High Grade DSO Iron Ore High Grade DSO Iron Ore at Peculiar Knob is - - PowerPoint PPT Presentation

WPG Resources Ltd WPG Resources Ltd

High Grade DSO Iron Ore High Grade DSO Iron Ore at Peculiar Knob is Just at Peculiar Knob is Just the Start……. the Start…….

Investor Presentation Investor Presentation Investor Presentation Investor Presentation October 2010 October 2010

Key Corporate Information

Directors:

– Bob Duffin (executive chairman) – Heath Roberts (executive) – Gary Jones (executive) – Bob Richardson (independent non executive) – Len Dean (independent non executive) – Lim See Yong (non executive) – Dennis Mutton (independent non executive) ( p )

Executives

– Martin Jacobsen (COO) – Greg Harding (CFO) – Myles Fang (Iron Ore Marketing) – Larissa Brown (Company Secretary) – Adrian Horne (PK Mine Manager)

Cash: $13 6 m (30 September 2010)

Issued shares 121.7m

Cash: $13.6 m (30 September 2010) Directors control 23m voting shares (19%) Institutions 12.2% Good core group of top 50 shareholders both t il d f i l

Unlisted options Share rights 5.8m 2.1m Fully diluted 129 6m

retail and professional TSR (pa): 202% 1 year, 35% 5years (Bloomberg)

Fully diluted 129.6m Market capitalisation $117m ( t $0 90/ h )

Investor Presentation October 2010

2

capitalisation (at $0.90/share)

Our Key Project Assets

IRON ORE

• DSO: Peculiar Knob,

Buzzard and Tui Buzzard and Tui deposits

• Magnetite BIF: Kestrel

d G h k H i and Goshawk, Harrier, Eagle, Kite and Falcon at Hawks Nest H tit BIF B d

• Haematite BIF: Buzzard

and Tui footwall COAL

• Penrhyn, Perfection

Well, Pidinga, Lochiel EXPLORATION O O

• Mt Brady, Windy Valley

Investor Presentation October 2010

3

Our Vision

• Bring Peculiar Knob into production at 3.3 mtpa late 2011
• Bring Buzzard into production later so DSO sales are 3-4 mtpa for minimum 10 year

Bring Buzzard into production later so DSO sales are 3 4 mtpa for minimum 10 year DSO project life

• Continue exploration at Hawks Nest to discover more DSO deposits to extend life

beyond 10 years great exploration prospectivity for DSO beyond 10 years – great exploration prospectivity for DSO

• Commence BFS on Hawks Nest magnetite in 2011 and commit to project

development in 2015 so that magnetite sales are 6-10 mtpa for 30 years from 2016-7

• More testwork on Hawks Nest haematite BIF to supplement magnetite concentrates

with haematite concentrates and add value

• Define measured/indicated/inferred coal resource at Penrhyn of not less than 200

mt by 2013

• Commit to clean coal technology project at Penrhyn producing ~10 mtpa by 2016
• Commit to clean coal technology project at Penrhyn producing ~10 mtpa by 2016
• Divert part of magnetite/haematite concentrates and Penrhyn coal to production of

1-2 mtpa seaborne-traded pig iron by 2017

Investor Presentation October 2010

4

Peculiar Knob DSO

• BFS updated Sep-Oct 2010
• Specular haematite deposit with

Specular haematite deposit with silica gangue; high grade Fe with virtually no impurities

