Outlook Positive with Solid Fundamentals May

Transcription

1 Outlook Positive with Solid Fundamentals May

2 Disclaimer This presentation has been prepared by and issued by Kangaroo Resources Limited ( Kangaroo or KRL ) to assist it in informing interested parties about the Company and its progress. It should not be considered as an offer or invitation to subscribe for or purchase any securities in the Company or as an inducement to make an offer or invitation with respect to those securities. No agreement to subscribe for securities in the Company will be entered into on the basis of this presentation. You should not act or refrain from acting in reliance on this presentation material. This overview of Kangaroo does not purport to be all inclusive or to contain all information which its recipients may require in order to make an informed assessment of the Company s prospects. You should conduct your own investigation and perform your own analysis in order to satisfy yourself as to the accuracy and completeness of the information, statements and opinions contained in this presentation and making any investment decision. Neither the Company nor its advisers have verified the accuracy or completeness of the information, statements and opinions contained in this presentation. Accordingly, to the maximum extent permitted by law, the Company and the advisers make no representation and give no assurance, guarantee or warranty, express or implied, as to, and take no responsibility and assume no liability for, the authenticity, validity, accuracy, suitability or completeness of, or any errors in or omission, from any information, statement or opinion contained in this presentation. Reports and announcements can be accessed via the Kangaroo s website Forward-Looking Statements: This presentation includes certain Forward-Looking Statements. All statements, other than statements of historical fact, included herein, including without limitation, statements regarding forecast cash flows and potential mineralisation, resources and reserves, exploration results, future expansion plans and development objectives of Kangaroo Resources Limited are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. 1

3 OVERVIEW 2

4 KRL (circled) and Bayan Locations 3

5 Bayan s Tabang project update 4

6 Bayan s Tabang Project Overview Adjacent Tabang Project owned and operated by KRL s majority shareholder (56%), PT. Bayan Resources Tbk Bayan has been steadily ramping up the production capacity of this project, currently producing approximately 1.1 million tonnes per month Additional fleet mobilisation for remainder of 2017 should enable production of million tonnes per month by year end Petrosea s Overburden Removal activities at night Main infrastructure already in place: 69km all-weather haul road 2 x loading silo s completed in April 2017 Total coal crushing capacity of 5,000tph (4 crushers) Haul Road and Dual Powered Road Train (300t capacity) 5

7 Bayan s Tabang Project Overview Barge loading facility at Senyiur with 2 barge loaders of combined capacity of 6,000 tph 2 x transhipment facilities of combined capacity 2,000 tph (CTB1 & CTB2) Balikpapan Coal terminal has stockpiling capacity of approximately 1 million tonnes and unloading and loading rate of 4,000 tph Contractors appointed and operating onsite: Side Dump No. 1 Senyiur Barge Loading Facilities PT. Petrosea Tbk (overburden and coal extraction) PT. BIS Industries (coal hauling) PT. Karunia Armada Indonesia (Overburden, coal extraction and coal hauling) PT. Mandiri Herindo Adiperkasa (coal hauling) Barge loading facilities - Senyiur 6

8 Bayan s Tabang Project Overview 69km Haul Road Side Dump No. 1 & 2 Side Dump No crushers 3,000tph Stockpiling Barge Loader No. 1 2,000tph Barge Loader No. 2 4,000tph 7

9 Path to Production North Pakar 8

10 North Pakar Overview Focus on PT. Tiwa Abadi ( TA ) and PT. Tanur Jaya ( TJ ) in Pakar North Permit status Clear and Clean Highest quality coal amongst all of the Pakar concessions ( 3,800 4,250 Kcal/kg GAR) Coal outcrops to the Northeast of TJ s concession most logical place to start => low stripping ratio Close to Bayan s hauling road which we can utilise under the Haul Road and Port Access Agreement (approx km haul) Links in well with Bayan s mining sequence 9

11 Primary Steps to Production 1. Receive Forestry Pinjam Pakai Exploration permits for TA and TJ East Kalimantan Governor had a moratorium on issuance of all new Pinjam Pakai permits from Jan 2013 until April Perform drilling program primarily of TA, some confirmatory drilling on TJ as well 3. Perform new JORC studies of these concessions to JORC 2012 standard 4. Prepare and submit the Exploration Report, Feasibility Studies and Environmental Impact Studies (AMDAL) 5. Upgrade the mining concession status from Exploration Stage to Production Stage 6. Apply for and obtain Production Forestry Pinjam Pakai permits 7. Award mining contracts and commence production 10

