april 2012 fortune minerals investor presentation
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Emerging Strategic Metal & Coal
P dFortune Minerals Limited ProducerFortune Minerals LimitedInvestor Presentation
April 2012TSX-FT
FORWARD-LOOKING INFORMATIONThis document contains certain forward-looking information. This forward-looking information includes, ormay be based upon, estimates, forecasts, and statements as to management’s expectations with respect to,among other things, the size and quality of the Company’s mineral resources, progress in development ofmineral properties, timing and cost for placing the Company’s mineral projects into production, costs ofproduction, amount and quality of metal products recoverable from the Company’s mineral resources,demand and market outlook for metals and coal and future metal and coal prices. Forward-lookinginformation is based on the opinions and estimates of management at the date the information is given andinformation is based on the opinions and estimates of management at the date the information is given, andis subject to a variety of risks and uncertainties and other factors that could cause actual events or results todiffer materially from those projected in the forward-looking information. These factors include the inherentrisks involved in the exploration and development of mineral properties, uncertainties with respect to thereceipt or timing of required permits and regulatory approvals, the uncertainties involved in interpretingdrilling results and other geological data, fluctuating metal and coal prices, the possibility of project costdrilling results and other geological data, fluctuating metal and coal prices, the possibility of project costoverruns or unanticipated costs and expenses, uncertainties relating to the availability and costs of financingneeded in the future, uncertainties related to metal recoveries and other factors. Mineral resources that arenot mineral reserves do not have demonstrated economic viability. Inferred mineral resources areconsidered too speculative geologically to have economic considerations applied to them that would enablethem to be categorized as mineral reserves. There is no certainty that mineral resources will be convertedinto mineral reserves. Readers are cautioned to not place undue reliance on forward-looking informationbecause it is possible that predictions, forecasts, projections and other forms of forward-looking informationwill not be achieved by the Company. The forward-looking information contained herein is made as of thedate hereof and the Company assumes no responsibility to update them or revise it to reflect new events orcircumstances, except as required by law.
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C t
Listing: TSX-FTShare Price: $ 0.87Issued Shares: 117 1 millionCorporate
InformationIssued Shares: 117.1 millionFully Diluted: 123.5 millionMarket Cap: $101.9 millionWorking Capital: $ 27.5 million (Q4- 2011)Total Assets: $ 156.0 million (Q4-2011)
China Mining Resources Group Ltd. ~13%Manulife Global Management US ~ 9%*Officer & Director Holdings ~21% (includes China Mining)
OwnershipOfficer & Director Holdings ~21% (includes China Mining)
Analyst ReportsKillian Charles, Industrial Alliance Securities ($3.30 Target 01/31/12)
David Davidson, Paradigm Capital ($2.85 Target 07/15/11)
Michael Fowler, Loewen Ondaatje McCutcheon ($2.65 Target 12/16/11)
Share P f
3
Performance
As of April 5, 2012All values in C$ unless otherwise noted*Precision IR data at April 12, 2012
PROPERTY INTERESTSPROPERTY INTERESTS
4Canada Focus - Operating in mining friendly jurisdictionsCanada Focus - Operating in mining friendly jurisdictions
EMERGING PRODUCER OF GOLD, MET. COAL & SPECIALTY METALSKEY ASSETS
M t Kl A th it C l P j t B iti h C l bi (BC)Mount Klappan Anthracite Coal Project, British Columbia (BC)One of the world’s premier metallurgical coal development projectsJV partnership with South Korean steel producer POSCOCollaboration with CN Rail to extend railway infrastructure
fAccelerated development strategy with funding to construction in placeNICO Gold-Cobalt-Bismuth-Copper Project, Northwest Territories (NWT) & Saskatchewan
4 million equivalent gold ozs (1) - Significant gold & cobalt - Largest deposit of bismuth in worldMine & Concentrator planned in NWTVertically integrated metals processing plant planned near Saskatoon, Saskatchewan Potential future mill feed from Sue-Dianne Copper-Silver-Gold satellite deposit
Two development projects - Both: Positive definitive feasibility studies >$ 1.3 billion combined base case NPVSuccessfully test mined & pilot plant processedIn permittingDeloitte & Touche engaged to secure strategic partnersNew reserves & economics pending
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p gEXPERIENCED BOARD & MANAGEMENT TEAM
Proven records in permitting construction & mine operations
(1) Using Metal Price Assumptions: US$ 900/oz Au, US$ 20/lb Co, US$ 10/lb Bi, US$ 2.75/ lb Cu