• Very sharp break between ore

and wall rocks

• Lies beneath 15 to 30 m cover
• Effectively all measured and

indicated resource reports to reserves LOM W O t i ti 4 75 1

• LOM W:O strip ratio 4.75:1
• Will market all-fines product at

reserve grade

Investor Presentation October 2010

5

reserve grade

Development Plan – Peculiar Knob

3 3 mtpa to start late

• 3.3 mtpa to start late

2011; maximise use of contractors

• We will build haul road to

Wirrida Siding

• Accommodation village
• Accommodation village

for 190

• Crushing plant at siding
• Rail haulage 11,200

tonnes per train 6 days per week to Port Pirie p

• Transhipment to

Capesize ships in deep water in Upper Spencer water in Upper Spencer Gulf

• One ship every 3 weeks

Investor Presentation October 2010

6

Mineral Resource Estimates Peculiar Knob Peculiar Knob

Category Million Tonnes Fe % P % SiO2 % Al2O3 % LOl % Measured resource 13.6 64.0 0.01 7.11 0.27 0.4 Indicated resource 4.1 63.8 0.02 7.69 0.20 0.4 Inferred resource 1 5 64 6 0 03 6 15 0 20 0 2 Inferred resource 1.5 64.6 0.03 6.15 0.20 0.2 Total resource 19.2 64.0 0.01 7.16 0.25 0.4

Sulphur: 0.009%; Cu, Pb, Zn, Ni, Cr; V, Cl, Ba, As, Zr, Sr, etc: at or BLD To WPG’s knowledge Peculiar Knob is Australia’s highest grade undeveloped Fe deposit Investor Presentation October 2010

7

To WPG s knowledge, Peculiar Knob is Australia s highest grade undeveloped Fe deposit

Ore Reserve Estimates Peculiar Knob Peculiar Knob

Category Million Tonnes Fe % P % SiO2 % Al2O3 % LOl % Proved reserve 13.5 63.2 0.01 8.2 0.35 0.45 Probable reserve 3.2 63.2 0.02 8.6 0.28 0.40 Total reserve 16 7 63 2 0 01 8 3 0 34 0 44 Total reserve 16.7 63.2 0.01 8.3 0.34 0.44

Investor Presentation October 2010

8

Permitting and Approvals

FINALISED

• Mining lease
• Native title mining agreement

g g

• Department of Defence: mining access agreement for mine development, haul

road, accommodation village, rail loader and crusher

• Access and compensation agreements with pastoralists
• Authorities to build infrastructure on all third party exploration licences
• MPLs and EMLs for haul road, infrastructure and borrow pits (tenements offered by

PIRSA; now finalising documentation)

• Stafford borefield – licensed by SA DWLBC (subject to agreeing final

documentation with Defence)

• Train paths

10 30 t t f i d l

• 10 – 30 year port access agreement for iron ore and coal
• Purchase of Port Pirie land (subject to final documentation)

STILL OUTSTANDING STILL OUTSTANDING

• MARP (fully drafted; EPBC referral to Commonwealth for thick billed grass wren)
• Port Pirie Development Application (scheduled to be lodged 5 November)

Investor Presentation October 2010

9

The Importance of Grade

Iron Ore Prices CNF Tianjin 180.0 200.0 Iron Ore Prices CNF Tianjin Source: The Steel Index 140.0 160.0 180.0 80 0 100.0 120.0

tonne

40.0 60.0 80.0

US$/t

62% Fe

0.0 20.0 Nov-08 May-09 Nov-09 May-10 Nov-10

58% Fe

Current price: 62% Fe: US$152/tonne; 58% Fe US$121/t Premium is US$7.75/t per 1% change in Fe content Al t ti l f i f l h l l i d b hi h F

y y

Investor Presentation October 2010

10

Also potential for premium for low phos, low alumina over and above high Fe

PK – Australia’s Best Quality Fines

Peculiar Knob Total Fines Sample Wet size distribution - % wt passing

90 0 100.0

WPR H d i Si t S l

The combination of:

• high Fe grade

50.0 60.0 70.0 80.0 90.0 wt passing

WPR Hyundai Sinter Sample Pilbara Blend Fines

• low P
• low Al2O3

10.0 20.0 30.0 40.0 % w

low Al2O3

• low %age of ultrafines

makes PK the best quality fines

0.0 0.01 0.10 1.00 10.00 Size (mm)

Assay (%)

makes PK the best quality fines produced in Australia

Fines Product y ( ) Fe SiO2 Al2O3 P LOI 1000% Robe River CID 56.30 5.96 2.87 0.041 9.11 Yandi CID 59.22 5.26 1.09 0.044 8.73

