for personal use only - asx.com.au · click to edit master text styles – second level important...
TRANSCRIPT
Cobar Consolidated Resources Limited
Investor Presentation
24 April 2013
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Important Notice and Disclaimer
This Presentation has been prepared by Cobar Consolidated Resources Limited ACN 118 684 576 (Cobar).
Summary information
This Presentation contains summary information about Cobar and its subsidiaries (Cobar Group) and their activities current as at 24 April 2013.
The information in this Presentation does not purport to be complete or comprehensive, and does not purport to summarise all information that an
investor should consider when making an investment decision. It should be read in conjunction with Cobar’s other periodic and continuous
disclosure announcements lodged with ASX, which are available at www.asx.com.au. All dollar values are in Australian dollars (A$) and financial
data is presented for the financial year ending 30 June 2012 unless stated otherwise.
Not financial product advice
This Presentation is for information purposes only and is not a prospectus, product disclosure statement or other offer document under Australian
law or the law of any other jurisdiction. This Presentation is not financial advice, a recommendation to acquire Cobar shares or accounting, legal or
tax advice. It has been prepared without taking into account the objectives, financial or tax situation or needs of individuals. Before making an
investment decision, prospective investors should consider the appropriateness of the information having regard to their own objectives, financial
and tax situation and needs and seek such legal, financial and/or taxation advice as they deem necessary or appropriate to their jurisdiction.
Cobar is not licensed to provide financial product advice in respect of Cobar shares. Cooling off rights do not apply to the acquisition of Cobar
shares.
Past performance
Past performance information given in this Presentation is given for illustrative purposes only and should not be relied upon (and is not) an
indication of the Company's views on its future financial performance or condition. Investors should note that past performance, including past
share price performance, of the Cobar Group cannot be relied upon as an indicator of (and provides no guidance as to) future Cobar Group
performance including future share price performance. The historical information included in this Presentation is, or is based on, information that
has previously been released to the market.
Future performance
This Presentation contains certain forward looking statements. The words anticipated, expected, projections, forecast, estimates, could, may,
target, consider and will and other similar expressions are intended to identify forward looking statements. Forward looking statements, opinions
and estimates provided in this Presentation are based on assumptions and contingencies which are subject to change without notice, as are
statements about market and industry trends, which are based on interpretations of current market conditions. Forward looking statements
including projections, indications or guidance on future earnings or financial position and estimates are provided as a general guide only and
should not be relied on as an indication or guarantee of future performance. There can be no assurance that actual outcomes will not differ
materially from these statements. The forward looking statements in this Presentation speak only as of the date of this Presentation. To the full
extent permitted by law, Cobar and its directors, officers, employees, advisers, agents and intermediaries disclaim any obligation or undertaking
to release any updates or revisions to the information to reflect any change in expectations or assumptions. Nothing in this Presentation will under
any circumstances create an implication that there has been no change in the affairs of Cobar Group since the date of this Presentation.
Cobar Consolidated Resources 00002222
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Important Notice and Disclaimer (cont.)
Investment risk
An investment in Cobar shares is subject to investment and other known and unknown risks, some of which are beyond the control of Cobar
Group. Cobar does not guarantee the performance of Cobar or any particular rate of return on the performance on Cobar Group, nor does it
guarantee the repayment of capital from Cobar or any particular tax treatment. Please see the Risk Factors section of this Presentation for further
details.
Not an offer
This Presentation is not and should not be considered an offer or an invitation to acquire Cobar shares or any other financial products and does not
and will not form any part of any contract for the acquisition of Cobar shares. Eligible shareholders will be entitled to participate in the Offer
under the Entitlement Offer Booklet expected to be lodged with ASX, and dispatched, on or about 10 May 2013. Eligible shareholders who wish to
acquire the shares the subject of the Offer should consider the Entitlement Offer Booklet in deciding whether to apply under the Offer and
complete the Entitlement and Acceptance Form which will be in, or accompany, the Entitlement Offer Booklet. This Presentation does not
constitute an offer to sell, or the solicitation of an offer to buy, any securities in the United States. Cobar shares have not been, and will not be,
registered under the US Securities Act of 1933 and may not be offered or sold in the United States exempt in a transaction exempt from, or not
subject to, the registration requirements of the US Securities Act and applicable US state securities laws.
