Investor Presentation Strategy Discussion: Melior Resources Pathway - - PowerPoint PPT Presentation

Investor Presentation

Strategy Discussion: Melior Resources Pathway Forward

1 August 2016

This presentation contains information about Melior Resources Inc. (“Melior”) and should be read in conjunction with Melior’s public filings available at www.sedar.com and at www.meliorresources.com. The content of this presentation is not to be construed as legal, financial or tax advice. Any reader should contact his, her or its own professional advisors for legal, financial, tax or other advice. Certain information contained in this presentation constitutes forward looking information under the provisions of Canadian securities laws. Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the use of forward-looking terminology such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates", “projects”, “potential”, "believes" or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", “should”, "might" or "will be taken", "occur" or "be achieved" or the negative connotation. Such statements and information include, without limitation, statements regarding, the estimated mineral resources at the Goondicum property, and other aspects of the Goondicum mine. This forward looking information is subject to numerous risks, uncertainties and assumptions, certain of which are beyond the control of Melior including the impact of general economic conditions; industry conditions; volatility of minerals prices; volatility of commodity prices; currency fluctuations; mining risks; risks associated with foreign operations; governmental and environmental regulation; competition from other industry participants; the lack of availability of qualified personnel or management; stock market volatility. Readers are cautioned that the material assumptions used in the preparation of such information, although considered reasonable by management at the time of preparation, may prove to be imprecise. Actual results, performance or achievement could differ materially from those expressed in, or implied by, this forward-looking information and, accordingly, no assurance can be given that any of the events anticipated by the forward- looking information will transpire or occur, or if any of them do so, what benefits Melior will derive therefrom. Melior disclaims any intention or obligation to update or revise any forward-looking information, whether as a result of new information, future events or otherwise except as required by applicable securities laws. For more information on the risks, uncertainties and assumptions that could cause Melior’s results, performance or achievement to differ from current expectations, please refer to the “Risk Factors” section of Melior’s Annual Information Form dated November 19, 2014, Melior’s first quarter Management’s Discussion and Analysis

• f Financial Condition and Results of Operations dated November 19, 2015, as well as Melior’s other public filings, available at www.sedar.com and at

www.meliorresources.com.

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FORWARD LOOKING STATEMENTS DISCLAIMER

The expectations outlined in this presentation regarding the re-start of the Goondicum Mine represent management’s objectives based on its internal analysis and studies of project scope, capital costs and production plans (the “Internal Analysis”) which have included detailed mechanical and electrical design as well as quotes on equipment and construction work packages. However, the Internal Analysis relies in part on inferred resources and does not constitute a preliminary feasibility study or a feasibility study for the purposes of National Instrument 43-101. As a result, the internal analysis is subject to increased uncertainty and technical and economic risks

• f mine failure and there can be no assurance that management’s expectations will be achieved.

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RESOURCE CATEGORY & INTERNAL ANALYSIS DISCLAIMER FORWARD LOOKING STATEMENTS DISCLAIMER (CONT’D)

The scientific and technical information, as it relates to the Goondicum property, in the 43-101 report effective as of February 2014 has been reviewed and approved by Simon Tear (BSc (Hons), MIAusIMM, PGEO, EurGeol, IMO3) a director H&SC, Graham Lee (BSc, FAusIMM, CP(Geo)), an Associate of H&SC and Chris Desoe (B.E.(Min)(Hons), FAusIMM, RPEQ, MMICA), who are all Qualified Persons under National Instrument 43-101. A new geological model has been developed with four mineralised units being delineated from drilling information and surface topography/mapping, thought to represent in situ to short-distanced transported material from both alluvial and gravity slide (soil creep) processes. The gabbro in the area under investigation has undergone multiphase oxidation and erosion producing a relatively complex weathering pattern of the host rock. The decomposed gabbro is believed to be in situ. Mineralisation comprises resistive ilmenite liberated by the relatively complex weathering process. Reporting of the resource estimates used a 2.5% available ilmenite cut-off grade and a partial percent volume adjustment factor for the 2013 topographic surface. Reconciliation of the new H&SC block model with the 2012-2013 production showed a 10% difference which is considered acceptable for an Indicated Resource. Further exploration opportunities exist within the remainder of the Goondicum Crater as some of the earlier drilling work by Monto Minerals had intersected significant amounts of similar style mineralisation within the Goondicum Crater. For detailed technical information please see the technical report prepared by H&SC Consultants Pty Ltd effective as of 25 February 2014, which is posted on Melior’s SEDAR profile.