WPG has 7 sales MOUs in place for 3.9 – 4.5

Pilbara Blend BID 62.20 4.26 2.07 0.075 4.14 Cliffs BID 62.10 3.96 1.96 0.079 4.26

WPG Fines 63.21 8.28 0.34 0.012 0.44

mtpa which is much more than we will produce

Investor Presentation October 2010

11

BFS – Key Metrics

CAPEX:

• Site $85m
• Port Pirie $54m

T t l $139 OPEX:

• Average cash opex over LOM: $66/t to

FOB

• Royalties add another $6/t
• Total capex: $139m

WORKING CAPITAL:

• Pre-strip, mine, process and transport first
• Royalties add another $6/t
• Total cash opex: $72/t to FOB
• Sea freight $17/t to north Asia
• Cash opex to delivery in China: $89/t

p, , p p 160,000 t: $29m TOTALS

• Total initial capital: $168m

REVENUE

• Spot price CNF: US$152/t
• Total initial capital: $168m

UPSIDE

• Spot price CNF: US$152/t
• In A$: $152/t (at parity)

MARGIN

• Imported steel price has fallen in A$ terms

as A$ rises

• Diesel price falls as A$ rises and opex

would now be $2/t cheaper

• Cash operating margin: $63/t at spot
• Margin on 3.3 mtpa: $208m pa at spot

Peculiar Knob’s Cash Generation Capacity is Very Strong and it is WPG’s Intention to Monetise the Deposit ASAP!!

Investor Presentation October 2010

12

and it is WPG s Intention to Monetise the Deposit ASAP!!

Debt Funding Package

Deutsche Bank AG has been mandated to provide US$120 million debt funding package Package consists of: Conditions include:

• Credit approval
• Due diligence

Package consists of:

• US$70m senior secured notes
• US$50m iron ore pre-pay

Due diligence

• Approval of MARP
• Approval of DA for Port Pirie infrastructure
• Other CPs

Notes carry 8% coupon and are repayable in 3.5 years Other CPs Notes also have detachable warrants totalling 6% of WPG’s capital exercisable at 30% premium to VWAP Iron ore facility is to be satisfied by delivery of 526,000t iron ore fines over 18 months Deutsche Bank will also purchase as an arms Deutsche Bank will also purchase as an arms- length customer a further 1.1mt of iron ore fines at market price

Investor Presentation October 2010

13

PK: Low Capex Intensity

• Capex site only $85m for 3.3

mtpa => US$26/annual tonne pa US$ 6/a ua o e

• Increases to US$42/annual

tonne if Port Pirie capex of $54m is included $54m is included

• Current benchmark US$70-

90/annual tonne (source: Metalytics, London conference Sept 2010)

• For example: Marillana

For example: Marillana US$68/annual tonne (no rail spur) or US$100/annual tonne (with rail spur) (source: BRM (with rail spur) (source: BRM ASX announcement 29 Sep 2010)

Investor Presentation October 2010

14

Port Pirie

• Operated by Flinders Ports
• We have 30 year agreement with

Flinders Ports to use Berth 7

• State government has agreed to

g g sell LMC land to us to build facilities

• Sale is contingent on approval of

g pp MARP and DA

• We will develop facilities with 7

mtpa capacity but will use only mtpa capacity but will use only half; excess capacity to be

• ffered to others
• Will be suitable for Hawks Nest

Will be suitable for Hawks Nest magnetite and Penrhyn coal exports too Investor Presentation October 2010

15

Port Pirie

• We will use a transhipment operation

similar to Whyalla

• But we will use a small ship not tugs
• But we will use a small ship, not tugs

and barges

• First anchorage 11 nm offshore, top

up 12 nm further out up 12 nm further out

• Capacity 7 mtpa => commercial
• pportunity

Investor Presentation October 2010

16

Low Capex Intensity for the Port as Well

100

Iron Ore Ports - WA

30 40 50 60 70 80 90 $/tonne 10 20 Hedland Dampier Cape Lambert Oakajee Anketell Point Simple Average Capex per Tonne of Annual Capacity 90

Coal Ports - NSW and QLD

30 40 50 60 70 80 $/tonne

Iron ore ports: $36/annual tonne capacity (average)

10 20 30 Wiggins Island Balaclava Island Abbott Point Newcastle Port Waratah Simple Average

Coal ports: $40/annual tonne capacity

Port Pirie: $8/annual tonne capacity O t t di l Att ti M t i !

