Tonogold Iron Ore Mexico DISCLAIMER - Important Notice Tonogold - - PowerPoint PPT Presentation

DISCLAIMER - Important Notice Tonogold Resources Inc (Tonogold). It is not recommended that any person makes any investment decision in relation to Tonogold based on this presentation. This presentation contains certain statements which may constitute "forward-looking statements". Such statements are only predictions and are subject to inherent risks and uncertainties which could cause actual values, results, performance or achievements to differ materially from those expressed, implied or projected in any forward-looking statements. No representation or warranty, express or implied, is made by Tonogold that the material contained in this presentation will be achieved or prove to be correct. Except for statutory liability which cannot be excluded, each of Tonogold, its officers, employees and advisers expressly disclaims any responsibility for the accuracy or completeness of the material contained in this presentation and excludes all liability whatsoever (including in negligence) for any loss or damage which may be suffered by any person as a consequence of any information in this presentation or any error or omission there from. Tonogold accepts no responsibility to update any person regarding any inaccuracy, omission or change in information in this presentation or any other information made available to a person nor any obligation to furnish the person with any further information.

Tonogold – Iron Ore Mexico

Iron Ore – Mexico

• Located approx. 40km

north of Hermosillo (Capital

• f Sonora)
• Project accessed by sealed

highway.

• 180 km the port of Guaymas

where international shipments are sent to China.

• 35,000 hectares under
• wnership
• In production since Jan 13
• SUBSTANTIAL POTENTIAL

FOR GROWTH – SHORT TERM TONOGOLD has negotiated an exclusive Option to acquire 34%

interest for $10 million in two stages

 Major, thriving city  Capital of Sonora, Mexico  Population – 800,000  Main industries manufacturing, electronics, IT and commerce  26 major manufactures employing some 68,000 jobs  Major manufacturing company includes:

 Ford Motor Company (3,300 employees increasing t0 4,300 for the manufacture of the Fusion for which Ford has invested $1.3 billion)  Caterpillar Mining  Cummings

Source: http://en.wikipedia.org/wiki/Hermosillo#Economy

Iron Ore – Mexico Hermosillo

Iron Ore – Mexico

• Project covers 35,000 hectares

(approx. 135 square miles, 350 square kms)

• Currently privately owned by two

groups – US individuals (50%) and major Mexican construction company (50%)

• Commenced small scale

mining/processing in January 2013

• n two deposits (highlighted in

yellow)

• Simple ore beneficiation process

and product sold to China

• Two shipments so far this year – a

third expected within days.

• All necessary permits are in place

Current production from two deposits - Ponderosa and Fito 3  Ponderosa

 Drilling program commenced in November 2011.  134 holes were drilled for a total of 3,800 metres .  Drill holes ranged from 15 to 50 metres in depth.

 Fito 3

 81 holes were drilled for a total of 3,500 metres .  Drill holes range from 20 to 50 metres in depth.

 No official Reserves or Resources calculated yet but production from these two sources expected for at least 3 years

Iron Ore – Mexico

 Project has no debt.  All equipment bought

• utright includes:

 CAT excavators  CAT Trucks  Grader  CAT front end loaders  Cummins Generators  Jaw crusher  Cone crusher  Light towers  Dry Magnetic separation  Screens, conveyors, maintenance equip etc  Laboratory equipment

Iron Ore – Mexico

Company operates its own laboratory on-site

Iron Ore – Mexico

 Simple beneficiation process being used to remove impurities and increase the grade

• f iron in the final product.

 Ore mined is crushed to ~2 inches and processed via dry magnetic separation to produce ~58% Iron ore  Off take agreement with Chinese producer  Flat 18% penalty on spot price applied for product impurities  Impurities can be reduced by milling and wet mag separation process (Future)  Based on current mining equipment, project mines around 22,000 of ore producing ~15,000 tonnes of final product per month.

Iron Ore – Mexico

Iron Ore – Mexico

• Iron Ore is transported by road 180kms to the main port of

Guaymas and shipped to China

• Off-take agreement in place whereby 95% is paid once product is

loaded on ship

 Project employs around 53 people (including administration staff)  Current costs of around US$61 per tonne of final product

 Costs substantially less in Mexico due mainly to wage levels (approx. US$30/t saving).

 Average worker in the Australian Iron Ore industry = $100,000 pa  Average worker in Mexico = $15,000 pa

 Company receiving ~US$100* per tonne of iron ore providing a margin of ~US$39 per tonne ($7 million per year)

* Basis: spot price of $124/t (58% Fe)

Iron Ore – Mexico

 Benefits of the Project

 Low wage bill  Low strip ratio (~2:1)  Close to main city – 40kms (no FIFO costs)  Close to main port (180kms by road)  Low road transportation costs of around 9c per tonne km (compared with 15c in Australia) – mainly the result

• f lower wage rates.

