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Peculiar Knob Peculiar Knob DSO Iron Ore ProjectDSO Iron Ore Project
ItIt’’s the Grade that Counts!s the Grade that Counts!
Bob DuffinBob DuffinExecutive Chairman Executive Chairman –– WPG Resources LtdWPG Resources Ltd
Presentation to Sydney Mining ClubPresentation to Sydney Mining Club7 October 20107 October 2010
Sydney Mining Club Presentation 7 October 2010 2
Key Corporate InformationDirectors:– Bob Duffin (executive chairman)– Heath Roberts (executive)– Gary Jones (executive)– Bob Richardson (independent non executive)– Len Dean (independent non executive)– Lim See Yong (non executive)– Dennis Mutton (independent non executive)
Executives– Martin Jacobsen (COO)– Greg Harding (CFO)– Myles Fang (Iron Ore Marketing)– Larissa Brown (Company Secretary)– Adrian Horne (PK Mine Manager)
Cash: $13.6 m (30 September 2010)Directors control 23m voting shares (19%)Good core group of top 50 shareholders both
retail and professional
TSR (pa): 212% 1 year, 36% 5years (Bloomberg)
Issued shares 121.7m
Unlisted optionsShare rights
5.8m2.1m
Fully diluted 129.6m
Market capitalisation
$117m(at $0.90/share)
Sydney Mining Club Presentation 7 October 2010 3
Our Key Project AssetsIRON ORE• DSO: Peculiar
Knob, Buzzard and Tui deposits Magnetite BIF: Kestrel and Goshawk, Harrier, Eagle, Kite and Falcon at Hawks Nest
• Haematite BIF: Buzzard and Tui footwall
COAL• Penrhyn,
Perfection Well, Pidinga, Lochiel
EXPLORATION• Mt Brady,
Windy Valley
Sydney Mining Club Presentation 7 October 2010 4
Peculiar Knob DSO• BFS updated Sep-Oct 2010• Specular haematite deposit with
silica gangue; high grade Fe with virtually no impurities
• Very sharp break between ore and wall rocks
• Lies beneath 15 to 30 m cover• Effectively all measured and
indicated resource reports to reserves
• LOM W:O strip ratio 4.75:1• Will market all-fines product at
reserve grade
Sydney Mining Club Presentation 7 October 2010 5
Development Plan – Peculiar Knob• 3.3 mtpa to start late
2011; maximise use of contractors
• We will build haul road to Wirrida Siding
• Accommodation village for 190
• Crushing plant at siding• Rail haulage 11,200
tonnes per train 6 days per week to Port Pirie
• Transhipment to Capesize ships in deep water in Upper Spencer Gulf
• One ship every 3 weeks
Sydney Mining Club Presentation 7 October 2010 6
Mineral Resource Estimates Peculiar Knob
Category MillionTonnes
Fe %
P %
SiO2%
Al2O3 %
LOl%
Measured resource 13.6 64.0 0.01 7.11 0.27 0.4
Indicated resource 4.1 63.8 0.02 7.69 0.20 0.4
Inferred resource 1.5 64.6 0.03 6.15 0.20 0.2
Total resource 19.2 64.0 0.01 7.16 0.25 0.4
Sulphur: 0.009%; Cu, Pb, Zn, Ni, Cr; V, Cl, Ba, As, Zr, Sr, etc: at or BLD
To WPG’s knowledge, Peculiar Knob is Australia’s highest grade undeveloped Fe deposit
Sydney Mining Club Presentation 7 October 2010 7
Ore Reserve Estimates Peculiar Knob
Category MillionTonnes
Fe %
P %
SiO2%
Al2O3 %
LOl%
Proved reserve 13.5 63.2 0.01 8.2 0.35 0.45
Probable reserve 3.2 63.2 0.02 8.6 0.28 0.40
Total reserve 16.7 63.2 0.01 8.3 0.34 0.44
Sydney Mining Club Presentation 7 October 2010 8
Permitting and ApprovalsFINALISED• Mining lease• Native title mining agreement• Department of Defence: mining access agreement for mine development, haul
road, accommodation village, rail loader and crusher• Access and compensation agreements with pastoralists• Authorities to build infrastructure on all third party exploration licences• MPLs and EMLs for haul road, infrastructure and borrow pits (offered by PIRSA
and subject to agreeing final documentation)• Stafford borefield – licensed by SA DWLBC (subject to agreeing final
documentation with Defence)• Train paths (reserved)• 10 – 30 year port access agreement for iron ore and coal• Purchase of Port Pirie land (subject to final documentation)
STILL OUTSTANDING• MARP (will be lodged this month)• Port Pirie Development Application (will be lodged in November)
Sydney Mining Club Presentation 7 October 2010 9
The Importance of Grade
Current price: 62% Fe: US$141/tonne; 58% Fe US$110/t
Premium is US$8/t per 1% change in Fe content
[Don’t fall into the trap of calculating the price of 58% Fe fines by back- calculating the US cents per dmtu price then applying the multiplier: (141/0.62)*0.58 = US$132/tonne, not US$110/tonne!!!]
