Providing finance for Critical Metals with a market value of over US - - PowerPoint PPT Presentation

“Providing finance for Critical Metals with a market value

• f over US $370 billion per annum”

The Critical Metals Streaming Company

2

Contents

• Overview

3-5

• Demand is Growing

6-8

• The Mining Sector Needs Finance

9-12

• Streaming Provides Finance

13-15

• Medium to High Risk Critical Metals

16-18

• AUS Streaming Advantage

19-22

• AUS Streaming Competition

23-25

• Summary

26-28

• Reference

29

• Important Information

30

3

“Securitised Streaming Contracts provide debt with equity - a much needed financing solution for mining companies”

Overview

4

Introduction

• AUS Streaming Investments Limited (AUS Streaming) completed an agreement on June 30th 2015 to

be acquired by ASX listed Murchison Holdings Limited (ASX:MCH). Upon approval at its EGM, Murchison Holdings Limited will change its name to AUS Streaming Limited and AUS Streaming will become a wholly owned subsidiary of Murchison Holdings Limited.

• AUS Streaming currently has $300m + of legacy assets that it will be selling down and re-investing into

Securitised Streaming Contracts for critical metals.

• Critical Metals targeted by AUS Streaming have annual sales of over US $370 billion per annum and

cover a third of all mining production by value. 1

• There are currently only 4 public streaming companies as compared to over 2,400 public mining
• companies. 1
• One of the leading public streaming and royalty companies, Silver Wheaton (TSE: SLW), addresses a

market a third of the size of AUS Streaming and has a current market cap of over $7bn.

• Recent challenging times in the mining sector have resulted in a lack of available financing which,

coupled with forecast increased demand, has created a unique window for value creation.

Key Statistics Ordinary shares 2 320,000,000 Net Asset Value per share 2 $0.93 Fair Value per share 3 $1.51 Senior Management Chris Every CEO Christopher Tawney CFO Warren Straude Director FY End 31st December 2016 2017 2018 2019 2020 Gross Revenue ($ 000’s) 3,125.00 26,250.00 93,125.00 200,000.00 320,000.00 Cost of Production 0.00 3,750.00 26,250.00 75,000.00 135,000.00 Expenses & Tax 5,639.36 17,165.77 33,710.80 50,977.66 69,930.07 Net Income ($ 000’s)

• 2,514.36

5,334.23 33,164.20 74,022.34 116,710.14 Net Assets ($ 000’s) 321,725.64 327,059.87 360,224.07 434,246.41 550,956.55 Diluted Shares Outstanding (000,000’s) 420.00 420.00 420.00 420.00 420.00 Earnings Per Share (0.01) 0.01 0.08 0.18 0.28 Net Asset Value Per Share 0.77 0.78 0.86 1.03 1.31

AUS Streaming Corporate Snapshot

5

6

“Commodity demand will continue to grow – Driven by population growth and urbanisation of over 1.5 million people PER WEEK”

Demand is Growing

• The Global Economy is in the middle of a “Great Transformation” from “North to South” that began at

the beginning of the 21st century.

• Global GDP is projected to grow by over 250% between now and 2050. 4
• The global population has grown from 3.6 billion in 1970 to 7 billion in 2011 and is forecast to grow to
• ver 9 billion by 2050 (over two thirds of whom will be in emerging markets). 4
• The global middle class was 1.8 billion at the end of 2009, and is projected to grow to 3.2 billion by

2020 and 4.8 billion by 2030. 5

• Urbanisation will continue to drive growth, between now and 2050 it is predicted that the 3.5 billion

people currently living in cities will increase to 6.5 billion - an increase of over 1.5 million people per week.6

• The factors above will create an unprecedented demand for natural resources because of

corresponding needs for infrastructure, construction and energy plus consumer consumption.

Why Demand is Growing

7

Projected Critical Metals Prices 2015-2025

• The World Bank Ten Year Major Metals price forecasts listed below show that prices for major metals are

now forecast to remain steady at their current levels.

• Major Metals prices recently sold off and lost roughly one third of their value compared to where they

were at the peak of the current cycle in 2011.

• AUS Streams targeted Critical Metals include the Base Critical Metals in the table listed below and 45
• ther Critical Metals which are all subject to supply risk and increasing demand.