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INVESTMENT HIGHLIGHTS

Melior’s attractive value proposition

1. Investing at the right time – opportunity to gain ilmenite exposure at the bottom of the market 2. Brownfield mining project already commissioned, with a quick restart timeline and low capex requirement 3. New early stage technology (Browne Process) has the potential to upgrade Goondicum products to higher margin products as well as be applied to other industries 4. Proximity to key markets and in a mining-friendly jurisdiction 5. Current market cap not reflective of potential asset valuations

CONTENTS Melior Overview Goondicum Mine Browne Process Technology Market Overview Funding Requirement

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Melior Resources

Melior Resources Inc. is currently a Tier I Investment Issuer listed on the TSX Venture Exchange Melior’s assets include: 100% of the Goondicum Mine 100% of the Browne Process 6.1% of Asian Mineral Resources Resources (TSX.V: ASN), with market value of C$1.4m. AMR

• wns and operates the Ban Phuc sulphide nickel

mine in Vietnam.

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Share Price1 C$0.025/share Shares Outstanding1 211.47m Market Capitalization1 C$5.3m Cash & Short-Term Investments2 C$0.5m Drawn Down Debt2 US$2.2m Total Available Debt Facility US$0.475m

Key Shareholders

1. As of July 2016 2. As of June 2016

Pala Investments 45% Takota Asset Management 13% Belmont Park Investments 9% Panarama Ridge 9% Others 24%

Melior management owns ~ 10.0%

CONTENTS Melior Overview Goondicum Mine Browne Process Technology Market Overview Funding Requirement

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Cost-effective restart with working capital requirement of ~ A$7.5m Optional capex spend of ~ A$5.0m to complete construction of the Eastern Access Road (“EAR”) Attractive operating cost base sees cash breakeven forecast in today’s market conditions

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GOONDICUM MINE

Operations primed to restart as soon as market allows

Cost-Efficient Operations Commissioned and operated at a plant capacity rate of 375t of ore per hour Historical sales of more than 65kt of ilmenite product successfully shipped to customers Fully-permitted mine with ~ A$130m of investment to date and infrastructure in place Low Technical Risk Operations to date indicate average LOM production of ~ 170,000tpa of ilmenite and ~ 45,000tpa of apatite Continuous high-grade portion of the resource yielding 20Mt at 11.4% ilmenite Significant resource-expansion potential compliments the existing mining lease Favorable location for Asian markets and customer base Strong Project Fundamentals

Established mine site with mining, processing and logistics infrastructure in place − More than 65kt of ilmenite historically produced and sold over the history of the mine with Melior achieving production in excess of 18kt of ilmenite since mid-April 2015

− ~ A$130m has historically been spent on

commissioning the existing processing plant and significant related infrastructure as well as undertaking an extensive drilling program Located in a mining-friendly jurisdiction

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Low-risk mine with significant historical investment

GOONDICUM MINE

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Capital & operating highlights

Mine Life Production Processing capacity of 2.8Mtpa Target average ilmenite production of ~ 170ktpa over the life of mine Target average apatite production of ~ 45ktpa over the life of mine Mine Commissioned Targeted commissioning plant capacity rate