JORC Code
The information to which this statement is attached that relates to exploration results is based on information compiled by Martin Lenard who is a
Fellow of the Australasian Institute of Mining and Metallurgy. Martin Lenard is an employee of Cobar Consolidated Resources Ltd and has
sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity to which he is
undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Mineral Resources and Ore
Reserves” (the JORC Code). Martin Lenard consents to the inclusion in this report of these matters based on the information in the form and
context in which it appears. BM Geological Services was engaged in October 2011 by Cobar Consolidated Resources Ltd, to prepare a mineral
resource estimate for the Wonawinta silver-zinc-lead deposit in New South Wales. A W Bewsher, Senior Geologist, prepared this report. The
mineral resource estimates in this report have been classified and reported in accordance with the JORC Code. The following statement is made in
accordance with Clause 8 of the JORC Code: The information in this report that relates to mineral resources is based on information compiled by
A W Bewsher, who is a Member of The Australian Institute of Geoscientists. A W Bewsher is a full-time employee of BM Geological Services, and
has sufficient experience, which is relevant to the style of mineralisation and type of deposit under consideration and to mineral resource
estimation processes to qualify as a Competent Person as defined in the JORC Code. A W Bewsher consents to and has provided his prior written
consent to the inclusion in this report of these matters based on the documentation in the form and in the context in which it appears. The
information in this report that relates to ore reserves is based on information compiled by P W Llewellyn who is a Fellow of The Australasian
Institute of Mining and Metallurgy. P W Llewellyn consults to Cobar Consolidated Resources Ltd and has sufficient experience, which is relevant to
the style of mineralisation and type of deposit under consideration and to ore reserve estimation processes to qualify as a Competent Person as
defined in the JORC Code. P W Llewellyn consents to and has provided his prior written consent to the inclusion in this report of these matters
based on the documentation in the form and in the context in which it appears. Ore Reserves were estimated using all available geological and
relevant drill hole and assay data, including mineralogical sampling and test work on mineral recoveries and final product qualities. Ore Reserve
estimates were determined by the consideration of all of the “modifying factors” in accordance with the JORC Code 2004, including product
prices, mining costs, metallurgical recoveries, environmental consideration, access and approvals.
Cobar Consolidated Resources 00003333
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Important Notice and Disclaimer (cont.)
Cautionary note for investors outside Australia regarding reserves and resources
Investors outside Australia should note that while Cobar's reserve and resource estimates comply with the JORC Code, they may not comply with
similar guidelines in other countries, including the United States. The JORC Code and Guide 7, which governs disclosures of mineral reserves in
registration statements filed with the U.S. Securities and Exchange Commission, differ in several significant respects. In particular, Industry Guide
7 does not recognise classifications other than proven and probable reserves and, as a result, the SEC generally does not permit mining
companies to disclose their mineral resources in SEC filings. Information contained in this presentation describing Cobar's mineral deposits may
not be comparable to similar information made public by companies in accordance with Guide 7. You should not assume that quantities reported
as “resources” will be converted to reserves under the JORC Code or any other reporting regime or that Cobar will be able to legally and
economically extract them.
Advisers
Cobar's advisers have not authorised, permitted or caused the issue, lodgement, submission, despatch or provision of this Presentation and do not
make or purport to make any statement in this Presentation and there is no statement in this Presentation which is based on any statement by the
advisers.
To the maximum extent permitted by law, Cobar, its representatives, advisers and their respective officers, directors, employees, agents or
controlling persons (collectively, the Representatives) expressly disclaim all liabilities in respect of, and make no representation or warranty,
express or implied, as to the accuracy or completeness of the information contained in this Presentation or in any other documents furnished by
the foregoing persons. Only those representations and warranties that are made in definitive transaction documents regarding the proposed
investment, when, as and if executed, will have any legal effect.
Statements made in this Presentation are made only at the date of this Presentation. The information in this Presentation remains subject to change
without notice
Cobar Consolidated Resources 00004444
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Contents
► Capital Raising Initiatives
► Company Overview and Ramp-up Progress
► Exploration Upside
► Conclusions
► Risk Factors and International Selling Restrictions
Cobar Consolidated Resources 00005555
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Capital Raising Initiatives
Cobar Consolidated Resources 00006666
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Capital Raising Initiatives
► Cobar today announced a list of funding initiatives that will address short
term working capital requirements and allow the company to meet
scheduled debt repayments.