8

9

“Even with commodity demand increasing capital for mining companies is scarce due to recent sector under performance”

The Mining Sector Needs Finance

• The global mining sector is in a depressed state due to recent under performance and, as such, there

is a lack of finance available throughout the sector.

• The mining sector was the worst performing sector during 2014 and it has continued its decline in

value during 2015 as commodity prices have declined further.

• Specialist mining indices have decreased between 34% and 70% between 2011 and 2015 the cause of

which is a decline in commodity prices and sector under performance.

• In the same period the Dow Jones Industrial Average increased by 43%.
• There is a need for consolidation in the sector as there are too many small public mining companies -
• ver 70% of the public mining companies by number have a value of US$20 million or under (1,358
• ut of 2,494 mining companies).
• Write-offs by Majors has also negatively affected earnings and sector sentiment.

Lack of Available Finance

10

11

Major Mining Indexes lost over 26% in the third quarter (67.31% off of all time high)

• The third quarter of 2015 saw the five major mining indexes covered lose 26.47% of their value, after

losing 18.63% during 2014, as compared to an 8.56% third quarter loss by the five major all-share indexes covered, after a 4.27% gain during 2014.

• The five major mining indexes were over 67% off of their all-time high, whereas the five major all-

share indexes covered were 16.46% off of their all-time high. Of the five major mining indexes, the FTSE/JSE General Mining Index was down the least from its all-time high at 54.28%.

Country Exchange Index Index Symbol: Exchange Currency 30/09/2015 30/06/2015 %age difference All Time High % Difference

Australia ASX S&P/ASX 300 Metals & Mining Index XMM:ASX AUD 2124.87 2566.5

• 17.21

6,153.40

• 65.47

Canada TSX S&P/TSX Global Mining Index TXGM:TOR CAD 46.65 60.13

• 22.42

135.53

• 65.58

UK LSE FT FTSE 350 Mining Index FTNMX1770:FSI GBP 8321.49 12614.27

• 34.03

30,745.80

• 72.93

South Africa NYSE FTSE/JSE General Mining Index XX:MET:JNB ZAR 575.5 7350.02

• 24.14

12,193.60

• 54.28

USA S&P S&P Metals & Mining Index SPSIMM:PSE USD 819.81 1252.3

• 34.54

3,774.92

• 78.28

AVERAGE

• 26.47
• 67.31

IPO volume and proceeds (2007-2014) for mining companies outlines the recent decline.7

Proceeds $b

• The mining and metals sector lagged a broader IPO recovery, as commodity price weakness put

continued pressure on share prices and dampened risk appetite. 7

• There were a total of 17 IPO’s in the sector in 2014, in comparison to 26 in 2013. 7

Lack of Traditional Capital

Number of IPOs

50 100 150 200 250 300 5 10 15 20 25 2007 2008 2009 2010 2011 2012 2013 2014 Total Proceeds Number of Deals 12

13

“Streaming is a solution that can provide much needed finance for the mining industry”

Streaming Provides Finance

• Diversification – A streaming company typically has agreements with multiple miners, thus spreading and

mitigating any potential risk. The larger existing streaming companies have dozens of deals and multiple streams of income.

• Align Interests – Streaming is a method of financing which aligns the interest of the miner with the interests
• f the streaming company, enabling incremental value creation for both parties.
• Upside – Since the deals are usually for a percentage of the mine’s lifetime production, the streaming

company stands to benefit immensely if new zones are discovered and actual production comes in higher than

• riginally forecast. This often occurs in the industry when drilling delineates new resources, increasing

production and extending the life of the mine.

• Limited Downside – While a miner may see profit margins squeezed as the cost of production rises, the

streaming company has a contract for a percentage of the metal produced at a fixed pricing formula which doesn’t increase with increasing mining costs. The contracts contain a number of other provisions to protect the streaming company.

• Favourable tax treatment – Streaming companies enjoy a favourable tax situation as long as the company is

structured correctly and reinvests profits or pays them out as dividends.

Advantages of Streaming

14

Why Securitised Streaming Contracts?

• AUS Streaming’s Securitised Streaming Contracts are a low risk alternative to traditional mining

investment.

• Securitised Streaming Contracts can be entered into at any stage of a mining project’s lifecycle and are

for a fixed percentage of production.