• f 375t of ore per hour was achieved in Q2

2015 Cost of Production Competitive average unit operating costs

• ver the life of mine following construction of

EAR − ~ A$5.0M spend on construction of EAR reducing haul distance to port by 100km Limited working capital requirement to reinitiate operations

GOONDICUM MINE

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Strong achievable production profile

Goondicum is fully commissioned to achieve ilmenite production of ~ 170ktpa once the mine reinitiates operations

1. Production projections based on management assumptions

50,000 100,000 150,000 200,000 250,000 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Tonnes

Goondicum Target Ilmenite and Apatite Production

Ilmenite Apatite

GOONDICUM MINE

CONTENTS Melior Overview Goondicum Mine Browne Process Technology Market Overview Funding Requirement

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BROWNE PROCESS TECHNOLOGY

Work commenced in late 2015 and is demonstrating successful early stage results

Benchtop scale testing1 has demonstrated the Browne Process will: ► upgrade the TiO2 content of different ilmenite types to as high as 85%, at temperatures significantly less than conventional slagging processes ► upgraded product (UGI) appears appropriate for use in the sulphate pigment manufacturing process ► test work completed on Goondicum’s titano-magnetite (TM) is indicating that this product will yield foundry iron along with a UGI containing up to 48% TiO2 IP assigned to Goondicum Resources Pty Ltd and patent application pending Hatch consultants have provided technical input into the design of the testwork programs, analysis of the results, and subsequent review of the Browne Process.

1. The Heater15 test program was conducted on 100gm samples and the Heater35 test program was conducted on 5.5kg samples

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BROWNE PROCESS TECHNOLOGY

Initial test work program has delivered very promising results

► Lower temperature process means significantly reduced complexity of operating the furnace and associated material handling systems ► Reduced energy consumption per tonne of product ► Reduced consumable and maintenance cost for the system through less wear and tear via lower temperature operation ► Lower capital costs per tonne of installed capacity and amenability to small scale operation ► Value created out of titano-magnetite (Goondicum project specific)

Offers potential upgrade to product pricing as UGI-style products are indicated at ~ US$300/t FOB for 80% TiO2 and foundry iron is ~US$200/t FOB (depending on the impurities present in the iron product) The Browne Process can potentially be applied to a range of ore types including magnetite (to directly produce foundry iron for the Electric Arc Furnace feed) and limestone (to produce quicklime)

Ilmenite feed => Raw Product => Foundry Iron UGI

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BROWNE PROCESS TECHNOLOGY

Driving the Browne Process to development

Stage 3 cost estimated to be ~ US$500k and achieve:

► Further benchtop testing ► Design and construction of an optimal benchtop-scale Bauer Heater ► Benchtop testing and analysis using the Bauer Heater ► Flow sheets and construction costing confirmed for a pilot plant ► Patent applications progressed in key geographic locations, such as Australia, USA and China ► Positioning for appropriate means of commercialisation

Potential risks on commercialisation of the Browne Process include:

► Technical risks with further scale up to full production ► Final confirmation of the operating and capital costs ► Maintenance of confidentiality and IP

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BROWNE PROCESSING TECHNOLOGY

Leveraging the technology

Monetisation of the technology may be achieved in several ways:

1 Restart Goondicum offering a higher margin product 2 Purchase third party ilmenite for upgrading in- house and subsequent on-sale 3 Sell or licence the technology to a third party 4 Combination of the above

CONTENTS Melior Overview Goondicum Mine Browne Process Technology Market Overview Funding Requirement

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0.0 0.5 1.0 1.5 2.0 2.5 3.0 TiO2 Pigments Zinc Oxide Clay Calcium Carbonate Vaccum Refractive Index

TiO2 & ilmenite market overview

Titanium dioxide (TiO2) pigment is a fine white powder used in paints, plastics and paper products - which imparts whiteness, brightness and opacity on the products Titanium dioxide pigments are produced from titanium feedstocks such as ilmenite, rutile and titanium slag

