Managing g Director s Presentation Annual General Meeting Port Moresby PNG May 20 th 2008 Level 4, 167 Eagle Street, Brisbane Australia Website: www.highlandspacific.com Contact: +61 7 3239 7800
2007 Review Current Projects and activities Looking forward 2
Kainantu Gold Mine New management team recruited and mobilised Reviews by in-house and contract experts Implementation of strategies to improve performance Targeted increased gold production to offset cash flow issues Tonnes mined in the second half increased by 56% Gold production increased by 56% over first half year Concentrate grade increased by 101% over first half 3
Financing Challenge 25,000.0 20,000.0 15,000.0 USD 000's 10,000.0 5,000.0 0.0 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Loan & Hedging Commitments Post Bank Relaxation Cash Balance 4
900 Gold Price 800 850 900 700 750 USD Hedge book closed out Barrick deal settled 550 600 650 Discussions with Barrick 500 550 1/05/2 8/05/2 15/05/ 22/05/ 29/05/ 5/06/2 12/06/ 19/06/ 26/06/ 3/07/2 10/07/ 17/07/ 24/07/ 31/07/ 7/08/2 14/08/ 21/08/ 28/08/ 4/09/2 11/09/ 18/09/ 25/09/ 2/10/2 9/10/2 16/10/ 23/10/ 30/10/ 6/11/2 13/11/ 20/11/ 27/11/ 4/12/2 11/12/ 18/12/ 25/12/ 5
160000 140000 120000 100000 80000 Out of the Money Hedge Balance Price when Barrick deal settled - USD810 or USD12 million 000's 60000 USD 40000 20000 0 Hedge Book closed out USD758 600 610 620 630 640 650 660 670 680 690 700 710 720 730 740 750 760 770 780 790 800 810 820 830 840 850 860 870 880 890 900 910 920 930 940 950 USD Gold Price 6
Ramu sale process was not going to happen quickly enough to offset cashflow issues and pending bank repayments Kainantu s improved production not enough to offset the increasing debt due to gold hedge book Interest from a number of majors in the surrounding exploration licences led to in depth discussions with Barrick Gold Tight timetables due to debt, and Barricks commitment to sale & PNG allowed for quick commercial and legal l process Settlement occurred 2 days before bank holiday (14 th Dec) 240,000 ounce gold purchase in October saved HPL a further US$13.5 million by settlement date 12 th December Debt and hedge book fully repaid leaving US$24million in cash with a further US$7million to be paid on transfer of two remaining EL s 7
Lateritic nickel project. Joint ventured with China Metallurgical Construction Corporation. Ramu resource is estimated at 143Mt @ 1.01%Ni 0.10% Co Ore Reserve of 75.7Mt @ 0.91%Ni, 0.10% Co 20 year plus mine life. HPL interest 8.56% carried to production, right to claw back to 11.3% free and to 20.55% at fair market value. MRDC & Landowners 6.44% interest. 9
Debt funding arranged and secured by MCC. Non recourse to other Joint Venture partners. Project will be financed by approx 70% debt & 30% equity. Finance from Chinese banking institutions approx 40% and 30% provided by way of a shareholder loan from the Chinese Syndicate involved in the project. Repayable over 10 years. Equity funding free carry. Joint Venture enjoys a 10 year tax holiday. Capex USD 1.37B. (Including financing costs during construction). Production due to commence the second half of 2009. 10
Ramu Project Participants China Metallurgical Group Corporation (MCC) MCC JJJ Mining Development Company Limited (MCC JJJ) Ramu Nickel Limited ( RNL ) Highlands Pacific Group Limited Mineral Resources Ramu Limited ( MRRL ) Mineral Resources Madang Limited ( MRML ) MCC Ramu NiCo Limited Jinchuan Group Limited ( Jinchuan ) Jilin Jien Nickel Industry Corporation Limited ( Jilin ) Jiuquan Iron and Steel Group ( Jiuquan ) MCC (61%) Jinchuan (13%) Jiilin (13%) Jiuquan (13%) MCC JJJ MCC Ramu MRRL, a wholly owned MRML, a project area RNL, a wholly owned NiCo Limited subsidiary of MRDC landowner company subsidiary of HPL (8.56%) (85.0%) (3.94%) (2.50%) Ramu Nickel & Cobalt Project 11