► These initiatives are:
– Entitlement Offer to raise $12.2 million.
– Realisation of part of Cobar’s hedge book to raise $5.1m.
– Six month deferral of repayments under project finance facility.
Cobar Consolidated Resources 00007777
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Entitlement Offer
► Cobar is undertaking a 2 for 5 renounceable pro rata entitlement offer
(Entitlement Offer) to raise approximately $12.2 million.
► The offer price is $0.13 per share, representing:
– A 43.6% discount to the 5 day VWAP of $0.23 as at Thursday 18 Apr 2013.
– A 26.3% discount to the Theoretical Ex-Rights Price (TERP) of $0.18.
► Shareholders can apply for additional shares in excess of their entitlement.
► The offer is underwritten by Cobar’s major shareholder, Magna, at no cost
to Cobar (subject to FIRB approval, which has been applied for).
– The underwriting agreement contains no termination rights relating to a fall
in any market index, Cobar’s share price, or the silver price.
► Magna has committed to taking up its full pro rata entitlement,
representing approximately $2.3 million.
► Magna will have the right to appoint a nominee to the Board of Cobar
following completion of the Entitlement Offer.
Cobar Consolidated Resources 00008888
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Other Capital Initiatives
► Cobar has also negotiated changes to its financing facilities with CBA.
These include:
– Restructure of Cobar’s hedge book to raise $5.1m.
� Cobar has entered into new hedging arrangements for 900,000oz of
silver at an average price of A$23.75/oz.
� Cobar continues to hold hedging for approximately 500,000oz at an
average silver price of A$29/oz.
– Deferral of scheduled term loan repayments under its project finance facility
� Next repayment due in December 2013.
Cobar Consolidated Resources 00009999
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Use of Funds
Closing cash position as at 31 March 2013 $2.8m
Proceeds from part-sale of hedge book $5.1m
Proceeds from the Entitlement Offer (before costs) $12.2m
Gross proceeds from capital initiatives $20.1m
Costs of the Entitlement Offer ($0.3m)
Outstanding debt balance following debt restructure ($16.8m)
Amount available for working capital purposes
before operating and investing cash flows$3.0m
Cobar Consolidated Resources 10101010
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Executive Changes
► Ian Lawrence to step-down as Managing Director on 23 May 2013 after
more than 7 years with the Company.
► Paul Bibby has been appointed as COO in the interim period.
– Will assist the Company in the transition to a new Managing Director.
– Previously CEO of Range River Gold and OceanaGold.
– Has held operating and development roles at Nyrstar, Zinifex and Rio Tinto.
Cobar Consolidated Resources 11111111
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Indicative Timetable (Entitlement Offer)
*Dates and times are indicative only and subject to change
Event Date
Announcement 24 April
Shares trade on ASX on an ‘ex’ basis and rights trading starts 30 April
Record date for determining entitlements 6 May
Entitlement Offer opens 10 May
Rights trading ends 21 May
New shares quoted on a deferred settlement basis 22 May
Entitlement Offer closes 28 May
Announce results of Entitlement Offer 31 May
Allotment of new shares under the Entitlement Offer 5 Jun
Trading of new shares under the Entitlement Offer 6 Jun
Cobar Consolidated Resources 12121212
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Company overview & Ramp-up progress
Cobar Consolidated Resources 13131313
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Company Overview
► Cobar Consolidated Resources is the owner and operator of the Wonawinta
Silver Mine in western New South Wales, Australia.
► We have successfully transitioned from junior explorer to developer and
producer in 5 years.
► We are moving to become a profitable ASX-listed
silver producer benefitting from a silver
price that is underpinned by a compelling story
for sustained long term demand.
Cobar Consolidated Resources 14141414
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Investment Highlights
► Solid mineral inventory*.
– 10Mt at 80g/t for 26Moz Ag - probable ore reserve estimate.
– 53Moz - indicated and inferred resource estimate.
► Plant constructed and operational.
– Mining from a series of shallow open pits.
