Developing Power Generation Projects in Southern Africa. July 2015

Transcription

1 Developing Power Generation Projects in Southern Africa July 2015

2 Summary AFR is participating in the development of three large-scale power projects in Botswana These are close to the existing transmission grid and centrally located within SADC Sese JV (AFR 49%): First Quantum Minerals are evaluating the potential for development of a fully integrated mine and power station Mmamantswe (AFR 100%): binding term sheet agreed to sell project for US $20M subject to a tender bid being shortlisted Mmamabula West (AFR 100%): seeking to create further value via development of integrated minemouth power station(s) +/- export coal mines 2

3 Regional Power Hub African Energy has substantial coal resources in Botswana Positioning the business to focus on regional power demand: Surrounded by robust demand for power: every country in SADC is chronically short of reliable, affordable base-load power Regional hub: AFR s projects are centrally located within the SAPP transmission grid Easy access to core infrastructure: AFR s projects within close proximity to grid connection Stable business environment: Botswana provides the most secure/stable fiscal and political setting in southern Africa 3

4 Power Generation The Economic Case 1. Robust market demand for affordable base-load power Cost of new baseload generation >>$0.10 per kwh across the region Utilities paying short term prices >$0.15 per kwh for imported power Most utilities still reliant to some extent on diesel/hfo at >$0.30 per kwh 2. Access to secure fuel source and low financing costs Ownership of fuel source reduces exposure to price risk Access to low cost coal via resource ownership minimises fuel costs Access to low cost finance allows competitive tariff offer whilst maintaining healthy equity returns 3. Competitive advantage for low-cost power producers Lowest fuel + finance costs a big advantage in securing long term power purchase agreements Few new base load projects able to offer competitive pricing at or below retail tariffs Opportunity for energy trading of surpluses if project finance structure allows 4

5 AFR s Power Generation Portfolio Project strengthened via partnership with First Quantum Minerals Short-term potential return from Mmamantswe Sese JV fully funded to project decision point JV partner brings balance sheet strength, project management experience and engineering skills Under a binding term sheet, Mmamantswe project will be fully funded to bid for RSA IPP tender Successful shortlisting will provide a strong cash return to AFR Future project pipeline A number of development options at Mmamabula West Includes multiple power generation opportunities and regional/global export options SESE JV MMAMANTSWE MMAMABULA WEST 5

6 The Sese JV Key Terms First Quantum Minerals Limited (FQM) have invested AUD $8M in Sese to take a 51% project interest and are now the manager FQM increasing their interest to 75% by sole funding the next AUD $12M in the joint venture This funding is being used to evaluate the development of a fully integrated mine and mine-mouth power station FQM are responsible for sourcing all additional funding beyond the initial $20M investment, which would include that necessary to build an integrated power project (if approved) AFR s 25% share of this additional funding will be loaned to it by FQM, carried to commercial production, and is to be repaid from dividends 6

7 Mmamantswe Sale Opportunity South Africa s Dept. of Energy seeking 600MW of cross-border, coal-fired baseload IPP via public tender Binding term sheet recently executed to sell the project to an experienced SA project developer who intends to submit a bid: Qualifying criteria and the RFP documentation to be released later this year Developer will form a bid consortium and will sole fund bid preparation and submission AFR will be paid USD $10M if bid is shortlisted, at which point project ownership will be transferred to the developer AFR paid a further USD $10M at financial close 7

8 Mmamabula West : Project Overview 2.47 billion tonnes in two main ~5m thick, m deep coal seams Seam geometry and coal quality provides multiple options for power generation and/or export of coal Prefeasibility study (March 2014) evaluated a 220Mt portion of A-Seam for a conventional underground mine and modular wash plant, capable of producing export quality coal and/or power station fuel AFR sole funding the permitting activities, currently discussing subsequent phases with potential development partners 8

