company presentation - sierra rutile limited · 2017. 11. 16. · company presentation november...

>

COMPANY PRESENTATION November 2012

>

Disclaimer

Forward-Looking Information This document may contain forward-looking statements. These forward-looking statements are made as of the date of this document and Sierra Rutile Limited (the “Company”) does not intend, and does not assume any obligation, to update these forward-looking statements, except as required under applicable securities legislation. Forward-looking statements relate to future events or future performance and reflect Company management’s expectations or beliefs regarding future events and include, but are not limited to, statements with respect to the estimation of mineral reserves and resources, the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production, capital expenditures, success of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage. In certain cases, forward-looking statements can be identified by the use of words such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved” or the negative of these terms or comparable terminology. By their very nature forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements. Such factors include, among others, risks related to actual results of current exploration activities; changes in project parameters as plans continue to be refined; future prices of mineral resources; possible variations in ore reserves, grade or recovery rates; accidents, labour disputes and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion of development or construction activities; as well as those factors detailed from time to time in the Company's interim and annual reports. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward- looking statements.

Working for a better Sierra Leone 2

>

Investment Highlights

>

Investment Highlights

> One of the largest primary rutile mines in the world

– JORC Resource in excess of 600 million tonnes at 1.3% rutile

– High-grade, high-value premium natural rutile product

– Fully licensed and permitted with significant opportunity to expand resource and production

> Sustained improvement in existing operations, resulting in significant cash flow generation

– Improvements to Lanti Dredge have resulted in a ~50% increase in rutile production since mid-2011

> Lanti Dry Mining project in commissioning

– Lanti Dry Mining project to be delivered on schedule and under budget, with production anticipated in 2012

– Experience gained from Lanti Dry Mining construction allows for cost and timing improvements in future dry mining operations

> Gangama Dry Mining project, reducing expansion risk and increasing near-term production growth

– Gangama Dry Mining project has been selected in favour of a new large dredge due to its superior economics, reduced construction risk and improved development timeline

– Pre-tax IRR of 228% and NPV10 of US$507 million

> Positioned to deliver on production growth from c.90,000 tonnes per annum 2012F to 200,000 tonnes per annum

– Lanti Dry Mining project currently in commissioning with work already underway for the Gangama Dry Mining project

– Optionality to grow production to in excess of 200,000 tonnes per annum with the Sembehun Dredge and Mogbwemo Tailing projects

– Expansions to be funded from internally generated cash flows


>

Established Operation, Exceptional Growth

>

Gunson Resources 0.74mt

White Mountain Titanium 3.46mt

Sierra Rutile 7.8mt

Kenmare Resource 5.16mt

Mineral Deposits 0.44mt

Base Resources Ltd 0.95mt

Iluka Resources 9.14mt

World Titanium Resources 1.35mt

Astron Limited 3.6mt

0

5

10

15

20

25

30

35

0 20 40 60 80 100 120 140 160 180

Rutile Production Growth through 2015 (kt)

Bubble Size: In-Situ Rutile Resources

A Unique World-Class Deposit


> The largest primary rutile asset in the world

– JORC Mineral Resource in excess of 600 million tonnes rutile at 1.3% rutile

> Exceptional, high value assemblage

– 76% of payable heavy mineral1 is rutile

– 22% of payable heavy mineral1 is zircon

Source: Company announcements, IBMA, Credit Suisse, Sierra Rutile estimates 1. Pricing assumptions based on TZMI LT prices: Zircon 1,715 US$/t, Ilmenite: 145 US$/t, Rutile 1,000 US$/t, Leucoxene 850 US$/t

Construction stage Existing Producer

Well positioned to take advantage of the positive market fundamentals for rutile

Ass

em

bla

ge V

alu

e1

(US$

/t)

Planning stage

>

Established Infrastructure and Skilled Workforce


Welding Crew

Power Plant

> Significant infrastructure already in place

– Mineral separation plant expandable to >200,000 tonnes of rutile per annum

– Established port and shipping fleet with capacity to ship >200,000 tonnes per annum of rutile