• All agreements are structured to give AUS Streaming security until repaid in full, as well as to be tax

efficient for both the producer and AUS Streaming.

• AUS Streaming enters into a Securitised Streaming Contract with the producer which provides a loan to

the producer to bring either the mine into production or to expand production or to bring a by-product into production.

• AUS Streaming’s Securitised Streaming Contracts carry a 12.5% coupon and are securitised on the assets
• f the producer.
• As part of the Securitised Streaming Contract AUS Streaming enters into a streaming purchase

agreement where AUS Streaming takes 20% of mine production at a fixed cost (typically the cost of production).

15

16

“The Medium to High Risk Critical Metals targeted by AUS Streaming cover a third of all mined products globally”

Medium to High Risk Critical Metals

Critical Metals are 69 Metals with Supply Risk

• Critical metals are an essential part of 21st Century life and include metals referred to as strategic metals,

technology metals and minor metals, as well as including certain precious metals with supply risk.

• A critical metal is one which is essential to an industrial process and for which there is no actual or commercially

viable substitute. There are many critical metals in various areas of industry and interest in this sector is set to grow significantly as their scarcity increases.

• Critical Metals consist of 69 metals which have all been identified as having significant risk by various

government agencies .

• China currently dominates global production of critical metals and is the leading global producer of 28 of the 52

critical metals referred to on the British Geological Survey risk list. In addition China dominates Rare Earth production with over 95% of current global production (despite having less than 20% of global reserves).

• Critical Metals supply risk is broken down into six categories; Very High Risk (15 metals), Significant Risk (19

metals), High Risk (4 metals), Medium Risk (13 metals), Medium to Low Risk (4 metals) and Low Risk (14 metals).

• AUS Streaming is focused on: Very High Risk Critical Metals, a US$6.3 bn per annum market; Significant Risk

Critical Metals, a US$21.8 bn per annum market; High Risk Critical Metals, a US$32.0 bn per annum market; and Medium Risk Critical Metals, a US$314.3 bn per annum market.

17

Critical Metals by Supply Risk Category

There are 69 critical metals featured on the 6 widely used critical metals lists (British Geological Survey, American Resources Policy, MMTA, EU & UK Science & Technology Committee, Kaiser and Criticalmetals.com). Scheduled below are the 69 metals broken down by the number of lists on which each metal is included.

Very High Risk Significant Risk High Risk Medium Risk Medium to Low Risk Low Risk (All 6 lists) (5 lists) (4 lists) (3 lists) (2 lists) (1 list) Gallium Antimony Manganese Arsenic Graphite Bauxite Indium Beryllium Selenium Aluminium Lead Beryl Ore Niobium Cobalt Tellurium Bismuth Silicon Barium Tantalum Chromium Zirconium Cadmium Zinc Boron Tungsten Germanium Copper Calcium Cerium Lithium Fluorine Diamond Dysprosium Magnesium Gold Iron Europium Molybdenum Hafnium Mica Lanthanum Platinum Mercury Promethium Praseodymium Rhenium Nickel Quartz Neodymium Titanium Silver Talc Samarium Vanadium Strontium Thallium Scandium Erbium Tin Thorium Terbium Gadolinium Uranium Yttrium Holmium Lutetium Holmium Thulium Ytterbium

18

19

“Strong balance sheet, no legacy issues and a global network”

AUS Streaming Advantage

Minimum Return Criteria

• AUS Streaming require that at a minimum each Securitised Streaming Contract entered into meets its

“Minimum Return Criteria”.

• AUS Streaming’s Securitised Streaming Contracts” consist of a securitised loan with a 12.5% coupon for

the capital advanced along with a streaming purchase contract for 20% of life of mine production for the product streamed.

• Each stream is for 20% of the mine’s production with AUS Streaming paying the cash cost of production

(cost of production to be a maximum of 33% of the price of the critical metal being streamed).

• The critical metal streamed has to be at a maximum of 18 months from production and is normally less

than 12 months from production or is already in production.

• Optimum production of the critical metal streamed should be at least three times the value of the total

capital advanced.

• Operator must have a successful track record of mine production and management.
• Projected profit from each stream must meet AUS Streaming minimum return on investment criteria

(before any exploration upside).

