Highfield Resources Ltd Corporate Presentation

Transcription

1 Highfield Resources Ltd Corporate Presentation March 2015 ASX Code: HFR

2 COMPETENT PERSON STATEMENT - RESOURCES Information relating to resources was prepared by Mr Leo Gilbride, P.Eng and Ms Vanessa Santos, P.Geo, of Agapito Associates. The Competent Person for Resources under JORC Code standards is Mr Leo Gilbride, P.Eng and Ms Vanessa Santos, P.Geo. of Agapito Associates of Colorado, USA. Mr Gilbride is a licensed professional engineer in the State of Colorado, USA and is a registered member of the Society of Mining, Metallurgy and Exploration Inc. Ms Santos is a licensed professional geologist in South Carolina and Georgia, USA, and is a registered member of the Society of Mining, Metallurgy and Exploration Inc. The Society of Mining, Metallurgy and Exploration Inc is a JORC Code Recognized Professional Organization (RPO). An RPO is an accredited organization of which the Competent Person under JORC Code Reporting Standards must belong in order to report Exploration Results, Mineral Resources, or Ore Reserves through the ASX. Mr Gilbride is the Vice President of Engineering and Field Services and Ms Santos is the Chief Geologist with Agapito Associates and both have sufficient experience to qualify as a Competent Person for the relevant style and type of mineralisation and deposit under consideration of this release. Mr Gilbride and Ms Santos consent to the inclusion in the report of the matters based on this information in the form and context in which it appears. COMPETENT PERSON STATEMENT RESERVES Information relating to reserves was prepared by Mr. José Antonio Zuazo Osinaga, Technical Director of CRN, S.A.; Mr. Jesús Fernández Carrasco. Managing Director of CRN, S.A. and Mr Manuel Jesus Gonzalez Roldan, Geologist of CRN, S.A. Mr. José Antonio Zuazo and Mr. Jesús Fernández, are licensed professional geologists in Spain, and are registered members of the EUROPEAN FEDERATION OF GEOLOGISTS, an accredited organization to which the Competent Person (CP) under JORC Code Reporting Standards must belong in order to report Exploration Results, Mineral Resources, or Ore Reserves through the ASX. Mr. José Antonio Zuazo is the Technical Director of CRN and he has sufficient experience which is relevant to the style of mineralization and type of deposit under consideration and to the activity which they are undertaking to qualify as a CP as defined in the 2012 Edition of the JORC Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr. José Antonio Zuazo and Mr. Jesús Fernández consent to the inclusion in the release of the matters based on their information in the form and context in which it appears. FORWARD LOOKING STATEMENTS This presentation includes certain forward looking statements. All statements, other than statements of historical fact, are forward looking statements that involve various risks and uncertainties. There can be no assurances that such statements will prove accurate, and actual results and future events could differ materially from those anticipated in such statements. Such information contained herein represents management s best judgment as of the date hereof based on information currently available. The company does not assume any obligation to update any forward looking statement.

3 Highfield Resources Limited CONTENTS APPENDICES 1. Introduction A1 Corporate Overview 2. The Projects A2 Muga, Vipasca and Pintano Projects 3. Proven basin and proven mining and processing A3 Sierra del Perdón Project 4. Muga Definitive Feasibility Study A4 Permitting 5. Lowest capital cost A MOP market supply and demand 6. First quartile margin in production A6 Muga DFS High level snapshot 7. Advantages to our addressable markets A7 Potash price assumption 8. First quartile costs to customer A8 Muga DFS sensitivity overview 9. Management have built and operated mines A Company defining year 11. Summary 3

4 1. Introduction Highfield Resources is developing the Muga Project, one of its four 100% owned potash projects in northern Spain. Decline accessed underground mine with project economics boosted by first world infrastructure and domestic markets Located in a producing potash basin where undergound mines have operated via decline with simple sylvinite flotation circuit processing. The flagship Muga Project has the lowest capex of any development stage potash project. In production Muga will have first quartile EBITDA margins due to a combination of high price end markets and low total cash costs to customer. Management team has proven mine building experience in Spain and operating experience in potash is a defining year for the Company. Highway from within 7 kms of mine gate to port Aerial photo of Port of Pasajes Virtual image of proposed aboveground operations 4