– A modern MFO (Marine Fuel Oil) power plant capable of producing 23MW of power (current utilisation under 9MW)

– Over 80km of established haulage roads

– Modern engineering and camp facilities in place

> Skilled and experienced workforce

– Experienced management team

– +30 years of experience operating experience at Sierra Rutile

– >95% Sierra Leonean nationals

– Highly educated employees

– Significant recruitment from premier universities of Sierra Leone, Fourah and Njala

Nitti Port

Dredge Management Meeting

Substantial infrastructure and experienced workforce provide a strong foundation for growth

>

Existing Operations: Performance Enhanced


> Lanti Dredge and process plants upgraded

– Following a capital investment project initiated in October 2010 the operation has increased the rutile production rate from around 60,000 tonnes per year to over 90,000 tonnes per year

– Record quarterly production of 26,381 tonnes of rutile in Q3 2012

– Upgrade included:

– Upgrade of drives

– Refurbishment of bucket band

– Replacement of process spirals and cyclones

– Installation of new magnets

– In addition, the company has improved operational management procedures and risk mitigation planning

Significant Improvement in Existing Operations

Lanti Dredge

Source: Sierra Rutile

40,000

50,000

60,000

70,000

80,000

90,000

100,000

1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12

Trai

ling

12

mo

nth

s p

rod

uct

ion

(r

uti

le t

on

ne

s)

>

Lanti Dry Mining: A Step Change in Production


The Lanti Dry Mining project has been delivered on budget and ahead of time

Project Commissioning

Scrubbing and screening module assembled

> The Project

– Targeting high-grade pockets of resource, inaccessible to dredge mining

– 28.1 million tonnes at 1.5% recoverable rutile

– Adds production of 30,000 to 35,000 tonnes per annum of rutile and associated ilmenite and zircon by-products

> Project Update

– Ore processing plant is currently being commissioned, on budget and ahead of time

– Production from Lanti Dry Mining to be realised before year end 2012

– Supervisors and operators are onsite and fully trained

– Majority of earth moving equipment onsite, in-line with plan

– The building of the of 400,000 tonne ore stockpile is complete

Spirals being installed

>

Gangama Dry Mining: Adds Unparalleled Value


Dry mining Gangama provides access to a high-grade resource in a shorter development time and reduced capital cost, enhancing Sierra Rutile’s leverage to

strong prices

> The Project

– The high-grade Gangama deposit will add significant free cash flow by reducing project construction time and substantially decreasing capital cost compared to D3 dredge project

– The project, consisting of two 500 tonnes per hour units, provide additional optionality and operational flexibility

– Mining inventory increased by 22% to 39 million tonnes, as dry mining will provide access to previously inaccessible mineralisation

– 12-month project construction period

– Power, water and road access are already in place

– Matched equipment fleets will provide operational and maintenance synergies with existing operations

– Detailed construction costs are known and extensive economies of learning exist from the Lanti Dry Mining project

– Plant and infrastructure is semi-mobile and can be re-located to other deposits when mining at the Gangama deposit has been completed

Gangama Dry Mining PFS: Key Project Highlights

Average annual production rate (ore

mined) 7.0 million tpa

Average annual production rate (rutile

produced) 83,400 tpa

Up-front capital expenditure $103 million

Operating cost (LOM) $307/t

Construction period 12 months

Gangama resource mined 39 million tonnes

Project life 6 years

Pre-tax NPV10 $507 million

Post-tax NPV10 $330 million

Pre-tax IRR 228%

Post-tax IRR 157%

Project payback 8 months


>

Gangama Dry Mining: Near-Term Milestones


Detailed engineering and site preparation work is already underway

Gangama deposit with resource outline > Project Update

– Internal pre-feasibility study has been completed incorporating known costs and significant project learning’s from the Lanti Dry Mining project

– The project will be expedited through the next levels of study

– Detailed engineering work has commenced

– Long lead-time pre-construction activities, including dam construction for process water storage, will commence in November