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Ramu Project Environment & Community All environment approvals received. Deep sea tailings placement plant plan approved. Comprehensive Terrestrial & Marine Baseline Studies completed. Community support through projects such as health programs, road links, Ramu bridge, construction of church buildings, community halls and other community support infrastructure at Maigari & Basamuk, school upgrade and teacher support, supporting local sport etc. Construction phase for schools, hospitals and other public facilities. Social & Economic Development plan to be implemented. Training and employment for Nationals up to 580 job opportunities to be offered. 13
Ramu Project Tailings Sediment Discharge into the Vitiaz Bas Submarine Canyons off Basamuk 14
Highlands Share of Project Cash Flow 2010 and Beyond 70.00 Highlands Share of Ramu 60.00 50.00 40.00 Free Cash Financing Capex 30.00 Cash Costs 20.00 10.00-1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Years Nickel Price USD 7/lb (currently USD 12/lb) Cobalt Price USD 20/lb (currently USD 48/lb) Operating cash costs USD 2.50/lb Projected Annual Production 31,150T Ni 3,300T Co 15
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Large open cut copper/gold porphyry. Resource at Frieda is estimated to contain approximately 16.7 billion pounds of copper (7.5Mt Cu) and 14.3 million ounces of gold. Nena, 72Mt @2.0%Cu, 0.5g/t Au * Porphyries, 1,003Mt @ 0.5%Cu, 0.3g/t Au** Enormous upside Ekwai*** 188m @0.8%Cu, 0.5g/t Au. *indicated and measured resource, 0.2% Cu cutoff. **indicated and inferred, 0.2% Cu cutoff as HIG. *** DDH 097NOR06. Nena - HPL 88% OMRD 12% previously reported by Greater Frieda Xstrata 73.7%, HPL 16.4%, OMRD 9.9% 24
Scoping Study completed. Development timeline in place (assuming hurdles are met). ACTIVITY 2008 2009 2010 2011 2012 2013 2014 2015 201 6 ExtendedScope Pre-feasibility Feasibility Detailed Eng. Construction Production USD $25M spend in 2008, 2009 and 2010 accelerated spend. USD $10M spent in 2007. 158,000 metres of exploration drilling on the project to date with a further 20,000 metres planned in 2008, including 16,000 metres of infill drilling in the Horse-Ivaal-Trukai pit. Estimated project capex $2.6B. 26 year mine life. Production averaging 190,000T 000T copper metal, 295,000 oz gold pa. 25
Frieda River Project - Copper Price Sensitivity NPV (10%) US S$m Real 1,000 800 600 400 200 - (200) (400) (600) (800) (Gold at US$500/oz flat) 1.25 1.35 1.45 1.55 1.65 1.75 1.85 1.95 2.05 2.15 2.25 Flat Copper Price US$/lb NPV USD 681.5M @ 10% discount rate. Cu @ USD 2.00 lb Au @ USD700 oz. IRR -17.7% payback years (undiscounted)3.5 years. Average C1 (real) over 26 years USD 0.84 lb payable copper (Cu). 26
Located within the historic Wau-Bulolo Goldfield. Within 5 km of Kerimenge, Hamata and Hidden Valley deposits. (5M oz Au) Although a small EL it contains two significant high-grade shallow level epithermal Au prospects Yangalemu and Kobiak. Estimated exploration budget USD $1 1.5M for 2008. Unusual for PNG as both prospects are within 5 km of existing roads. EL 1340 Lae WAU-BULOLO Port Moresby Yangalemu Hill showing scars from small-scale mining activity 31
Hole From (m) To (m) Interval (m) Au (g/t) YD 001 50.0 52.0 2.0 1.17 YD 002 27.0 29.0 20 2.0 224 2.24 79.5 83.0 3.5 6.86 110.0 112.0 2.0 10.10 184.0 186.0 2.0 4.22 205.0 207.0 2.0 9.71 YD 003 28.0 30.0 2.0 15.70 YD 007 18.0 20.0 2.0 8.71 28.0 30.0 2.0 5.73 Historical Drill results from 1995 32
The Company s current share of the resource base reported for its Project and Joint Ventures is: 3 million oz of gold. 5 billion pounds of copper. 275 million pounds of nickel. 27 million pounds of cobalt. Listed on ASX & POMSox. Post Kainantu sale effectively USD$30 million in cash, no debt or hedging. JV Partner in the world class Ramu nickel cobalt project currently under construction. ti JV Partner in the Frieda River copper/gold project being operated by Xstrata Copper. 33