5 2. The Projects Four 100% owned potash projects in northern Spain 5

6 3. Proven basin and proven mining and processing Mines in Ebro Basin have produced for close to 100 years Highfield Iberpotash Mining Decline access into underground conventional room and pillar mine Processing Flotation circuit processing of sylvinite ore Estimated 2015 MOP Production by Mining Method Israeli Chemicals Ltd (ICL:IT) owns Iberpotash and on 7 August 2014, Stefan Borgas, CEO noted: 19% 5% [our expansion projects in the Ebro Basin] are so shockingly attractive we`re putting an accelerator on 76% Underground Conventional Brines Solution Source: Scotiabank, HFR Research 6

7 4. Muga Definitive Feasibility Study Post tax NPV 10 of US$1.42bn Post tax, unlevered IRR of 51.9% EBITDA in first year of full production estimated at $US296m Initial 24 year mine life of 1.12m tonnes of potash (K60 product) per annum in full production Pre-production capital cost estimated at less than US$256.25m (from total capital cost estimate of US$354.36m) All in cash costs to port of Bilbao of US$119 per tonne Total C3 costs of US$135 per tonne Realistic 2017 FOB Vancouver potash price reference of $374 per tonne (nominal) ASX Release 30 March 2015 Virtual image of mine storage and processing facilities (for marketing puroposes only) 7

8 5. Lowest capital cost Highfield has stand-out MOP projects in terms of total capex and capital intensity Total capex (in absolute terms) Capital intensity per tonne of production Eurochem: VolgaKaliy W. Potash: Milestone Potashcorp: Rocanville Eurochem: Usolskiy Encanto: Muskowekwan Uralkali: Polovodovsky Verde: Cerrado Verde Karnalyte: Wynyard Brazil Potash: Autazes Passport: Hollbrook Elemental: Sintoukola Uralkali: Ust South Boulder: Colluli MagIndustries: Mengo Pros. Glb'l: Hollbrook Allana: Danakil Highfield: Muga Average: US$2,093 million - 2,000 4,000 6,000 Capital Expenditure US$ millions W. Potash: Milestone Eurochem: VolgaKaliy MagIndustries: Mengo Encanto: Muskowekwan Brazil Potash: Autazes Uralkali: Polovodovsky Elemental: Sintoukola Karnalyte: Wynyard Eurochem: Usolskiy Passport: Hollbrook Verde: Cerrado Verde South Boulder: Colluli Allana: Danakil Uralkali: Ust Prospect Global Potashcorp: Rocanville Highfield: Muga Average: US$807/tonne ,000 1,500 Capital Intensity US$/tonne of Production Source: GMP Europe Research May 2014 HFR:Muga figures from DFS 8

9 6. First quartile margin in production First quartile margin is driven by high priced end markets and low total costs to customer Project Highfield Muga* Belaruskali BHP Jansen* Intrepid Potash K+S Legacy* Price at Customer CFR Brazil / CIF NW Europe 1 US$357 / tonne Asia / Brazil / Europe 1 US$348 / tonne FOB Vancouver US$290 / tonne CIF US Midwest US$432 / tonne FOB Vancouver US$290 / tonne $250 Estimated EBITDA margin (US$ / tonne) $200 $150 $100 $50 $- $232 $186 $136 $115 $51 $(50) $(80) $(63) $(67) $(80) Estimated delivered cost to customer (US$ / tonne) $(100) $(150) $(200) $(250) $(300) $(350) $(26) $(43) $(45) $(8) $(11) $(37) $(10) $(21) $(215) $(58) US$124 $(19) $(11) $(36) US$162 US$154 $(40) $(40) $(25) $(15) $(14) US$239 $(33) US$317 Operating Costs Freight Costs Sustaining Capital Royalties Corporate SG&A EBITDA Margin * Under development Source: Street research, Company reports and HFR estimates 1 Assumes sales evenly distributed 9

10 7. Advantages to our addressable markets Competitive access to high priced MOP markets 18.7 Estimated 2014 MOP supply and demand by region 21.0 FOB Vancouver $ Canada 1.5 CIF US Midwest $432 USA Brazil CIF NW Europe $363 CFR Brazil $ EU* Africa Middle East CFR India $322 FSU Asia China 13.0 CFR SE Asia $330 CFR China $305 Sth America 1 Global Totals (2014) Production Consumption MOP spot US$/mt 1 Excluding Brazil 2 Excluding China MOP spot Prices in USD as at 1 Jan 2015 Prices for Standard Product Source: IFA, Scotiabank, Uralkali, HFR Research 10