Mining Pond

Dams

Existing roads

Deposit outline

>

Sembehun Dredge: Long-Term Value Creation


> The Project

– The Sembehun group of deposits are located approximately 45km from the current operating area

– 274 million tonnes at 1.34% rutile in Sembehun provides the opportunity to develop a new project that delivers long-term returns

– A pre-feasibility study has been completed by Snowden Mining Industry Consultants on the construction of a independent operation at Sembehun, which includes:

– A 1,875tph large dredge and wet plant concentrator

– New mineral processing plant

– New 18.6 MW power facility

– All site infrastructure required to support an independent operation

> Project Update

– An exploration programme was commenced in October 2012 to support detailed mine planning and confirm geometallurgy for the feasibility study. This programme is expected to be concluded in Q2 2013

Sembehun Dredge study: Key Project Highlights

Average production rate (ore

mined) 13 million tpa

Average rutile production rate

first 5 years / LOM 135,000 tpa / 113,000 tpa

Up-front capital expenditure $305 million

Operating cost $322/t HM produced

Construction period 24 months

Project start year 2016

Total resource mined 274 million tonnes

Project life 22 years

Pre-tax NPV10 $347 million

Post-tax NPV10 $215 million

Pre-tax IRR 34%

Post-tax IRR 26%

Deposit Mining Pond Mining Lease Boundary Proposed Dam Final Product Haul Road Existing Road HMC Hauling Road

Source: Snowden Mining Industry Consultants study

>

Strong Production Growth


The new development plan substantially reduces capex requirements while maintaining production growth optionality

> Increased production flexibility

– The utilisation of dry mining will provide significant production flexibility and increased synergies between mining operations

> Reduced capital cost

– Capex requirements over the same period have been reduced by $66 million

> Significant growth optionality beyond 200,000 tonnes

– Substantial growth optionality remains

– Sembehun Dredge project

– Mogbwemo Tailings project

– Additional dry mining targets


0

50

100

150

200

250

2011 2012F 2013F 2014F 2015F

Ru

tile

Pro

du

ctio

n (

'00

0 t

on

ne

s)

Lanti Dredge Lanti DM Gangama DM

>

Partnership with Sierra Leone

>

Sierra Leone – An Investment Friendly Destination


“We know that countries are more likely to prosper when they encourage entrepreneurship; when they invest in their infrastructure; and when they expand trade and welcome investment. So we will partner with countries like Sierra Leone to create business environments that attract investment, not scare it away.” US President Barack Obama, Speech to the United Nations General Assembly, September 2010

Over 40 years, Sierra Rutile has forged strong relationships with the people and Government of Sierra Leone

> Investment friendly jurisdiction

– Sierra Leone is a stable and investor friendly country

– Sierra Leone has a pro-mining investment climate with the current development of multiple mining projects including African Minerals’ and London Mining’s iron ore projects

– Sierra Leone is a key part of Tony Blair’s African Governance Initiative which is working to develop the capacity of the Government to set and deliver on its priorities

> Strong relationship with Sierra Leone

– The Company has a positive and long-standing relationship with the Government

– Mining leases date back to the 1970’s and are valid through 2038 with the option to extend for a further (minimum) 15 years

– In March 2011, a special repayment of US$18.3m was made on the loan to Government of Sierra Leone. The monies repaid on this loan are used to fund local development projects such as roads and infrastructure. US$29.6m (€23.75m) is outstanding on the loan, which will be repaid in accordance with its terms over the next 4 years

– In April 2012, Sierra Rutile purchased the Governments 7.1% effective interest in the local subsidiary and pre-paid 2 years of PAYE tax for US$17m

>

Sierra Rutile and the Community


Aquaculture Sustenance Programme

Sierra Rutile is a powerful force for development in the local community

0

20

40

60

80

100

120

140

2008 2009 2010 2011 2012FFi

sh in

tro

du

ced

('0

00

s)

