BUILDING A MID- -TIER RESOURCES GROUP TIER RESOURCES GROUP - - PowerPoint PPT Presentation

BUILDING A MID BUILDING A MID-

• TIER RESOURCES GROUP

TIER RESOURCES GROUP

PDAC PDAC -

• TORONTO

TORONTO 5 March 2007 5 March 2007

HILLGROVE

Structure

HILLGROVE RESOURCES ASX:HGO S.A. DEVELOPMENT & EXPLORATION EASTERN STAR GAS ASX:ESG INTERMET RESOURCES ASX:ITT

KANMANTOO MINE COPPER/GOLD/GARNET WHEAL ELLEN LEAD/ZINC REGIONAL EXPLORATION Au, Cu, Ag, Zn, Pb GUNNEDAH GAS PROJECT WILGA PARK POWER STATION GAWLER IOCG GAWLER URANIUM GAWLER GOLD, BASE METALS

100%/ 90% 100% 65% 100% 26.4% 31%

EXPLORATION ALFORD GAWLER IOCG

20% ->70%

HILLGROVE

In South Australia

KANMANTOO

Why South Australia?

• One of the most prospective terrains in the world – home of the Big

One – Olympic Dam

• Ideal for application of latest exploration techniques
• Neglected historically
• Gawler is vastly under explored → major mines
• New greenstone domains akin to the Eastern Goldfields of WA
• Supportive State Government
• Sixth most desirable region in the world to explore (Fraser Institute)
• Projects located close to infrastructure

Result → SA will host Australia’s major mineral discoveries

KANMANTOO

Project Location

• Low operating

cost setting

• Existing

infrastructure

KANMANTOO

Kanmantoo Copper Gold Mine 2005

KANMANTOO

Potential Open Pit Operation

KANMANTOO Current Resource

Kanmantoo Deposit Resource Estimate – October 2006 (0.25% Cutoff)

177,218 262,613 0.20 0.94 27,997,725 0.16 0.92 10,611,060 0.22 0.95 17,386,665

Total

160,420 242,041 0.20 0.95 25,501,537 0.16 0.92 10,032,123 0.22 0.96 15,469,414

Fresh

10,445 13,600 0.20 0.84 1,626,683 0.21 0.78 432,427 0.20 0.86 1,194,256

Transitional

6,353 6,972 0.23 0.80 869,505 0.23 0.70 146,510 0.23 0.82 722,995

Oxide

Ounces Tonnes g/t % T g/t % T g/t % T Au Cut Cu Metal Au Cut Cu Tonnes Au Cut Cu Tonnes Au Cut Cu Tonnes

Type

TOTAL INFERRED INDICATED

Resource Evaluations

10,141 33,537 0.09 0.92 3,645,337 Emily Star 53,137 39,240 0.34 0.81 4,832,697 O'Neil 9,857 12,223 0.31 1.25 977,878 Eastern 4,235 8,808 0.11 0.73 1,209,302 North West 11,329 14,139 0.28 1.14 1,242,539 North East 46,391 34,277 0.37 0.88 3,890,311 South East 30,941 98,484 0.10 1.05 9,421,335 Main Ounces Tonnes g/t % T Au Cut Cu Metal Au Cut Cu Tonnes Zone

KANMANTOO

Updated Resource by Area

KANMANTOO

Pre-Feasibility Study Highlights

Mineral resources:

• Copper/Gold: 28MT at 0.94% Copper and 0.20g/t Gold

Contained metal:

• 262,600T Copper and 177,200oz Gold

Initial planning inventory:

• 12,727,554MT optimized at USD$1.80 per lb copper price

Base case assumptions:

• Copper price US$2.65 → US$1.63
• Exchange rate (A$/US$) A$0.70 flat

Open pit:

• 1.2km long X 600m wide X 270m deep
• Ore mined 2MT PA with potential to expand to 2.5MT PA
• Initial minimum mine life 6.5 years

Processing:

• Conventional crushing, grinding and flotation
• Mill throughput 2MT PA with potential to expand to 2.5MT PA

Average head grade:

• 0.95% Copper, 0.23g/t Gold, 3.55g/t Silver

Average recovery:

• Copper 80% - 93% depending on ore type
• Gold 15% - 53% depending on ore type

Concentrate:

• 61,000 - 82,000 dry TPA
• High quality, medium copper content, low impurities

Concentrate grade:

• 25% Copper, 2.0 - 3.7g/t Gold, 39.3 – 61.4g/t Silver

Average metal in cons:

• 19,000T PA Copper
• 6,000oz PA Gold
• 113,000oz PA Silver

Initial Capex:

• A$98.3 Million

KANMANTOO

Key Pre-Feasibility Study Consultants

KANMANTOO

Potential Open Pit Development

KANMANTOO

Process Flow

KANMANTOO

Financials

• Breakeven cash cost US$1.20 per lb including gold and silver

revenue

• $5,137 capital cost per annual tonne of copper production – in

the mid-range for its peers

• <2 year initial Capex payback

Cu (US$/lb) Fx (A$/US$) Discount % NPV $’m IRR % NPAT $’m

Base Case 2.65 →1.63 0.70 8.5 75 32 141 Case 1 2.50 0.70 8.5 134 42 239 Case 2 3.00 0.70 8.5 216 60 358

KANMANTOO

Upside

Resource increase by 40% to target 40MT, throughput 2.5MT/pa NPV@8.5% $102M Improves 6c Increase head grade >1.1% NPV@8.5% $122M Improves 11c Concurrent/ subsequent underground mining $ ? Revenues from garnet by-product $8-20M Treat Wheal Ellen lead/ zinc, satellite copper ore bodies $ ?

Cost per lb

KANMANTOO

Key DFS Consultants

KANMANTOO

Conceptual Flow Chart

2006 2007 2008 2009 Pre-feasibility Metallurgy Permitting Drilling Definitive Feasibility Study Construction & Development Mining

KANMANTOO

Near-mine Exploration

Exploration and resource definition drilling is ongoing and will be particularly concentrated during the Definitive Feasibility Study (DFS) which commenced in December 2006 Recent drilling intersected high-grade zones of copper mineralisation and highlighted new zones not incorporated in the latest resource or the PFS economic model The programme confirmed the prospectivity of the area and potential for a mineralised system of considerable size Both the resource tonnage and the confidence level have increased Given the substantial gaps and possible strike extensions targeted for drilling, there is excellent potential for further significant copper resource growth in and around the old open cut

KANMANTOO

Mine Corridor IP with Drilling and Ore Blocks

KANMANTOO

Regional Magnetics

Regional exploration has recommenced, reconnaissance of all new magnetic targets underway 12 major magnetic targets outside Mine Corridor

KANMANTOO

Wheal Ellen Area – Magnetics

Angus Deposit on same stratigraphic contact about 10km to the south and is a discrete magnetic high Series of magnetic targets have been identified along these targets These targets are largely unexplored with a number

• f targets with historic

workings Rock chips up to 24g/t gold, 147g/t silver, 18% lead and 21% zinc

KANMANTOO

Junior Australian Emerging Copper Producers

Hillgrove is significantly undervalued relative to its peers

Company Universal Copper Co Ex Co Discovery Matrix Hillgrove Resources Nickel Metals Resources Code URL CUO EXS DNL MRX HGO Mkt Cap @ 23 Jan 07 A$m 59.2 170.7 51.2 20.4 66.2 10.3 ** Key Project Roseby Lady Annie Cloncurry & White Dam Maun White & Cuthbert Kanmantoo First Production Q1 2008 Q3 2007 Q3 2008 2010 ? 2008 4Q 2008 Copper Production tpa 34,000 10,000 10,000 ? 15,000 20,000 Resources mt 127.2 36.1 27.5 20.0 14.8 28.0 Grade % 0.73 0.92 1.25 1.20 1.10 0.94 Copper in Ground kt 933 331 344 240 163 263 Copper Equivalent kt 961 331 392 240 163 283 Notes: SX/EW Sulphide SX-EW 0.2 g/t Au PFS U308 U308 & CBM