12 Tabang / Pakar Situation Map 11

13 Other Concessions 12

14 GPK GPK concession requires exploration work to bring into commercial production Drilling program commenced ongoing. Current plan is 47 drill holes for 2,080m covering approximately 467Ha In 2011 reported 117 million tonnes of indicated / inferred resources to JORC 2004 Standard Plan to update the above and prepare an Open Cut Coal Reserves and Resources report to JORC 2012 standard in 2H 2017 Similar coal quality to North Pakar ( 3,800 Kcal/kg GAR) Coal haulage distance much shorter (circa 11 25km) Bathymetric study to confirm river water levels will commence in 2H 2017 Will require capital expenditure for road and port facilities. Potential to use neighbouring concession infrastructure 13

15 GPK Drilling Plan Total Drill holes : 47 Holes - Open Holes : 1,383 m - Core Holes : 697 m Drilling Location at IPPKH area : 467 Ha Legend : : Seam GRA Contour : IPPKH Area 14

16 Mamahak Statement of Open Cut Coal Resources report prepared as at Feb 2015 stated total resources of 14.0 million tonnes at an average coal quality of 7,080 Kcal/kg GAR Recommencement of mining dependent on the identification of additional mineable coal reserves, establishment of a more accessible port location and a significant improvement in coal markets.river water levels present a challenge at this location and may only allow barging for part of the year Will continue evaluation of these concessions as whether to retain 15

17 Bayan / KRL Transaction Update 16

18 Bayan/KRL Transaction Update KRL issued billion shares to Bayan in exchange for Bayan injecting 9 coal concessions into KRL To date, 5 of the 9 concessions have been injected into KRL; remaining 4 were caught by Indonesia s new mining law in relation to foreign ownership: Exploration concessions can have a maximum of 75% foreign ownership Production concessions can have maximum of 49% foreign ownership after 10 years (stepped divestment structure) Legal and taxation advice from leading Indonesian and Australian advisors has identified a solution to resolve this matter This process will be implemented in 2017 to allow further concessions (AU and TA) to be injected into KRL Injection of the 2 remaining concessions (BS and CA) subject to the resolution of the Indonesian court process between SSP (a third party concession owner) and the Government 17

19 Bayan/KRL Transaction Update The following table summarizes the steps/processes for the completion of the transaction: Mining Concession Exploration Status (IUP EXP) Mining Concession Production Status (IUP OP) SSP Overlap Clear & Clean Status Tiwa Abadi Apira Utama Conversion to Foreign Ownership (PMA) Company Conversion to IUP OP first, target Sep 2017 Application in process Bara Sejati Cahaya Alam Pending outcome of court case Pending outcome of court case 18

20 Impairment 19

21 Coal Selling Price Forecast The Company uses a robust and consistent process in preparing a valuation for its Mining Properties based on a discount cash flow model The key assumptions for the Company s valuation model upon which the impairment is based is coal selling price with the long term price having the greatest impact The Company subscribes to an independent source to obtain the coal selling price forecast The independent source forecasts are based on a consensus of leading analyst estimates for coal price including (but not limited to) Credit Suisse, Deutsche Bank, BOA Merrill Lynch, Macquarie Bank, Investec and Commonwealth Bank A comparison of the 2015 and 2016 benchmark selling price projections from Consensus Economics is presented below: US$/Tonne Long Term ( ) As at Dec-15 $65.1 $67.3 $69.4 $73.5 Long Term ( ) As at Dec-16 $60.0 $59.0 $62.3 $

22 Coal Selling Price Forecast Recent gains in short term coal price (Jul 2016 until now) have not impacted analysts long term coal price forecasts, in fact they have decreased by approximately US$6 per tonne. This makes sense as a 6 month rally in coal price should not be materially impacting a discount cash flow model going out 20 years This independent source provided sales forecasts until 2026, for 2027 and beyond the company used the Long Term Forecast plus an escalation factor Partly offsetting the decline from the reduction in selling price was the reduction in the discount rate (14.6% in % in 2016). There were no other material variations used in the Company s valuation models between 2015 and 2016 The Company s impairment model was reviewed by ASIC in 2016 and are annually audited by PriceWaterhouseCoopers Australia In this regard, the decline in the forecast of the long term coal price is the primary driver behind the pre-tax impairment of A$50.6 million that the Company recorded in