Ruby Rose Centre


> Considerable contribution to national and local economy

– Sierra Rutile makes up a significant proportion of Sierra Leonean GDP and exports

– The company is one of the largest private sector employers in Sierra Leone

– Where possible, the Company is committed to local procurement, spending over US$30m annually on in-country procurement and wages

– Long standing and positive relations with local Mine Workers Union

> Contributions to the local community

– Over US$1m invested annually in the local community

– The Company’s medical facility treats over 20,000 people a year with free HIV testing, education, and mosquito nets for Malaria prevention

– Local technical college, sponsored by Sierra Rutile, provides education to over 300 students

– Through the Sierra Rutile Foundation the Company funds local projects such as schools, wells, grain stores, latrines, courts, bridges, clinics, a local radio station and more

– Fish farms located in old mining ponds provide local villagers with work and a reliable source of food

>

A Responsible Steward


>Ongoing Land Rehabilitation Programme

Tree Planting

> Environmental management

– Sierra Rutile is committed to rectifying the legacy disturbance of historical owners and to the continual rehabilitation of mined-out areas

– In 2011, a full survey of disturbed land was conducted and a plan has been developed and is being implemented to rehabilitate all legacy disturbed areas over the next 6 years

– Strong, positive relationships with the Sierra Leone Environmental Protection Agency and Ministries of Fisheries and Agriculture

– Agricultural project initiated in 2010, aims to provide significant sustainable employment for the local people

>

Corporate

>

Senior Management


John Bonoh Sisay Chief Executive Officer

> Considerable experience in African mining sector, having worked in 10 African countries

> Formerly De Beers, America Mineral Fields (now First Quantum)

> Previously President of Chamber of Mines, Sierra Leone

> Sierra Leone national

Gerald Boting Chief Operating Officer

> 35 years experience having held senior management positions across Africa with Anglo Base Metals and De Beers

> Previously COO of Vedanta Zinc, responsible for operations in Namibia, Ireland and South Africa

Yves Ilunga1 Chief Financial Officer

> Previously, VP – Transformation for AngloGold Ashanti Ghana

> Has held various financial management roles across Africa for AngloGold Ashanti and DeBeers

Andrew Taylor Head of Operations

> 20 years of mining and processing expertise

> Significant experience of operating in Africa with De Beers and Anglo American

> Managed the construction and commissioning of the Voorspoed Mine in South Africa from 2005 to 2010

Neil Gawthorpe Marketing & Logistics Director

> 17 years experience in international industrial minerals marketing

> Previous technical and marketing positions at Redland PLC, Frank & Schulte GmbH and Minelco Group

Desmond Williams Operation Manager

> Previously with SNC Lavalin and Worley Parsons in Canada

> Worked at Sierra Rutile between 1988 and 1998


1 Starts 1 January 2013

>

Board of Directors


Jan Castro Non-Executive Chairman

> Chief Executive of Pala Investments, an investment company focused on the mining sector, and SRL’s cornerstone shareholder

> Significant strategic advisory, management and investment experience

> Serves on the boards of Alacer Gold, Nevada Copper, and Asian Mineral Resources

John Bonoh Sisay Chief Executive Officer

> Considerable experience in African mining sector, having worked in 10 African countries

> Formerly De Beers, America Mineral Fields (now First Quantum)


Michael Barton Non-Executive

> Senior Vice President at Pala Investments

> Significant strategy and transaction advisory experience

> Serves on the boards of Peninsula Energy, Elemental Minerals and WDS Ltd

Michael Brown Non-Executive

> Former Chief Operating Officer of De Beers. Led restructuring of De Beers during GFC

> Deep industry expertise in strategy, operations, construction

> Senior Vice President at Pala Investments

> Serves on the board of Asian Mineral Resources

Charles Entrekin Non-Executive

> 35 years of experience in the mining sector

> As former President of Titanium Metals Corporation, brings significant industry specialism