Investor Presentation October 2010

17

Capex per Tonne of Annual Capacity

– Outstandingly Attractive Metric!

The Upside #1 – Depth Extensions at PK

• Whittle pit optimiser wants to push

pit deeper pit deeper

• Bottom of orebody not defined by

drilling to date

• Reserves of 16.7 mt calculated to

maximum depth of 175 m but

• rebody is covered by 20 m of
• rebody is covered by 20 m of
• verburden
• So reserve is ~110,000 t per

vertical metre in the orebody vertical metre in the orebody

• If we extended drilling depth by 60

m there is potential to increase total reserves by ~7 mt

• This would add 2 more years to life
• f mine

Investor Presentation October 2010

18

• f mine

The Upside #2 – Hawks Nest Iron Ore p

WPA 127 000 k

2

• WPA covers 127,000 km2 - same

size as England

• Occupies 13% of South Australia

but 25% of Gawler Craton

• Highly prospective

The Commonwealth engaged Dr

• The Commonwealth engaged Dr

Allan Hawke to review the WPA in May 2010; report expected this year (interim report expected this month)

• WPG is optimistic that an outcome

G s opt st c t at a

• utco

e satisfactory to both the military and the mining industry will eventuate (time sharing model?)

Investor Presentation October 2010

19

(time sharing model?)

Mineral Resource Estimates Totals – DSO Deposits

(Peculiar Knob, Buzzard, Tui) (Peculiar Knob, Buzzard, Tui)

Category Million Tonnes Fe % P % SiO2 % Al2O3 % LOl % Measured resource 25.7 63.1 0.03 7.6 0.8 0.7 Indicated resource 9.3 61.8 0.05 9.2 0.8 0.8 Inferred resource 2.6 63.1 0.05 7.9 0.5 0.4 Total resource 37.6 62.8 0.04 8.0 0.8 0.7 Total resource 37.6 62.8 0.04 8.0 0.8 0.7

NB: Addition of Buzzard and Tui would double the DSO tonnage Investor Presentation October 2010

20

DSO Ore Reserve Estimates (Peculiar Knob and Buzzard only)

Category Million Tonnes Fe % P % SiO2 % Al2O3 % LOl % Proved reserve 25.0 62.1 0.03 8.2 0.83 0.68 Probable reserve 4.5 61.5 0.03 8.4 0.95 0.81 Total reserve 29 6 62 0 0 03 8 2 0 85 0 70 Total reserve 29.6 62.0 0.03 8.2 0.85 0.70

NB: If mining is approved total DSO project life could be g pp p j doubled with minimal additional capex (just the haul road – everything else was built for Peculiar Knob development) Investor Presentation October 2010

21

Mineral Resource Estimates Magnetite Deposits Magnetite Deposits

• Kestrel

Category Million Tonnes Fe % P % SiO2 % Al2O3 % LOl %

• Kestrel

Measured resource 100 37 0.06 37 0.8 0.6 Indicated resource 60 36 0.06 38 1.0 0.8 Inferred resource 60 36 0.06 39 1.1 0.8 T t l 220 36 0 06 38 0 9 0 7

• All magnetite

Total resource 220 36 0.06 38 0.9 0.7 Category Million Tonnes Fe % P % SiO2 % Al2O3 % LOl % Kestrel – measured, 220 36 0.06 38 0.9 0.7

• All magnetite

Kestrel measured, indicated and inferred 220 36 0.06 38 0.9 0.7 Goshawk - inferred resource 148 35

