TSX V:AVT
Steel Alloy Metals 121 Mining Investor Conference April 21, 2015 - - PowerPoint PPT Presentation
Steel Alloy Metals 121 Mining Investor Conference April 21, 2015 - - PowerPoint PPT Presentation
Emerging Molybdenum Producer and Supplier of Steel Alloy Metals 121 Mining Investor Conference April 21, 2015 TSX V:AVT CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION This presentation contains certain forward-looking information
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
This presentation contains certain forward-looking information concerning the business of Alloycorp Mining Inc. (the “Corporation”). All statements, other than statements of historical fact, included herein including, without limitation; the availability, timing and structure of financing for the Corporations’ working capital and for construction of the project; the estimated project timeline including anticipated dates for receipt of permits and approvals, construction, start-up and production, and other milestones; anticipated mine design or life of mine; anticipated results of the enterprise optimization plan and
- ther analyses; resource and reserve estimates; the future demand and supply of molybdenum; the terms and timing of any off take arrangements; estimated timing and amounts of future expenditures, and
the Corporation’s future production, operating and capital costs, internal rate of return, tax rates, anticipated timing to pay back capital investments, operating or financial performance, potential taxes to be paid and potential jobs created are forward-looking statements. These forward-looking statements are based on the opinions of management at the date the statements are made and are based on assumptions and subject to a variety of risks and uncertainties and other factors that could cause actual events to differ materially from those projected in forward-looking statements. Important factors that could cause actual results to differ materially from the Corporation’s expectations include fluctuations in commodity prices and currency exchange rates; uncertainties relating to interpretation of drill results and the geology, continuity and grade of mineral deposits; uncertainty of estimates of capital and operating costs, recovery rates, production estimates and estimated economic return; the need for cooperation of government agencies and native groups in the exploration and development of properties and the issuance of required permits; the need to obtain financing to construct a mine and uncertainty as to the availability and terms of future financing; the possibility of delay in exploration or development programs or in construction projects and uncertainty of meeting anticipated program milestones; uncertainty as to timely availability of permits and other governmental approvals; and other risks and uncertainties disclosed in the Corporation’s Annual Information Form dated May 29, 2014, which is available at www.sedar.com. The Corporation is under no obligation to update forward-looking statements if circumstances or management’s opinions should change, except as required by applicable securities laws. The viewer is cautioned not to place undue reliance on forward-looking statements. This presentation may also contain future-oriented financial information (“FOFI”) and information which could be considered to be in the nature of a “financial outlook”. Such FOFI or financial outlook was approved by Management as of the date of presentation for the purpose of providing Management’s reasonable estimate of what return investors might expect to earn based on the assumptions set forth in such estimates and the information may not be appropriate for other purposes. Management cautions that such FOFI or financial outlook reflects the Corporation’s current beliefs and are based on information currently available to the Corporation and on assumptions the Corporation believes are reasonable. Actual results and developments may differ materially from results and developments discussed in the FOFI or financial outlook as they are subject to a number of significant risks and uncertainties. Certain of these risks and uncertainties are beyond the Corporation’s control. Consequently, all of the FOFI or financial outlook are qualified by these cautionary statements, and there can be no assurances This presentation uses the terms “proven and probable