20

“Securitised Streaming Contracts”

Ongoing Production Payments

Metal Sales to AUS Streaming at fixed cost price

AUS Streaming makes an initial up-front payment as a securitised loan which is either refinanced by the producer once in production or repaid from the proceeds of production.

Securitised loan

AUS Streaming makes a subsequent fixed payment for each unit of the commodity upon delivery.

AUS Streaming receives 20% of the Life of Mine Production for the Critical Metal Streamed

LOAN SECURITISED ON ASSETS UNTIL REPAID PLUS STREAMING CONTRACT FOR 20% OF PRODUCTION AT FIXED COST

21

Option & Portfolio Based Exposure to Critical Metals

• AUS Streaming strategy of providing multiple critical metals with Securitised Streaming Contracts

provides its investors with an option on the future forecast growth of critical metals, at the same time as providing a significant long term revenue annuity.

• Critical Metals are defined as suffering from supply risk and being critical for economic growth and

secure supply of critical metals is sought after by governments around the world.

• As the global population grows, consumption of critical materials and specifically critical metals is

becoming more intense.

• By focusing on critical metals identified as being medium to high risk by various governments AUS

Streaming is focused on critical metals that should out perform other commodities due to the pressure

• f supply.
• AUS Streaming diversifies risk by investing in a portfolio of critical metals via multiple Securitised

Streaming Contracts.

• By establishing a portfolio of critical metal streams AUS Streaming protects against market pricing

fluctuations providing investors with a de-risked approach to critical metals investment with its Securitised Streaming Contracts.

22

23

“Over 2,400 public mining companies and only 4 public streaming companies.”

AUS Streaming Competition

Peer Group – Current Public Streaming Companies

24

• The average net assets to book ratio for the four currently publicly listed mining streaming companies is currently 1.35.
• The average PE ratio for the four currently publicly listed mining streaming companies is currently 102.70.
• The combined market value of the four currently publicly listed mining streaming companies is A$21.18 billion.
• AUS Streaming will be the first streaming company to list on the Australian Securities Exchange.

Company Name Exchange Symbol

• Mkt. Cap.

Revs. PE N Assets M Book

Franco Nevada Corp. TSE FNV

10,333.91 611.33 130.91 4,710.84 2.19

Silver Wheaton Corp. TSE SLW

7,162.22 857.52 74.48 1,381.72 1.43

Royal Gold Inc. NASDAQ RGLD

3,222.62 384.50

NS

3,254.43 0.99

Sandstorm Gold Ltd. TSE SSL

460.21 77.45 NS 583.67

0.79 AUS Streaming Limited NA NA NA NA NA $279m NA

(All financial information as at 30th November2015. All figures in AUD)

Sector Valuation Advantage

25

• The mining industry has been going through an unprecedented lull in valuations, due to multiple factors.
• These factors include commodity pricing, over supply, poor cost control, and reduced growth forecasts.
• After a sustained bull run ending in 2012, the industry is currently in a period of re-setting itself to a “new

normal”, with investors demanding better corporate governance, more focused cost control, and deliverable sustainable returns.

• Despite recent declines in metals and energy prices medium and long term forecasts are now positive overall,

indicating mining markets are either at, or are near to, a bottom.

• Smart capital is now entering the mining sector: private equity fund X2 Resources managed by former Xstrata

CEO Mick Davis recently raised $5billion for acquisitions of mining assets.

• Because valuations are at an unprecedented low, and there is a lack of finance available, AUS Streaming has an

ideal opportunity to purchase assets at the bottom of the cycle.

• Streaming companies have an additional significant valuation advantage as they are typically valued at a 3%

discount to future cash flow as opposed to 12% for traditional mining companies due to the difference in the risk profile.8

26

“The Mining Sector needs the finance that Securitised Streaming Contracts can provide”

Summary

Why the time is right for Streaming

27

Demand

• Increasing demand for commodities and specifically critical metals projected to 2050:
• based on world population increasing to 9 billion;

a doubling middle class sector; urbanisation of over 1 million a week.

Only Base Critical Metals and Rare Earth Prices Have Sold Off

• The prices of most base critical metals have fallen recently although long term forecasts are positive.
• All other Critical Metals prices have remained strong despite recent sell off in the commodities market (except

Rare Earth Prices which have declined due to Chinese policy). Poor Sector Performance

• Poor relative performance for the public mining sector and too many public mining companies 700+ in Australia

(over 2,400 globally) = a universal lack of finance available.