• Mkt. Cap/Tonne Cu

$62 $516 $131 $85 $405 $36

** Hillgrove excl. $48m of ESG & ITT Shares

Projects Roseby Lady Annie Cloncurry Mt Cuthbert Kanmantoo Contained Metal 312,749 t 126,900 t 344,000t 20,465 t 262,600 t Production per annum 34,000tpa 15,000tpa 5,500tpa 19,000tpa Cost per lb @US$1.14 @US$0.75 @US$1.59 @US$1.20 NPV at 8% or 8.5% NPV $156m NPV $86m NPV $41m NPV $75m

ALFORD PROJECT

Highlights

• Past drilling has identified significant widths of copper

mineralisation associated with haematite alteration including 76m at 0.95% Copper including 12m at 2.18% Copper in ALDDH001

• Key similarities to Iron-Oxide-Copper-Gold (IOCG) deposits such

as Olympic Dam, Prominent Hill and Carrapateena

• Copper mineralisation associated with a number of discrete

gravity features, a key association for IOCG deposits

• Uranium potential with past drilling returning excellent first pass

with assay results up to 290ppm Uranium

• Past exploration has defined a series of copper anomalies along

the Alford Shear Zone for over 7km in strike

• 2007 exploration program underway which will include calcrete

sampling, aircore drilling, diamond drilling and assaying of past work for uranium

ALFORD PROJECT

Interpreted Geology

INTERMET RESOURCES

Investment Summary

• Issued capital – 40m shares and 31m @ 20c (10m expiry

30/11/07, 21m expiry 24/5/10)

• Cash 31 December 2006 of $3 million
• Tightly held structure – major shareholders Hillgrove 31% and

Sempra Metals & Concentrates 8%

• Specialist Gawler Craton explorer with over 8,500km² under title
• World class team of exploration professionals – Managing

Director, Gary Ferris, and Director, Dr Neville Alley

• Very active 2007 programme targeting company makers

• Detailed understanding of the tectonic history and mineral systems
• n the Gawler Craton
• Technical expertise – Exploration team has extensive experience
• n the Gawler Craton and gold systems
• Uranium expertise – strategic JV’s with proven uranium explorers

– UEQ, Mega Uranium

• Association with Hillgrove Resources – keeps costs down and

provides access to drill rigs

• Concurrent multiple exploration programmes – constant stream of

results due in 2007

• JV’s and cash leverage ITT’s probability of success

INTERMET RESOURCES

Competitive Advantage

INTERMET RESOURCES

ITT Project Matrix

Project Tenement No. Participants JV Commitment ($) Exploration Model EL3466 ITT 100%

• IOCG
• Base metals related to Hiltaba Suite magmatic event
• Orogenic gold

EL3467 ITT and Hindmarsh Resources $600,00 over 4 years to get 80% interest in Unconformity-related uranium only

• Unconformity-related uranium
• Epithermal gold and base metals

Lake Gilles ELA 537/06 ITT 100%

• Base metals related to Hiltaba Suite magmatic even
• Orogenic gold

EL3314, ELA 230/06 ITT and WCP Uranium $1.5M over 4 years to get 80% interest in uranium

• Palaeochannel hosted uranium

EL3314 ITT 100%

• Archaean greenstone hosted base metals, nickel and

gold mineralisation Coulta ELA 230/06 ITT 100%

• Proterozoic “Broken Hill” style base metals

EL3462, EL3463 ITT and Uranium Equities Ltd $2M over 5 years to earn 80% interest in Palaeochannel and unconformity related uranium

• Palaeochannel hosted and unconformity related

uranium EL3462, EL3463 ITT and Silver Swan Group $500,000 over 4 years to get 80% interest in all minerals excluding palaeochannel hosted and unconformity related uranium

• IOCG
• Orogenic gold
• Archaean greenstone hosted base metals and gold

Cocata ELA 690/06 ITT 100%

• Unconformity related uranium
• Archaean greenstone hosted base metals and gold

EL3313, EL3323, ELA 379/06 ITT and Uranium Equities Ltd $1M over 5 years to earn 80% interest in uranium

• Palaeochannel hosted uranium

Watson EL3313, EL3323 ITT and Silver Swan Group $500,000 over 4 years to get 80% interest in all minerals excluding uranium