Iron Ore Prices CNF TianjinSource: The Steel Index
0.0
20.0
40.0
60.0
80.0
100.0
120.0
140.0
160.0
180.0
200.0
Nov-08 May-09 Nov-09 May-10 Nov-10
US$
/tonn
e
62% Fe
58% Fe
Sydney Mining Club Presentation 7 October 2010 10
Summary of BFSCAPEX:• Site $84.9m• Port Pirie $53.6m• Total capex: $138.5m
WORKING CAPITAL:• Pre-strip, mine, process and transport
first 160,000 t: $29.3m
TOTALS• Total initial capital: $167.8m
FACILITIES• Expect banks to offer a very
satisfactory debt facility
OPEX:• Average cash opex over LOM:
$64.35/t to FOB• Royalties add another $5.61/t• Total cash opex: $69.96/t to FOB• Sea freight $17/t• Cash opex to delivery in China: $87/t
(rounded)
REVENUE• Spot price CNF: US$141/t• In A$: $148/t
MARGIN• Cash operating margin: $61/t• Margin on 3.3 mtpa: $201m pa
Peculiar Knob’s Cash Generation Capacity is Very Strong and it is WPG’s Intention to Monetise the Deposit ASAP!!
Sydney Mining Club Presentation 7 October 2010 11
PK: Low Capex Intensity is Attractive• Capex site only $84.9m for 3.3
mtpa => US$24/annual tonne• Increases to US$37/annual
tonne if Port Pirie capex of $53.6m is included
• Current benchmark US$70-90/annual tonne (source: Metalytics, London conference Sept 2010)
• For example: MarillanaUS$68/annual tonne (no rail spur) or US$100/annual tonne (with rail spur) (source: BRM ASX announcement 29 Sep 2010)
Sydney Mining Club Presentation 7 October 2010 12
Port Pirie• Operated by Flinders Ports • We have 30 year agreement
with Flinders Ports to use Berth 7
• State government has agreed to sell LMC land to us to build facilities
• Sale is contingent on approval of MARP and DA
• We will develop facilities with 7 mtpa capacity but will use only half; excess capacity to be offered to others
• Will be suitable for Hawks Nest magnetite and Penrhyn coal exports too
Sydney Mining Club Presentation 7 October 2010 13
Port Pirie• We will use a transhipment operation
similar to Whyalla• But we will use a small ship, not tugs
and barges• First anchorage 11 nm offshore, top
up 12 nm further out• Capacity 7 mtpa => commercial
opportunity
Sydney Mining Club Presentation 7 October 2010 14
Port Access is the Key!Iron Ore Ports - WA
0102030405060708090
100
Hedland Dampier Cape Lambert Oakajee Anketell Point SimpleAverage
Capex per Tonne of Annual Capacity
$/to
nne
Coal Ports - NSW and QLD
0102030405060708090
Wiggins Island BalaclavaIsland
Abbott Point Newcastle Port Waratah SimpleAverage
Capex per Tonne of Annual Capacity
$/to
nne
Iron ore ports: $36/annual tonne capacity (average)
Coal ports: $40/annual tonne capacity
Port Pirie: $8/annual tonne capacity – Outstandingly Attractive Metric!