reserves”, “measured resources”, “indicated resources” and “inferred resources”. The Company advises readers that although these terms are recognized and required by Canadian regulations (under National Instrument 43-101 Standards of Disclosure for Mineral Projects (“NI 43-101”)), the United States Securities and Exchange Commission does not recognize resources. Readers are cautioned not to assume that any part or all of the mineral deposits in these categories will ever be converted into reserves. In addition, “inferred resources” have a great amount of uncertainty as to their existence, and economic and legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibility studies, or economic studies, except for a Preliminary Assessment as defined under NI 43-101. Investors are cautioned not to assume that part or all of an inferred resource exists, or is economically or legally mineable. Certain technical data in this presentation was taken from the technical report entitled “Kitsault Molybdenum Project, British Columbia, Canada, NI 43-101 Technical Report” with an effective date of March 14, 2014 (the “Kitsault Optimization Report”), prepared by Scott Fulton, P.Eng., David G. Thomas, P.Geo., Ramon Mendoza Reyes, P.Eng. and Simon Allard, P.Eng. of AMEC Americas Limited, Peter Healey, P.Eng. and Michael Levy, P.E. of SRK Consulting (Canada) Inc. and Bruno Borntraeger, P.Eng of Knight Piésold Ltd., and is subject to all of the assumptions, qualifications and procedures described therein. The Qualified Person who supervised the preparation of the technical information in this presentation is Graham Karklin. THIS PRESENTATION IS NOT AN OFFER TO PURCHASE SECURITIES AND DOES NOT CONSTITUTE AN OFFERING DOCUMENT UNDER SECURITIES LEGISLATION. ANY UNAUTHORIZED DISSEMINATION OR USE OF THIS PRESENTATION IS STRICTLY PROHIBITED.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
All figures in CAD unless otherwise noted
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Alloycorp at a Glance
- TSX-Venture listed,
headquartered in Toronto,
- perations office in Vancouver
- To become the unique supplier
- f steel alloy metals
- Build the Avanti Kitsault Project
in BC, Canada
- Acquire assets producing
commodities that supply to the steel alloys industry
Our Strategy:
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Growth Strategy
Kitsault is only the beginning
(Today)
Avanti Kitsault development underway
- Finalize financing
- Construction
Transformation to a steel alloys supplier
- Cash flow producing assets
- Positioned as “the unique
supplier of steel alloy metals” Strategic acquisitions
- Adding steel alloys
commodities:
‒
Niobium?
‒
Vanadium?
‒
Nickel?
‒
Tungsten?
‒
Chromite?
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Capitalization
1. Adjusted for conversion of US$20 million bridge loan and US$50 million pre- construction loan held by RCF
Market Capitalization OWNERSHIP (FULLY DILUTED)
$32 million (Basic) $107 million (Fully Diluted)1 Resource Capital Funds, 86% SeAH, 3%
CASH LIQUIDITY
$22 million (March 2015)
1,000 2,000 3,000 4,000
$0.00 $0.04 $0.07 $0.11 $0.14
Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15
Thousands
Chart Title
Alloycorp Share Price (CAD) Volume Traded (000)
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Management and Board
Gordon J. Bogden President, Chief Executive Officer and Director Graham du Preez Chief Financial Officer Peter Mah Chief Operating Officer Shawn Howarth VP, Corporate Development and Investor Relations Kimberly A. Humphreys VP, People and Culture Bernée Bolton VP, Corporate Responsibility Shane Uren VP, Safety, Health and Environment Mark A. Smith (Chairman) Former mining executive Jasper Bertisen Principal at RCF Gordon J. Bogden President, Chief Executive Officer and Director of Alloycorp Mario Caron Retired mining executive Bob Francis Retired senior audit partner Daniella Dimitrov Mining executive John Stubbs Retired mining executive
Management Directors
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Recap of 2014
- NI 43-101 Kitsault Optimization Report
- Mandate letter for US$612 million
- Secured additional bridge financing
from RCF
DE-RISKED AVANTI KITSAULT ENGAGED STAKEHOLDERS
- CBA with the Nisga’a, leading to federal permit
approval
- Off-take transaction with SeAH
- Reconfirmed untied loan guarantee with German
government / ThyssenKrupp
RE-LAUNCHED STRATEGY
