Technical Presentation The Star-Orion South Diamond Project. June 18, 2013

Transcription

1 Technical Presentation The Star-Orion South Diamond Project June 18, 2013

2 Safe Harbour Statement This presentation contains forward-looking statements as defined by certain securities laws, including the "safe harbour" provisions of Canadian securities legislation and the United States Private Securities Litigation Reform Act of Forward-looking information is often, but not always, identified by the use of words such as "anticipate", "believe", "expect", "plan", "intend", "forecast", "target", "project", "guidance", "may", "will", "should", "could", "estimate", "predict" or similar words suggesting future outcomes or language suggesting an outlook. In particular, statements regarding Shore's future operations, future exploration and development activities or other development plans constitute forward-looking statements. Forward-looking statements in this presentation include, but are not limited to, anticipated diamond price adjustments, the anticipated Project schedule and attendant timelines, assumptions made in the cash flow model, assumptions made respecting capital and operating costs, anticipated diamond production, anticipated revenue from rough diamond sales, assumptions made respecting diamond price increases resulting from long-term supply/demand fundamentals, the anticipated economic impact of the Project on surrounding communities and anticipated employment opportunities which may result from the Project. The Project schedule includes an estimated 5 year long pre-production period and a 20 year long mine production phase followed by mine closure. These durations were developed based on currently projected timelines for power distribution line design and construction; equipment and material procurement, deliveries, assembly and commissioning; environmental assessment and review; permitting and other factors. The assumed dates and timing of milestone events such as the 2017 commencement of full-scale ore production, and the 2036 cessation of operations were based on available information and the time lines between the assumed dates are reasonable based on the envisaged Project. There is a possibility the assumed dates such as the date for corporate approval to proceed with the Project will shift forward into the future for a multitude of reasons including, but not limited to, longer than projected time lines for environmental assessment and public consultation, engineering, procurement, construction and commissioning, availability of project financing. The cash flow model includes estimates of future federal, provincial and local government taxes. Federal and provincial (Saskatchewan) corporate income taxes payable on pre-tax cash flows were estimated based on future tax rates. The values of future property and school taxes were calculated based on estimates provided by the Saskatchewan Assessment Management Agency ( SAMA ). Diamond royalty payments were estimated based on the royalty regime announced by the Government of Saskatchewan in Additionally, the cash flow model utilizes selected estimated deductions available to the Project from unclaimed costs carried forward for tax purposes (e.g. tax pools) including Canadian exploration expenses and Canadian development expenses. The estimated capital and operating costs (± 15 percent estimation) were derived from first principles and supported by budget quotations and/or cost information derived from relevant cost databases and/or contractor quotations, and assumptions. The cash flow model includes capital contingencies. These forward-looking statements are based on Shore's current beliefs as well as assumptions made by and information currently available to it and involve inherent risks and uncertainties, both general and specific. In making the forward-looking statements contained in this news release, Shore has utilized diamond valuations completed in February Risks exist that forward-looking statements will not be achieved due to a number of factors including, but not limited to, developments in world diamond markets, changes in diamond prices, risks relating to fluctuations in the Canadian dollar and other currencies relative to the US dollar, changes in exploration, development or mining plans due to exploration results and changing budget priorities of Shore or its joint venture partners, the effects of competition in the markets in which Shore operates, the impact of changes in the laws and regulations regulating mining exploration, development, closure, judicial or regulatory judgments and legal proceedings, operational and infrastructure risks and the additional risks described in Shore's most recently filed Annual Information Form, annual and interim MD&A. Shore's anticipation of and success in managing the foregoing risks could cause actual results to differ materially from what is anticipated in such forward-looking statements. Although management considers the assumptions contained in forward-looking statements to be reasonable based on information currently available to it, those assumptions may prove to be incorrect. When making decisions with respect to Shore, investors and others should not place undue reliance on these statements and should carefully consider the foregoing factors and other uncertainties and potential events. Unless required by applicable securities law, Shore does not undertake to update any forward-looking statement that is made herein. 2

3 Diamond Market Outlook Prices expected to increase by an average of 6% per annum from 2014 onwards. Ed Sterck, Metals and Mining Analyst BMO, London May 16, 2013 Diamond sales: Records broken as frenzy for rare rocks takes hold. Financial Times, London June 8,

4 Diamond Market: Recent Records May ct Briolette $11 million April 2013 Bulgari Blue Ring $9.5 million: $1.8 per carat May ct D Flawless $26.7 million April 2013 Princie Pink 36.4 ct $39.3 million 4

5 Star Orion South Diamond Project Large accessible diamond resource in central Saskatchewan, Canada Feasibility Study completed August 2011: 34.4 million carats at US$242 per carat, 20 year LOM 2013 focus on Project permitting and development finance 5

6 Star Orion South Project Location & ADVANCED PROJECTS Mines Evaluation Projects Jericho Ekati Diavik Snap Ekati & Diavik Snap Gaucho Gahcho Kue CANADA ORION Kue STAR STAR & ORION Prince Albert Victor Renard Renard Vancouver Seattle Calgary Saskatoon SASKATOON Victor Montreal Star Orion South Diamond Project is in a mining friendly jurisdiction. Saskatchewan produces potash, uranium, gold, coal, oil and gas. 6

7 Mineral Claim Holdings & FalC Forest TR S4.1 P1-20 7

8 Environment & Permitting 8

9 Revised EIS Environment & Permitting Submitted to Provincial and Federal review agencies August 10, 2012 Substantial document which includes over 10,500 pages of information Responses provided to Provincial and Federal agencies and no additional information requested to date Environment Canada currently reviewing revised water management plan Release for public comment imminent 9

