THE RIVERSDALE ANTHRACITE COLLIERY (RAC) PROJECT LOW IMPURITY - - PowerPoint PPT Presentation

THE RIVERSDALE ANTHRACITE COLLIERY (RAC) PROJECT

LOW IMPURITY ANTHRACITE FOR BLUE CHIP CUSTOMERS

FEBRUARY 2017 ASX:AJC

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Disclaimer

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RIVERSDALE ANTHRACITE COLLIERY (RAC) – A HIGH VALUE PROJECT

STRONG DEMAND FOR RAC’s PRODUCT DUE TO DECLINING REGIONAL SUPPLY, SIGNIFICANT BARRIERS TO IMPORTS AND EXCEPTIONAL RAC QUALITY PRODUCT The RAC project Meets our Preferred Criteria for Project Generation

 Project acquired from a Major Resource Company  Mining Right in place  Total Resources of 9Mt in the Gus Seam Reported in accordance with the JORC 2012 Code  Alfred Seam previously excluded from resources being drilled with a view to growing the resource base  Stable jurisdiction with access to rail, road, power and water in a <7km radius  The market needs this product today – high demand for RAC product in the market  Non binding Letter of Intent to buy the production received from a major customer and trading house  Strong Relationships with Blue Chip customers who lead their industry sectors – minimal marketing risk  Highly Skilled Management Team with relevant experience and demonstrated success

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RAC COAL RESOURCES

THE RESOURCES ARE REPORTED IN ACCORDANCE WITH THE JORC 2012 CODE The RAC resource is a high quality coal resource, with the ability to produce high value metallurgical coal products for the ferroalloy, ilmenite and steel industry as a substitute for coking coal and coke.

Seam Block Classification Area Thick RD GTIS TTIS RCV RA RIM RV RFC RS Central 1 Indicated 592180 0.93 1.47 809,500 688,100 29.09 14.90 1.94 7.58 75.58 0.84 Central 2 Indicated 208350 1.13 1.47 346,000 294,100 27.61 17.17 1.87 10.63 70.33 0.63 Central 3 Inferred 1699500 0.83 1.55 2,186,400 1,639,800 26.50 20.96 2.11 7.99 68.94 0.69 Central 4 Indicated 292920 0.98 1.55 444,900 378,200 24.96 22.17 2.64 8.56 66.63 0.72 South Inferred 602870 0.89 1.61 863,800 647,900 23.66 26.90 2.37 8.02 62.71 0.82 West Indicated 1604690 1.03 1.60 2,644,500 2,247,800 23.69 26.01 2.62 8.38 62.99 1.15 North-West Inferred 165190 1.15 1.53 290,600 218,000 26.77 20.24 2.33 9.22 68.21 0.82 North-East Indicated 515760 0.95 1.51 739,800 628,800 27.54 15.89 2.53 6.14 75.44 0.77 South-East Indicated 404850 1.00 1.59 643,700 547,100 24.17 26.14 1.98 7.48 64.40 0.75 Total 6,086,310 0.95 1.5591 8,969,200 7,289,800 25.53 22.32 2.32 8.05 67.31 0.87 Gus Seam GUS SEAM RESOURCES

Seam Block Classification Area Thick RD GTIS TTIS PY PCV PA PIM PV PFC PS Central 1 Indicated 592180 0.93 1.47 809,500 688,100 90.46 30.36 16.00 1.83 7.51 74.66 0.83 Central 2 Indicated 208350 1.13 1.47 346,000 294,100 87.49 30.20 16.00 1.60 11.34 71.06 0.50 Central 3 Inferred 1699500 0.83 1.55 2,186,400 1,639,800 79.15 30.39 16.00 1.79 8.35 73.86 0.61 Central 4 Indicated 292920 0.98 1.55 444,900 378,200 70.00 29.19 16.00 3.10 9.56 71.34 0.65 South Inferred 602870 0.89 1.61 863,800 647,900 58.58 29.29 16.00 2.09 9.09 72.82 0.60 West Indicated 1604690 1.03 1.6 2,644,500 2,247,800 67.39 29.85 16.00 2.02 9.25 72.73 0.59 North-West Inferred 165190 1.15 1.53 290,600 218,000 84.76 30.21 16.00 1.68 10.73 71.59 0.51 North-East Indicated 515760 0.95 1.51 739,800 628,800 83.37 29.62 16.00 2.56 5.86 75.58 0.64 South-East Indicated 404850 1.00 1.59 643,700 547,100 63.93 30.60 16.00 1.88 7.90 74.22 0.59 Total 6,086,310 0.95 1.5591 8,969,200 7,289,800 74.03 30.00 16.00 2.01 8.63 73.36 0.62 Gus Seam GUS SEAM: 16% ASH PRODUCT

