Hillgrove Resources Limited · ASX:HGO
Hillgrove Resources — Investor Presentation (October 2010)
48 slides from Hillgrove Resources's investor presentation, Oct 29, 2010
Slide 1: Kanmantoo FID and Capital Raising
Kanmantoo FID and Capital Raising 29 October 2010 NOT FOR DISTRIBUTION OR RELEASE IN THE UNITED STATES
Slide 2: Disclaimer
DISCLAIMER Important Notice No representation or warranty is or will be made by any person (including Hillgrove Resources Limited ACN 004 297 116 (“Hillgrove” or “HGO”) and its officers, directors, employees, advisers and agents) in relation to the accuracy or completeness of all or part of this doc
Slide 3: Hillgrove Overview & Investment Highlights
HILLGROVE OVERVIEW & INVESTMENT HIGHLIGHTS 3
Slide 4: FID and Funding Overview
FID AND FUNDING OVERVIEW HILLGROVE RESOURCES IS AN EMERGING COPPER/GOLD COMPANY TARGETING PRODUCTION BY Q4 2011 Overview The Board of Directors of Hillgrove Resources Limited (“HGO”) has made a final investment decision (“FID”) for the development of the Kanmantoo copper/gold mine in South Australia
Slide 5: Kanmantoo Overview
KANMANTOO OVERVIEW Kanmantoo and HGO’s other key projects HGO’s flagship project is the Kanmantoo copper/gold mine 100% owned by HGO Bird’s Head project Located just 55km from Adelaide, in South Australia Sumba project The project enjoys comparative cost advantages Close to necessary power, water, r
Slide 6: Kanmantoo Overview: Highlights
KANMANTOO OVERVIEW Highlights Life-of-mine (“LOM”) average payable metals production: 21k tonnes p.a. copper 9k ounces p.a. gold 174k ounces p.a. silver Remaining construction costs of A$121 million Includes A$10 million of contingencies Includes A$27 million of pre-strip costs A$23 million spent to
Slide 7: Strategy
STRATEGY NEAR TERM PRODUCTION, PROSPECTIVE EXPLORATION Strategic Direction & Focus Deliver Kanmantoo as a producing asset, within time and budget estimates Single mine producer in 12 months HGO’s strategy is to be a multi-mine producer Australian and Indonesian focus for near term Leverage off knowl
Slide 8: Investment Highlights
INVESTMENT HIGHLIGHTS HILLGROVE OFFERS A COMPELLING INVESTMENT OPPORTUNITY Investment highlights An emerging copper/gold producer1 Near term cashflows – targeting first production by Q4 2011 Flagship project is located in a favourable asset location with no additional transport/power infrastructure
Slide 9: Potential Value Upside for Emerging Copper Producer
POTENTIAL VALUE UPSIDE FOR EMERGING COPPER PRODUCER1 EV/resource Producers (US$/t Cu eq.) 1,000 800 600 400 200 0 Hillgrove Resources Aditya Birla Minerals Jabiru Metals Ltd. Equinox Minerals Ltd. PanAust Ltd OZ Minerals Ltd. Ltd. Ltd. EV/resource (US$/t Cu eq.) Explorers 1,600 1,400 1,200 1,000 800
Slide 10: Offer Summary
HILLGROVE OFFER SUMMARY
Slide 11: Equity Offer Details
EQUITY OFFER DETAILS FULLY UNDERWRITTEN INSTITUTIONAL PLACEMENT AND NON UNDERWRITTEN SPP Summary A$65 million institutional placement comprising two tranches: Offer size Unconditional placement of 58.2 million shares to raise approximately A$14.5 million Equivalent to 12.1% of existing shares on iss
Slide 12: Indicative Offer Timetable
INDICATIVE OFFER TIMETABLE FULLY UNDERWRITTEN INSTITUTIONAL PLACEMENT Event Date Announcement and trading halt Friday, 29 October 2010 Unconditional placement and conditional placement bookbuild Friday, 29 October 2010 Trading halt lifted and HGO’s shares recommence trading Monday, 1 November 2010 S
Slide 13: Sources and Uses of Capital
