Nickel and Cobalt Producer Morgans PNG Investor Tour September 2018 1
Disclaimer This presentation has been prepared by Highlands Pacific Limited (“Company”) . The material contained in this presentation is for information purposes only. This presentation is not an offer or invitation for subscription or purchase of, or a recommendation in relation to, securities in the Company and neither this presentation nor anything contained in it shall form the basis of any contract or commitment. This presentation is not financial product or investment advice. It does not take into account the investment objectives, financial situation and particular needs of any investor. Before making an investment in the Company, an investor or prospective investor should read this document in its entirety, consider whether such an investment is appropriate to their particular investment needs, objectives and financial circumstances, seek legal and taxation advice appropriate to their jurisdiction and consult a financial adviser if necessary. The Company is not licensed to provide financial product advice in respect of the Company’s securities. This presentation may contain forward-looking statements that are subject to risk factors associated with exploring for, developing, mining, processing and sale of commodities. Forward-looking statements include those containing such words as anticipate, estimates, forecasts, should, will, expects, plans or similar expressions. Such forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties, assumptions and other important factors, many of which are beyond the control of the Company. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a range of variables and changes in underlying assumptions which could cause actual results or trends to differ materially. Nothing in this document is a promise or representation as to the future. Actual results may vary from the information in this presentation and any variation may be material. Past performance is not an indication of future performance. Statements or assumptions in this presentation as to future matters may prove to be incorrect and any differences may be material. The Company does not make any representation or warranty as to the accuracy of such statements or assumptions. Investors are cautioned not to place undue reliance on such statements. This presentation has been prepared by the Company based on information available to it and has not been independently verified. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this presentation. To the maximum extent permitted by law, none of the Company or its subsidiaries or affiliates or the Directors, employees, agents, representatives or advisers of any such party, nor any other person accepts any liability for any loss arising from the use of this presentation or its contents or otherwise arising in connection with it, including without limitation, any liability arising from fault or negligence on the part of the Company or its subsidiaries or affiliates or the Directors, employees, agents, representatives or advisers of any such party. The Company estimates its reserves and resources in accordance with the Australian Code for Reporting of Identified Mineral Resources and Ore Reserves 2012 Edition (“JORC Code”), which governs such disclosures by companies listed on the Australian Securities Exchange. Throughout the presentation all figures are quoted in US$ unless otherwise stated
Corporate Structure Capital Structure Shares on issue 1093m Share price A$0.11 Market capitalisation A$120m Cash (June 2018) A$22.1m Major shareholders ▪ Cobalt Streaming 13.04% company ▪ Chinese State-owned entity based in 11.8% GRAM Guangzhou ▪ JV partner at Frieda River LIM Advisors ▪ HK investment fund 9.4% Tribeca ▪ Investment fund 7.94% 3
Established player in PNG • World class copper, gold and nickel projects • RAMU nickel-cobalt mine - annual production Co - 3300t, Ni - 34,000t • STAR MOUNTAINS copper- gold project - exploration drilling • FRIEDA RIVER copper-gold project - being permitted • SEWA BAY nickel laterite - exploration • +20 years operating history in PNG makes Highlands an ideal project partner • Past involvement in the Porgera Gold Mine, Kainantu Gold Mine and various exploration sites in PNG 4
Compelling investment case • Perfectly positioned for battery metals revolution • Major exposure to nickel, cobalt, copper - as well as gold • Debt free following finalisation of transformational streaming deal • Generating significant cashflow • Poised for growth, focused on generating shareholder returns Resource base of Highlands’ Copper Gold Nickel Cobalt projects (Ramu, (Mt) (Mozs) (kt) (tonnes) Freida River, Star Mountains) Total Resource Contained Metal 13.6 24.3 1224 136,000 HIG share* 3.4 7.2 105 8037 *Post Cobalt27 streaming transaction, assuming US$15 million investment in stream. 5 See full resource statements included in appendix. Excludes Sewa Bay potential.