GTIS: RS: TTIS: PY: RD: RCV: RCV: PA: RA: PIM: RIM: PV: RV: PFC: RFC: PS: Product Volatile Matter Content (%) Product Fix Carbon Content (%) Product Sulphur Content (%)

ABBREVIATIONS

Raw Sulphur Content (%) Product Yield % Product Calorific Value (MJ/kg) Product Ash Content (%) Product Inherent Moisture (%) Raw Inherent Moisture (%) Raw Volatile Matter Content (%) Raw Fix Carbon Content (%) Gross tonnes in situ Total tonnes in situ Relative Density g/cm3 Raw Calorific Value (MJ/kg) Raw Ash Content (%)

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WHAT IS ANTHRACITE?

UNIQUE QUALITY OF COAL RAC can produce the full range of anthracite products: Maximise recovery by selling its discard Offers market diversification High value niche producer INCREASING ENERGY & CARBON CONTENT / DECREASING VOLATILE CONTENT

Brown coal Black coal Lignite Sub-bituminous Bituminous Anthracite Steam coal Coking coal High grade Ultra-high grade Standard grade Power generation Power generation Power generation Power generation Coke production (Metallurgy) Sintering / EAF (Metallurgy) Blast furnace / EAF (Metallurgy)

RAC quality range

Anthracite Grade Quality LV PCI Standard grade High grade U-High grade RAC (PCI) RAC (HG) RAC (UHG) RAC (High Ash) Fixed Carbon (min) 78% 60% 74% 80% 79% 74% 84% 62% Sulphur (max) 0.7% 1.0% 1.0% 0.7% 0.7% 0.7% 0.7% 0.7% Phosphorus (max) 0.04% n/a 0.02% 0.01% 0.007% 0.007% 0.007% n/a Volatiles (max) 14% 12% 10% 6% 11% 9% 6% 8% Ash (max) 10% 30% 18% 12% 9.5% 17% 9.5% 30%

Semi-anthracite LV PCI coal Blast furnace (Metallurgy)

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DEMAND FOR ANTHRACITE

SOUTH AFRICA EXHIBITS A UNIQUE DEMAND PROFILE

Source: Wood Mackenzie Source: Filippo Faralla

Global annual demand in 2016 for metallurgical anthracite is estimated to be 115Mt, with the ferrous sector accounting for over 80%. GLOBAL ANTHRACITE DEMAND BY USE/APPLICATION By comparison South Africa’s anthracite demand in 2016 was 2.1Mt of which 98% was consumed by the non-ferrous sectors. SOUTH AFRICAN ANTHRACITE DEMAND BY INDUSTRY

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SOUTH AFRICAN ANTHRACITE PRODUCTION

MINE CLOSURES, DECLINING PRODUCTION, DETERIORATING QUALITY AND RISING COSTS

The declining production profile is attributable to the depletion of viable resources, growing geological complexity of established mines and challenging quality. Ferrochrome, electrode paste, ilmenite and calcium carbide markets are particularly sensitive to impurities and require Sulphur<1%, and phosphorous <0.015%. At least one major competitor can no longer consistently provide this specification. The local ferrochrome market has been accepting up to 18-19% ash in order to keep low impurity mines viable. High sulphur/phosphorous mines are dependent upon the ferromanganese and export markets. All producers are benefitting from the growing market for exports of up to 35% ash anthracitic coal. No significant new projects or expansions are scheduled in South Africa.

The industry decline is occurring in an environment of increasing demand from a globally competitive ferroalloy industry driven by a lack of viable anthracite projects – RAC is the last known long-life, high quality anthracite project in South Africa.

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SOUTH AFRICAN ANTHRACITE QUALITY

RAC’S QUALITY IS REMARKABLE IN THE CONTEXT OF THE SOUTH AFRICAN MARKET The low Sulphur and phosphorous content of the RAC resource quality positions the project as a key supplier to SA’s world leading ferrochrome industry which is dependent upon low impurity anthracite.

Across key quality parameters, the RAC project quality is either equivalent or superior to existing producers.

PRODUCER PRODUCER QUALITY SEGMENT INDUSTRY SECTORS SUPPLIED SHARE OF PRODUCER SEGMENT ASH VM FC SULPHUR PHOS.