Highly potential PNG exploration ground at Wau- Bulolo l Graben close to the Hidden Valley Mine and the Wafi Gold Project being developed by Harmony Gold and their new partner Newcrest Mining Limited Ability to now consider M&A opportunities Cash a good springboard for growth Current fiscal climate favorable Commodities - copper/nickel/gold Possible geographic spread Australia, Asia/Pacific region Target assets that provide a superior return on shareholders equity 34
RAMU ACHIEVED FUTURE GOALS 2008 2009 2010 onwards 2029 Lateritic Nickel 20 plus year mine life Construction underway & accelerated development. $240M USD spent to date. Production due to commence second half of year 8.56% HPL equity 2,667t Ni 280t Co Per annum production before electing to increase up to 20.55% FRIEDA ACHIEVED FUTURE GOALS Mine life extension Copper/Gold 26 year mine life 2008 Scoping Study completed $25M USD spend 2010 Accelerated spend 2011 Feasibility Study completed 2012 2016 Construction commences Production commences avg 190,000t pa copper, 295,000 oz pa gold Future Growth: - New discoveries through exploration programs - Mergers/acquisitions - Floats/JV s 2042 Possible extension of mine life Resources: - Good cash reserves - Exploration upside - Low production costs - Experienced and dedicated team 35
Highlands Pacific (HPL) - a company with no debt or hedge book. A core portfolio of valuable assets in Ramu Ni/Co Project and Frieda River Copper/Gold Project. Cash USD $24m. Ability to undertake M & A opportunities. Cashflow/equity to commence from Ramu in 2010. Committed timeline for Frieda and increased spending levels forecast. Focused and experienced Board and Management team. Current share price does not reflect fundamental value of underlying assets or resource inventory. 36
This presentation has been prepared by Highlands Pacific Group Limited (the Company. 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. This presentation contains forecasts and forward looking information. Such forecasts, projections and information are not a guarantee of future performance, involve unknown risks and uncertainties. Actual results and developments will almost certainly differ materially from those expressed or implied. The Company has not audited or investigated the accuracy or completeness of the information, statements and opinions contained in this presentation. Accordingly, to the maximum extent permitted by applicable laws Highlands Pacific Group Limited makes no representation and can 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. Throughout the presentation all figures are quoted in AUD & USD unless otherwise stated. You should not act or refrain from acting in reliance on this presentation material. This overview of Highlands Pacific Group Limited does not purport to be all inclusive or to contain al 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 before making any investment decision. Information contained in this report that relates to Exploration Results, Mineral Resources or ore Reserves is based on previous announcements made by Highlands Pacific Group Limited to the ASX & POMSOX The information in the report to which this statement is attached that relates to Exploration Results is based on information compiled by L D Queen, who is a Member of The Australasian Institute of Mining and Metallurgy. Mr. Queen is a full-time employee of the company and 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 2004 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves. Mr. Queen consents to the inclusion in the report of the matters based on his information in the form and context in which it appears. 37