Hexa Resources Limited An Integrated Emerald business HEXA RESOURCES - - PowerPoint PPT Presentation

Hexa Resources Limited

An Integrated Emerald business

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Creating the world’s leading integrated emerald company

HEXA RESOURCES – JANUARY 2020

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Exploration

• Closed 2 deals in

Coscuez, Colombia

• In principle JV deal

key Colombian mine

• Big resource growth

potential in Brazil.

Cutting & Polishing

• IEEX office & team in

Bogota

• Leading master cutter
• Sourcing rough and

cut stones in Bogota and the mine areas.

2

Building sustainable emerald supply to leading jewellery brands

Trading

• “Plug and play”

trading using IEEX global networks

• Expected gross

margin of 50% p.a.

• First trades done.

Production

• Exclusivity on

leading Brazil mine

• Coscuez historical
• production. 2020

re-start.

• Late stage pipeline

HEXA RESOURCES

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Forward-looking statements

• This presentation/invitation document is being sent to you on the basis that you are a certified high net worth individual (as that term is

defined in article 48 (2) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (“FPO”). Accordingly, this presentation/invitation Document is exempt from the general restriction on the communication of invitations or inducements to engage in investment activity set out in section 21 of the Financial Services and Markets Act 2000 (“FSMA”).

• No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein. This

presentation includes certain “forward-looking statements”. All statements other than statements of historical fact, included in this presentation, including without limitation statements regarding potential mineralization and reserves, exploration results, and future plans and objectives of Hexa Reso esources Lim Limited (“Hexa”), are forward-looking statements that involve various risks and uncertainties.

• There can be no assurance that forward-looking statements will prove to be accurate and actual results and future events could differ

materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from Hexa expectations include, among others, risks related to mine and trading operations, the actual results of implementation of development/production plans, current exploration activities, conclusions of economic evaluations and changes in project parameters as plans continue to be refined as well as future prices of emeralds. Although Hexa has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such 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.

• This presentation is private & confidential and is not for distribution.

HEXA RESOURCES

We are creating the world’s leading integrated emeralds company:

❑ Initial focus on Lat-Am emeralds. Widening to global coloured gemstones in medium term. A significant market with few leading brands. ❑ Exclusive deal as 40%+ lead investor in major Brazilian emerald mine, Piteiras. Large indicated resource and world class asset. Key co-investor KGK Group. ❑ Closed 2 deals for 3 exclusive working areas next to Coscuez - Colombia’s 3rd largest emerald mine. Prep / exploration work underway. ❑ Building a leading downstream cutting, polishing and trading business, with IEEX, an established Colombian-UK marketing and trading platform. ❑ Advanced deal pipeline (Colombia): exploration/including re-boot of historic Espanoles emerald mine.

We e ha have:

▪ Seasoned team (exploration, mining, emerald trading). ▪ Existing supply relationships with global jewellery distributors (via IEEX). ▪ 2020 forecast positive cash flow, EBIT US$5 Million, mining and trading income. ▪ Strong funding: US$1.4 Million raised + C$20 Million equity facility on listing. ▪ Well positioned vs. our market competitors – at significantly lower pricing. ▪ Committed to list on CSE in H1 2020. Late stage LOI with Canadian shell.

Museum quality rough emerald crystal from the La Pita mine, Colombia

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Hexa Resources – Why Invest? Select growth opportunity in a $6.5Billion+p.a. wholesale market

HEXA RESOURCES

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2017 Business Development, Partnerships & Due Diligence: 2018 Acquisitions, Exploration, Trading: 2019/20 Exploration, Trading growth, Listing & Production:

• Start listing prep work (shell, audit, tech review). ✓
• Start exploration Esmeraldas de Coscuez. ✓
• Closed EDL113 Coscuez South West licence deal. ✓
• C$20 Million equity facility closed in Q3. ✓
• Closing Piteiras “world class” asset (Brazil) (WIP)
• Trading capital rise to US$1 Million by end Q1 20.
• CSE listing targeted H1 20
• Finalise Espanoles / Colombian mine deal H1 20
• Start mine production – Piteiras end Q2 20
• Released the Dos Rios/Greenfield acquisition, low technical results ✓
• Finalised Esmeraldas de Coscuez acquisition ✓
• Start active emerald trading (prove-up trading margins). ✓
• Binding MOU on Piteiras Brazil mine. World class resource and mine. ✓
• MOU on La Pita mine ✓ Following Due Diligence released option, retaining small trading stake. ✓
• Strategic partnership with IEEX ✓
• MOU on Dos Rios exploration license ✓
• Shell identified for CSE Listing ✓

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Our Strategic Path to Growth

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mid id 201 2018: US$ US$5 Mill illion

• Trading value - $3 Million
• Asset rights - $1.25 Million

(MOU rights on Dos Rios, c.1% share La Pita).

• Other Cash - $0.5 Million

Q1 Q1 202 2020: US US$25 Mill illion (Lis (List t Valu lue)

• Trading value - $6 Million
• Exploration - $15 Million

(3 Coscuez licences/work areas)

• Piteiras Investment - $3 Million (at cost)
• Other Cash - $1 Million (non trading)

Q4 Q4 202 2020: >U >US$50 Mill llio ion (F (Forecast) t)

• Increased Trading value
• Advanced Exploration

(3 Coscuez licences/working areas)

• Piteiras Mine value (Cashflow multiple)
• Other Cash

Fura Gems: US$30 Million TSX listed. Coscuez emerald mine in Colombia & African ruby exploration licences.

Gemfields: US$169 Million

Listed on JSX (de-listed AIM 2017 at $237 M). No.1 ruby & emerald producer, based in Africa.

MTC: est. US$350-450 Million

• #1 Colombian Emerald mine
• 500+ years of production
• Est 1-1.3 M Ct. emeralds p.a.
• Private Co. – plans to list 2020

Creating Value – Target listing at 47% uplift to Round 2 post-money value

HEXA RESOURCES

Round One (2018) Round Two (Q1 20)

Pos

• st-money val

aluation - US$ S$ 4 4 Mill illion Pos

• st money val

aluation - US$1 S$17 7 Mill illion

HEXA VALUE PMV MARKET

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Strong projected Income Growth

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50 100 150 200 250 300 350

• 5.0

0.0 5.0 10.0 15.0 20.0 25.0 Jun-19 Dec-19 Jun-20 Dec-20 Jun-21 Dec-21 Jun-22 Dec-22 Jun-23 Dec-23

Hexa Draft Financial Projections (US$Millions)

EBITDA Hexa Valuation

• EBITDA based on Piteiras mining operations, contribution from 2 Colombian smaller mines, plus trading income.
• Strong rise in Piteiras income as production levels are doubled after approval from ANM.
• Valuations based on forward looking EBITDA multiples.
• Projected Hexa draft NPV10 value of US$80 Million.

(Projections included are our best current estimate. There can be no assurance that such estimates and forward-looking statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements.)

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Comparison vs Listed Competitors

Com Comparative Fac actor 3.

• 3. Fur

FuraGems 2.

• 2. He

Hexa Res esources 1.

