocean port in North America >$120M in mine development in place Norwest PAS; ERD’s 25% generating >$20M annually after tax cashflow at full production using $52/tonne Current price: >$130/tonne for high quality thermal
Slide 18: Metals: Molybdenum
METALS: MOLYBDENUM Target: >300Mlbs >300Mlbs of of molybdenum, molybdenum, open open pit pit mineable mineable with with minimum minimum average average of of ~0.06% ~0.06% molybdenum molybdenum grade, grade, located located in in Asia Asia Market: Asia-Pacific Asia-Pacific region, region, led led b
Slide 19: Molybdenum Fundamentals
MOLYBDENUM FUNDAMENTALS Uses Led by Steel Casting 4% Tool & High Speed Steel 5% Moly Metal 7% Chemical 7% Low Alloy Steel 30% Stainless Steel 36% Super Alloys 5% Others 2% 19
Slide 20: Global Molybdenum & Stainless Steel Production
MOLYBDENUM Global Molybdenum & Stainless Steel Production Thousand Metric Tons Molybdenum Million Metric Tons Stainless 220 28 Thousand Metric Tons Molybdenum 200 26 Million Metric Tons Stainless 180 24 22 160 20 140 18 120 16 100 14 80 12 60 10 1990 1992 1994 1996 1998 2000 2002 2004 2006 Source US
Slide 21: China Supply and Demand
MOLYBDENUM China Supply and Demand Domestic Production vs Total Consumption and Export Mine Production Apparent consumption Exports 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 2000 2002 2004 2006 2008 2010 2012 2014 2016 21
Slide 22: Need for New Producers
NEED FOR NEW PRODUCERS Molybdenum Supply by Source Need for new sources Zuun Mod – Erdene Consumption Molybdenum Supply (Mlb Mo) Improved recoveries New supply needed 600 China expansions Recycling Existing mines Consumption trend 500 Zuun Mod - Erdene 400 2006 2007 2008 2009 2010 2011 2012 2013 201
Slide 23: Zuun Mod: Regional Molybdenum & Steel Production
ZUUN MOD Regional Molybdenum & Steel Production World’s Largest Steel Producing Region China’s Largest Molybdenum Producing Regions 23
Slide 24: Zuun Mod: Established Infrastructure
ZUUN MOD Established Infrastructure 24
Slide 25: Zuun Mod: Resources
ZUUN MOD Resources – Measured, Indicated & Inferred September 2008 Drill Results Cut-off Grade 0.04% Mo% 410m of 0.057% Mo (98m 0.091%) Measured Resource & Category Inferred 399m of Indicated 0.055% Mo (36m 0.088%) Resources Mt 237.1 49.7 428m of 0.060% Mo (66m 0.101%) Cu% 0.068 0.063 373m of Mo% 0.
Slide 26: Zuun Mod: Minarco Preliminary Pit Design
ZUUN MOD Minarco Preliminary Pit Design 26
Slide 27: Zuun Mod: Minarco Preliminary Assessment
ZUUN MOD Minarco Preliminary Assessment 27
Slide 28: Zuun Mod: Community Development
ZUUN MOD Community Development EXPERIENCED COMMUNITY DEVELOPMENT OFFICER FOCUSED ON IMPROVING HEALTH & EDUCATION COMMUNITY LIAISON COMMITTEE ESTABLISHED 28
Slide 29: Zuun Mod: Timeline
ZUUN MOD Timeline 2008 2009 2010 2011 2012 2013 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Resource Definition & Scoping Study Prefeasibility Feasibility Financing Development Start-up Zuun Mod Full Production 29
Slide 30: Zuun Mod Summary & Outlook
ZUUN MOD SUMMARY & OUTLOOK One of the largest molybdenum deposits in Asia On the doorstep of the largest steel producing and fastest growing molybdenum region Established >300 Mlbs of molybdenum resource at grades comparable to major producers Drilling continues to provide additional tonnage and hig
Slide 31: Construction Material
CONSTRUCTION MATERIAL Target: >100M >100M tonnes tonnes of of surface surface mineable, mineable, high high quality quality (DOT (DOT Grade Grade A)A) strategically strategically located located construction construction material material Market: U.S. U.S. eastern eastern seaboard seaboard where whe
Slide 32: Construction Material: U.S. Market
CONSTRUCTION MATERIAL U.S Market National Aggregates Production in in the the U.S. U.S. with with Projections Projections to to 2020 2020 2500 Aggregates (Millions of Metric Tonnes) 2000 Sand and gravel 1500 Crushed stone 1000 500 0 1900 1920 1940 1960 1980 2000 2020 32
Slide 33: U.S. Population Increase Through 2030
CONSTRUCTION MATERIAL U.S. Population Increase Through 2030 MAINE 10.7% N.H. R.I. 33.2% MASS. 10% 10.4% N.Y. CONN. 8.3% Secondary 2.6% Market N.J. Target MD. 16.5% 32.6% DELA. VA. 29.2% 38.8% N.C. MISS. 51.9% 8.7% S.C. ALA. 28.3% TX. LA. 9.6% GA. 0-25% 59.8% 7.5% 46.8% 25-50% FLA. 50-75% Primary 79.
Slide 34: East Coast Target Markets
CONSTRUCTION MATERIAL East Coast Target Markets Eastern Canada Projects 75% increase in U.S. aggregate imports from 2002 to 2006 Canada provides 35% e Li n of U.S. imports ll Fa Marine Transport Advantage Woodland, Mode Cost/tonne/mile West Georgia Granite Hill, Central Georgia Road $0.18-0.22 Rail
Slide 35: Southeast US Projects
CONSTRUCTION MATERIAL Southeast US projects Granite Hill Augusta Charleston Savannah Woodland Jacksonville Tampa Clearwater Railroad (owner) CSTX FEC Miami NS 35
Slide 36: Potential Canadian East Coast Projects
CONSTRUCTION MATERIAL Potential Canadian East Coast Projects Cape Breton Sydney Charlottetown Auld’s Cove P.E.I NEW BRUNSWICK Eastern Moncton Shore Saint John Bayside NOVA Halifax Bay Bay of of Fundy Fundy SCOTIA ATLANTIC ATLANTIC OCEAN OCEAN Southern New Brunswick South Shore 36
Slide 37: Construction Material: Summary
CONSTRUCTION MATERIAL Summary >500Mt of new demand per annum in US by 2030 Demand concentrated in coastal regions of southern US ERD positioning itself to have strategic project(s) in both offshore and nearest rail regions Increasing cost advantage associated with marine transportation One royalty p
Slide 38: Erdene Summary: Outlook
ERDENE SUMMARY: OUTLOOK Energy: Highest quality coal resource in close proximity to deep ocean port in North America led by worlds largest producer of thermal coal Development decision 2008 Initial cashflow in 2010 leading to >$20M/annum full production Metals: One of the largest molybdenum deposits
Slide 39: Erdene Market Facts
ERDENE MARKET FACTS Shares Trading Info: Cash Position: Website Outstanding: TSX:ER 89.2 M D Cdn $21.1 M www.erdene.com 98.6 M fd Market Market Capitalization Capitalization (CDN$) (CDN$) 120.00 100.00 CDN $ M 80.00 60.00 40.00 20.00 0.00 27-Feb 30-Jun 30-Nov 29-Apr 30-Sep 28-Feb 31-Jul 30-Dec 30-Ma