One of world’s largest undeveloped metallurgical coal deposits
MOUNT KLAPPAN ANTHRACITE COAL PROJECT
Advanced project with $ 87 million of work completed
Definitive Feasibility Study with robust economics
Railway development strategy to port of Prince Rupert - Allows for scalable expansion
World-class JV partner secured with POSCO - One of the world’s largest steel producers
Supply shortages of metallurgical coals with growing world consumption
Railway sub-grade links mine site with CN mainline & Ridley Terminals
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POSCO Canada (POSCAN) has acquired 20% interest in Mount Klappan. Highlights:
JOINT VENTURE WITH POSCO
Anticipated total payments & cash contributions of $ 181 million based on current capital cost estimates
$ 30 million paid to Fortune, $20 million contributed directly to the JV
20% f t t l d l t & it l t $154 illi d t ti t20% of total development & capital costs - $154 million under current estimates
$ 17.2 million in additional payments at production
20% of operating costs for 20% of production in-kind for their own use
Fortune is Project Manager & is compensated for providing operational, technical & administrative support over life of mine
Secures world-class investor & strategic partner
Validates Mount Klappan as one of world’s premier metallurgical coal development projects -Validates Mount Klappan as one of world s premier metallurgical coal development projects Key future supplier to global steel industry
Accelerates project development - Upfront payment anticipated to provide 100% of funding to complete detailed engineering, permitting & stakeholder consultations for construction
Maintains significant upside for Fortune shareholders
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Maintains significant upside for Fortune shareholders
$601 million post-transaction levered after-tax NPV (8%) for Fortune’s 80% interest at $175 per tonne for PCI based on current reserves
World’s 3rd largest steel producer by crude steel production
ABOUT POSCO
Crude steel production of 35.4 million tonnes in 2010 - Sales for 12 months ended September 30, 2011, totalled US$ 67.0 billionGwangyang Works - Largest steel mill in world, 22 million tonnes capacityGlobal expansion plans towards goal of 50 million tonnes total crude steel productionp p g pLeading innovator in steel production – FinexHeadquartered in Seoul, South Korea Listed on Korea (KRX), New York, London & Tokyo Stock Exchanges
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Large license area in northwest BC (15 866 Ha)
STRATEGIC LOCATION & INFRASTRUCTURE
Large license area in northwest BC (15,866 Ha)
Close proximity to deep water shipping ports
Stewart Port (150km)
Ridl T i l i P i R t (330k )Ridley Terminals in Prince Rupert (330km)
Mine site straddles railway right-of-way
Track (CN) installed to 150km south of mine
R il d b d l l l iRailway road bed largely complete to mine
Road access from railway subgrade
Support of CN Rail for railway expansion
BC Government extending electrical grid to area
Project in Tahltan and Gitxsan Territories
BC Government sharing revenues with First Nations
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Nations
MOUNT KLAPPAN RESOURCES & RESERVESSignificant potential to upgrade & increase resources & new reserves (expected Q2 2012)
Mount Klappan Resources (million tonnes)(1)
Lost Fox deposit remains open for possible expansion
Additional coal seams identified below 300 meters & on adjacent lands
Area Measured (M) Indicated (I) M + I InferredLost Fox 107.9 109.5 217.4 91.5Hobbit-Broatch - 13.5 13.5 258.4Summit - - - 9.6Nass
Historical resources included 2.2 billion tonnes in the speculative class, however, speculative resources are no longerconsidered NI 43-101 compliant and such resources should not be considered current. (2)
L t F M t ll i l C l R ( illi t )(1)
Nass - - - -Total 107.9 123.0 230.9 359.5
Lost Fox Metallurgical Coal Reserves (million tonnes)(1)
Run – Of –Mine Coal Reserves 10% Ash Product ReservesMeasured Indicated Total In Situ Proven Probable Total Product
89.5 16.8 106.3 51.6 9.2 60.8
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(1) Richard Marston, PE is the Qualified Person as defined by NI 43-101(2) 2.8 billion tonne resource in all classes – estimates by Marston & Marston Inc. as of February 2007
ANTHRACITE PRODUCTS
Highest quality coal with very high carbon & energy contentHighest quality coal with very high carbon & energy content Anthracite only 1% of world coal reservesMetallurgical coal with diverse applications
Filter Media US$ ~ 1000 / tonneFilter Media US$ 1000 / tonneMetallurgical Reductants / charge carbon US$ ~ 300 / tonne Ultra-Low Vol. PCI US$ ~ 175-200 / tonneSinter US$ ~ 150-175 / tonne
Other products:
Other products: Blend coal with coking coal for making metallurgical cokeDirect coke replacementUrea fertilizers
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Heating & cooking briquettesPelletizingPremium thermal coal
Source: Company Information.