ZAC Low impurity (ash < 10%, S < 1.0% Phos < 0.02%) low volatile (<6%) Titanium (Ilmenite) Carbon electrodes Calcium carbide 80% 9.5% 5% 86% 1.0% 0.02% SOMKHELE Low Phosphorus (< 0.02%) low Sulphur (< 1.0%) Ferrochrome Export (sinter) 63% 15 – 18% 8% 74 – 78% 0.7% 0.02% KIEPERSOL 12% 15 – 17% 9% 74 – 76% 1.0% 0.02% NKOMATI 16% 18% 8% 75 – 76% 0.4% 0.02% AVIEMORE High Sulphur (> 1.0%) Ferromanganese >80% 13- 14% 7% 80 - 81% 1.8% 0.03%

RAC PROJECT Low impurity, low volatile

• 9.5 – 17%

6 - 11% 74 - 84% 0.7% 0.007%

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THE WORLD’S LARGEST PRODUCER AND TRADER OF FERROCHROME HAS ISSUED A NON - BINDING LETTER OF INTENT TO ACACIA TO BUY ALL OF THE PROJECT’S OUTPUT AND IN 2017, DISCUSSIONS WILL PROGRESS ON BINDING OFFTAKE AGREEMENTS AND FUNDING OPTIONS.

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SOUTH AFRICAN ANTHRACITE - RAISON D’ETRE

SOUTH AFRICAN ANTHRACITE PRODUCERS ARE THE SMALLEST AND TRADITIONALLY LEAST PRODUCTIVE GLOBALLY South African anthracite exists because of demand from a globally competitive ferroalloy industry located in a carbon scarce region with large barriers to imports.

The evolution of South African anthracite: Historically domestic ferroalloy producers relied on imports of coking coal and coke as their source of carbon. Rising prices of coking coal, price variability and concentration of supply motivated substitution of coke with domestic anthracite. Ferroalloy producers adjusted their technology and designed their

• perations to substitute coke with up to 70% anthracite.

Significant barriers to imports of anthracite shield the industry from global competition, effectively creating a cost-plus pricing model. Customers willingly accept this model in return for stable prices. In recent years customers have been forced to accept deteriorating quality from aging mines and lack of new production. Significantly higher ash of 16-19% (air dried) is accepted providing Sulphur is <1% and Phosphorous is <0.015%.

Constraints on imports:

South African bulk handling logistics (rail & port) designed,

• perated and prioritised to facilitate exports of the country’s

mineral resources. Limited stockpile space for bulk imports. High freight costs from producing countries due to distance. Small volumes per product quality – higher stock-holding and freight costs. Strict size specifications requires re-screening after discharge in South Africa – no local market for the undersize (fines).

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RAC PROJECT HISTORY

AN ADVANCED STAGE COAL PROJECT THAT HAS POTENTIAL TO BE BROUGHT INTO PRODUCTION WITHIN 3 YEARS

The Riversdale Anthracite Colliery (RAC) Project is being purchased from Rio Tinto for ZAR37.8m (A$3.35m). It is a legacy of their 2011 acquisition of ASX listed Riversdale Mining Ltd. (ASX:RIV) The incoming Acacia Coal management team were the founding management of Riversdale Mining Ltd who purchased the project from Richards Bay Minerals (Rio Tinto) in 2004 with an exploration database. RBM owned the project as a risk mitigant against their reliance on extremely low Phosphorous and low Sulphur anthracite – RAC is the only known domestic project that could replace their existing supplier with sufficiently low impurity product. A Bankable Feasibility Study was done in 2006 by Acacia’s incoming management team and refreshed in 2010, using 2006 prices. The BFS was positive but the project awaited a Mining Right which has now been Granted – the Water Use License is being applied for and is expected to take 12 months to obtain. In the period since 2006, the anthracite market has changed significantly in RAC’s favour and the ferroalloy reductant market is compelled to accept significantly higher ash coal (16-19% ash vs. 13% ash) in return for low impurities. Prices in 2017 for a low impurity 16% ash ferroalloy reductant are more than double the 2006 price for a 13% ash coal, despite containing lower fixed carbon and 25% more ash. This will allow Acacia, subject to current drilling campaign results, to bring the Alfred seam into the Resources and Mine Planning which could add to the inventory of coal and allow a longer Life-of-Mine operation. RAC is the only coal project we could identify globally, sufficiently advanced and beyond substantial exploration risk, that has the potential to provide excellent return on equity through the mining cycle with minimal risks to cyclical downturn.