• 1. Gem

GemFields (Em (Emerald & Ber Beryl) Mineral Resource (Mt) Inferred 3Mt Indicated 0.81 Mt* Measured & Indicated 3.23Mt* Grade (carat/t) 2 36.5*(Hexa cut old 43-101) 300 (Measured & Indicated)* 43-101 Inferred Resource Y - {2018} 6M ct (4.6M ct equity share) Y - 30M ct* – Hexa reduced (12M ct equity share) Y- Emerald & Beryl -968M ct* 968M ct equity share* Location Colombia, Mozambique Colombia, Brazil Mozambique, Zambia Gem stones / # Licences Emerald 1, Ruby 6, Sapphire 1 Emerald 4 Emerald 2, Ruby 1 Market Cap, NAV Listed – US$30M NAV – US$ 25M Listed - 169M EBITDA Actual/Projected ? (not projected) US$5M p.a.(projected 2020) Corporate +US$59M (2018) Emeralds- $9.7M (net loss) Est’ economic life (years) 30 30+ Low (as is loss making) Est’ emerald average price $200/ct US$50/ct (Work in progress) $4.56/ct (*incl low value beryl) Marketing Approach All production sold as rough Integrated trading model (rough + cut) Integrated trading model (rough + cut)

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Board & Management Team

BOARD: Chris Harris – Managing Director (FCA) Chartered Accountant. 31 years in energy, commodity trading and mining finance (Ernst & Young, CIBC, Enron UK, BHP Billiton, GMI Resources, Altamira Gold). Multiple principal investments & director roles. Jon Coates – Technical Director 41 years in exploration, mine geology and development. Former Chief Geoscientist with BHP Billiton Exploration. Seven years resident in South America. Fluent Spanish speaker. Rory Dyer – Marketing Director Co-founder of IEEX, a pre-eminent Emerald exchange with a significant on-line and direct customer/buyer list. 7 years experience in-country and globally in the cutting and sales of Colombian emeralds. Worked prior as AIM broker and City-index management consultant. Kyler Hardy – Director 17 years in resource sector as an entrepreneur & executive, building early stage businesses. Experience in mining operations; open pit and underground, as well as remote exploration. Philip Spencer - Director Trained and served in the Royal Navy as a commissioned officer. Phillip then worked in the city as an equity broker. In 2014 he launched London Diamond and Emerald exchange, a leading bespoke coloured stone jewellery provider.

.

SEN SENIOR TE TEAM AND AND AD ADVISORS: Ser Sergio io Aqui Aquino – Br Brazil il di director

• r

42 years of mining exploration and mine development roles in gold and diamonds. Co-founder of Serabi Gold, and ex-Brazil head of Altamira Gold. Ron

• n Ri

Ring ngsrud -Tradin ing & Co Communit ity advi advisor Over 31 years experience as Colombian emerald buyer. Founder of Clayhands, a leading charitable foundation in Muzo area Co Colombian Team (o (over 51 51 years emerald ind ndustry ry experie ience): Geor George Sm Smit ith (Head Buyer, IEEX co-founder) Ri Ricardo Ji Jimenez (Master Cutter). Jair iro Naranjo (Advisor) experienced local geologist, with gold and emeralds local and international experience.

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Strategic partner – IEEX trading platform

Established quality Colombian emerald trader and significant shareholder of Hexa:

• 7 years trading record; 43+ years market experience.
• Established International wholesale (jeweller) network.
• Formal Hexa-IEEX marketing contract, business is “plug and-play”.

We buy quality rough and cut emeralds in Colombia:

• Responsible sourcing: where possible from known brokers.
• As a miner - have access to exclusive auctions and purchases.
• Cut rough to order and re-cut emeralds for quality uplift.

Strong Margin Business:

• Average 30-35% gross margin per cut stone; rough stone margin is 10%+ higher.
• Annualised gross margin for trading cut stones estimated at 50-60% p.a.
• Hexa targeting annual trading profit of US$0.5-1.0 Million per annum by end 2020.

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The Emerald Market

Market Background:

• Emeralds are one of the big 4 gemstones along with diamonds, rubies,

and sapphires.

• Total 2017 global coloured stone wholesale market sales of US$6.5+
• Billion. Emerald market estimated at US$1.65 Billion (i.e. 25%).
• Since the 16th century, Colombian emeralds have been highly prized

world-wide for their colour and brilliance. Growth Potential:

• Significant market growth potential in China, US and Middle East

augur well for future emerald sales growth.

