COMPANY PRESENTATION September 2013 >
Disclaimer Forward-Looking Information This document may contain forward-looking statements. These forward-looking statements are made as of the date of this document and Sierra Rutile Limited (the “Company”) does not intend, and does not assume any obligation, to update these forward -looking statements, except as required under applicable securities legislation. Forward- looking statements relate to future events or future performance and reflect Company management’s expectations or belief s regarding future events and include, but are not limited to, statements with respect to the estimation of mineral reserves and resources, the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production, capital expenditures, success of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage. In certain cases, forward- looking statements can be identified by the use of words such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of suc h words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved” or the negative of these terms or comparable terminology. By their very nature forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements. Such factors include, among others, risks related to actual results of current exploration activities; changes in project parameters as plans continue to be refined; future prices of mineral resources; possible variations in ore reserves, grade or recovery rates; accidents, labour disputes and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion of development or construction activities; as well as those factors detailed from time to time in the Company's interim and annual reports. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward- looking statements. >
Sierra Rutile is a leading mineral sands producer The Lanti Dredge mining the expansive Lanti deposit > Sierra Rutile is a leading mineral sands company, operating the largest primary rutile mine in the world – JORC Mineral Resource in excess of 840 million tonnes at 1% rutile – Lanti: 63 Mt at 1.42% rutile – Gangama: 48 Mt at 1.44% rutile – Gbeni: 63 Mt at 1.20% rutile – Sembehun: 274 Mt at 1.34% rutile – 2013 forecast rutile production of 125,000 tonnes of rutile with additional ilmenite and zircon by-products – Resources to support a mine life of over 65 years at current production rates Child being treated at the Sierra Rutile clinic > The company has a long and successful history in Sierra Leone – The company has a positive and long-standing relationship with the Government of Sierra Leone – The mine has been in operation since the early 1970s – Sierra Rutile supports local community projects such as schools, wells, bridges, clinics and directly supports the community through: • A medical facility, treating over 22,000 people a year • Sponsorship of a local technical college, providing education to over 300 students > 1
Driving Value From An Established Operation > Strong Rutile Production Growth An integrated multi-mine operation 130,000 – Lanti Dredge: bucket line dredge and integrated Trailing 12 months production 120,000 processing plant capable of mining and treating over 110,000 1,000 tonnes per hour (rutile tonnes) 100,000 90,000 – Lanti Dry Mining: truck and shovel mining operation 80,000 feeding a central 500 tonne per hour processing plant 70,000 60,000 50,000 > Significant installed infrastructure 40,000 – Mineral separation plant, currently capable of operating at a rate of 165,000 tonnes of rutile per annum, and easily Source: Sierra Rutile expandable to >200,000 tonnes of rutile per annum Process Recovery Improvements – A modern MFO (Marine Fuel Oil) power plant capable of producing 23MW of power (current utilisation is under 140% (3-month average; Feb 2011 = 100%) 11MW) Indexed Process Recovery 130% – Established export port and shipping fleet with capacity to ship >500,000 tonnes of product per annum 120% – Over 80km of established haulage roads 110% 100% Demonstrated ability to drive efficiency 90% improvements Source: Sierra Rutile 1 Since February 2011 > 2
Future Growth: Ready To Be Delivered > The Gangama Dry Mining project – The Gangama Dry Mining project is operationally identical to Gangama Dry Mining Capital Costs the Lanti Dry Mining project – The project will be constructed over a 12 month period and 75% of capital costs are fixed – very little will deliver annual production of 93,100 tonnes of rutile 1 risk of cost inflation – High capital efficiency: – Power, water and roads are already in place – Existing port facility able to handle increased 23% production volumes – 52% Only minor upgrades required to MSP to reach required 200,000 tonne capacity 14% > Ganagama Dry Mining project status – Engineering Complete: Detailed engineering of the plant and 11% infrastructure has been successfully completed with Consulmet (Pty) Limited. Process Plant (LSTK) Mobile Equipment Earthworks & Infrastructure Other – Capital costs reduced: Value-optimization exercise has reduced capital costs by 17% from US$103 million 2 to US$85 million. Further cost savings are expected. Gangama Dry Mine provides strong leverage to increasing rutile prices 1 Feasibility study estimate 2 Pre-feasibility study estimate > 3
Cash Generation Supports Future Distributions > Stated dividend policy Strong Operating Cash Flow Yield – Sierra Rutile has an approved policy to 30% $120 distribute at least 50% of free cash flows Cash Flow Yield after capital expenditures, committed Cash Flow From Operations Cash Flow Yield (Operating CFPS / share price) future expenditures and repayment of 25% $100 any borrowings Cash Flow From Operations (US$m) 20% $80 > Growing operating cash flow per share – Sierra Rutile is forecast to generate operating cash flow sufficient to pay a 15% $60 dividend yield of up to 25% base on current share price 10% $40 – Near-term cost reduction and efficiency gains to further improve operating margins 5% $20 > Debt facilities provide flexibility and 0% $0 optionality 2014E 2015E 2016E – Ability to optimize capital structure Source: Capital IQ, broker consensus provides further potential for returns to Note: Cash flow yield calculated as operating cash flow per share divided by current share price shareholders Sierra Rutile’s operating cash flow could support considerable returns to shareholders > 4
Maintaining Cost Discipline > > Operating Costs: Currently undergoing a comprehensive Capital Costs: Focusing on efficient capital allocation bottom-up review to reaffirm a culture of cost-efficiency – Lanti Dry Mining: The Lanti Dry Mining project was – Continued focus on cost control across the completed on budget and ahead of schedule organization – Gangama Dry Mining: Identified capital cost savings for – Re-examining all operations in order to identify areas the Gangama Dry mining project has reduced total capex by 17% ,from US$103 million to US$85 million 1 for cost reduction, including: – – Power and fuel: Potential improvements in power Gbeni Deposit: $23 million in savings to be realized plant optimization and vehicle utilization through the decision to dry mine the Gbeni deposit – Human resources: Localization plan is being – Cost savings realized by eliminating preparation work implemented to drive down overall expatriate and village relocation associated with the dredge move headcount – Delayed the move of the Lanti Dry Mining processing plant by seven years Expatriate Headcount – Pending retirement of Lanti Dredge further reduces the 90 Expatriate near-term stay-in-business capital requirement 80 headcount 70 declining as 60 operational “ SRX is one of the first companies we have seen to start 50 coming out with reduced capital development cost improvements 40 expectations that reflect the more muted environment have been 30 in which miners find themselves. We expect that others completed 20 will be following …” 10 Investec Securities - August 6, 2013 0 2009 2010 2011 2012 2013 2014 Source: Sierra Rutile Sierra Rutile continues to generate shareholder returns by focusing on cost efficiency 1 Pre-feasibility study estimate > 5
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