Sydney Mining Club Presentation 7 October 2010 15
The Upside #1 – Depth Extensions at PK
• Whittle pit optimiser wants to push pit deeper
• Bottom of orebody not defined by drilling to date
• Reserves of 16.7 mt calculated to maximum depth of 175 m but orebody is covered by 20 m of overburden
• So reserve is ~110,000 t per vertical metre in the orebody
• If we extended drilling depth by 60 m there is potential to increase total reserves by ~7 mt
• This would add 2 more years to life of mine
Sydney Mining Club Presentation 7 October 2010 16
The Upside #2 – Hawks Nest Iron OreBut First Understand the WPA!
• Administered by the Department of Defence and run by the RAAF
• Covers 127,000 km2 - same size as England
• Occupies 13% of South Australia but 25% of Gawler Craton
• It is used for weapons testing, and more often now than 5-10 years ago
• Includes a “Core Area of Operations”
Sydney Mining Club Presentation 7 October 2010 17
The WPA – Then and Now• Originally covered more than 250,000 km2
(including much of the East Pilbara in WA and also Olympic Dam) but has been halved in size
• Formerly used for Cold War era military activities and some space research; now used for the testing of war materials
• More than 7,000 rockets have been launched there including 2 satellites (1967 and 1971)
• The WPA is the Western World’s largest land-based weapons testing area
• But it is highly prospective for minerals!• The Commonwealth engaged Dr Allan Hawke to
review the WPA in May 2010; report expected this year (interim report this month or early November)
• WPG is optimistic that an outcome satisfactory to both the military and the mining industry will eventuate (time sharing model?)
Sydney Mining Club Presentation 7 October 2010 18
Mineral Resource Estimates Totals – DSO Deposits
(Peculiar Knob, Buzzard, Tui)
Category MillionTonnes
Fe %
P %
SiO2%
Al2O3 %
LOl%
Measured resource 25.7 63.1 0.03 7.6 0.8 0.7
Indicated resource 9.3 61.8 0.05 9.2 0.8 0.8
Inferred resource 2.6 63.1 0.05 7.9 0.5 0.4
Total resource 37.6 62.8 0.04 8.0 0.8 0.7
Sydney Mining Club Presentation 7 October 2010 19
DSO Ore Reserve Estimates (Peculiar Knob and Buzzard only)
Category MillionTonnes
Fe %
P %
SiO2%
Al2O3 %
LOl%
Proved reserve 25.0 62.1 0.03 8.2 0.83 0.68
Probable reserve 4.5 61.5 0.03 8.4 0.95 0.81
Total reserve 29.6 62.0 0.03 8.2 0.85 0.70
NB: Table above excludes Tui – Tui pit not yet designed
Sydney Mining Club Presentation 7 October 2010 20
Mineral Resource Estimates Magnetite Deposits
• Kestrel
• All magnetite
Category Million Tonnes
Fe %
P %
SiO2%
Al2O3 %
LOl%
Measured resource 100 37 0.06 37 0.8 0.6
Indicated resource 60 36 0.06 38 1.0 0.8
Inferred resource 60 36 0.06 39 1.1 0.8
Total resource 220 36 0.06 38 0.9 0.7
Category Million Tonnes
Fe %
P %
SiO2%
Al2O3 %
LOl%
Kestrel – measured, indicated and inferred
220 36 0.06 38 0.9 0.7
Goshawk - inferred resource
148 35 - - - -
Harrier - inferred resource
54 35 - - - -
Eagle - inferred resource
92 31 - - - -
Kite - inferred resource
30 51 - - - -
Falcon - inferred resource
25 32 - - - -
Total resource 569 36 - - - -
Clear potential to increase total resource to >1 billion tonnes with further drilling
Sydney Mining Club Presentation 7 October 2010 21
Mineral ResourcesHawks Nest Haematite BIF – EL 4248 and MC 3810
Category MillionTonnes
Fe %
P %
SiO2%
Al2O3 %
LOl%
Tui - indicated resource 23.9 38.2 0.03 43.5 0.72 0.51
Tui - inferred resource 2.8 36.7 0.02 45.2 0.92 0.61
Buzzard footwall – inferred resource 29.9 38.9 0.03 41.2 0.97 0.73