9 Mmamabula West : Development Pathway Phase 1: Project permitting Phase 2: Development of fully integrated power project Phase 3: Construction of road, mine and power station Phase 4: Operation of Integrated power project Key activities Amend EIA to include power Surface Rights Water rights Infill drilling for reserve Mine and power study BFS Mining Licence application Generation Licence application Project financing close Access road + water pipeline Grid connection Mine + civils EPC contracts Power station EPC contracts Power station O&M Power station OEM support Power sales/marketing Partnership opportunities AFR managed and sole funded Lead Developer (may be AFR) Co-developer(s) OEM contractor input O&M contractor input EPC contractor OEM contractor O&M contractor Infrastructure EPC Equity providers O&M contractor OEM contractor Mining contractor Investment size for a 300MW project Indicative Timeframe <$1M $10-15M $300M equity + $600M debt 6-9 months months months ~35 year operation 9

10 Summary - Project Pipeline Sese JV FQM evaluating an integrated mine and power project FQM earning-in, AFR loan carried to production Mmamantswe Binding terms for a Share Sale Agreement in place Potential $20M short term return, conditional upon SA IPP bid shortlisting Mmamabula Multiple power projects and longer term coal export potential AFR sole funding permitting. Partners being sought for development phases 10

11 Corporate summary ASX Code AFR Shares on issue 620 million Market Cap $0.07) AUD $43M Cash (31 May 2015) Debt AUD $8.2M Nil Major Shareholders The Sentient Group 22% First Quantum Minerals 11% Management 10% Top 20 62% 11

12 Disclaimer This presentation has been prepared by and issued by African Energy Resources Limited ( African Energy ) 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 African Energy 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. The Company has not 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 makes no representation and give no assurance, guarantee or warranty, express or implied, as to, and takes 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. The contents of this presentation are confidential. This presentation includes certain Forward- Looking Statements. The words forecast, estimate, like, anticipate, project, opinion, should, could, may, target and other similar expressions are intended to identify 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 African Energy 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. The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code ) sets out minimum standards, recommendations and guidelines for Public Reporting in Australasia of Exploration Results, Mineral Resources and Ore Reserves. The information contained in this announcement has been presented in accordance with the JORC Code and references to Measured Resources, Inferred Resources and Indicated Resources are to those terms as defined in the JORC Code. Information in this report relating to Exploration results, Mineral Resources or Ore Reserves is based on information compiled by Dr Frazer Tabeart (an employee of African Energy Resources Limited) who is a member of The Australian Institute of Geoscientists. Dr Tabeart has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person under the 2012 Edition of the Australasian Code for reporting of Exploration Results, Mineral Resources and Ore Reserves. Dr Tabeart consents to the inclusion of the data in the form and context in which it appears. 12

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14 DISCLAIMER DISCLAIMER To the maximum extent permitted by law, no representation, warranty or undertaking, express or implied, is made and, to the maximum extent permitted by law, no responsibility or liability is accepted by Avalon or any of its officers, employees, agents or consultants or any other person as to the adequacy, accuracy, completeness or reasonableness of this Presentation. To the maximum extent permitted by law, no responsibility for any errors or omissions from this Presentation whether arising out of negligence or otherwise is accepted. This Presentation contains general information about Avalon Minerals Limited (Avalon) which is in the business of exploring for minerals which is a speculative and risky venture. It does not purport to contain all the information that a prospective investor may require. The Presentation should not be considered as an offer or invitation to subscribe for or purchase of any securities in Avalon and no agreement to subscribe for securities will be entered into on the basis of this Presentation. Potential investors should conduct their own investigation and analysis and should check the accuracy, reliability, and completeness of the information provided and obtain independent and specific advice from appropriate professional advisors. FORWARD-LOOKING STATEMENTS This Presentation includes certain statements that may be deemed forward-looking statements. All statements in this Presentation, other than statements of historical facts, that address future activities and events or developments that Avalon expects, are forward looking statements. Although Avalon believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially from those in forwardlooking statements include market prices, continued availability of capital and financing, and general economic, market or business conditions. Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from those projected in forward-looking statements.