– Conventional carbon-in-leach (CIL) to produce silver dore.
– Ball mill expected to be operational by July 2013, increasing production and
silver revenues.
► Rapid transition from developer to producer.
– Definitive feasibility study completed December 2010.
– First silver poured in July 2012.
► Significant exploration upside.
– First phase of resource expansion drilling complete.
Cobar Consolidated Resources 15151515
*As at January 2012. As at March 2013, 532kt of ore at an average grade of 88.3 g/t has been extracted from the reserve base
(1.5Moz of silver), of which 397koz is contained in the oversize ore stockpile
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Why Silver?
► Silver’s unique properties are relevant in today’s modern world and will
underpin demand well into the future.
– Highest electrical conductivity of all the metals (critically important in the
miniaturisation of circuits) and is non corrosive.
– Superior thermal conductivity (transfers heat effectively; doesn’t overheat).
– Highest reflectivity (94%) in visible light (Gold 72%, Aluminium 92%).
► “Silver helps make today’s interconnected lifestyle possible and is a vital
component of virtually every automobile, cell and smartphone, computer
and laptop, appliance and electronic device we use.
Further, silver’s antibacterial properties are finding new uses in textiles,
medical instruments and hospital equipment, providing an effective tool
in combatting infection and bacteria”*
Source: The Silver Institute 2011
*Michael DiRienzo, the Silver Institute (March 2013)
Cobar Consolidated Resources 16161616
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Resource and Reserve Base (Jan 2012*)
Cobar Consolidated Resources 17171717
Reserve Tonnes Grade Grade Cont Cont
Classification Mt Ag g/t Pb % Ag Moz Pb ‘000t
Probable 10.1 80 1.1 25.9 107
Resource Tonnes Grade Grade Cont Cont
Mt Ag g/t Pb % Ag Moz Pb ‘000t
Indicated 16.9 66 0.9 36.0 148
Inferred 9.1 58 0.7 16.8 61
Total 26.0 63 0.8 52.8 209
► Underpins current operation.
► Provides platform to consider expansion options.
► Exploration activity will potentially add to resource/reserve base.
*Ore Reserves are included in the Mineral Resource; Cut-off grade of 22 g/t silver equivalent using a silver price of A$30/oz
and a lead price of A$1,869/tonne; A global dilution factor of 3 g/t silver has been applied; As at March 2013, 532kt of ore at an
average grade of 88.3 g/t has been extracted from the reserve base (1.5Moz of silver), of which 397koz is contained in the
oversize ore stockpile
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Ramp-up Progress
► Progressive ramp up in silver production July through December 2012.
► Tougher clays were recognized soon after production started.
► The mill installation was brought forward from Y3 to Y1.
► A number of interim solutions have been implemented.
– Crusher on the ROM pad.
– High pressure sprays.
– Gravity circuit commissioned.
– Dis-integrator installed.
► A stockpile of oversize material has accumulated.
► Ball mill installation expected in June 2013 (operational from July 2013)
will deal with harder ore and eliminate over-size altogether.
Cobar Consolidated Resources 18181818
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13
oz
Cum Actual Production Cum Prod'n - had there been no oversize ore
Impact of Oversize Ore on Production (FY13)
Cobar Consolidated Resources 19191919
586koz
948koz
+363koz
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Silver Production (FY13)
Cobar Consolidated Resources 20202020
*As with prior months, Cobar has a certain level of silver contained in concentrate on hand. At March 2013, this was 36koz
0
20,000
40,000
60,000
80,000
100,000
120,000
Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13
oz *
Silver production in the March quarter has been significantly constrained by the level of oversize ore.
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Ball Mill
Cobar Consolidated Resources 21212121
► The ball mill has arrived on site and is expected to be installed in June
2013 and operational in July 2013.
– The ball mill will deal with harder limestone ore and eliminate oversize clay ore.
– This will increase silver production and consequently revenues, and reduce operating costs per ounce.