EV fuelled battery market revolution Incremental commodity demand Global Electric Vehicle sales to surge…. in a 100% EV world (% increase) Source: Bloomberg New Energy Finance Source: UBS Gas/Diesel Vehicle Ban China has set a target that would 39+ Automakers see zero emission vehicles have invested in electric and Governments are responding by banning the sale of gasoline and diesel vehicles by: 2019 - 10% of new sales plug-in hybrid electric vehicles 2020 - 12% of new sales 2025 - Norway and Netherlands 2030 - India and Germany 2040 - UK and France 6
Cobalt demand rising • Ramu is one of the world’s largest cobalt mines and produces preferred MHP product for EVs Global annual Co production 108,000t Cobalt Market moving into deficit Source: Research in China Source: Wood MacKenzie 7
Nickel demand driven by batteries Nickel demand for EV and Energy Storage batteries • ~15m EV production in 2025 would mean an additional ~300-900ktpa of incremental nickel demand which is +10- 40% of demand - UBS, July 2017 • Only ~50% of nickel mine supply is suitable for battery Stagnant supply of preferred nickel product use. Nickel sulphide producers & nickel HPAL’s which produce high grade nickel products stand to benefit (nickel concentrate, nickel metal, nickel hydroxide or lithium nickelite). – UBS Source: UBS, AME, World Steel Association, International Nickel Study Group, Bloomberg 8
Nickel demand – 14 Ambatovys by 2030 9
Nickel price to surge 10
RAMU 11
Ramu Nickel Cobalt – PNG success story • Joint venture – Highlands 11.3% 1 , MCC Ramu 82.26%, PNG Govt and landowners 6.44% • $2.1 billion capex • Annual production 34,000t Ni, 3300t Co • Mine at Kurumbukari. 135km slurry pipeline to Basamuk port • Constructed 2008, commissioned 2012 • HPAL success story for nickel laterite 12 Note 1: Post repayment of Highland’s portion of Ramu project debt
Ramu Nickel Cobalt – Long Life • Resource: 136 Mt @ 0.9% Ni and 0.1% Co • Reserve: 56 Mt @ 0.9% Ni and 0.1% Co • Resource/reserve growth to deliver mine life of +35 years • Mining: Open pit, free digging • Utilizing hydro-sluicing successfully • Strip Ratio: Low 0.28:1 13
Record production in 2017 Nickel Production Co Production (In Concentrate, tonnes) (In Concentrate, tonnes) 34666 34000 3308 3300 25582 H2 22269 16630 Mine 20987 H2 2191 2134 life of 1656 2004 30+ years 11369 H1 1013 17370 5383 H1 469 1644 2012 2013 2014 2015 2016 2017 2018 (f) 2012 2013 2014 2015 2016 2017 2018 (f) 14
Ramu project generates strong margins Strong Production (t) Rising Metal Prices (USD) 40000 5000 18000 70000 Cobalt RHS 4500 16000 35000 60000 Nickel LHS 4000 14000 30000 50000 3500 12000 Cobalt RHS 25000 3000 40000 10000 Nickel LHS 20000 2500 8000 30000 2000 15000 6000 1500 20000 10000 4000 1000 10000 5000 2000 500 0 0 0 0 2012 2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 Increasing Revenues (USD) Strong Production 413 + Rising Metal Prices 302 = Increasing Revenue 220 203 181 + Low Costs (~US$7,500/t Nickel before Cobalt credits) = Strong Margins 15 2013 2014 2015 2016 2017
Ramu streaming transaction • Highlands receives US$113 million • Cobalt27 takes 55% of Highland’s share of future Ramu cobalt production and 27.5% of Ramu future nickel production • Cobalt27 will make ongoing volume based payments to Highlands of US$1.00/lb of Ni and US$4.00/lb of Co 1 • Proceeds used to fully repay Highland’s share of Ramu debt • Highland’s interest in Ramu increases from Kurumbukari mine site 8.56% to 11.3% • Highlands retains right to acquire US$15 million interest in streaming agreement (for 90 days from close) • If exercised, Cobalt27 would take 47.7% of Co and 23.9% of Ni entitlement from Ramu • Cobalt27 pursuing equivalent streaming arrangement with MRDC. • Share placement to Cobalt27 completed and ongoing strategic relationship established Basamuk process plant 1. Subject to inflation adjustment from June 2023 16
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