- Re-branded to Alloycorp
- Renewed management team and Board
- Corporate headquarters moved to Toronto
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Achievements Year-To-Date
FINANCING AT AVANTI KITSAULT DEVELOPMENT AT AVANTI KITSAULT
US$435 million in financing arranged to-date Engineering 55% complete Pre-construction activities underway
Credit approvals for US$225 million from two lenders Conditional equity investment commitments of US$210 million Access road construction Nass River Bridge construction 150 bed construction camp expansion
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Avanti Kitsault Highlights
FULLY PERMITTED TO CONSTRUCTION WORLD CLASS ASSET STRATEGIC PARTNERSHIPS IN PLACE Permitting and EA received June 2014 from the Government of Canada CBA signed with Nisga’a Nation for their support ThyssenKrupp – 50% of off-take SeAH – up to 20% of off-take “Top four” moly producer – 11,600 tpa production Lowest cost producer among peers – US$5.12/lb 14+ year mine life based on current reserves only
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Producing Molybdenum at the Right Time
Source: CPM Group, management estimates
CURRENT SUPPLY CANNOT MEET EXPECTED DEMAND
Declining by-product contribution longer term Other primary moly projects have stalled
$0.00 $3.00 $6.00 $9.00 $12.00 $15.00 $18.00 (15.0) (10.0) (5.0) 0.0 5.0 10.0 15.0 2012 2014 2016E 2018E 2020E 2022E Supply surplus Supply deficit Price (USD/lb) Supply Surplus / (Deficit), 000 tonnes Avanti Kitsault full production
AVANTI KITSAULT IS THE LEADING PRIMARY MOLY PROJECT TO GET DEVELOPED
Molybdenum Price, US$ per lb 10,000+ tpa deficit by 2022
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Capital Cost Update
1
Chart Title
Capital Cost Estimate $818 million Kitsault Optimization Report Trending 20% to 30% Higher
Independent review based on 45% engineering completed Greater clarity on cost and scope Improved constructability and significantly de-risked
- 10% engineering completed at the time
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Continue De-Risking – Next 8 Months
- Re-evaluated operating costs
- Improve moly / silver recoveries
- Third party technical review
CONSTRUCTION TARGETS INCREASED CERTAINTY ON PROJECT RETURN
- Complete pre-construction
- Lock down procurement of long-lead
items
- Complete detailed engineering
- Begin initial construction starting Q4
2015
128686199
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Financing Strategy
- Alloycorp is reviewing both equity and other non-dilutive sources of
financing to complete construction capital requirements ‒ Off-take investment by a strategic partner ‒ Investment in the project ‒ Other private equity ‒ Silver stream monetization ‒ Public offering
- Discussions have occurred with a number of potential parties and are
- ngoing
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Timeline To Production
2013 2014 2015 2016 2017 Financing Engineering and Construction Start-Up / Operation
US$435 million in commitments Site Preparation Detailed Engineering Construction Commissioning – Q4 2017 Full financing package by Q3 2015
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Value Proposition vs. Peers
Capital Market Development Stage Cost Cap Metal Permitting Financing Off-Take P/NAV ($ millions) ($ millions) Ivanhoe Mines $2,100 $588 Cu 0.27x PolyMet Mining $750 $340 Cu-Ni-Co 0.41x NGEx $4,300 $140 Cu-Au 0.21x Nevada Copper $410 $114 Cu-Au (Stage 1) 0.38x Western Copper & Gold $2,400 $36 Cu-Au 0.05x Canadian Zinc $200 $34 Zn-Pb (Land Use
Permit)
0.19x Royal Nickel $1,200 $25 Ni 0.17x Alloycorp Mining1 ~$1,000 $107 Mo-Ag 0.30x
Source: Cormark, public company information, management estimates; as at April 15, 2015 1. Fully diluted shares outstanding
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Molybdenum – A Strategic Metal
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Fundamental Input Into Steelmaking
Molybdenum End Uses
- Oil and gas drilling steel
- Pipelines and storage
tanks
- Bridges
- Offshore infrastructure
- Manufacturing of tools
- Automotive industry
- Manufacturing of aircrafts
and turbine engines
Source: CPM Group
HIGHER VALUE STEEL PRODUCTION LIMITED SUBSTITUTABILITY
71% is consumed in producing stainless and alloy steels
WIDE RANGE OF END USES
Few metals provide similar characteristics
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Fundamentals Are Currently Mispriced