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NEXT STEPS

KEY MILESTONES TO MINE DEVELOPMENT The project has a New Order Mining Right, an approved EMP (Environmental Management Plan), an approved SLP (Social and Labour Plan) and needs a Water Use License which will be applied for by mid 2017 The 2006 Feasibility Study is in the process of being updated and refreshed Reporting of previously reported resources under the JORC 2012 code Bring the Alfred Seam into the Resources reported for the project under the 2012 Code following drilling underway and scheduled for completion in Q2, 2017 A Pre Feasibility Study is targeted for delivery in Q2, 2017 along with an updated Reserve and Resource Statement The Feasibility Study targeted for delivery in Q3 2017 A non binding letter of intent from a major anthracite consumer and trader to purchase all production will be progressed with the intention of securing a binding agreement as a basis for mine funding during 2017

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BOARD AND MANAGEMENT

PROVEN TRACK RECORD; RELEVANT SKILLS AND EXPERIENCE

ADAM SANTAMARIA

Executive Chairman Mr Santa Maria is a practising lawyer and corporate finance executive with a range of experience gained in over 10 years of advising many of Australia’s leading corporations undertaking significant corporate and commercial transactions, both as a legal advisor and in investment banking, as well as in acting as a corporate consultant. Mr Santa Maria has particular expertise in corporate and commercial law, focusing on equity capital markets and M&A. He also has significant experience in transaction structuring, management and execution.

LOGAN ROBERTSON

Non Executive Director Mr Robertson has over 5 years finance and investment experience gained initially in the corporate finance team of Argonaut and more recently with Hoperidge Capital. Mr Robertson joined Hoperidge in January 2014, and is an analyst focused on investments in the technology and industrial sectors and has expertise investing in, financing and overseeing the management

• f growth businesses. Mr Robertson currently also holds a board position

as a non-executive Director of TamaskaOil and Gas Ltd (ASX: TMK).

BRETT LAWRENCE

Non Executive Director Mr Brett Lawrence has over 12 years of diverse experience in the resources industry, including seeking new venture opportunities with ASX listed companies. Mr Lawrence holds a Master of Petroleum Engineering, a Bachelor of Engineering (Mining) and Bachelor of Commerce (Finance) from Curtin University in Western Australia. Mr Lawrence is a Non- Executive Director of TamaskaOil and Gas Ltd (ASX: TMK).

HUGH CALLAGHAN

Managing Director Designate Hugh has a significant base of global resources experience with Rio Tinto and Xstrata that included roles in the USA, Canada, Chile, Brazil, and

• Australia. Mr. Callaghan then founded a coal company, Riversdale Mining

Limited, which acquired coal projects in South Africa, which delivered very substantial returns on capital after a transformation process that raised production by 80%, changed the marketing strategy, and expanded

• reserves. Since then, Hugh has invested in, and developed copper projects

in Chile, and potash projects in West Africa and the USA, and consulted to coal companies in the UK, USA, Australia, Zimbabwe and Columbia.

ROB SCOTT

Finance Director Designate Rob is Submex’s Finance Director. Rob served as Non-Executive Director at William Tell Holdings Ltd, Director at Dynamic Intertrade, Chief Executive Officer, Sekoko Resources (Pty) Limited, Country Manager, LONRHO PLC, Council to the Chief Executive Officer , AREVA, UraMin Inc., Chief Financial Officer, African Mining Management Company Inc., Advisor, Tantco Global (Pty) Limited, Executive Director, Primserve Group Limited, Articled Clerk, Deloitte & Touche Southern Africa, Executive Director, Justine Avon (Pty)

• Limited. Rob holds a Chartered Degree in Accounting.

PEET SNYDERS

Chief Operating Officer Designate Peet is Chief Operating Officer of Submex, and has 35 years of experience that has spanned coal, iron ore, chrome, diamonds, Platinum and Gold. Peet has held corporate and operational General Manager roles with a number of major companies, and more recently has held Chief Operating Officer roles with a number of junior coal mining companies. Peet was a key member of the founding Riversdale Mining team and led the successful expansion and turnaround of its anthracite business. Peet’s expertise includes all forms of mechanized coal mining including a specialization in narrow seam mining.

FILIPPO FARALLA

General Manager, Strategy & Marketing Designate Filippo is a process engineer with over 20 years experience in the mining industry the majority of which in metallurgical coal and anthracite. He has held management and commercial roles across the coal resource value chain, including mining, processing and commodity trading companies. His roles include, General Manager of African Carbon, the largest metallurgical char producer in South Africa; Coal Investment Manager for Vitol; Commercial Manager and member of the founding Riversdale Mining team; Global Coal Investment Manager for Gunvor, responsible for establishing and developing Gunvor’s global coal and anthracite trading business including investments into Keaton Energy (South Africa) and Signal Peak Energy (USA). Filippo holds degrees in Chemical Engineering and Business Administration from the University of Witwatersrand.