• Over last 11 years, emerald prices have seen a CAGR of 9% (rising to

25% p.a. in last 3 years).

• Emerald market is fragmented, ripe for consolidation, with no

globally listed recognized producers (Gemfields now de-listed).

• Has consistently been a high margin business, with margins ranging

from 20-100% for cut stones. Miners Rough dealers Cutters Exporters of cut goods Multiple gem dealers Jewellers private buyers

HEXA Trading

Bogota market

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Review of Key Near-Term Milestones – 2019/20

Milestone Da Date St Status Signed LOI term sheet for Canadian listing vehicle (clear route to listing) Oct 2018 ✓ Closed Acquisition of Coscuez licences Dec 18 ✓ Completion of first 2 emerald trades (margin approx. 30% per lot target) Jul - Dec 18 ✓ Signed MOU on Piteiras mining deal in Brazil Jan 2019 ✓ Closed EDL113 licence / Start mine and exploration prep Coscuez Apr/May 2019 ✓✓ Closed C$20M equity funding facility Aug 2019 ✓ External technical review Piteiras, Audit and prepare for listing Aug - Dec 2019 ✓WIP Close Piteiras deal and provide initial funding Jan/Feb 2020 ⚫ Close Funding 2nd Round Jan/Feb 2020 ⚫ CSE Listing / Agree MOU to “reboot” major Colombian mine Apr/May 2020 ⚫ Piteiras mine - Complete washplant and mine refit / start Ops Jun/Jul 2020 ⚫ First Auction Piteiras / AIM or LSE listing Q3/Q4 2020 ⚫

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Funding Proposal & Capital Structure

Hexa is a UK registered private company with 34.4 Million shares in issue and 73 investors. Late stage LOI with Canadian Shell: ✓

• Committed to fold Hexa into a Canadian pre-listing vehicle, similar pricing as above. Aim to go

to CSE Q1/Q2 2020. Potential for AIM or LSE dual listing in Q3/Q4 2020. Initial Funding – US$1.4 Million: extended round closed July 19 ✓

• To fund: completion of due diligence, initial start up, and part of initial acquisition costs;

plus base working capital for trading emeralds. Funders include one fund investor. Equity facility – C$20 Million (US$15 Million) : closed August 2019 – Available post listing ✓

• Will fund remainder of Piteiras acquisition costs post listing, plus any unfunded Colombia and

trading working capital costs. Keep as a buffer for acquisition and expansion. SECOND ROUND FUNDING: (Total $2Million requirement) 1. Completion & Growth Funding – US$2 Million : (By end Feb 2020)

• To cover pre listing costs, i.e,: initial Piteiras mine acquisition costs, legal completion costs, and

part of Colombia exploration & mining operations.

• Pricing of 16p/share. plus for larger stakes (>£50,000) 1 warrant per share at 27p/share strike

with 2 year duration. For mid-sized stakes (£20,000-50,000) ½ warrant per share - same terms.

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42% 20% 16% 22%

Post 2nd Round Funding Equity share

Founders & Mgmt Early Investors Round One Round Two

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Projected funding requirements

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Next 12 month funding needs

(2nd Round-2R, Eq Facility/Bridge-EFB)

Funded by US$ Million

2R EFB* 1. Piteiras project – Brazil (40%): (Capex, Opex, and direct 15% purchase) 1.5 4.5 6.0

• 2. Esmeraldas de Coscuez – Colombia

(Exploration and bulk sampling costs) 0.2 0.3 0.5

• 3. Espanoles / Other – Colombia

(Exploration costs) 0.5 0.5

• 4. Trading working Capital

(Purchase of rough and cut stones) 0.3 0.7 1.0

Total

*Bridge sought to cover part/full spend

2.0 6.0 8.0

(Numbers include UK, Colombia, Brazil overhead)

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Brazil - Piteiras Mine Location

A 312 ha licence area and mine located in the Nova Era emerald belt in south east Minas Gerais, Brazil : Location:

• 120 km from Belo Horizonte (state

capital)

• 15km due east of Itabira, a city of

>100,000 inhabitants Excellent infrastructure:

• Fully paved highway runs ~300m

from mine mouth.