• Archaean hosted gold and base metals
• Proterozoic intrusive hosted nickel

Southern Gawler Ranges EL3461, EL3598, EL3612 ITT 100%

• IOCG
• Orogenic gold

Garford North ELA 683/06 ITT 100%

• Archaean gold (similar to Challenger Gold Mine)
• Archaean nickel and base metals
• ?IOCG

INTERMET RESOURCES

Lake Gilles Project – IOCG Ingredients

Important “ingredients for IOCG style deposits”

• Temporal association of Cu-Au mineralisation with magmatism of

the Hiltaba Suite and Gawler Range Volcanics – Lake Gilles, Southern GRV, Cocata Projects

• Importance of breccias in localising mineralisation – Lake Gilles
• A high crustal level of Fe-oxide and Cu-Au-U formation – Lake

Gilles, S GRV Projects

• A strong brittle structural control on the location of breccias and
• re – LG, Cocata, SGRV
• Importance of hematite accompanying higher grade Cu-Au-U

mineralisation – LG, SGRV

• The roles of two fluids of contrasting physico-chemical properties,
• ne of which is meteroic in origin – LG, S GRV

INTERMET RESOURCES

Lake Gilles Project – IOCG Exploration

• Three prominent gravity

features on Lake Gilles project area

• Coincident magnetic feature
• Modeling shows gravity

features to be between 220- 650m depth

• Initial programme – 6

diamond holes planned

• Drilling commenced in

November 2006 – Hole Rd- DD2 completed to 481m

EASTERN STAR GAS LTD

Major Position in Eastern Australia

• PEL238 (ESG 65%) covers 2.2 million acres
• Largest onshore gas resource in Australia. 17TCF P10 gas potential

in Maules Creek coals alone (35TCF including Black Jack)

• 8.7TCF of gas resources (Netherland and Sewell 2000). Equivalent

to more than 20 years of NSW consumption

• Bohena Project area 265km² gas resource area – 3,700PJ gas-in-

place – targeting conversion of portion of GIP to 2P reserves from this programme (PJ = $3M revenue, TCF = $3B at $3 per GJ)

• North West Shelf – Gorgon 20TCF, North Rankin 8TCF. Cooper

Basin remaining reserves of ~2TCF

• Will change the NSW gas supply picture/ electricity generation
• 41PJ/a or >30% of Queensland gas market from CSG – gas fired

power stations preferred

EASTERN STAR GAS LTD

Resource Parameters

EASTERN STAR GAS LTD

Market Opportunities – Immediate

Ability to Supply 11 MW Wilga Park Power Station

11 MW: Gas requirement is 2.75mmcf/d Possible expansion to 40 MW Use gas from Bibblewindi pilot

January, 2005 July, 2005 March, 2006 December, 2006 December, 2007 Drill Frac Unconfined Production Pilot Reserves Certification Continue Unconfined Production Pilot CSG: Drill/Frac Confined Production Pilots Confined Production Pilot Reserves Certification Decide Expansion

• f Power Stations

to Tamworth & Gunnedah: 75MW Expand Power Station Coal Seam Gas Conventional Finalise initial gas sales to Sydney/ Newcastle Willaroo-1 (PEL 6) Nyngenderry-1 (PEL 8) Burnamwood-1 (PEL 422) Netallie-1 (PEL 424)

EASTERN STAR GAS LTD

PEL 238: Development Strategy

EASTERN STAR GAS LTD

Peer Comparison

Peer Comparison CSG 2P Reserves

100 200 300 400 500 600 700 800 Molopo Australia Sydney Gas Arrow Energy Queensland Gas ESG Debut ?? Reserves (PJ)

CSG 2P, 3P & Resources

1000 2000 3000 4000 5000 6000 7000 Molopo Australia Sydney Gas Arrow Energy Queensland Gas Eastern Star Gas Reserves (PJ) 2P 3P

Company Code Mkt Cap 2P 3P 2P 3P (A$m) (PJ) (PJ) (PJ) (PJ) Sydney Gas SGL 119 $ 83 109 1.43 $ 1.09 $ Queensland Gas QGC 670 $ 695 2,464 0.96 $ 0.27 $ Eastern Star Gas ESG 139 $ 5,997