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
March 2013 Quarterly Results
Cobar Consolidated Resources 22222222
Operating
parameters
Sep ‘12 Dec ‘12 Mar ‘13 Comment
Ore mined (t) 129,035 198,765 204,290 �
Ore grade (g/t) 72 90 97 �
Ore processed (t) 75,561 177,919 171,398 Debottlenecking required
Ore grade (g/t) 83 93 101 �
Recovery (%) 90 81 79 84% achieved in March
Silver in oversize (oz) 56,666 112,232 228,102 Ball mill to process
Silver produced (oz) 76,850 277,473 231,253 Refer comment below
Cash at bank ($M) 12.7 9.7 2.8 Capital raising announced
As at 31 March there was 36,000oz of silver contained in concentrate and 397,000oz of silver contained in oversize ore.
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Exploration upside
Cobar Consolidated Resources 23232323
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Cobar Basin Exploration
► Cobar Basin poly-metallic mineral field.
► Three operating underground and one
open cut mine; two advanced projects.
► CCR tenements >900km2 on western
margin of basin.
► 70 strike km of prospective basin-
bounding structures.
► Exploration Objectives:
– Extend mine life – increase silver
reserve/resource inventory.
– Increase silver output.
– Grow project portfolio (new discovery) –
pursue blue sky base metal potential at
Wonawinta and Gundaroo.
Cobar Consolidated Resources 24242424
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Wonawinta Resource Expansion
► A 110 hole RC program totaling 6,429m
was recently completed in the Wonawinta
area.
► Two objectives for the program:
– Identify areas within the existing resource
with the potential for upgrading from
inferred to indicated resource.
– Locate new areas with the potential for
additional oxide silver resources.
► Results highlights:
– Most significant result at the Southern end
of Target 1D, where CCRC959 intersected
5m @ 139g/t Ag from a depth of 26m.
– Drilling at 2D identified a new zone of
oxide mineralisation over a strike length of
2.5km and an E-W extent of 100-300m.
Grades are generally low at <50g/t Ag.
Cobar Consolidated Resources 25252525
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Wonawinta Resource Expansion - Regional
► Two drillholes spaced 300m apart were
completed at the Southern end of the
Junction prospect located 5km NE of the
Wonawinta mine.
– CCRC996 intersected 12m @ 13g/t Ag.
Presence of silver mineralisation and
favourable host rocks at shallow depths in
this grass-roots target is regarded as highly
encouraging.
– No mineralisation intersected at CCRC997.
► Further drilling is required on Smith’s Tank
line (Target 2E) to define the higher grade
mineralisation.
► Targets 2F and 2G are yet to be tested.
Cobar Consolidated Resources 26262626
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Conclusions
Cobar Consolidated Resources 27272727
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Conclusions
► The Wonawinta operation is transitioning to nameplate capacity.
– The level of oversize ore is constraining silver production.
– The priority is the ball mill installation, which will allow for the treatment of
oversize ore.
► Capital initiatives will provide immediate working capital and fund
scheduled repayments of debt facilities.
► Exploration upside.
– Silver and base metals.
► Revenue is leveraged to silver price.
– More than two-thirds of production is un-hedged.
Cobar Consolidated Resources 28282828
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Risk factors and Selling restrictions
Cobar Consolidated Resources 29292929
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Risk Factors
Cobar is a minerals exploration and production company with a primary focus on silver. Due to the nature of Cobar’s business activities
and mineral exploration interests, investment in the Company carries with it risks reasonably expected of an investment in a business of
this type. An investment in the Company should be considered speculative. Shareholders should consider the risk factors described
below, together with the Company's other periodic and continuous disclosure announcements lodged with ASX and other publicly
available information on Cobar’s website at www.ccrlimited.com.au, before investing in the Company.
The following is not intended to be an exhaustive list of the risk factors to which the Company is exposed.
Additional requirements for capital
The size of the Entitlement Offer is sufficient to meet the Company’s working capital requirements and debt repayment schedule under its
current business plan, but with a minimal cash buffer for contingencies. The Company’s actual capital requirements will depend on
numerous factors. Depending on the Company’s ability to generate income from its operations, the cost of exploration activities, and other
acquisition opportunities, the Company may require further financing in due course in addition to amounts raised under this capital
raising. Any additional equity financing may dilute shareholdings. In addition, there is limited scope for the Company to increase its debt
financing under its current debt arrangements. If the Company is unable to obtain additional financing as needed, it may be required to
reduce the scope of its operations or scale back its exploration programs, as the case may be.