• Cl

t ti l

Harrier - inferred resource 54 35

• Eagle - inferred

resource 92 31

• Clear potential

to increase total resource to >1 billion tonnes

Kite - inferred resource 30 51

• Falcon - inferred

resource 25 32

• billion tonnes

with further drilling Investor Presentation October 2010

22

Total resource 569 36

Hawks Nest EL 4248 and MC 3810 Haematite BIF Mineral Resources

Category Million Fe P SiO2 Al2O3 LOl Tonnes % % % % % Tui - indicated resource 23.9 38.2 0.03 43.5 0.72 0.51 Tui - inferred resource 2.8 36.7 0.02 45.2 0.92 0.61 B d f t ll i f d 29 9 38 9 0 03 41 2 0 97 0 73 Buzzard footwall – inferred resource 29.9 38.9 0.03 41.2 0.97 0.73 Buzzard SE – inferred resource 16.1 35.2 0.11 45.9 1.65 0.73 Buzzard West – inferred 29.8 36.6 0.03 45.4 0.86 0.66 resource Total resource 102.5 37.4 0.04 43.8 0.99 0.66

Exploration Targets

Mineralisation Category Exploration Target Tonnage Range Million Tonnes Fe Grade Range

Exploration Targets

g g g % Magnetite BIF 790 – 890 32 – 37 Haematite BIF 1,400 – 1,680 22 – 43

Investor Presentation October 2010

23

Total 2,190 – 2,570 22 – 43

The WISCO Magnetite Deal – Key Elements

• WISCO will fund first $45m to earn a 50% JV interest in the Hawks Nest

tenement (excluding Buzzard DSO)

• WISCO cannot withdraw until it has spent $25m and if it does then its

interest will be 28% WPG’ i t t t f ll b l 50% d WISCO’ t b >50%

• WPG’s interest cannot fall below 50% and WISCO’s cannot be >50%
• WPG will be manager of the JV (BFS and production stages)
• WISCO will subscribe for 12m WPG shares and nominate 1 person to
• WISCO will subscribe for 12m WPG shares and nominate 1 person to

join WPG’s board

• WISCO to have right to purchase part of WPG’s share of cons

g p p

• WISCO will assist WPG with capex and funding of Port Bonython
• Deal fully executed, has NDRC approval and meets FIRB guidelines

but Defence won’t yet support it

• Deal swings on outcome of the Hawke Review

Investor Presentation October 2010

24

The Upside #3 - Penrhyn Coal Project

Permian semi-bituminous coal in the Arckaringa Basin 40 km SW of Coober Pedy and 20 km from P li K b h l d d il l d

Coal Category Exploration Target Tonnage Range (mt)

Peculiar Knob haul road and rail loader

Sub-Bituminous Coal 200 – 300

• Ash 6.5% - 20%
• Moisture 32%

36%

• Moisture 32% - 36%
• CV Seam 4: 27.7 MJ/kg; increases to

28.5 MJ/kg after washing

• Similar to Lake Phillipson coals (sold to

p ( WEC for >$35m August 2010 but no access then on ground)

• Water washing is effective in salt removal
• WPG sees Penrhyn as domestic power
• WPG sees Penrhyn as domestic power

station coal or suitable for upgrading for export using emerging clean coal technology

Investor Presentation October 2010

25

gy

The Upside #4 – Leverage off Port Access

WPG has a number of opportunities to leverage the 3-4 mtpa spare capacity in its port access agreements:

• Clip the ticket

C p t e t c et

• Joint venture into projects
• M&A

The port access agreements represent a very valuable asset to the Company a very valuable asset to the Company. WPG intends to run the port as a WPG intends to run the port as a separate profit centre. Investor Presentation October 2010

26

Comparison with Portman – DSO Only! p

y

• Same distances mine/siding/port
• PMM mining commenced 1995 at 1 mtpa
• At Dec 97 PMM resource had grown to 37

mt with reserves 15 1 mt at 63% Fe

96 km

mt with reserves 15.1 mt at 63% Fe

• WPG’s DSO resource now 37.6 mt at

62.8% and reserves 29.6 mt at 62% Fe

mine/siding; 650 km siding/port

• PMM resource grew after mining started

by exploration PMM i d

• PMM acquired

by Cliffs Nov 2008 for $3 3bn

100 km mine/siding;