15 AVALON MINERALS THE INVESTMENT CASE 100% ownership of the High Quality Viscaria Copper Asset ASSET Near Term Development, Significant Upside, Affordable Capex, Expandable, Infrastructure in place TEAM Discovery, Mining, Finance, Track Record of Delivery CORPORATE Tidy structure, Good funding position, Strong shareholder support UNDERVALUED Low Market Capitalisation, Low Enterprise Value, Low $/lb resources

16 AVALON MINERALS THE FOCUS IS.. Moving the Viscaria Copper Deposit towards production 90% of focus and funding Update Scoping Study during 2015 to deliver copper only development scenario Focus on D Zone resource increase D Zone continuing to deliver better results Additional A Zone high grade resource growth Environmental and Social Impact Assessment progress, and Development Permitting Targeting a Decision to Mine in 2017 Assessing near mine exploration opportunities 10% of focus and funding Discovery of additional copper in near mine environment could modify Viscaria development plans

17 CORPORATE TICKER ASX:AVI SHARE PRICE* $0.03 SHARES ON ISSUE 240,319,478 MARKET CAP CASH # $7.2M $3.2M 52 WEEK TRADING $ $0.12 BROKER COVERAGE CORPORATE ADVISORY As at day VWAP * As at unaudited # Morgans Stockbroking Morgans Stockbroking Breakaway Research Viaticus Capital Top 10 shareholders hold 65% of shares on issue Top 10 comprise institutions and high net worth individuals Board and management hold 3.2% and have participated in recent placements European and UK shareholders total 42% SUBSTANTIAL SHAREHOLDERS NAME % Valbonne II 11.42% Tan Sri Abu Sahid Bin Mohamed 9.31% Marilei International 7.69% Phoenix Copper Ltd (ASX:PNX) 5.36%

18 VISCARIA COPPER PROJECT PROJECT SITE KIRUNA TOWN PUBLIC ACCESS ELECTRIC RAIL AVAILABLE CHEAP HYDRO POWER

19 VISCARIA COPPER PROJECT OPEN PIT & UNDERGROUND Avalon aspires to be a long term >20,000 tonne per annum copper producer within 4 years Drilling Program and Scoping Study in progress Assessing an $80M CAPEX, minimum 1.2Mt per annum plant, copper-only start up project Timing updated Scoping Study delivery Q4, 2015, decision to build 2017, copper production 2018 Defined Mineral Resource contains Measured and Indicated grades of >1.2% Cu in the top 100m and >1.7% - 2.3% Cu in zones below 100m

20 LOCATION 3 Exploitation Concessions ( mining leases, K3, K4, K7) approved covering the main areas of mineralisation at Viscaria Viscaria is in an area of National Interest for Minerals Outstanding access to, and quality of, infrastructure, and low cost power Commitment to highest standards of stakeholder engagement and environmental management

21 D ZONE LONG SECTION 500m Also Open Developing thicker copper system with high grade shoots Limit of Resource Estimate

22 D ZONE DRILLING AND PLANNING UNDERWAY 150 m Open Pits Decline 400 m Stopes D Zone showing planned open pit and schematic emerging mine planning scenario based on studies in progress, and current proposed drill holes

23 RESOURCE ESTIMATE SUMMARY VISCARIA COPPER FOCUS HIGHER GRADE SUBSETS OF ESTIMATED RESOURCES A Zone Open Pit 1.25% Cu Defining A Zone 2.5% Cu Defining D Zone 1.7% Cu Defining D Zone Open 0.9% Cu VISCARIA RESOURCE 2014 SCOPING STUDY OPEN PIT RESOURCE Cu 1.1% % Cu & 23% Fe 1 16% Measured 51% Indicated 33% Inferred 604,000t or 1.33 Billion lbs Copper 215,000t or 471M lbs Copper 6Mt Recoverable iron