• $

0.02 $ Arrow Energy AOE 744 $ 498 2,778 1.49 $ 0.27 $ Molopo Australia MPO 53 $ 58 151 0.91 $ 0.35 $ CSG Resources A$ per GJ

• HGO holds a 26.4% fully diluted strategic stake in ESG
• ESG poised to be the key player in NSW gas production
• Context of lowered green house gas emissions from gas generated

electricity sets scene for use in electricity generation

• Improving gas prices with demise of PNG gas pipeline
• Majors seeking to secure Australian onshore gas resources
• ESG has 65% of Gunnedah Gas Project and unassailable operatorship
• Clear value adding route: gas production → reserves → contracts →

cashflows

• Value to Hillgrove of ESG shares/ notes/ options

– @ 20cps = $28 million – @ 30cps = $44 million – @ 40cps = $60 million

EASTERN STAR GAS LTD

Summary

• Shares on Issue

– 514 million shares (Hillgrove 93 million) – 42 million shares in Converting Notes (100% Hillgrove) – 25 million - 3 year; 15 cent Eastern Star options (100% Hillgrove)

• Market Capitalisation

– $135 million

• Finances

– Cash: $10 million

• Major Shareholders

– Hillgrove Resources (present 19.9% 26.4% fully diluted) – Directors (10%) – Ingalls and Snyder (7%)

EASTERN STAR GAS LTD

Post-Hillgrove Energy Purchase Structure

Directors

Dean Brown, Chairman

– Former Premier of South Australia

David Archer, Managing Director

– Founded Savage Resources and PowerTel Ltd

John Quirke, Non-executive Director

– Former Senator, SA Member of Parliament

Ron Belz, Non-executive Director

– Certified practicing Accountant

Senior Staff

Ian Kirkham, Company Secretary and CFO

– Previously CFO of a number of Australian mining companies

Dale Ferguson, General Manager – Exploration & Operations

– Involved in discovery of a number of Australian deposits

Marty Adams, Project Manager – Kanmantoo

– Mining Engineer with 20 years’ experience including Newmont (Woodcutters) and as General Manager at Tennant Creek for Normandy

Wolfgang Fischer, Geologist/Geophysicist

– Consultant with 32 years of local and international technical and commercial experience in oil and gas exploration and development

HILLGROVE

Key People

Ordinary Shares HGO 242.1 million Options – 30 cents 2009 Unlisted 12.5 million Options – other expiry - ESOP Unlisted 7.5 million Options – other expiry - Sempra Unlisted 18.0 million Market Cap (@ 25 cents per share) $60.5 million Cash (incl. options $7.2m + placement) > $12 million Future Cash – Sempra BFS funding $2.0 million

HILLGROVE

Capital Structure

SHAREHOLDERS

Top 35%

D & V Archer 8.2% Chairman and Managing Director Sempra Metals 7.0% Fortune 500, American energy & Concentrates and metals trading group SegaInterSettle 7.5% Swiss Nominee Anglo Pacific 3.5% London based investment fund Colonial Global 3.5% Large Australian pensions institution Macquarie Bank 3.1% Australia’s largest investment bank Merrill Lynch 2.2% London based investment fund

Kanmantoo Copper Gold Mine (NPV range) 75 - 215 million Eastern Star Gas shares/notes/options 20 - 60 million InterMet (12.35M shares, 9.0M options) @ 29cps 4.9 million Exploration ? million Investments 1.0 million

HILLGROVE

Value Proposition

$

DISCLAIMER This presentation may contain forward looking statements that are subject to risk factors associated with copper, gold and gas businesses. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a variety of variables and changes in underlying assumptions which could cause actual results

• r trends to differ materially, including but not limited to: price fluctuations, actual demand, currency fluctuations,

drilling and production results, reserve estimates, loss of market, industry competition, environmental risks, physical risks, legislative, fiscal and regulatory developments, economic and financial market conditions in various countries and regions, political risks, project delay or advancement, approvals and cost estimates. Investors should undertake their own analysis and obtain independent advice before investing in HGO shares. All references to dollars, cents or $ in this presentation refer to Australian currency, unless otherwise stated.