SOURCES AND USES OF CAPITAL FROM SEPTEMBER 2010 THROUGH MAY 2012 Kanmantoo Copper/Gold Project, Indonesian exploration and Corporate expenses Sources of capital A$ million Parent cash contribution (from existing cash position) 57.0 Project finance loan 30.0 Project finance bonding & guarantee facili
Slide 14: Pro-forma 31 July 2010 Balance Sheet
PRO-FORMA 31 JULY 2010 BALANCE SHEET (ADJUSTED FOR THE CAPITAL RAISE) Balance sheet 1 2 31 July 2010 Actual Pro-forma transactions Pro-forma Balance Sheet Assets (A$ million) (A$ million) (A$ million) 3 Cash and cash equivalents 93.7 60.1 153.8 Other current assets 12.5 - 12.5 Property, plant & equi
Slide 15: Kanmantoo Project
HILLGROVE KANMANTOO PROJECT
Slide 16: Kanmantoo Overview
KANMANTOO OVERVIEW Highlights Geographic location Near term cash flows: First copper/gold production scheduled for Q4 2011 Resources of 32.2Mt @ 0.9% copper, 0.2g/t gold and 3.2g/t silver Configured to initially be a 2.4Mtpa open cut mine potentially ramping-up to 2.7Mtpa through operational efficie
Slide 17: Exploration at Kanmantoo Has Improved Resource Certainty
EXPLORATION AT KANMANTOO HAS IMPROVED RESOURCE CERTAINTY AND INCREASED THE RESOURCE-RESERVE CONVERSION RATIO Resource growth Reserve growth Mt Mt 40.0 Inferred Indicated Measured 20.0 Probable Proved 35.0 31.8 32.2 18.0 28.0 16.0 14.8 30.0 14.0 25.0 12.0 11.1 18.4 20.0 10.0 15.0 8.0 8.5 6.0 10.0 4.0
Slide 18: Summary of Estimated Capital and Development Costs
SUMMARY OF ESTIMATED CAPITAL AND DEVELOPMENT COSTS TO BRING KANMANTOO TO PRODUCTION Total capital costs Capital costs spent to date Remaining capital costs (A$ million) (A$ million) (A$ million) Capital costs Mining 17.1 0.1 17.0 Pillara processing plant 67.9 21.3 46.6 Other infrastructure 9.3 0.4 8
Slide 19: Cash Costs
CASH COSTS Competitive cash cost of production Cash cost breakdown US$/lb Mining costs 0.97 Processing 0.50 Transport (includes trucking, port and ship) 0.12 Treatment charges, refining charges and price participation 0.27 Sub-total 1.86 Gold/silver by-product credits (0.25) Total 1.61 Note: Cash co
Slide 20: Size and Grade of Emerging Copper Production
SIZE AND GRADE OF EMERGING COPPER PRODUCTION POTENTIALLY COMING ON-LINE IN THE MEDIUM-TERM Copper development projects1: Resource2 size and Cu head grade Cu grade (%) 4.0% First quartile Second quartile Third quartile Fourth quartile 2.0% Kanmantoo (0.9%) Weighted average grade: 0.79% 0.0% 0 50 100
Slide 21: Projected Capital Cost per Tonne of Annual Production
PROJECTED CAPITAL COST PER TONNE OF ANNUAL PRODUCTION OF EMERGING COPPER PRODUCTION POTENTIALLY COMING ON-LINE IN THE MEDIUM-TERM Copper development projects1: Capital cost per tonne of annual copper production Capex/Production (US$/t/y) 30,000 First quartile Second quartile Third quartile Fourth qu
Slide 22: Kanmantoo Copper/Gold Project: Tenements, Site Plan
KANMANTOO COPPER/GOLD PROJECT TENEMENTS, SITE PLAN AND INTERPRETED CROSS SECTION Tenements Site plan Summary of Hillgrove Kanmantoo tenement status Tenement Tenement Area EL Number Name type (sq km) Expiry date Holding and Comments EL4401 Kanmantoo Exploration 489 16/12/2010 Hillgrove Resources Limi
Slide 23: Kanmantoo Copper/Gold Project: Processing Overview
KANMANTOO COPPER/GOLD PROJECT Processing overview Lime ROM BIN FEED PRODUCT Construction and commissioning VIBRATING GRIZZLY BIN SCREEN NEUTRAL- FEEDER ISATION contract with Abesque Engineering JAW CRUSHER STOCK PROCESS TANK SECONDARY PILE HYDRO WATER TANK CYCLONE CRUSHER Simple, standard flowchart
Slide 24: Kanmantoo Copper/Gold Project: Pillara Facility and Logistics