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CORPORATE STRUCTURE

TAX EFFICIENT Coalvent Limited Vryheid Anthracite Collieries Pty Ltd Riversdale Anthracite Colliery Pty Ltd African Onca Pty Ltd

BEE partner The Black Economic Empowerment partner is loaned money for their share of acquisition and development costs at the South African Prime Interest Rate (presently 10.5%) plus a 2% premium, while management fees are recovered AUSTRALIAN LISTED PARENT COMPANY CYPRUS REGISTERED SOUTH AFRICAN REGISTERED HOLDING COMPANY RAC PROJECT 100% 100% 74% 26%

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PROJECT LOCATION

WELL POSITIONED FOR INLAND MARKETS AND EXPORT INFRASTRUCTURE

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RAC INFRASTRUCTURE

UNUSED RAIL SIDING ON THE MAIN RBCT COAL LINE, WITHIN 7KM TRAVELLING DISTANCE ON SEALED ROADS

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RAC STRUCTURE

THE RAC RESOURCE IS DIVIDED INTO DISTINCT BLOCKS, ALL OF WHICH ARE ACCESSIBLE BY ADITS ON THE OUTCROP The Gus Seam outcrops around the mountain. 3 adits will be developed on the outcrop, allowing flexibility, continuity of production, product blending and stable volumes.

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RAC RESOURCE

THE OUTCROPPING COAL ALLOWS FOR CAPITAL EFFECTIVE ADIT ACCESS AND IN-SEAM DEVELOPMENT. 3 Adits will be developed and 6 sections will be established in a phased ramp up. Mains development will utilise Continuous Miners, while production will use conventional (drill and blast) mining in a bord and pillar configuration. Requires less capital. Reduces fines generation and better fragmentation to take advantage of premium pricing for sized products in metallurgical markets. Coal will be transported by road haulage to a wash plant located on site.

AN OUTCROP ON THE NORTH-EAST SIDE OF THE RESOURCE VIEW OF THE PROJECT SITE FROM THE R34 HIGHWAY – A MOUNTAIN TOP RESOURCE

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RAC PROJECT

PLANNED DEVELOPMENT STRATEGY – FOCUS ON RISK MITIGATION

3 Adits will be opened and 6 mining sections will be phased in over a ramp up period Use of low-seam continuous miner on mains development and production by conventional drill and blast mining in a bord and pillar configuration supported by low profile scoops. Run-of-mine will be tuck hauled by internal mine road to a single stage washing plant. A single stage washing plant will blend Run of Mine coal from different adits to optimize quality and yield to a 16-19% ash product for the ferrochrome industry. Majority of production will be sold domestically on an FCA basis - collected in road trucks from the washplant – low stockholding. The great majority of the product will be sold to blue chip customers (Glencore, Samancor, South 32, Hernic Ferrochrome) who are global leaders in their industries and less susceptible to cyclical downturn than smaller

• customer. Low credit risk.

A high ash middlings will be produced opportunistically for export to Ukraine, Vietnam, India and China. Export coal will be road hauled 7km to a siding on the main RBCT coal line and loaded by Front End Loaders, and sold to traders on an FOR or FOB basis.

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WHY INVEST IN ACACIA?

The feasibility study underway is examining the case for a phased production ramp up to 60,000

tonnes per month Run of Mine production over a 24 month period, with first saleable coal 9 months

after commencement of construction. The RAC project has 9Mt of Total Resources of low impurity anthracite and has a valid Mining Right The feasibility study underway will be completed in 2 Stages A Pre Feasibility targeted for completion by Q2, 2017 A Feasibility Study targeted for completion in Q3, 2017

The global market needs this product today – this is not a project for the future:

Ukraine has been removed from the export market due to conflict unlikely to be resolved soon - is now a net anthracite importer. Vietnam has shifted during 2014-2016 from a major exporter to a significant importer of anthracite. China and the USA are no longer forces in the international seaborne market. The South African anthracite market has a unique fundamental supply and demand profile: The world-leading local ferrochrome industry requires low Phosphorous and low Sulphur anthracite and is dependent

• n anthracite for a large portion of its carbon reductant requirement in the absence of domestic coking coal.

The world leading local ferromanganese industry, while able to use lower quality carbon reductant, is a substantial customer. The world leading local mineral sands sectors use high quality anthracite as a reductant for ilmenite.

ASX : AJC