24 OUTSTANDING BELT SCALE EXPLORATION UPSIDE One drill hole; 1.6% Cu & 2.5% Cu Development Area One drill hole; 2.5% Cu & 0.9% Cu Nihka iron oxide copper system discovered; only one drill hole West Nukutus copper discovery; up to 0.5% Cu in auger samples; 1.2km long; drilling starting this month Bahpagobba; historical drilling; 7m at 1% Cu from 123m, 1.5m at 1.9% Cu from 60m Mine scale orebody extensions, low technical risk Exploration success within 5km; several targets defined and being tested A rich portfolio of near mine targets to add to the scale of the project Background; TMI magnetics 12

25 INFRASTRUCTURE IN PLACE, HIGH QUALITY Kiruna town population 20,000, skilled workforce Sealed national highway to mine gate Electrified public access rail to mine gate Abundant Low Cost Power Supply ~8c/kwh Contractors and Equipment Manufacturers based in Kiruna 100+ year mining heritage Local smelter & multiple ports within 350km by rail

26 STAKEHOLDER ENGAGEMENT Proposed development area is in a window surrounded by multiple land use areas The key issues are (1) a strong mining heritage, (2) reindeer herding, (3) Natura 2000, and (4) recreation Area of Development Focus Area of National Interest for Minerals

27 A VERY HIGH QUALITY LEADERSHIP TEAM Chairman Graham Ascough CEO and Managing Director Malcolm Norris General Manager Studies and Technical Services Ray Robinson CFO & Company Secretary Gavin Leicht General Manager - Geology Dr. Bruce Rohrlach Non-Executive Director Crispin Henderson Non-Executive Director Don Hyma Resources executive. Broad global experience with large companies and building juniors Geologist and Business Development. Track record of discovery and growth Mining Engineer. Has delivered many feasibility studies Finance professional with significant experience in copper Geologist who has played a key role in several significant discoveries and feasibility studies Senior banking executive Senior project management executive across multiple commodities 15

28 PLANNING TO DELIVER STAKEHOLDER ENGAGEMENT Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Stakeholder plans, forums, reviews STUDIES AND EXPLORATION Exploration Scoping Study Prefeasibility Study Feasibility Study PERMITTING ESIA Preparation ESIA Baselines ESIA Assessment and review to approval FUNDING Drilling and Scoping Studies - A$4 mill Drilling and Prefeasibility Studies - A$6 mill Drilling and Feasibility Studies - A$5 mill Exploration discretionary - A$3 mill Corporate - A$1.4 mill/year Decision to Mine Copper Production during 2018 TARGET TIME FRAMES Investigating options to shorten timeframe to decision to mine Construction start in 2017 Cu production 2018; expansion potential 2020

29 WHY SHOULD YOU OWN AVALON MINERALS? We hold 100% of a high quality asset We are in a low risk mining district We have Infrastructure and low cost hydro power Low sovereign risk There is a manageable path to production There is leverage to copper We will deliver exploration success in a low technical risk environment We are undervalued relative to our peers EV A$4 mill for all this even in a bear market it won t stay this low ASX:AVI

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31 Melbourne Mining Club Cutting Edge Series, 21 July 2015 Richard Laufmann, CEO

32 Slide information courtesy of CRU International 2

33 0.66% copper Average Head Grade (first 12 years) Slide information courtesy of CRU International 3

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36 Hillside Overview Copper-gold operation Open Pit Shallow orebody Copper flotation processing plant Quality Cu-Au concentrate 27% copper concentrate with no arsenic Advantages Low CapEx start-up Low capital intensity (~US$9,650/annual CuEq payable tonne of production) Competitive cash costs (US$1.61/lb) net of by product Average Output (first 12 years) Payable copper (Cu) 35,000+ozpa Payable Gold (Au) ~25,000+ozpa 5