KANMANTOO COPPER/GOLD PROJECT The Pillara processing facility Logistics and services Similar processing flowchart to that originally designed Mine site is close to the city of Adelaide, the main for Kanmantoo highway and to port facilities Greater throughput capacity provides options for low Private
Slide 25: Kanmantoo Copper/Gold Project: Low Risk Features
KANMANTOO COPPER/GOLD PROJECT LOW RISK FEATURES Kanmantoo’s key attributes Historical operations reduce risk for the project Environmental, construction & mining licenses granted; all approvals to mine in place Known, simple metallurgy with excellent recoveries Large database of exploration, mining
Slide 26: Exploration
HILLGROVE EXPLORATION
Slide 27: Exploration Assets: Indonesia
EXPLORATION ASSETS: INDONESIA PROSPECTIVE COPPER & GOLD EXPLORATION Why Indonesia? Map of development projects Proven geological provenance for target commodities (Cu, Au) HGO’s position obtained through strong in- country experience base and development of pre-existing formal/informal relationships
Slide 28: Sumba Island
SUMBA ISLAND HILLGROVE 80% Hillgrove is an 80% beneficial shareholder in PT Fathi, holding IUP over ~1,000 km2 for a period of six years HGO is responsible for sole funding and management of all exploration and development activities up to decision to mine Main projects: Masu and Tanah Daro Masu 8km
Slide 29: Sumba Island
SUMBA ISLAND HILLGROVE 80% Major structural corridor identified over >20km with associated intensive hydrothermal alteration, silicification and gold mineralisation Numerous prospects identified for scout drilling Large airborne geophysical survey to commence Q4 2010 Potential Cu / Au porphyry targe
Slide 30: Bird's Head Project
BIRD’S HEAD PROJECT HILLGROVE 80% Hillgrove is an 80% beneficial shareholder in PT Akram: Rights cover almost 1,000km2 granted IUP for six years HGO is responsible for sole funding and management of all exploration and development activities up to decision to mine Significant exploration undertaken
Slide 31: Bird's Head Project: Conceptual Porphyry Target
BIRD’S HEAD PROJECT CONCEPTUAL PORPHYRY TARGET Mapped alteration, surface geochemistry and magnetic signature indicates shallow, buried porphyry at West Delta Target depth top ~200m; between Cadia and Batu Hijau deposit depths. Earlier drilling too shallow Target Area Current Topographic Surface Low
Slide 32: Project Finance Facility
HILLGROVE PROJECT FINANCE FACILITY
Slide 33: Summary of Project Finance Facilities
SUMMARY OF PROJECT FINANCE FACILITIES Commitment letter Hillgrove has accepted a commitment letter in respect of project financing for the Kanmantoo project and is in the process of finalising a facility agreement with Macquarie Bank Limited and Barclays Bank PLC The key terms of the project financi
Slide 34: Summary of Project Finance Facilities (Cont'd)
SUMMARY OF PROJECT FINANCE FACILITIES (CONT’D) Other material features and key terms Mandatory Hedging Borrower must not enter into committed hedging of > 65% of the underlying payable copper production for any year Early Access Hedging Access to early hedging is available to Hillgrove to enable it
Slide 35: Management and Board of Directors
MANAGEMENT AND BOARD OF DIRECTORS 35
Slide 36: Management Team & Board of Directors
MANAGEMENT TEAM & BOARD OF DIRECTORS EXPERIENCED TEAM WITH PROVEN TRACK RECORD Key management team Drew Simonsen Cam Schubert Managing Director & Chief Executive Officer General Manager – Kanmantoo Project Appointed MD & CEO in August 2010 Appointed late 2009 35 years in resources, investment and co
Slide 37: Management Team & Board of Directors