• Vale private rail runs alongside road.
• Excellent power connections
• Close access to skilled mining labour
• Mine services available locally

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• Acquire 40%+ equity interest (25% farm-in, 15%+ equity purchase) in the Piteiras emerald

mine via Piteiras Mineracao Ltda, financial closing Feb 2020.

• Consideration US$6.1M - $3.6M farm-in (as below) and $2.5M equity purchase:
• US$ 2.4M capex (including 15-20% provision)
• US$0.6M opex (1st 6 months of 2020 working capital)
• $0.6M to repay assigned debts of Piteiras.

Timing: $2.2M at closing after technical/legal signoff. Remainder spread over 4-6 months.

• Hexa right to :
• appoint/remove key roles: mine manager, CEO, CFO; and block all financial decisions.
• buy, cut and market emeralds (monthly auction)
• Exclusively advance exploration activity & recover costs from Piteiras.

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Piteiras – Binding exclusivity

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Benefits of the Piteiras Deal

Piteiras is a key deal for Hexa:

• It brings us a large emerald resource supported by a (2001 dated) 43-101 report. Very

few emerald mines have a mineral resource estimate, so this significantly underpins the company value. Our reduced estimate is 30 Million carat of resource (reviewed by SGS).

• Strong profitability and cashflow: The mine can be re-started in 4-5 months. Independent

estimates project $18-24 million net profit p.a.

• Long estimated production life: 30+ years.
• Great potential for exploration and resource uplift.

World-class quality and size of gemstones:

• Quality: Known for larger stones. Verified by GIA as higher quality than top Belmont mine.
• Diversifies our emerald business, now Colombia and Brazil. Capturing a wider product

range and market for our emeralds. Co-investor the KGK group is key gem trading partner.

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Piteiras Belt location and area history

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Emerald mining in Minas Gerais is relatively recent:

• Belmont 1978
• Capoeirana – garimpeiro area 1988
• Piteiras discovered in 1998

Area remains under-explored

• Resource area open to west
• Additional emerald targets on lease
• Alexandrite and aquamarine garimpos in close

proximity

• Piteiras discovered via conventional mapping,

geochemistry & geophysics Good multi-gemstone exploration potential Belmont is private company with very little public domain information – clearly a major producer

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Colombian Operations / Licences - Location

Colombia – Western emerald belt (80km North of Bogota):

• Esmeraldas de Coscuez SAS

(EDL112 licence, 2 operating area’s next to historic Coscuez

• mine. historical production)
• EDL113 Coscuez licence (South

West of and bordering the Coscuez mine)

• Las Pavas mine (exploration and

production option – reboot of a historic leading mine).

HEXA RESOURCES

LAS PAVAS DOS RIOS LA PALMA COSCUEZ

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Esmeraldas de Coscuez – Late stage exploration & fast track production potential

Closed Dec 18: Leading Operator - Esmeraldas de Coscuez (EdC), next to Coscuez mine:

• Hexa has secured exploration / operating rights to a large proportion (48%) of EdC’s

69 ha next to the historic Coscuez mine (majority owned and operated by Fura Gems).

• Main Coscuez mine operated over 450 years – is one of top three producing areas in
• Colombia. High quality emerald production. Recent 43-101 resource of 6 Million carat.
• Coscuez anticline and Muzo Formation extrapolated within the EdC licenses. Access

tunnels already in place providing accelerated exploration potential.

• EdC has produced gem quality emeralds historically, and recently in smaller quantities,

and has an active network of 7 tunnels/adits covering circa 4-5km. Terms:

• Purchased 2% JV interest and 2 exclusive operating areas (incl. 2 tunnels) in the EdC

licence area (options available for later equity increase). Hexa receives 60% of net profits as operator as well as equity share (so 60.8% overall economic share).