► 90% of titanium feedstocks are used for the manufacture of titanium pigment

Titanium pigments are produced using the sulphate process or the chloride process

► The sulphate process, prevalent in China, utilizes ilmenite and slag feedstocks

Little ability to substitute other products for TiO2 pigments given TiO2’s uniquely high position on the refractive index

90% 4% 6% Pigments (paint) Titanium sponge Other (welding)

TiO2 use by end market Few viable substitutes for TiO2

Highly opaque

Source: Credit Suisse Source: DuPont

More than 50% of global ilmenite feedstock is used in Chinese sulphate pigment plants – shift to chloride processing is unlikely in the near-term

“TZMI believes it could be another 4-5 years before China produces a more meaningful and consistent amount of chloride-based TiO2. The focus in the near-term will therefore continue to be on improving the sulphate process.” RBC – November 7, 2013

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Growing ilmenite demand from China and TiO2 feedstock substitution

Strong sulphate feedstock demand in China

Ilmenite is the preferred TiO2 feedstock

Increase in global feedstock prices has strengthened the case for substitution to sulphate pigment production using lower-cost ilmenite

► Stronger profit margins being realized by sulphate-based TiO2

Evidence of continued strength in sulphate ilmenite demand illustrated by recent M&A activity

Source: Goldman Sachs Source: Credit Suisse

16% 31% 53%

Feedstock Consumption by Type

High Grade - China High Grade - Rest of World Low Grade - China $0 $200 $400 $600 $800 $1,000 $1,200 2007 2008 2009 2010 2011 2012 2013 2014E 2015E $/t TiO2 Production Cost - Sulfate Production Cost - Chloride

Robust demand expectations and increasing pressure from TiO2 producers likely to translate to higher raw material costs and improved pricing dynamics Concerns around China ramping up and depressing prices further are

• verstated:

► Pigment exports have largely moderated since peaking in 2010 ► Limited opportunity for Chinese TiO2 producers due to their low quality product ► Chinese government motivated to slow down its TiO2 industry due to pollution considerations 20

Investing at the low point of the ilmenite cycle will lead to superior returns

Price recovery in 2016 expected to remain

Source: Credit Suisse report (28-Mar-14) for 2009-2013 historical prices; TZMI reports for 2014-2016 historical prices; Q1 2016 represents January and February 2016 only

1.5 2.0 2.5 3.0 3.5 4.0 4.5 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 '000 TiO2 units Existing supply & approved projects/expansions Underlying demand 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 10,000 20,000 30,000 40,000 50,000 Pigment Apparent Consumption (kg) GDP Per Capita (PPP Basis 2005$)

China (annual) Japan (Average) South Korea (Average) Western Europe (Average) USA (Average) Indicative S- Curve

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TiO2 demand is anticipated to increase significantly as both developed and emerging economies continue to strengthen TiO2 is a late-cycle commodity with usage increasing substantially as GDP per capita rises

► China is anticipated to require significantly more TiO2 ► Population forecast to peak at 1.4 billion in 2025 with middle-class growing to 70% by 2020 ► Urbanization in Asia, Latin America, and India will further improve TiO2 demand

US housing recovery presents near-term upside The leading TiO2 sector consultancy believes that the ilmenite market will move into a supply deficit from 2016 onwards

Source: J.P. Morgan estimates

Pigment consumption vs. GDP per capita Strong TiO2 & ilmenite outlook Ilmenite supply & demand forecast

Source: Rio Tinto

Strong fundamentals support growing TiO2 demand

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Phosphate rock (Apatite)

• Projected average production of 45,000 tonnes per annum
• Rich in phosphate; low contaminants
• Apatite is a slow release refractory rock ideal for organic fertilizer

manufacture

• No competing domestic supplier to organic market in Australia
• Monto’s location offers a strong competitive advantage
• A lucrative second source of project revenue