11 8. First quartile costs to customer Low total cash costs to customers with large royalty and logistics advantages $350 $317 $300 $250 $200 $150 $100 $154 $137 $11 $124 $21 $20 $11 $10 $8 $- $6 $16 $26 $15 $45 $186 $162 $24 $1 $19 $- $48 $37 $43 $50 $212 $9 $30 $35 $33 $229 $25 $1 $23 $15 $165 $239 $25 $40 $36 $58 $280 $13 $23 $28 $45 $171 $33 $14 $15 $40 $215 Corporate SG&A Royalties Sustaining Capital Freight Costs Operating Costs $50 $80 $80 $67 $63 $63 $105 $80 $- Highfield Muga* ICL Dead Sea BHP Jansen* Belaruskali Uralkali PotashCorp K+S Germany K+S Legacy* Mosaic Intrepid Source: Company Reports and street research * Not in production. Figures are sourced from public announcements Highfield Muga figures from DFS March

12 9. Management have built and operated mines Proven in-country team with over thirty professionals including experienced mine builders Pedro Rodriguez Development Director Alfredo Luis Menendez Diaz EGM Construction Michael Schlumpberger EGM Operations Geologist with over 30 years experience in Spain, including for senior management roles for multi-nationals including Billiton, Navan-Almagrera and Newmont Direct responsibility for permitting and delivery of the Aguas Teñidas, Los Santos and Mazarrón mines Mining Engineer with over 30 years experience in Spain including for HUNOSA and SADIM Was directly responsible for the mine and facilities construction projects at Aguas Teñidas, Sotiel and Migollas and for technical and procurement services at La Zarza, Rio Tinto and Los Santos Mining Engineer with extensive underground mining experience including over 21 years at PotashCorp Operational responsibility for the expansion and ongoing operations at PotashCorp s 8Mtpa Lanigan underground mine Aguas Teñidas CU-Pb-Zn mine Huelva Province, Spain Opened

13 A Company defining year The transition from developer to producer Q1 Muga-Vipasca JORC Resource estimate upgrade Sierra del Perdón maiden JORC Resource estimate Muga Mine Definitive Feasibility Study Q2 Muga Mine project finance term sheets agreed Sierra del Perdón Scoping Study Q3 Muga Mine Financial Close Q4 Muga Mine construction commences Brochure cover explaining the Company s commitment to its four pillars of corporate responsibility 13

14 11. Summary Highfield Resources is developing the Muga Potash Project, one of its four 100% owned potash projects in Northern Spain. The projects are in a producing potash basin where conventional undergound mines have operated via decline and sylvinite flotation circuit processing. The flagship Muga Mine Project has the lowest capex of any development stage potash project. In production it will have first quartile EBITDA margins driven by combination of high price end markets and low total cash costs to customer. A management team has been assembled with proven mine building experience in Spain and in potash operations is a defining year for the Company. Logo of the Company s Spanish Foundation that is currently delivering several projects with the local communities 14

15 Highfield Resources Ltd Appendices

16 Price (A$) Volume (m) A1. Corporate Summary Fully Diluted Equity Ordinary Shares on Issue 252.0m Options 43.5m Performance B* Shares 51.5m Fully Diluted 347.0m Undiluted Market Cap at A$1.39 (26 Mar 15) $350m Fully Diluted Market Cap at A$1.39 $482m Cash as at 31 December 2014 ~A$25m Average Daily Volume (3months) ~310,000 Shareholders (Fully Diluted) Spanish in-country management 21% Australian based management 8% EMR Capital 20% Other Shareholders 51% Total 100% * Performance shares were granted for acquisition of the Spanish assets with the following milestones B. Construction and operating approvals for production of 500,000 tonnes of potash per annum. Broker Recommendation 12-month Price Target Bell Potter BUY $1.23 Blue Ocean BUY $1.65 Canaccord Genuity BUY $1.30 Foster Stockbroking BUY $1.35 GMP Securities BUY $1.75 Numis Securities BUY $2.20 Pareto Securities BUY $1.35 Taylor Collison BUY $1.18 AVERAGE $