Buzzard SE – inferred resource 16.1 35.2 0.11 45.9 1.65 0.73
Buzzard West – inferred resource 29.8 36.6 0.03 45.4 0.86 0.66
Total resource 102.5 37.4 0.04 43.8 0.99 0.66
Sydney Mining Club Presentation 7 October 2010 22
Exploration TargetsHawks Nest BIF – EL 4248, MC 3809 and MC 3810
Mineralisation Category Exploration Target
Tonnage Range Million Tonnes Fe Grade Range%
Magnetite BIF 790 – 890 32 – 37
Haematite BIF 1,400 – 1,680 22 – 43
Total 2,190 – 2,570 22 – 43
The exploration targets set out above are in addition to the mineral resource estimates set out in the earlier slides. The exploration targets are based on the currently available drill hole data and are conceptual in nature. Except for the resource estimates in the earlier tables, there has been insufficient exploration to define a mineral resource in these areas, and it is uncertain if further exploration will result in the determination of a mineral resource
Sydney Mining Club Presentation 7 October 2010 23
The WISCO Magnetite Deal – Key Elements• WISCO will fund first $45m to earn a 50% JV interest in the Hawks Nest
tenement (excluding Buzzard DSO)• WISCO cannot withdraw until it has spent $25m and if it does then its
interest will be 28%• WPG’s interest cannot fall below 50% and WISCO’s cannot be >50%• WPG will be manager of the JV (BFS and production stages)• WISCO will subscribe for 12m WPG shares and nominate 1 person to
join WPG’s board• WISCO to have right to purchase part of WPG’s share of cons• WISCO will assist WPG with capex and funding of Port Bonython• Deal fully executed, has NDRC approval and meets FIRB guidelines
but Defence won’t yet support it• Deal swings on outcome of the Hawke Review
Sydney Mining Club Presentation 7 October 2010 24
The Upside #3 - Penrhyn Coal Project
Coal Category Exploration TargetTonnage Range (mt)
Sub-Bituminous Coal
200 – 300
Permian semi- bituminous coal in the Arckaringa Basin 40 km SW of Coober Pedy and 20 km from Peculiar Knob haul road and rail loader
The exploration target set out above is based on the currently available drill hole data and is conceptual in nature. There hasbeen insufficient exploration to define a mineral resource, and it is uncertain if further exploration will result in the determination of a mineral resource
Sydney Mining Club Presentation 7 October 2010 25
Penrhyn Coal Project
Ash 6.5% - 20%
Moisture 32% - 36%
CV Seam 4: 27.7 MJ/kg; increases to 28.5 MJ/kg after washing
Similar to Lake Phillipson coals (sold to WEC for >$35m August 2010 but no access then on ground)
Water washing is effective in salt removal
WPG sees Penrhyn as domestic power station coal or suitable for upgrading for export using emerging clean coal technology
Sydney Mining Club Presentation 7 October 2010 26
The Upside #4 – Leverage off Port Access
WPG has a number of opportunities to leverage the 3-4 mtpa spare capacity in its port access agreements:
• Clip the ticket
• Joint venture into projects
• M&A
The port access agreements represent a very valuable asset to the Company.
WPG intends to run the port as a separate profit centre.
Sydney Mining Club Presentation 7 October 2010 27
Comparison with Portman – DSO Only!
• Same distances mine/siding/port• PMM mining commenced 1995 at 1 mtpa• At Dec 97 PMM resource had grown to 37
mt with reserves 15.1 mt at 63% Fe• WPG’s DSO resource now 37.6 mt at
62.8% and reserves 29.6 mt at 62% Fe• PMM resource grew after mining started
by exploration• PMM acquired
by Cliffs Nov2008 for $3.3bn
• Why can’t WPG reproduce this?