• Lack of available traditional finance = unprecedented opportunity for streaming.

Summary

28

• AUS Streaming is the first mover in the streaming of critical metals and will be the first public

streaming company to list on the Australia Securities Exchange.

• The streaming industry is projected to grow fivefold this decade to over US $100 billion per
• annum. The first mover streaming companies will be the ones that reap the benefit.
• Current lack of financing options in the mining industry means that there is an opportunity to

create exponential share holder value over the next 24 months for AUS Streaming.

• Streaming companies’ assets are valued higher than mining companies’ assets as they have

fixed capital and operating costs without any direct operating or exploration risk (only exploration upside) and they have highly diversified asset bases.

• Team of management and advisors have been assembled to enable AUS Streaming to become

the premier streaming company in a critical metals market worth over US$370 billion per annum.

• Silver Wheaton, the leading public streaming company, has a target market a third of the size
• f AUS Streaming’s target market and has a current market cap. of over $7 billion.

Reference

29

All numbers in AUD unless stated otherwise 1. DWF Capital Limited - Mining Capital Markets Update Q3 2015. 2. Pro Forma Post Merger with Murchison Holdings Limited. 3. Based on separately available Pro Forma Valuation Analysis. 4. The World in 2050 – PwC. 5. OECD Observer. 6. UN Reports, "World Urbanisation Prospects”. 7. Mining, Mergers & Acquisitions - E&Y. 8. Dayton Way Financial PTY Streaming Report.

Important Information

30

• 1. This Information Pack

This Information Pack does not purport to be all-inclusive or necessarily to contain all the information that a prospective investor may need in investigating AUS Streaming Limited (the Company) and may be subject to updating, revision or amendment. This Information Pack is not intended to form the basis of any investment decision by a prospective investor. Interested parties should carry out their own investigations and analysis of the Company and of the data referred to in this Information Pack and should consult their own advisers before proceeding with any offer. The information contained in this Information Pack will not constitute or form part of any offer for purchase of shares in the Company nor will any such information form the basis of any contract in respect thereof. Any interested party must rely on the terms and conditions contained in such a contract subject to such limitationsand restrictions as may be specified therein.

• 2. Disclaimer

All information and opinions contained in this Information Pack have been provided by the management of the Company and this Information Pack has not been independently verified as to its accuracy. No representation or warranty, express or implied, is given by the Company or any of its respective directors, partners,

• fficers, affiliates, employees, advisers or agents (and any warranty expressed or implied by statute is hereby excluded) as to the accuracy or completeness of the

contents of this Information Pack or any other document or information supplied, or which may be supplied at any time or any opinions or projections expressed herein or therein, nor is any such party under any obligation to update this Information Pack or correct any inaccuracies or omissions in it which may exist or become apparent. In particular, for reasons of commercial sensitivity, information on certain matters has not been included in this Information Pack. Such informationmay be made available at a later stage. The projected financial information contained in this Information Pack is based on judgemental estimates and assumptions made by the management of the Company, about circumstances and events that have not yet taken place. Accordingly, there can be no assurance that the projected results will be attained. In particular, but without prejudice to the generality of the foregoing, no representation or warranty whatsoever is given in relation to the reasonableness or achievability of the projections contained in this Information Pack or in relation to the bases and assumptions underlying such projections and you must satisfy yourself in relation to the reasonableness, achievability and accuracy thereof. No responsibility or liability is accepted for any loss or damage howsoever arising that you may suffer as a result of this Information Pack and any and all responsibility and liability is expressly disclaimed by the Company, its shareholders or any of them or any of their respective directors, partners, officers, affiliates, employees, advisers or agents. The information contained herein does not constitute an offer to sell or a solicitation of an offer or a recommendation to purchase securities under the securities laws of any jurisdictionor a solicitation to enter into any other transaction.

• 3. General

Neither receipt of the Information Pack nor any information supplied in connection with the investment opportunity by any person is or is to be taken as constituting the giving of investment advice. This Information Pack should not be considered as a recommendation by the Company or any of its subsidiaries or affiliates or their respective directors, partners, officers, affiliates, employees, agents or advisers to invest in the Company and each potential investor must make its own independent assessment of the merits or otherwise of investing in the Company and should take its own professional advice.