17 15 km A2. Muga-Vipasca and Pintano Projects Vipasca Project Area Over 490m tonnes of JORC Resource estimate* covering less than 20% of Project area Muga Project Area Pintano Project Area 52 km * Refer ASX Releases dated 24 February 2015 and 20 November 2013 Map of Muga-Vipasca and Pintano Project Areas showing JORC Resource estimate, drill holes and seismic profiles 17

18 Annual production ('000 t) % KCl A3. Sierra del Perdón Project Photo showing mine operations at Potasas de Subiza in the mid 1990s Potash Production History Production Grade Source: Annual Minestrio de Industria lodgements by Mina de Potasas de Navarra and Subiza, SA (former mine owner) Map of Sierra del Perdón showing historic mine infrastructure and drill holes 18

19 A4. Permitting A defined permit process is underway Minimal visual and environmental impact Backfilling of salt tailings Lodgement 30 days 4 months Mine Project Review Environmental Impact Study Public Consultation Review Legislated process with recent legislative changes designed to quicken environmental approval process Strong community engagement Momentum improving in Spain following recent approvals including Ormonde Mining (21 Nov 2014) and EMED Mining (23 Jan 2015) 30 days Positive Env. Construction Mining Approval Declaration Application Gazetting Period Mining Concession Licence Construction Ready Construction Flow sheet of defined permit process Virtual image of proposed aboveground processing plant 19

20 A MOP market supply and demand 2015 MOP market is tight with most producers expected to be at full capacity The only spare capacity sits with PotashCorp and Mosaic Source: BMO 30 January

21 A6. Muga DFS High Level Snapshot Total Capex Estimate Summary Euros (m) USD (m) Underground development and Machinery Process plant and associated infrastructure Utilities and logistics Sub Total Mining Permits EPCM and Owners Costs Contingency (12.5%) Total Pre production Capex FINANCIAL HEADLINES US$ Post Tax Unlevered IRR 51.9% NPV at 10% Discount Rate 1.352bn 1.42bn Opex Cost Summary - per tonne MOP Euros / t USD / t C1 Cost - Mining Processing Transport Sub Total G&A Sustaining Capital Total C1 Costs C2 Costs - Depreciation C1 Costs Total C2 Costs C3 Costs - Royalties C2 Costs Total C3 Costs Forecast Steady State EBITDA CY19 281m 296m Project Enterprise Value (@ 8 x CY19 EBITDA) 2.24bn 2.36bn 21

22 A7. Potash price assumption Potash price assumed is conservative and with a broad basis Our current valuation model assumes 50% potash sales into Brazil, and 50% in NW Europe, consistent with preliminary market studies Our Potash price assumption is Integer independent pricing Less a 10% sales and marketing fee and contract pricing discount FOB Vancouver Reference Ave. CIF NW Eur and CFR Brazil Less: Sales Commission (5%) Contract Price Discount (5%) Average Nett Price Integer Report dated 17 March

23 A8. Muga DFS sensitivity overview Projects still attractive with depressed potash prices. NPV Sensitivity Potash Price and Discount Rate - US$ millions Potash Price Sensitivity (Parallel Shift in Prices) 1, % -15% 0% +15% +30% Discount 8% , , , ,078.9 Rate 10% , , , % , , ,994.5 NPV Sensitivity - Exchange Rate and Discount Rate - US$ millions Exchange Rate (USD:EUR) 1, Discount 8% 1, , , , ,983.8 Rate 10% 1, , , , , % , , , ,269.9 NPV Sensitivity - Capex and Discount Rate - US$ millions Capex Sensitivity 1, % -15% 0% +15% +30% Discount 8% 1, , , , ,704.6 Rate 10% 1, , , , , % 1, , , , ,

24 REGISTERED OFFICE 169 Fullarton Road Dulwich SA 5065 Australia HEAD OFFICE Avenida Carlos III, 13-15, 1B, Pamplona, Spain T F info@highfieldresources.com.au FURTHER INFORMATION Anthony Hall Managing Director T John Claverley General Manager T Hayden Locke Corporate Development T