> Turnaround expertise

> Serves on the board of Melior Resources

Alex Kamara Non-Executive

> Head of Engineering at Sierra Rutile from 1982-1995

> Chairman of Standard Chartered, Sierra Leone


Richard Lister Non-Executive

> 40 years of experience in the industrial minerals and mining sectors

> Significant commodity marketing experience

> Formerly Chief Executive of Zemex Corporation, Vice-Chairman of Dundee Bancorp and Chief Executive of Campbell Resources

> Serves on the board of Labrador Iron Mines Holdings

>

0

50

100

150

200

250

300

Sierra Rutile FTSE AIM All Share FTSE All Share Mining

Other 4%

Investec Asset Management

Limited 5%

Neon Liberty Capital

7%

JPMorgan Asset Management

Limited 9%

M&G 20%

Pala Investments 55%

Corporate Overview


> Sierra Rutile Share Price vs. FTSE All Share Mining

> Major Shareholders

Capital Structure

> Listing: LSE AIM: SRX

> Issued shares: 510.0 m

> Options: 26.9 m

> Current Share Price1: 56p

> Market cap: £286 m (US$460m)

> Cash2: US$16.5 m

> Gross Debt: €23.7m (US$29.6m)

Analyst Coverage

> Goldman Sachs

> Mirabaud Securities

> Royal Bank of Canada

> RFC Ambrian

Source: Bloomberg

Source: Bloomberg, Statutory Filings

1 31 October 2012 2 30 Sept 2012

Contact Details

John Sisay

Chief Executive Officer

Working for a better Sierra Leone

Email: [email protected]

Sierra Rutile Limited 20 Hill Cot Road Freetown Sierra Leone Website: http://www.sierra-rutile.com/

>

Appendix

Market Fundamentals

>

TiO2 Overview

> Titanium dioxide (TiO2) pigment is a fine white powder used in paints, plastics and paper products - which imparts whiteness, brightness and opacity on the products

> Titanium dioxide pigments are produced from titanium feedstocks. The principle feedstock products are:

> High-grade:

– Natural rutile (95-96% TiO2)

– Synthetic rutile (90-93% TiO2)

– Titanium slag (75-85% TiO2)

Low-grade:

– Ilmenite (30-63% TiO2)

– Leucoxene ( Titanium pigments are produced using the chloride process (55%) or the sulphate process (45%)

> The chloride process requires higher-grade feedstocks (>90% TiO2) and is is favoured for its more efficient, cleaner and lower-cost process

> The sulphate process can utilise lower grade (usually ilmenite) feedstocks

> 90% of titanium feedstocks are used for the manufacture of TiO2 pigment


90%

4% 6%

Pigments (paint)

Titanium sponge

Other (welding)

Overall TiO2 market: 6.8 million tonnes

Source: Credit Suisse

-

1.0

2.0

3.0

4.0

Chloride Process Sulphate Process

TiO

2 u

nit

s (m

)

Rutile

Synthetic Rutile

Titanium Slag

Ilmenite

Titanium Feedstock Consumption in Pigment Process

Overall TiO2 End Markets

Source: Credit Suisse

>

Late-Cycle Demand Driven by China and Urbanisation


Demand growth anticipated from economic recovery and changing demographic trends

> TiO2 demand grows exponentially, late in the economic cycle

– Demand growth anticipated to increase significantly as both developed and emerging economies strengthen

> China is anticipated to require significantly more TiO2

– Population forecasted to peak at 1.4 billion in 2025 with middle-class growing to 70% by 2020

> Urbanization in Asia, Latin America, and India will further impact TiO2 demand

> US housing recovery presents near-term upside

Pigment Consumption vs. GDP Per Capita

Source: Rio Tinto

Late-Cycle Demand Growth

Satu

rati

on

Lev

el (

%)

Note: Saturation level is the point at which consumption per capita does not increase with income levels Source: Rio Tinto

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

0 10,000 20,000 30,000 40,000 50,000

Pig

me

nt

Ap

par

en

t C

on

sum

pti

on

(kg

)

