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SPC-EU EDF10 Deep Sea Minerals (DSM) Project
This document remains the property of IHC Merwede. All rights reserved. This document or any part thereof may not be made public or disclosed, copied or otherwise reproduced or used in any
form or by any means without prior permission in writing from IHC Merwede.
Dr. John Feenan Tanoa International HotelIHC Mining B.V. Nadi, Fiji
16 August 2012
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Presentation Outline
1. IHC Merwede & IHC Mining Background2. My Background & History of Neptune Minerals3. What Drives Mineral Explorers?4. Review of the Mining Technology Cycle5. Introduction to Calculating Exploration Value6. Overview of Deep Sea Mineral Exploration Risks7. Focus on Resource Definition Risk & Sampling8. The Implications for the Minerals Industry & Investors9. Q&A
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If it is innovative technology, IHC builds it!
IHC Merwede facts & figures:• Financial turnover in 2011: EUR 1,1 billion
• Staff in 2011: 3500
• 5 Shipyards in The Netherlands, 1 shipyard in China
• In-house research centres, MTI, MAS and OTI (60 employees)
• 3-4% of turnover for R&D (300-350 employees)
• World wide services and manufacturing locations
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IHC Merwede History
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Responsibilities in sphere of influence
Assess to prevent• Prediction tools• Risk assessments
Engineer to mitigate• Safety• Reduce environmental impact
Monitor to optimize• Optimize equipment performance• Environment
Collaborate to complete• Community
Sustainable development
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IHC Merwede Mining Division
Mining services
Market segments
Product groups
Life-cycle support
Reliable partner forefficient mining life cycles
Innovative vessels Life-cycle supportAdvanced equipment
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My Background
2003
Today
StartedNeptune Minerals Plc
Deep Sea MineralsExploration & Consulting
Marine Biology@ Sydney Uni
GeologyBSc (Hons)
Oil & GasExploration Geologist
Oil & GasCommercial Consultant
1984
2005
MSc Pet. Geol.Imperial College
PhD Innov. MgtUWA
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Neptune Minerals History8
1999 Neptune Resources application2000-02 NZ Oceans Policy Review2002 (Oct.) PL39 195 @ 30,000km2
2003 (Feb.) Start funding roadshows2004 (Dec.) $1million seed funding2005 (May) Neptune Minerals, Plc2005 (Oct.) AIM LSX listing £9.3M2005 (Dec.) K05 drillship Brothers2007 (May-July) K07 & CM072007 (Aug.) RV Meteor, Mediterranean 2008 (April) IHC-Technip Mining Study2009 (Feb.) GFC Slow-down2010 (Dec.) US investor discussions2011 (Mar.-May) K11 Dorado Discovery2011 (Dec.) Neptune Minerals, Inc.2012 Private exploration company
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What drives mineral explorers?
EXPLORATION & MINING Co’s
• Growing company asset value & shareholder returns
• Reserves replacement & growth• Having a successful “hit rate” from
exploration vs competitors• Avoiding exploration failures• $$$
NATIONAL / GOVERNMENT Co’s
• Resource & supply security to sustain national industries
• Technology & skills development to assist industrial growth
• Geopolitical presence & influence
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The need to educate “dry” mineral explorers
Now
FutureIncrease in deep sea mining projects
& knowledge generated by new entrants
No. m
arine mining projects
Project Attrition
Current potential deep sea projects
Exploration Evaluation Feasibility Construct & Operate
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Overview of Mining Cycle
Exploration Evaluation Feasibility Construct &Operate
• Initial discovery• Inferred mineral
resource• Economic viability• Start EIA baseline
• A “bankable” resource
• Refined costs• Engage
stakeholders• Improve EIA
• Market report of ore reserves
• Detailed costs• Stakeholders
support• Full EIA
• Best practice project performance
• Stakeholder communications
• EIA monitoring
Exploration Licence term Mining Licence term
8 – 15 years 20 – 30 years
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Technology Partnering – Exploration Licence Phase12
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Technology Partnering – Mining Licence Phase13
ExplorationLicencePhase
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Introduction to Calculating Exploration Value
“It is a truth very certain that when it is not in our power to determine what is true we ought to follow what is most probable.” Descartes
Decision making under uncertainty, how to manage?
With total project certainty:
$we get full project value
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In an uncertain world:
$ we start here!
RISK
NPV$EMV$
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Risks
Geology, technology, economics and risk combine to create project value EMV$ per mineral deposit
Cash-flow
$
Costs
$
EMV$P50
Resource EstimateTonnage & Grade
Geology
Licence
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What is Expected Monetary Value (EMV)?