• US$180,000 purchase price, with $40,000 paid on closing, the rest over 2 years.
• Exploration, planning and mining prep work for 1st 12-14 months.

Esmeraldas de Coscuez Highlights:

• Located next to Coscuez mine
• Significant tunnel infrastructure
• Potential for fast track production

HEXA RESOURCES Fura Gems Coscuez mine EdC licences

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Esmeraldas de Coscuez – Late-stage exploration plans

Exploration programme (12 month period):

• Remapping areas of former reported production within EDL-112
• Surface mapping of extensions of structures onto Hexa licenses (including

satellite data acquisition)

• Geochemical and geophysical testing of targets pre exploration drilling
• Diamond drill testing of targets within existing tunnels - before extending

existing tunnels to locate potential mineralised zones Late Stage exploration:

• To cover the first year following closing
• Focusing on available zones near to the historic

Coscuez mine.

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Hexa - Improving sustainable mining performance

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Production:

• Implement enhanced security processes to reduce stealing
• Install washing plant to improve screening and recovery of small emeralds
• Use more geological inputs and drilling to improve discovery rate
• Consider decline-access tunnel to lower levels, to improve:

➢ air circulation, temperature, materials flow and personnel access.

• Renew electrics, air supply lines, and general equipment

Exploration:

• Geophysical and geochemical surveys to locate potential resource areas
• Detailed mapping and in-mine drilling to identify zones of interest

Corporate & Social Responsibility:

• Provide worker stability by fixing salaries, and motivate with profit share
• Upgrade Health & Safety equipment and procedures and provide training
• Contribute to selected local community projects once business profitable

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Sustainability and Community – a firm commitment

We strongly believe in building a Sustainable Business, which is healthy and safe, and aligned with the environment and the community. This is a key measure of success for us. Health and Safety:

• Aim is to refit the mines, and our work areas, to ensure they comply with International / Colombian

good / best practice. Training will also be carried out to ensure staff are health and safety conscious. Environment:

• Colombian mining authority laws focus mainly on water, effluents, and location of waste tips. We will

endeavour to ensure that we comply with the law and best practices in the disposal of water, and waste.

• We will be seeking to introduce green energy sources (eg solar) to the mines we work in, to reduce

carbon emissions, and help create a cleaner environment. These sources will also assist profitability. Community:

• Our Community Advisor is Ron Ringsrud, who has worked for many years in the Colombian emerald
• industry. He runs a charity called Clayhands which supports the local mining communities of

Muzo/Boyaca by building housing, and community infrastructure. We support Clayhands directly.

• Together with Clayhands we have identified a derelict brick factory near our new Coscuez licences. We

intend to co-invest to re-start this factory, and then have it managed by the local community.

• Our approach in any new area is to research where we can help the community and put in place a long

term support plan.

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Risk Analysis – Top 8 risks

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Contact Details / Key Partners

HEXA RESOURCES

Hexa Resources Limited 31-35 Kirby Street Hatton Garden, London EC1N 8TE Great Britain

Chr Chris is Ha Harris Managing Director chris@hexaresources.com cell: +44 (0)7899 66 44 92 Rory

• ry Dy

Dyer Marketing Director info@hexaresources.com cell: +44 (0)7502 204 352

Key Partners: Legal:

• DuMoulin Black (Canada)
• Holland & Knight (Colombia)
• Arap Nishi Uyeda (Brazil)

Banking:

• Santander Bank (UK)
• BBVA (Colombia)
• Banco Bradesco (Brazil)

Accounting & Security advisory:

• Biz Latin Hub (Bogota)

Technical:

• SGS and others
• Exploration Mapping

Trading & Marketing:

• IEEX SAS, Stone World and KGK