PRODUCING DEEP INTO THE COST CURVE
Approximately 40% of production is not profitable at current prices
200 400 600 800 1,000 1,200 1,400 20 40 60 80 100 120 140 160 180 200 220 Cumulative Molybdenum (Thou. mt)
Note: Does not include all producers. Source: Minecost.com, CPM Group, SNL, Company
Spot: US$8.15/lb
Price (US Cents / lb)
Primary Producers By-Product Producers Chinese Production
Higher cost, Chinese production tightening – China transitioning to a net importer Thompson Creek, Endako taken
- ffline, inventories working down
CURRENT PRICES ARE NOT SUSTAINABLE
Industry Cost Curve
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Supply Trends
SUPPLY GROWTH IS MANAGEABLE BY-PRODUCT: AGEING MINES, DECLINING GRADE – IMPACT TO LONG-TERM PRODUCTION
Bingham Canyon, Cerro Verde, Los Pelambres, and others – historical production grade is larger than reserve grade Sierra Gorda production to decline ~50% after three to five years By-product supply (~50% of total production) expected to increase However, expected supply surplus is approximately half that of historical levels
$8.90 $15.40 $11 to $14
$0.00 $2.00 $4.00 $6.00 $8.00 $10.00 $12.00 $14.00 $16.00 $18.00
5 10 15 20 25 Avg (1995 - 1997) Avg (2009 - 2011) Avg (2014 - 2017E)
Market Surplus and Price
Supply Surplus (000 tonnes)
$8.15 Spot
- Avg. supply surplus
- Avg. Moly Price (US$/lb)
Note: 2014 – 2017E represents CPM Group estimates
13% of supply 8% of supply 3% of supply
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Strong Demand Outlook
19.0% 14.3% 13.7% 12.6% 8.8% 7.8% 7.0% 5.8% 11.0%
Oil and Gas Chemical / Petrochemical
Automotive
Mechanical Engineering Process Industry Other Transportation Power Gen Building / Construction Other
- Energy storage facilities are required for
excess production
- Investment into energy infrastructure has
continued
- Re-tooling to support model, new body designs
- Engineered steel supporting higher performance
engines and designs
Source: SMR, IMOA
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
North American Energy Infrastructure
Source: Pipeline & Gas Journal 1. Source: Corporate presentation; as at January 2015 2. Source: public company documents, management estimates
68,000 km of pipeline to be developed in North America X70-grade pipeline requires ~500 kg
- f molybdenum per km2
TransCanada: $45 billion of commercially secured projects1
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
300 600 900 1,200 1,500 2000 2003 2006 2009 2012 2015
Index (Jan 2000 = 100)
Molybdenum Nickel
Molybdenum vs. Copper and Nickel
Source: Bloomberg, Platts, management estimates
Copper
Molybdenum price is correlated to copper
China Domestic Supply
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Molybdenum Price Volatility
(75%) (25%) 25% 75% 125% 175% 225%
Annual Moly Demand Growth (y-o-y) Annual Moly Price (y-o-y; Real 2013 US$)
Future volatility?
Annual Percentage Change
Source: CPM Group
- Not “forward looking”
- Prices reflective of
fundamentals at that moment
- Historically greater volatility on
the upside vs. downside
Spot Market Characteristics
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Avanti Kitsault Project
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
World Class Project – NI 43-101 April 2014
Ownership 100% Alloycorp Mineralization Molybdenum – Silver Molybdenum Reserves 190,600 t @ 0.082% Mo Mining Method Conventional Open Pit Throughput Rate 45,000 tpd Strip Ratio 1:1 Processing Method Milling and Flotation Average Metallurgical Recovery1 88.5% Mo, 39% Ag Mine Life (Reserves Only) 14 Years Average Molybdenum Production 11,570 tpa Operating Costs (Before By-Product) $6.78 / US$5.96 per lb Operating Costs (Net of By-Product) $5.82 / US$5.12 per lb Planned Start-Up 2017
Source: Kitsault Optimization Report 1. Undergoing metallurgical test work to improve moly and silver recoveries
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Most Advanced Primary Moly Project in Development Pipeline
$7.00 $9.00 $11.00 $13.00 $15.00 $17.00 $19.00 $21.00
1 2 3 4 5 6 7 8 9 10
Permitting complete US$435 million in financing arranged Pre-construction underway
Moly Price Needed For 15% IRR (USD/lb)
Stage of Development
Avanti Kitsault
- Mt. Hope
Koktenkol El Creston CuMo Ruby Creek Spinifex Liberty Merlin
Source: CPM Group, public company information, management estimates
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Established Strategic Partnerships