MANAGEMENT TEAM & BOARD OF DIRECTORS EXPERIENCED TEAM WITH PROVEN TRACK RECORD Board of Directors Hon. Dean Brown AO FAICD Non-Executive Chairman Former Premier and Minister of the South Australian Government and Member of the South Australian Parliament Chairman of InterMet Resources Limited, a Dir
Slide 38: Appendix
HILLGROVE APPENDIX
Slide 39: Kanmantoo: Major Contracts
KANMANTOO: MAJOR CONTRACTS Off-take Agreement – J.P. Morgan Metals & Concentrates LLC Under the terms of the agreement, J.P. Morgan Metals & Concentrates LLC agrees to buy, and HGO agrees to sell, 100% of the clean sulphide floatation copper concentrate produced at and during the life of the mine Ka
Slide 40: Risk Factors
RISK FACTORS The business activities of Hillgrove are subject to risks, which include those which apply generally to investments in equity markets, and those which apply specifically to Hillgrove's business and the present stage of development of Hillgrove's operations. Some of the specific risks ma
Slide 41: Risk Factors (Cont'd)
RISK FACTORS (CONT’D) Risks in securing project financing to fund the Kanmantoo Project Hillgrove anticipates that the remaining development cost of the Kanmantoo Project will be approximately A$121 million, including contingency cost overruns. Of this amount, Hillgrove is required to secure A$30 mi
Slide 42: Risk Factors (Cont'd)
RISK FACTORS (CONT’D) International operations In Indonesia, in which Hillgrove has assets and operations, such assets and operations are subject to various political, economic and other uncertainties, including, among other things: The risks of expropriation, nationalisation, renegotiation or nulli
Slide 43: Risk Factors (Cont'd)
RISK FACTORS (CONT’D) Production estimates Actual future production may vary materially from targets and projections of future production for a variety of reasons. There is greater risk that actual production will vary from estimates of production made for properties under exploration or not yet in
Slide 44: Foreign Selling Restrictions
FOREIGN SELLING RESTRICTIONS Notice to European Economic Area Investors In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (2003/71/EC) (each, a “Relevant Member State”) (except for the UK), with effect from and including the date on which t
Slide 45: Foreign Selling Restrictions (Cont'd)
FOREIGN SELLING RESTRICTIONS (CONT’D) Germany Hong Kong Luxembourg This document has been prepared by Hillgrove Resources Limited The contents of this document have not been reviewed or The information in this document has been prepared on the basis that for information purposes only, solely for the
Slide 46: Foreign Selling Restrictions (Cont'd)
FOREIGN SELLING RESTRICTIONS (CONT’D) Singapore United Kingdom Malaysia This document and any other materials in connection with the Offer relating to This document is being distributed only to, and is directed at (a) This document may only be supplied to investors in Malaysia in Singapore have not
Slide 47: Note on Reserves & Resources
NOTE ON RESERVES & RESOURCES Note on reserves & resources The information in this presentation that relates to Mineral Resource estimates for the Kanmantoo Project is based on information compiled by Mr Paul Payne, who is a Member of The Australasian Institute of Mining and Metallurgy. Mr Payne is E
Slide 48: Glossary
GLOSSARY Key terms EGM: Extraordinary General Meeting FID: Final Investment Decision HGO or Hillgrove: Hillgrove Resources Limited ISDA: International Swaps and Derivatives Association, Inc. IUP: Izin Usaha Pertambangan (Indonesian mining permit) JORC Code: 2004 Edition of the ‘Australasian Code for
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