37 Updated Hillside Ore Reserve Resource Reserve Conversion 2Mt contained copper classified as a Mineral Resource Approximately 25% has converted into Proved and Probable Reserves Hillside Ore Reserve Summary May 2015 Reserve Category Tonnes (Mt) Grade Copper Gold (%) (g/t) Contained Metal Copper Gold (t) (oz) Proved , ,454 Probable , ,051 Total , ,504 6

38 EFS Summary Life of Mine (LOM) Key Financials Project revenue* Operating costs, royalties and sustaining capital Pre-tax project operating cash flow* A$4.3b A$2.7b A$1.6b Copper head grade - first 12 years 0.66% Pre-production capital C1 cash cost A$480m (US$360m) US$1.61/lb Post tax real Net Present Value (NPV 8% )* $188m Internal Rate of Return (IRR)* 14% Pre-production capital Construction (plant, equipment, TSF) Mining Fleet Pre-strip Other infrastructure and utilities Surface works, spares, other Sub-Total Contingency Total up-front capital A$206m A$66m A$80m A$21m A$67m A$440m A$40m A$480m (US$360m) * Refer to Appendix 1 7

39 Hillside C1 EFS estimate ~US$3,550/t in second quartile. Slide information courtesy of CRU International 8

40 Approvals Mining Approvals Federal Government Approvals: Complete no further action required State Government Approvals (ML/MPL): Mining Lease received (September 2014) Section 49 other infrastructure: Received on March 2014 Employment Construction workforce employing up to 550 (18-20 months) Production workforce employing an average of ~500 for 12+ years 9

41 Growth Potential Regional Upside Satellite targets to leverage Hillside investment There is potential for additional large scale copper-gold mines where the prospective Olympic Domain rocks occur close to the surface 10

42 Corporate Structure and Ownership Rex Minerals Ltd. (ASX:RXM) Capital Structure: Cash * Debt * $12.7m NIL Shares 220.5m Options (unlisted) Market Capitalisation ** NIL ~$25m ** as at 31 March 2015 ** as at 16 July 2015 Board: David Carland Non-Executive Chairman Richard Laufmann CEO & Managing Director Alister Maitland Non-Executive Director Major Shareholders: Acorn 9.2% Directors and Management 5.4% Grand South Development 5.3% Greenstone Property 3.7% 11

43 General enquiries to: Richard Laufmann, Managing Director Phone: +61 (0) Media enquiries to: Gavan Collery Phone: +61 (0)

44 Appendix 1 Competent Persons Report Ore Reserves The information in this report that relates to Ore Reserves is based on information compiled by Mr Charles McHugh who is a Member of the Australasian Institute of Mining and Metallurgy and is a consultant to Rex Minerals Ltd. Mr McHugh has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr McHugh consents to the inclusion in the report of the matters based on their information in the form and context in which it appears. Competent Persons Report Mineral Resources The information in this report that relates to Exploration Results or Mineral Resources is based on information compiled by Mr Patrick Say who is a Member of the Australasian Institute of Mining and Metallurgy and is a full time employee of Rex Minerals Ltd. Mr Say has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr Say consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. Forward-Looking Statements This announcement contains forward-looking statements. All statements other than those of historical facts included in this announcement are forwardlooking statements. Where the Company expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, forward-looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by such forward-looking statements. Such risks include, but are not limited to, copper and other metals price volatility, currency fluctuations, increased production costs and variances in ore grade or recovery rates from those assumed in mining plans, as well as political and operational risks and governmental regulation and judicial outcomes. The Company does not undertake any obligation to release publicly any revisions to any forward-looking statement. Metal Price and Exchange Rate assumptions Commodity and exchange rate Assumption Copper US$3.0/lb Gold US$1,250/oz AUD:USD * 0.70 Quotes for the capital cost estimates in the EFS assumed an exchange rate of 0,75. A longer term exchange rate forecast of 0.70 was used for the life of the operation. 13