• The probability or risk weighted value of an investment.• The methodology:
• Identify a potential marine mineral resource• Estimate the costs of successful development (+/- 25% accuracy)• Estimate the production rate and revenue stream• Calculate discounted after-tax cashflows for a hypothetical success• Use monte carlo simulation of a range (low-med-high) of input
parameters to generate a probabilistic range of project value NPV$• Identify key risks to determine the total Probability of Success (PoS%)• Multiply/reduce the mean NPV$ by the PoS% to calculate the EMV$
• If the EMV$ less exploration capital cost$ is calculated to be positive, then the decision should be to commit to the investment.
The higher the positive EMV$ the more attractive the investment.
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An Overview of Deep Sea Exploration Risks
Resource Definition Risk is considered one of the highest risks to manage for investment confidence.
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JORC Reporting for Resource Definition
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Background and Purpose of Sampling
Exploration Evaluation Feasibility Construct &Operate
Survey & Geophysics
Exploration Sampling
Geological Modelling & Resource Estimates
Target Selection
Sampling
Resource Evaluation & Estimate
Mineral Resource Definition
Research & Development
Feasibility Studies
Project Implementation
Mine Planning Design
Mining Operations
Production Management
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Sampling Program Objectives
• Three dimensional delineation of the extent of the resource• Information to select the minable target area• The grade and grade variability of the resource• In-situ geotechnical criteria for mining tool design• Nature and characteristics of the target minerals• The presence of beneficial or problematic associated minerals• Baseline environmental data
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Sampling Processes
Exploration Evaluation Feasibility
Exploration Sampling
Resource Definition Sampling
Test Mining /Bulk Sampling
Increasing Resource Confidence
Construct &
Operate1 2 3
Reduced uncertainty in the economic viabilityand geo-technical characteristics of mining
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Contrast Onshore vs Subsea Mining
www.superpit.com.au www.ihcmerwede.com
(Fixed) (Mobile)
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Prospecting Exploration Mapping & Sampling23
First phase is a “light touch” of seabed…
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Drill Sampling (SMS)How deep is mineralisation?
• Multiple options (>30 suppliers)• Scientific & oil industry heritage• Exploration sampling stage focus• Varying logistics to deploy• Variable tool limitations & sample standards• No “silver bullet” solution
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Bulk & Grab Sampling (SMS, nodules & crusts)How continuous is mineralisation?
• Grid of sample stations across resource area• Identify “ore sweetspots” and understand why• Rock on deck for tonnage & grade• Volumes for metallurgical processing evaluation• Improve geotechnical understanding• Capture biota for biological data
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Sampling Challenges
• Availability of suitable sampling technology• Availability and cost of suitable vessels & LARS (Launch & Recovery System)• Availability of geoscientists to process and evaluate samples• Gaining access to material• Obtaining representative samples• Undisturbed in‐situ seabed characteristics• Seastate operating limits
…requires innovation!
www.debeersgroup.com
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De Beers Marine – Alluvial Diamonds
www.debeersgroup.com
• First offshore West Africa diamonds recovered in 1961• De Beers Marine production c. 1.5 million carats p.a• Five mining vessels in operation, including:
• Peace in Africa – mining vessel & crawler to 200m water depth• Debmar Atlantic – mining vessel using a large 8m diameter drill• Douglas Bay – dedicated exploration sampling vessel
• Ore reserve is developed on a “rolling basis”• Survey & sampling conducted in parallel with mining• Sampling for reserve replacement + new target identification• Deposit lacks homogeneity• Sampling 2‐3 years ahead of mine plan
(Grabs, drilling & vibracoring)
(Ref. Richardson, K., 2007; www.debeersgroup.com)
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De Beers Marine – Alluvial Diamonds
www.debeersgroup.comDebmar Atlantic
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Nautilus Minerals – Massive Sulphides
www.nautilusminerals.com
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Solwara 1Est. Resources 2.5MtProduction @ 1.3Mtpa
Requires ongoing cycle of resource development to justify a 10, 20 or 30 year project life for the mining investment.
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Subsea Sampling – A New Paradigm?
Exploration Evaluation Feasibility
Exploration Sampling
Resource Definition Sampling Test Mining
Construct &Operate
1 2 3
Onshore (static)
Exploration Evaluation Feasibility
Exploration Sampling
Resource Definition Sampling
Test Mining / Bulk Sampling
Operations
1 2 3
Plan
Subsea (cyclical)
Expand
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Industry Implications
• Market reporting for investors• Challenging the Code constraints – JORC & NI43‐101• Developing stakeholder confidence• Re‐thinking project management
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Questions and Answers