Production and operating risks
Shareholders should understand that mining projects are high-risk undertakings. Actual future production may vary materially from
targets and projections of future production for a variety of reasons. The failure of the Company to achieve its production estimates could
have a material adverse effect on any or all of its future cash flows, profitability, results of operations and financial conditions. Actual
production may vary from estimates for a variety of reasons, including: the availability of certain types of ores; the actual ore mined
varying from estimates of grade or tonnage; variations in metallurgical and other characteristics from those expected and recovery rates;
short‐term operating factors such as the need for sequential development of ore bodies and the processing of new or adjacent ore grades
from those planned; equipment failures; industrial accidents; natural phenomena such as inclement weather conditions, floods, droughts,
rock slides and earthquakes; encountering unusual or unexpected geological conditions; changes in power costs and potential power
shortages; shortages of principal supplies needed for mining operations, including explosives, fuels, chemical reagents, water, equipment
parts and lubricants; plant and equipment failure; the inability to process certain types of ores; labour shortages or strikes; lack of
required labour; civil disobedience and protests; and restrictions or regulations imposed by government agencies or other changes in the
regulatory environment. Such occurrences could also result in damage to mineral properties or mines, interruptions in production, injury
or death to persons, damage to property of the Company or others, monetary losses and legal liabilities in addition to adversely affecting
mineral production. These factors may cause a mineral deposit that has been mined profitably in the past to become unprofitable forcing
the Company to cease production. Of particular relevance to the Company, production from Wonawinta has been below budget because
of the level of stockpiling of oversized ore which cannot at present be processed through the leaching and elution circuit. Further,
production experience from the Boundary pit has indicated variability in the ore grade from the current resource/reserve block modelling
resulting in higher mining losses than originally estimated.
Cobar Consolidated Resources 30303030
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Risk Factors (cont.)
Water
The Company’s water rights under its existing licenses are sufficient to meet the current water requirements of its operations. Should
additional water be required for its current operations, expansion activities and/or exploration activities, the Company would require
additional water rights. There is no guarantee that the Company will be able to increase the amount of water available to it at a reasonable
price, within a reasonable timeframe or otherwise.
New ball mill ramp-up and capacity
To address issues related to oversized ore, the Company raised funds in September 2012 to purchase and install a ball mill. The ball mill
has been purchased, refurbished, transported to site and is currently being installed. The stockpile of oversize, high-grade ore currently
contains around 400,000oz of silver. The amount of oversize ore and its impact on silver production has been greater than expected which
has resulted in reduced silver revenues. This stockpiled ore and any future oversize will be treated by the ball mill, which is expected to
be operating by July 2013. However, delays in the ramp up of the ball mill compared to current expectations will adversely impact the
financial position of the Company. In addition, there is a risk that the ball mill may be ineffective in treating the oversize ore and its
capacity may prove insufficient to handle the ore feed when the feed rate increases to the targeted level, dependent on the relative
proportions of clay and limestone ores fed to the plant.
Business plan risk
The Company estimates its future costs of production based on various assumptions underpinning its business plan, including input costs
and volume and productivity rates. By their nature, these estimates and assumptions are subject to significant uncertainties and,
accordingly, the actual costs may materially differ from these estimates and assumptions. No assurance can be given that the cost
estimates and the underlying assumptions, including targeted production rates, will be realised in practice, which may materially and
adversely affect the Company’s earnings and therefore viability.
Silver price volatility and exchange rate risk
The revenue the Company derives through the sale of silver exposes the potential income of the Company to silver price and separately
exchange rate risks. Commodity prices fluctuate and are affected by many factors beyond the control of the Company. Such factors
include supply and demand fluctuations for silver, technological advancements, forward selling activities and other macro-economic
factors. Furthermore, international prices of various commodities are denominated in United States dollars, whereas the income and
expenditure of the Company are and will be taken into account in Australian currency, exposing the Company to the fluctuations and
volatility of the rate of exchange between the United States dollar and the Australian dollar, as determined by international markets. As at
18 April 2013, the last day of trading in Cobar’s shares prior to the date of this presentation, the silver price was around A$22.6/oz, which
represents a 29% decline from the price of A$29.1/oz at 1 January 2013. Should the recent price decline be sustained for a prolonged
period of time, the Company’s sales revenue would be adversely impacted.