Iron Ore – Mexico

NEAR TERM (2-6 months)  Additional mining equipment purchased from cash generated from previous shipment.  Due to arrive on site within a few weeks.  Project expected to double its mining rate to produce ~25,000 – 30,000 tonnes of iron ore in near term ($14 million cash PA)

Iron Ore – Mexico

MEDIUM TERM OPPORTUNITIES (6-12 months) 1. Evaluate tenements/patents for additional deposits and increasing mining and processing rate. 1. Upgrade process facilities to produce high quality product and reduce the penalty

Iron Ore – Mexico

 Minimal exploration has been carried out

• ver the extensive

tenements/patents.  Government flown aero magnetics highlight significant magnetic anomalies

• ver the property

 Anomalies confirmed by significant magnetite and hematite outcropping

Iron Ore – Mexico

EVALUATE LAND HOLDING

• 2. UPGRADE PROCESS FACILITY

 Company has secured a property approx. 20 kms from site which has:

 Ample water supply  Mains power  Just 20 metres from rail line that is currently used to rail copper concentrates from Arizona to Guaymas

 Test work required to determine equipment, capital cost and benefit of constructing milling and wet mag plant.  Objective to produce quality product and increase sales price

Iron Ore – Mexico

Iron Ore – Mexico

Site of potential Milling operation - 20 metres from rail link and access to grid power

Iron Ore – Mexico

Indicative cost per tonne savings with additional treatment facilities However the principle benefit to emerge would be a lower penalty and thereby a higher price for the final product. Initial estimates highlight a margin increase from $39/t of final product currently to +$70/t could be expected.

Mexican Company was seeking an industry partner to bring mining expertise and capital to help further develop and grow the business. TONOGOLD

Iron Ore – Mexico

TONOGOLD’S OPPORTUNITY

 Tonogold has secured an option to acquire a 34% interest in the Mexican company that owns the Project by investing US$10 million in two tranches. Formal agreement executed provides:  Tonogold has to a free 6 week exclusive option (extendable by a further 30 days for $50,000) to subscribe for new shares in the Mexican entity (“MIL- LER”) by investing $5 million to earn 17%.  Tonogold has a 6 month option (which commences when/if Tonogold elects to exercise 1st Option) to subscribe for additional new shares (to provide with 34% on a fully diluted basis) in MIL-LER by investing a further $5 million. Tonogold to pay $100,000 for this 2nd option.

Iron Ore – Mexico

 Implied value of MIL-LER - $29 million  Implied project value - $19 million  MIL-LER to have the option to be issued with 20 million fully paid

• rdinary shares in Tonogold

which if exercised would reduce the cash component by $1 million (to $4 million). Tonogold will be investing in the entity that owns the tenements/patents, own the plant and equipment and will participate in its current cash flows

Iron Ore – Mexico

TONOGOLD’S OPPORTUNITY

 Initial $5 million investment:

 To fund a significant exploration program over tenements/patents (including ground magnetics, drilling etc)  To fund metallurgical test work in Australia to determine cost/benefit of further beneficiation

 Second $5 million investment:

 To provide equity funding to upgrade treatment facility  Further Exploration  New opportunities in the region

Iron Ore – Mexico

 Project currently cash flow positive and a low cost producer.  Trail mining/processing has virtually eliminated risks associated with new start ups  Potential for significant share price accretion in the short term.  Spring board for further opportunities in Mexico  Tonogold’s mining expertise and MIL-LERS high reputation and competitive advantage in Mexico offers yet unknown future

• pportunities

 Tonogold well positioned to consolidate project ownership in the future  Both management teams have “like minded” visions, aspirations and values – a unique relationship is expected to develop

Iron Ore – Mexico

With minimal exploration success production of +500,000 – 1,000,000 tonnes

• f iron ore is achievable in the future.

Iron Ore – Mexico

IRON ORE FUNDIMENTALS

 World production 2.4 billion tonnes Iron Ore in 2010  China is the worlds largest producer ~ 900 million tonnes in 2010 data – and the largest consumer  Australia is the worlds second largest producer ~ 420 million tonnes (2010)  USA is the world’s 8th largest producer at around 49 million tonnes in 2010  Mexico is the world’s 14th largest producer ~ 12 million tonnes in 2010 data  China currently imports around 200 million tonnes per annum to supplement its own production.  China’s demand for Iron Ore has increased by 9.5% pa compounded since 2008  Iron Ore used to produce to produce steel and represents just under 95% of all metals used.

IRON ORE FUNDIMENTALS Historical pricing

 Tonogold to raise ~$6 million via an issue of new shares within the next 6-10 weeks ($5 million for investment in project and $1 million working capital).  Price and terms of capital raising yet to be determined  Details to be provided to the market shortly  Company invites current shareholders who are “accredited” to consider participating in new issue.  Concurrent with the capital raising, Tonogold will apply to immediately become “fully reportable” on the US Stock Exchange

Iron Ore – Mexico Capital Raising