GDP Per Capita (PPP Basis 2005$)

China (annual) Japan

(Average)

South Korea (Average)

Western Europe (Average)

USA (Average)

Indicative S-Curve

>

China Moving to High-grade Feedstocks


China’s Move to Chloride Technology

> China’s 12th Five Year Plan stipulates the move to chloride-based production, which requires significantly increased rutile volumes

> Some Chinese companies have now obtained the technology to produce pigment via the chloride process, increasing demand for high-grade feedstocks including rutile

> The first chloride pigment producer will come online in China in 2013 with substantial growth forecast thereafter; plants are to be commissioned using 100% rutile

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

2013 2014 2015 2016 2017 2018

Pig

me

nt

(kt)

Source: Company Estimates

Forecast Chloride Pigment Production Ramp Up in China

High Grade - China

High Grade - China

High Grade - RoW

High Grade - RoW

Low Grade - China

Low Grade - China

Low Grade - Row

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2000 - 2010 2010 - 2020

CAGR = 3.3% CAGR = 4.1%

TiO2 Feedstock Demand Growth

Source: RioTinto

>

Limited Ability for a Supply Response


> Limited supply response

– Greenfield supply response is muted by long project development times and financing requirements

> Limited near-term expansion potential

– Sierra Rutile is one of few producing assets capable of significant, near-term expansion potential

> Significant challenges facing other projects

– Should further prolong strong supply side fundamentals

Natural Rutile Supply/Demand Forecast

Natural Rutile Supply Additions

0

200

400

600

800

1,000

1,200

1999 2004 2009 2014 2019TiO

2 U

nit

s o

f R

uti

le (

'00

0 T

on

ne

s)

Current Supply SRL Base Resources

Other White Mountain Demand

Source: TZMI, Company Estimates

Project Company Country Existing Production ktpa Expansion production

ktpa Potential

Production ktpa Total Production

ktpa Earliest Possible

Production Status

Sierra Rutile Sierra Rutile Sierra Leone 125 80 - 205 - Construction

Kenmare Resources Moma expansion Mozambique 6 10 10 26 2012 Construction

Mineral Deposits Grand Côte Senegal 10 0 10 2013 Construction

Base Resources Ltd* Kwale Kenya 73 0 73 2013 Construction

Gunson Resources Coburn Zircon WA 0 10 10 2013 Feasibility

Trimex* Trimex Group India 8 0 8 2013 Feasibility

Tronox Fairbreeze S.Africa 120 25 0 145 2014 Construction

White Mountain* Cerro Blanco Chile 0 95 95 2014 Feasibility

Astron* Astron Ltd Australia 60 0 60 2015 Feasibility

Diatreme & Image Resources Cyclone Australia 0 6 6 2015 Investigation

Total Potential Production 206 246 201 653

Source: Sierra Rutile, * IBMA, Credit Suisse

>

The Result: Strong Long-Term Under-Supply

Working for a better Sierra Leone

TiO2 Supply and Demand Balance

Source: Goldman Sachs

-250

-200

-150

-100

-50

0

50

100

150

2009 2010 2011 2012E 2013E 2014E 2015E

TiO

2 u

nit

s (k

t)

26

> Late-cycle demand growth

– Strong demand growth for TiO2 is anticipated as developed and emerging economies strengthen

> Premium titanium metal and specialist welding sectors poised for expansion

– Rutile demand will see additional upward pressure as high-grade TiO2 feedstock is required for premium titanium metal and welding products

> Trend towards chloride production process

– Improvements in environmental impact and cost efficiency is driving the movement toward chloride production, a process which favors natural rutile use

> Global rutile supply increases are likely to be insignificant

– Long project lead times and material capital requirements restrict near-term supply additions

> Market pricing in transition

– Increased volatility in TiO2 prices is expected as demand increases and legacy long-term contracts expire

Fundamental changes in market dynamics with lead to stronger feedstock pricing

company presentation - sierra rutile limited · 2017. 11. 16. · company presentation november...

Documents