96 km mine/siding; 650 km siding/port
100 km mine/siding; 575 km siding/port
Sydney Mining Club Presentation 7 October 2010 28
Our Vision• Bring Peculiar Knob into production at 3.3 mtpa in H2 2011• Bring Buzzard into production later so total DSO sales are 3-4 mtpa for minimum 10
year DSO project life• Continue exploration at Hawks Nest to discover more DSO deposits to extend life
beyond 10 years – great exploration prospectivity for DSO• Commence BFS on Hawks Nest magnetite in 2011 and commit to project
development in 2015 so that magnetite sales are 6-10 mtpa for 30 years from 2016-7
• More testwork on Hawks Nest haematite BIF to supplement magnetite concentrates with haematite concentrates and add value
• Define measured/indicated/inferred coal resource at Penrhyn of not less than 200 mt by 2013
• Commit to clean coal technology project at Penrhyn producing ~10 mtpa by 2016• Divert part of magnetite/haematite concentrates and Penrhyn coal to production of
1-2 mtpa seaborne-traded pig iron by 2017
Sydney Mining Club Presentation 7 October 2010 29
Competent Persons The review of exploration activities and results and the mineral resource estimates for the Peculiar Knob, Buzzard and Tui
DSO deposits and the non-Kestrel magnetite deposits at Hawks Nest contained in this presentation are based on information compiled by Mr Gary Jones, a Member of the Australasian Institute of Mining and Metallurgy. He is Technical Director of WPG Resources Limited and a full time employee of Geonz Associates Limited. He has sufficient experience which is relevant to the style of mineralisation and types of deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the December 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). Gary Jones has consented in writing to the inclusion in this presentation of the matters based on his information in the form and context in which it appears.
The mineral resource estimate for the Kestrel magnetite deposit at Hawks Nest contained in this presentation is based on information compiled by Mr Arnold van der Heyden, a Member of the Australasian Institute of Mining and Metallurgy. He is an employee of Hellman & Schofield Pty Ltd. He has sufficient experience which is relevant to the style of mineralisation and types of deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the December 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). Arnold van der Heyden has consented in writing to the inclusion in this presentation of the matters based on his information in the form and context in which it appears.
The ore reserve estimate for the Peculiar Knob and Buzzard deposits contained in this presentation are based on information compiled by Mr John Wyche, a Member of the Australasian Institute of Mining and Metallurgy. He is an employee of Australian Mine Design and Development Pty Ltd. He has sufficient experience which is relevant to the style of mineralisation and types of deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the December 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). John Wyche has consented in writing to the inclusion in this presentation of the matters based on his information in the form and context in which it appears.
The review of exploration activities and results for the Penrhyn coal deposit contained in this presentation is based on information compiled by Mr Gary Jones, a Member of the Australasian Institute of Mining and Metallurgy. He is Technical Director of WPG Resources Limited and a full time employee of Geonz Associates Limited. He has sufficient experience which is relevant to the style of deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the December 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). Gary Jones has consented in writing to the inclusion in this announcement of the matters based on his information in the form and context in which it appears.
Sydney Mining Club Presentation 7 October 2010 30
Important Notice This presentation contains forward looking statements concerning the
projects owned by WPG. Statements concerning mineral resources and ore reserves may also be deemed to be forward looking statements in that they involve elements based on specific assumptions
Forward looking statements are not statements of historical fact, and actual events or results may differ materially from those described in the forward looking statements as a result of a variety of risks, uncertainties and other factors. Forward looking statements are based on WPG’s beliefs, opinions and estimates as of the date they are made and no obligation is assumed to update forward looking statements if these beliefs, opinions and estimates should change or reflect other future developments
Data and amounts shown in this presentation relating to capital costs, operating costs and project timelines are based on consultant reports, contractor quotes and internally generated estimates
WPG cannot guarantee the accuracy and/or completeness of the figures or data in this presentation
All dollar amounts indicated in this presentation are in Australian dollars unless otherwise stated.