2008 for $3.3bn

• Why can’t WPG

reproduce this?

mine/siding; 575 km siding/port Investor Presentation October 2010

27

p

Competent Persons p

• The review of exploration activities and results and the mineral resource estimates for the Peculiar Knob, Buzzard and Tui DSO deposits and

the non-Kestrel magnetite deposits at Hawks Nest contained in this presentation are based on information compiled by Mr Gary Jones, a Member of the Australasian Institute of Mining and Metallurgy. He is Technical Director of WPG Resources Limited and a full time employee

• f Geonz Associates Limited. He has sufficient experience which is relevant to the style of mineralisation and types of deposits under

p y yp p consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the December 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). Gary Jones has consented in writing to the inclusion in this presentation of the matters based on his information in the form and context in which it appears.

• The mineral resource estimate for the Kestrel magnetite deposit at Hawks Nest contained in this presentation is based on information

compiled by Mr Arnold van der Heyden a Member of the Australasian Institute of Mining and Metallurgy He is an employee of Hellman & compiled by Mr Arnold van der Heyden, a Member of the Australasian Institute of Mining and Metallurgy. He is an employee of Hellman & Schofield Pty Ltd. He has sufficient experience which is relevant to the style of mineralisation and types of deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the December 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). Arnold van der Heyden has consented in writing to the inclusion in this presentation of the matters based on his information in the form and context in which it appears.

• Th

ti t f th P li K b d B d d it t i d i thi t ti b d i f ti il d b M

• The ore reserve estimate for the Peculiar Knob and Buzzard deposits contained in this presentation are based on information compiled by Mr

John Wyche, a Member of the Australasian Institute of Mining and Metallurgy. He is an employee of Australian Mine Design and Development Pty Ltd. He has sufficient experience which is relevant to the style of mineralisation and types of deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the December 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). John Wyche has consented in writing to the inclusion in this presentation of the matters based on his information in the form and context in which it appears.

• The review of exploration activities and results for the Penrhyn coal deposit contained in this presentation is based on information compiled

by Mr Gary Jones, a Member of the Australasian Institute of Mining and Metallurgy. He is Technical Director of WPG Resources Limited and a full time employee of Geonz Associates Limited. He has sufficient experience which is relevant to the style of deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the December 2004 edition of the Australasian y g q y p Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). Gary Jones has consented in writing to the inclusion in this announcement of the matters based on his information in the form and context in which it appears.

• The exploration targets in this presentation are based on the currently available drill hole data and are conceptual in nature. There has been

insufficient exploration to define a mineral resource, and it is uncertain if further exploration will result in the determination of a mineral resource

Investor Presentation October 2010

28

resource

Important Notice p

• This presentation contains forward looking statements concerning the projects
• wned by WPG Statements concerning mineral resources and ore reserves may
• wned by WPG. Statements concerning mineral resources and ore reserves may

also be deemed to be forward looking statements in that they involve elements based on specific assumptions

• Forward looking statements are not statements of historical fact, and actual events

lt diff t i ll f th d ib d i th f d l ki

• r results may differ materially from those described in the forward looking

statements as a result of a variety of risks, uncertainties and other factors. Forward looking statements are based on WPG’s beliefs, opinions and estimates as of the date they are made and no obligation is assumed to update forward looking t t t if th b li f i i d ti t h ld h fl t th statements if these beliefs, opinions and estimates should change or reflect other future developments

• Data and amounts shown in this presentation relating to capital costs, operating

costs and project timelines are based on consultant reports, contractor quotes and costs and project timelines are based on consultant reports, contractor quotes and internally generated estimates

• WPG cannot guarantee the accuracy and/or completeness of the figures or data in

this presentation

• All d ll

t i di t d i thi t ti i A t li d ll l

• All dollar amounts indicated in this presentation are in Australian dollars unless
• therwise stated.

Investor Presentation October 2010

29