10 New On-site Core Warehouse 10

11 New On-site Core Warehouse 11

12 Future Project Footprint 12

13 Feasibility Study Highlights Probable Mineral Reserves (diluted) of 279 Mt at a weighted average grade of 12.3 cpht containing 34.4 Mct at a weighted average price of US$242 per carat over the 20 year LOM, initial capital cost payback period of 5.3 years; Robust Project economics combined with proximity to infrastructure (electric power, paved highways, railroads, water and labour) in Saskatchewan; The Base Case FS has a pre-tax and royalty NPV (7%) of $2.1B with an IRR of 16% and a post-tax and royalty NPV (7%) of $1.3B with an IRR of 14%; (Base Case uses Feb % Model price); 13

14 FS Sensitivity Graph % After Tax ($M CAD) Diamond Price / Diamond Grade (cpht) Capex / Opex CAD/US$ Exchange Rate Percent of Value 14

15 How Can the FS be Improved? Decrease Costs Revise overburden mining methods Increase Production Increase mining rate Increase plant throughput by raising bottom cut-off Increase Diamond Price Positive rough market outlook: 6% Diamond Price Escalation Increase Mineral Reserve Reclassify Inferred to Indicated Resources 15

16 FS Mineral Reserves and Resources MINERAL RESERVES Deposit Category Ore (Mt) Ore Grade (cpht) Carats (Mct) Star Probable Orion South Probable Total Probable Indicated Resources (PFS) equivalent to Probable Reserves (FS) MINERAL RESOURCES WITHIN FS PIT Deposit Category Ore (Mt) Ore Grade (cpht) Carats (Mct) Star Inferred Orion South Inferred Total Inferred The cost of excavation of these Inferred Resources is included in the FS but processing cost and resultant revenue is not included, as NI only permits revenue derived from Indicated Resources or Reserves. NI considers Inferred Resources too speculative geologically to have economic considerations applied to them that would enable them to be categorized as Mineral Reserves, and there is no certainty that they will be economic. 16

17 Star Pit Outlines: Indicated & Inferred 17

18 OS Pit Outlines: Indicated & Inferred 18

19 OS Pit Outlines: Indicated & Inferred 19

20 OS Pit Outlines: Indicated & Inferred 20

21 OS Pit Section: Indicated & Inferred 21

22 OS Pit Section: Indicated & Inferred 22

23 OS Pit Section: Indicated & Inferred 23

24 Micro & Macrodiamonds Microdiamonds microns in size, beneficial for macros (>850 μm) to occur in sample Microdiamonds recovered by digestion of kimberlite in HF or NaOH: complete liberation of diamond population from the kimberlite host Microdiamond analysis used to confirm that kimberlite is diamondiferous Microdiamond populations are frequently used to infer macrodiamond grade (cpht) When used in Resource calculations, microdiamond populations need to be calibrated against actual macrodiamond populations The lower grades in the FALC kimberlites require microdiamond samples of at least 150 kg from individual kimberlite units Initial work on microdiamond populations from Star indicate excellent macrodiamond grade estimation Images from 24

25 Micro & Macrodiamonds: Star EJF Microdiamonds Model Macro Grade 4.0 Projection Factor Log(cumulative-spht) R² = Number of Micros = 1,001 Number of Macros = 17,127 Micro Diamond Grade = cpht Estimated Macro Grade = cpht (1.0 mm) Actual Macro Grade = cpht (1.0 mm) Actual Macro Grade Log Size (cts) 25

26 Potential Drill & Microdiamond Program Application of microdiamond analysis to a combination of existing drill core and an additional 12 to 20 drillholes The current cost estimate for this potential program is between $3 and $5 million This program has the potential to substantially increase the Orion South Mineral Reserve 26

27 Attractive Diamond Populations Attractive diamond populations Coarse size frequency distributions suggest the occurrence of plus 100 carat diamonds once production commences (Star: ct; Orion South: ct) High diamond price: US$242 per carat High proportion of Type IIa diamonds Highest value stone: carat Type IIa from Star with a price of US$18,000 per carat 27

28 Conclusions Accessible, world class diamond project in a stable political jurisdiction Opportunity to improve FS: Increase Reserve, Decrease Costs & Increase Productivity Optimistic world outlook for the sale of rough diamonds: 6% price increase per annum Attractive diamond populations with high average price: US$242 per carat. Potential for large high value diamonds: high value stones used as a store of wealth Permitting at an advanced stage and release for public comment is imminent 28

29 Management & Technical Team Kenneth E. MacNeill - President, Chief Executive Officer, Director Extensive background in all aspects of natural resource exploration and development Greg P. Shyluk Chief Financial Officer Chartered accountant with 14 years experience with mining and natural resource companies George H. Read - Senior Vice President of Exploration and Development Diamond exploration geologist with 29 years of international experience Joseph A. Dickson Manager Investor Relations 13 years of Project experience Mark Shimell Project Manager Geologist with 19 years experience Brian Desgagnes Senior Project Geologist Geologist with 8 years experience Ethan Richardson Manager, Environment Environmental Engineer with 17 years experience Dan Stevely Chief of Security Retired RCMP officer with 33 years experience MARKET AND FINANCIAL INFORMATION Exchange: Symbol TSX: SGF Shares outstanding 225 million Shares fully diluted 232 million Cash position $6.7 million (May 7, 2013) CORPORATE OFFICE th Avenue S, Saskatoon, SK S7K 5M5 Tel: (306) Fax: (306) shoregold@shoregold.com Web: 29

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