Cobar Consolidated Resources 31313131
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Risk Factors (cont.)
Upgrading resource categories and conversion of resources to reserves
Reserve and resource estimates are expressions of judgment based on knowledge, experience and industry practice. Estimates which
were valid when originally calculated may alter significantly when new information or techniques become available. In addition, by their
very nature, resource estimates are imprecise and depend to some extent on interpretations, which may prove to be inaccurate. The
category of Inferred Mineral Resources described in this Investor Presentation is the lowest level of confidence under the JORC Code for
resource reporting. The evaluation of these resources with the intention of upgrading resource categories and converting them to
reserves is impacted by a number of issues, including the underlying silver price (of which a price of A$30.00/oz was used in the
calculation of the Company’s current resource and reserve base) mining dilution, metallurgical recovery and grade variability. There can
be no guarantee that the resources will be developed to the point of production.
Potential change in ownership
Shareholders should be aware that the Entitlement Offer, in particular the underwriting arrangements relating to the Entitlement Offer,
may result in Magna potentially increasing its relevant interest in the voting shares of the Company from 19% before the Entitlement Offer
to up to a maximum of 42%. In the event that Magna’s percentage shareholding in the Company is sufficiently large the Company may lose
the opportunity to obtain a substantial takeover premium for its shares in any potential change of control context.
Contractor risk
The Company utilises various specialist contractors in the conduct of its mining operations. Any significant failure by any of these
contractors to comply with its obligations under the operating agreement (whether as a result of financial or operational difficulties or
otherwise), any termination or significant breach of agreements by a contractor or any failure by the Company or any of its contractors to
renew the operating agreement when the agreement expires (and the Company is unable to find a satisfactory replacement contractor)
could materially and adversely affect its business, financial condition, results of operations and prospects. The activities of contractors
have a material impact on the ability of the Company to comply with the requirements of the applicable mining licences. If the Company is
unable to comply with its requirements and obligations under the applicable mining licences due to the actions or failures of contractors,
and if the Company does not have any recourse against its contractors whose action or failure caused loss, then the Company’s operations
and prospects may be materially and adversely affected.
Change in key personnel
The responsibility of overseeing the day-to-day operations and the strategic management of the Company depends substantially on its
Directors and its key personnel. The Company has announced that the current Managing Director, Mr Ian Lawrence, will step down from
his position on 23 May 2013. There can be no assurance that the Company will find a new Managing Director with equivalent skills and
experience as Mr Lawrence and/or that there will be no detrimental impact on the Company following Mr Lawrence’s, or indeed any other
key employee’s, departure.
Cobar Consolidated Resources 32323232
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Risk Factors (cont.)
Trading liquidity
As a small entity, there is likely to be only limited trading liquidity in the Company’s shares. The Company might not be covered by a
broad base of research analysts which may make it harder for shares to be traded.
Tenement title
Interests in tenements in Australia are governed by Federal and State legislation and are evidenced by the granting of licences or leases.
Each licence or lease is for a specific term and carries with it annual expenditure and reporting commitments, as well as other conditions
requiring compliance. Consequently, the Company could lose title to or its interest in tenements if licence conditions are not met or if
insufficient funds are available to meet expenditure commitments as and when they arise. Further, mining and exploration tenements are
subject to periodic renewal. There is no guarantee that current or future tenements will be approved. Renewal of the term of a granted
tenement is at the discretion of the relevant government authority. Renewal conditions may include increased expenditure or work
commitments or compulsory relinquishment of the areas comprising the Company's projects. The imposition of new conditions or the
inability to meet those conditions may adversely affect the operations, financial position and/or performance of the Company.
Market conditions
The market price of the shares in the Company can fall as well as rise and may be subject to varied and unpredictable influences on the
market for equities in general and resource exploration stocks in particular. Neither the Company nor the Directors warrant the future
performance of the Company or any return on an investment in the Company.