Offtake agreement for 50% of moly production Offtake agreement for up to 20% of moly production
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Innovative Financing Structure
- US$300 million senior debt guarantee with the German
government
- Tied to off-take structure with ThyssenKrupp
- Administered by PricewaterhouseCoopers
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Innovation in Corporate Responsibility
First Nations Engagement Employee Wellness Environmental Responsibility Operations Engagement Government (Provincial and Federal) Engagement Safety
Nisga’a Gitanyow Metlakatla Wilp Luxxhon
Capital Foundation
KIN Initiative Development Partner Framework
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Innovation in Environmental Responsibility
- Formed an Independent Engineering Review Panel
- Comprised of three experts in geotechnical engineering
- New asphalt core design for tailings management
facility
Starter Embankment Asphalt Core Ongoing Raises
Source: Knight Piésold
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
“Top 4” Primary Moly Producer by 2017
0.0 5.0 10.0 15.0 20.0 25.0 Sandaozhuang Henderson Jinduicheng Avanti Kitsault Climax
Source: CPM Group; 2017E production
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Lowest Cash Costs Among Primary Peers
Source: CPM Group; includes selected producers; Kitsault cash costs based on LOM estimates, net of by-product credits 1. Avanti Kitsault costs based on expected LOM estimates as per Kitsault Optimization Report 2. End of mine life; placed on care-and-maintenance Q4 2014 3. Placed on care-and-maintenance Dec 2014 due to low commodity prices Thompson Creek Kitsault (Life of Mine) Climax Henderson Henan Province Shaanxi Province Endako Other China Inner Mongolia Province High Chinese Producers
200 400 600 800 1000 1200 1400 20 40 60 80 100 120 Cumulative Molybdenum (000 tonnes)
+$13.69 Typical Costs (~$9.26 - $11.47) Typical Costs (~$8.38 - $13.53) Typical Costs (~$7.79- $9.26) Typical Costs (~$11.47 - $13.69)
Historic Average Cash Cost1 (US Cents per lb)
2 3
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Significant Free Cash Flow
$0 $100 $200 $300 $400 $500 $600 $700
Expected to produce in excess of $100 million in free cash flow at US$10.00 per lb
2018E – 2020E Cumulative: $440 million $785 million $890 million $1.1 billion
2018E 2019E 2020E LOM 2018E 2019E 2020E LOM 2018E 2019E 2020E LOM 2018E 2019E 2020E LOM
US$10.00 US$12.50 US$14.50 US$18.00 Molybdenum Price (per lb)
Unlevered Free Cash Flow (Millions)
Source: Kitsault Optimization Report
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Investment Thesis
ROIC Growth Commodity Price Upside
- Avanti Kitsault base case IRR1,2: 19%
- $100+ million free cash flow at US$10 per lb moly
+ +
- 40,000 t of additional resource (20% increase to reserves)2
- Adjacent Bell Moly deposit unexplored
- Acquisition of other steel alloy producing assets
1. Kitsault Optimization Report; based on long-term molybdenum price of US$14.50/lb 2. Based on a reserve of 231.1 million tonnes @ 0.082% Mo and a measured and indicated resource of 321.8 million tonnes @ 0.071% Mo; source: Kitsault Optimization Report
- Multiple periods of 100%+ price increases
- Historically much greater on the upside vs. downside
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Summary
- New management
- New strategy
- Avanti Kitsault:
‒ CBA in place ‒ Fully permitted ‒ Pre-construction near completion ‒ 55% through detailed engineering ‒ US$435 million in debt and equity commitments in place ‒ Optimized value entry point
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TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals
Growth Strategy
Kitsault is only the beginning
(Today)
Avanti Kitsault development underway
- Finalize financing
- Construction
Transformation to a steel alloys supplier
- Cash flow producing assets
- Positioned as “the unique
supplier of steel alloy metals” Strategic acquisitions
- Adding steel alloys
commodities:
‒
Niobium?
‒
Vanadium?
‒
Nickel?
‒
Tungsten?
‒
Chromite?
Corporate Office: Alloycorp Mining Inc. 67 Yonge Street Suite, 602 Toronto, ON Canada M5E 1J8 Further information, please contact: Shawn Howarth VP, Corporate Development & Investor Relations showarth@alloycorp.com (416) 847-0376
TSX V:AVT Emerging Molybdenum Producer and Supplier of Steel Alloy Metals