23 Coal Market 22

24 Coal Market 2016 Overview Supply The year 2016 saw two major coal production control measures in Asia in China and Indonesia The market dipped to its lowest level in Q1 as Chinese demand for imported coal was subdued and demand was further dampened by depreciation of the Yuan against the US dollar. Q2 indicated early signs of the Chinese looking at importing coal again. Demand pressure commenced when the Chinese Government introduced a reduction of operating days for domestic coal mines from 330 to 276 days per year The largest exporter, Indonesia, was showered with heavy rainfall across the second half of 2016 inflicted further supply constraints 23

25 Coal Market 2016 Overview (continued) Newcastle price continued to climb reaching US$103.4 in Nov 2016; the Chinese domestic coal price nearly doubled in the same period In mid-november, China s National Development and Reform Commission (NDRC) implemented relaxation measures allowing Chinese miners to mine for 330 days a year until March 2017 in order to bring stability to the market As expected, the market reacted sharply to the sudden drop in Chinese demand resulting in the Newcastle index shedding $20/MT to low 80s. Demand Demand growth in the emerging economies of South East Asia, offset demand reductions in India and the EU, to hold overall 2016 seaborne demand in line with South East Asian demand growth continues to be supported by the construction of new coal fired generation capacity The price recovery from the lows at the beginning of 2016 has facilitated the return to positive cash margins for the majority of seaborne thermal coal producers, yet price volatility and access to capital should continue to limit supply growth 24

26 Coal Market 2017 Outlook It is important that Indonesia maintain the production discipline with continued efforts to reduce cost and improve production efficiency The likeliness of some idled low quality capacity/ production returning may impact the price recovery The production data continue to lead us to a conclusion that there is a general decline in supply volumes of higher energy coal export products, particularly from Indonesia and South Africa, as high grade reserves are depleted Consequently, high energy coals remain in tighter supply, supporting market segmentation and price differentiation The market is expecting continued measures from China and supply restrictions across major producing nations to keep coal prices stable We anticipate coal price in 2017 shall be range bound trading between $70 and $80/MT 25

27 Summary 26

28 Summary We have full financial, technical and administrative backing and support of Bayan to get North Pakar into production Significant Resource and Reserve base of coal Limited capital expenditure required to get North Pakar into production (primarily a drilling program) Permits and fulfilling regulatory requirements key to timing Favourable fundamentals for the coal market for medium term Target to commence production as soon as possible 27

29 Appendices 28

30 KRL Overview Capital Structure: ASX CODE - KRL Shares Issued Billion Market Cap - A$68m (as at 18-Apr-17) Largest Shareholder - PT. Bayan Resources Tbk. (56.05%) Top 20 Shareholders - 95% Corporate Structure: 4 Directors 2 Majority Shareholder Appointed Directors Locations - Perth, Jakarta, Kalimantan 29

31 KRL Board & Management Team Russell Neil - Managing Director Susmit Shah Non Executive Director David Low Yi Ngo - Non Executive Director Managing Director Over 24 years of experience in finance in the mining industry Has been a Director of PT. Bayan Resources Tbk since 2008 Previously worked with WMC Ltd, Eltin Ltd, and Tiwest Joint Venture in Australia and consulted to a number of Indonesian mining companies Holds Bachelor of Commerce and Arts (Southeast Asian Studies) degrees and is a FCPA and a CFA Director Over 25 years of experience in accounting and finance, with the last 20 years in the mining sector Has served as a director and company secretary for a number of ASX and TSX listed entities over the past 20 years with varied experience in stock exchange requirements, joint venture negotiations, corporate fundraisings Holds a Bachelor of Science (Economics) degree and is a Chartered Accountant Director Over 8 years of experience with the Bayan group in various capacities Sales and Marketing director Graduated from Nanyang Technological University, Singapore and majored in Mechanical and Production Engineering Trevor Butcher Non Executive Director Damien Henderson Financial Controller Paul Jurman Corporate Secretary Director Over 15 years experience in Indonesia and over 10 years in the coal mining industry Experienced in coal exploration, mine operations and business development Employed in a range of management and director roles in Indonesia Has studied Science and Business and has a background in manufacturing Financial Controller Over 25 years experience as a finance professional with 18 years in the mineral resources sector Worked for mining contractors, large multinational companies in Australia, Papua New Guinea, Ghana, Mongolia and Indonesia including Rio Tinto, Peabody, Placer Dome (Barrick Gold) Holds a Bachelor of Business degree and is a FCPA Corporate Secretary Over 20 years experience as a finance professional with 10 years in the mineral resources sector Involved with a diverse range of Australian public listed companies in company secretarial and financial roles. Holds a bachelor of commerce degree and CPA qualifications 30