Environmental risks
The operations and proposed activities of the Company are subject to Australian State and Federal laws and regulations concerning the
environment. As with most exploration projects and mining operations, the Company’s activities are expected to have an impact on the
environment, particularly if advanced exploration or mine development proceeds. It is the Company’s intention to conduct its activities to
the highest standard of environmental obligation, including compliance with all environmental laws, in order to minimise damage to the
environment and risk of liability. Nevertheless, there are certain risks inherent in the Company’s activities which could subject the
Company to extensive liability.
Native title
The Company is not aware of any native title rights which it expects to materially adversely affect its current operations or performance.
Whilst the Company holds this view, no guarantee can be given that these native title rights (nor any native title rights over areas in which
the Company may in future acquire an interest in) will not affect the Company.
Cobar Consolidated Resources 33333333
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
Risk Factors (cont.)
Occupational health and safety
The mining industry has become subject to increasing occupational health and safety responsibility and liability. The potential for liability
is a constant risk. If Cobar fails to comply with necessary OH&S legislative requirements, it could result in fines, penalties and
compensation for damages as well as reputational damage.
Litigation risk
Exposure to litigation brought by third parties such as contractors, regulators, or employees could negatively impact on the Company and
its operations and licences. Legal claims, if successful, could adversely impact the profits or financial position of the Company.
Economic and political risks
General economic conditions, movements in interest and inflation rates, currency exchange rates, and changes in Government policy may
have an adverse effect on the Company’s exploration, development, production and marketing activities, as well as on its ability to fund
those activities. If activities cannot be funded, there is a risk that tenements may have to be surrendered or not renewed. Furthermore,
share market conditions may affect the value of the Company’s quoted securities regardless of the Company’s operating performance.
Share market conditions are affected by many factors such as (a) general economic outlook; (b) interest rates and inflation rates; (c)
currency fluctuations; (d) changes in investor sentiment toward particular market sectors; (e) the demand for, and supply of, capital; (f)
terrorism or other hostilities; and (g) government fiscal, monetary and regulatory policies.
Cobar Consolidated Resources 34343434
For
per
sona
l use
onl
y
► Click to edit Master text styles
– Second level
International Selling Restrictions
This document does not constitute an offer of new ordinary shares ("New Shares") of the Company in any jurisdiction in which it would be
unlawful. New Shares may not be offered or sold in any country outside Australia except to the extent permitted below.
New Zealand
The New Shares are not being offered or sold to the public within New Zealand other than to existing shareholders of the Company with
registered addresses in New Zealand to whom the offer of New Shares is being made in reliance on the Securities Act (Overseas
Companies) Exemption Notice 2002 (New Zealand). The offer of New Shares is renounceable in favour of members of the public.
This document has not been registered, filed with or approved by any New Zealand regulatory authority under the Securities Act 1978
(New Zealand). This document is not an investment statement or prospectus under New Zealand law and is not required to, and may not,
contain all the information that an investment statement or prospectus under New Zealand law is required to contain.
Singapore
This document and any other materials relating to the New Shares have not been, and will not be, lodged or registered as a prospectus in
Singapore with the Monetary Authority of Singapore. Accordingly, this document and any other document or materials in connection with
the offer or sale, or invitation for subscription or purchase, of New Shares may not be issued, circulated or distributed, nor may these
securities be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to
persons in Singapore except pursuant to and in accordance with exemptions in Subdivision (4) Division 1, Part XIII of the Securities and
Futures Act, Chapter 289 of Singapore (the "SFA"), or as otherwise pursuant to, and in accordance with the conditions of any other
applicable provisions of the SFA.
This document has been given to you on the basis that you are an existing holder of the Company's shares. In the event that you are not
such a shareholder, please return this document immediately. You may not forward or circulate this document to any other person in
Singapore.
Any offer is not made to you with a view to the New Shares being subsequently offered for sale to any other party. There are on-sale
restrictions in Singapore that may be applicable to investors who acquire New Shares. As such, investors are advised to acquaint
themselves with the SFA provisions relating to resale restrictions in Singapore and comply accordingly.
United States
This document may not be released in the United States. Any securities described in this document have not been, and will not be,
registered under the US Securities Act of 1933 and may not be offered or sold in the United States except in transactions exempt from, or
not subject to, registration under the US Securities Act and applicable US state securities laws.
Cobar Consolidated Resources 35353535
For
per
sona
l use
onl
y
For
per
sona
l use
onl
y