CONTENTS Melior Overview Goondicum Mine Browne Process Technology Market Overview Funding Requirement

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FUNDING REQUIREMENT

Use of proceeds

Melior’s funding requirement for the next 12 months is C$2.6 million including:

Melior is seeking expressions of interest for equity funding (net of costs) of up to C$2.6 million by October 2016

Use of funds C$m Goondicum costs 1.95 Planned PTP expenditure 0.65 Total 2.60

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EXECUTIVE SUMMARY

Corporate thinking and strategy

The Goondicum mine provides excellent exposure and leverage at a low point in the ilmenite market cycle, with strong indications of an improving titanium feedstock sector Introduction of the new Browne Process technology has potential for:

► adding material value to Goondicum, independent of market movements; and, ► creating significant value for Melior in its own right

The Browne Process, whilst still in the development stage, has the potential to deliver material value in a relatively short time frame and with a relatively low capital requirement compared to other R&D projects There are some mutual benefits between Goondicum and the Browne Process, however they are not necessarily dependent on each other Melior will focus on optimising the holding structure of these two assets over the next 6 – 8 months with a view to realizing the full value of Goondicum and continuing to fund the Browne Process development

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The Goondicum deposit is comprised of near- surface, ilmenite-rich oxidized gabbro A feasible mine plan shows 39mt at 7.66% available ilmenite mined over a 12 year mine life with average ilmenite production of ~200ktpa Continuous high-grade portion of the resource yielding 20mt at 11.4% available ilmenite ~48ktpa of apatite also produced as a by-product, enhancing production and cash flow Potential to recover additional vanadium containing titanomagnetite and feldspar by- products

Goondicum Resource

Category Lithology 43-101 Mineral Resource Tonnes (mill.) Available Ilmenite (%)1 Available Ilmenite (mill. tonnes)2 Indicated CL 4.1 10.8 0.45 CS_H 4.9 12.9 0.63 CS_L 5.0 4.0 0.20 DG 17.3 3.6 0.62 Total 31.3 6.1 1.90 Inferred CL 2.5 10.1 0.25 CS_H 8.8 11.2 0.99 CS_L 5.9 4.0 0.23 DG 13.7 3.3 0.46 Total 30.9 6.3 1.93

Resource estimates from HS&C 43-101 report February 2014 1. Available ilmenite represents the total amount of ilmenite present in the 5.5AM recovered magnetic fraction and is calculated for each interval submitted as part of a composite sample 2. Minor rounding errors

Large Existing Resource Base

Charles Entrekin – Chairman − Over 35 years of experience in the mining and metals sector − Previous President and Chief Operating Officer of Titanium Metals Corporation, a $2.8 bn NYSE listed titanium alloy producer − Previous President and Chief Executive Office of Timminco Ltd, a TSX-listed magnesium, silicon and aluminum company − Successfully implemented restructurings and turnarounds of mining and metals companies in North America and worldwide Martyn Buttenshaw – Director − Over 13 years of direct mining experience within technical and management roles at Rio Tinto and Anglo American − Currently a Vice President with Pala Investments and a director of Asia Mineral Resources Limited − Former director of Sierra Rutile Limited Mark McCauley – Director & CEO − Substantial mining experience and involvement in the development of several major mining projects in both Australia and Argentina, including turnaround and organizational restructuring − Previously Non-Executive Director and Chair of the Audit Committee at Norton Goldfields − Previously served as Chief Financial Officer and Company Secretary of Felix Resources Ltd, an ASX-listed coal mining company during which time the market capitalization increased from $35m to over $1 billion − Most recently was Managing Director of RMM Capital, a private equity investor specializing in mining and resources − Completed the Advanced Management Program at Harvard Business School in 2003, holds an MBA from Bond University in Australia and has a Bachelor of Engineering from the University of Queensland

Board of Directors

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Ilmenite feed => Raw Product => Foundry Iron UGI