GROWING PCI DEMAND FROM STEEL PRODUCERS
Use of Pulverized Coal Injection (PCI) d th t f k(PCI) reduces the amount of coke required in steel production
Steelmakers around the world are expanding PCI use to reduce costscosts
Low-vol PCI typically priced at 70% to 80% of high quality hard coking coal
Mount Klappan PCI will achieve aMount Klappan PCI will achieve a higher price given its ultra-low volatile content
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Source: Macarthur Coal
DECREASING QUANTITIES OF ANTHRACITE AVAILABLE FOR EXPORTWorld 2009 anthracite production: ~ 565 million tonnes
China: 483 million tonnesChina: 483 million tonnesVietnam: 43 million tonnes – Reduced exports to utilize production domesticallyFew new high-quality deposits in mining friendly jurisdictions
Production & Export of Anthracite in 2009In million mt
483
450
500
6.5
Import of Anthracite for Japanese MarketMillion mt
150
200
250
300
350
400Production Export
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
Source: EIA, Marubeni
Export / Production 55.8% 1.2% 58.4% 32.2%
4310
29246 6 9
0
50
100
Vietnam China Russia Others
1.5
2.0
2.5
Source: Marubeni (1990 – 2009 data), China Coal Resource Website (2010 data), Deloitte
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EMERGENCE OF CHINA AS NET COAL IMPORTERChina became a net coal importer of anthracite in 2004, coking coal in 2007, all coals in 2009
350 02002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Coal & Anthracite Net Imports by China In million mt
$300
$215
$291
200 0
250.0
300.0
350.0
Coal Total
Anthracite
Met Coal Price (US$/t)
103.4
145.8 167.7
31 9$47 $45
$58
$125 $115 $98
$129
50 0
100.0
150.0
200.0
(72.7)(83 6)
(68.3)(46.1)
(25.4)(2.1) (4.9)(3.9) (4.0)
1.4 7.1 17.5 23.2 13.3 31.1 22.2 31.9
(100 0)
(50.0)
-
50.0
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(83.6) (100.0) Source: China Coal Resource Website, Bloomberg
Global Met Coal Demand
SIGNIFICANT FUTURE MET COAL DEMAND GROWTH
Increasing demand for good qualityMillion mt
>500 million mt demand increase over the next decade with limited new production
t ti l
1,185
1,440
1,200
1,400
1,600 Increasing demand for good quality metallurgical coals
China’s growth ~10% per yr
Japan & South Korea are increasing anthracite imports –
potential
920
600
800
1,000
g pNew steel technologies - Lower emissions
Emerging economies are driving forces for future metallurgical coal demand
200
400
600 India’s growth ~8% per yr & -Crude steel production expected to increase from 72.8 million tonnes to 124 million tonnes by 2012 & 293 million tonnes by 2020
Source: Peabody Global Energy Analytics
-2010 2015 2020
2020
Brazilian crude steel production expected to increase from 26.5 million tonnes to 103 million tonnes by 2030
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Insufficient supply of metallurgical coals to meet forecast global demand
Railway transportation of coal provides lower operational risk over trucking – Allows for scalable expansion of production to take advantage of large resource base
RAILWAY UPGRADE & EXPANSION
CN Rail operates between Prince George & port of Prince Rupert & on Dease Lake Line to Minaret, 150 km south of Mount Klappan
Railway road bed largely constructed to mine site – Brownfield extension from Minaret
S & i i f il t i $ 317 8 illi it l t i l d d i 2010 DFSSurvey & engineering of railway extension - $ 317.8 million capital cost included in 2010 DFS
CN collaborating on railway upgrade & extension to Mount Klappan
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Existing railway right-of-way & road bed
Ice-free, deepwater port 36 hours closer to Asia than port of Vancouver
PORT OF PRINCE RUPERT
Ridley coal terminal a world-class coal & bulk materials handling facility
Capable of handling full Capesize vessels that reduces ocean freight
Currently handling ~70% of 16 Mtpa design capacity
Expansion to 24 Mtpa in progress – Potential to expand to 50 Mtpa
Opportunities for shared cargos & blending of coals with other metallurgical coal producers
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November 2010 update to 2005 & 2008 DFS
2010 DEFINITIVE FEASIBILITY STUDY
November 2010 update to 2005 & 2008 DFS
Based on railway transport of coal to Ridley Coal Terminal in Prince Rupert
Initial 3 Mtpa production from Lost Fox deposit open pit mine, wash plant & site infrastructure
60 8 Mt of product coal reserves – 20+ yrs production (only 3 6% of global resource)60.8 Mt of product coal reserves 20+ yrs production (only 3.6% of global resource)
Premium ultra-low volatile PCI product
Can diversify product mix to produce premium products (charge carbon) & sinter
Life of mine average Free On Board (FOB) vessel cash cost US$104 79/tonne (C$110 30/tonne)Life of mine average Free On Board (FOB) vessel cash cost US$104.79/tonne (C$110.30/tonne)
BASE CASEUltra-Low Volatile PCI
US$175 / tonne (C$1 = US$ 0.95)
Pre-Tax NPV (8%)In billions
$3.3 $3.8
$3.5 $4.0 $4.5
PRE-TAX AFTER TAX
IRR 25.4% 20.7%
NPV (8%) C$ 1,027.8 Million C$ 667.4 Million $0.5 $1.0
$1.6 $2.2
$2.7
$0.5$1.0 $1.5 $2.0 $2.5 $3.0
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Capital (Years 1-4) C$ 768.4 Million(includes railway capital)
$-$0.5
$150 / t $175 / t $200 / t $225 / t $250 / t $275 / t $300 / t
Rail transportation allows for higher annual production than 3 Mtpa
SIGNIFICANT UPSIDE POTENTIAL
DFS reserves only represents 3.6% of total resource – New reserves in preparation
Updated reserves in preparation for Lost Fox deposit that can support higher production rates.
Production can be expanded from adjacent Hobbit – Broatch depositProduction can be expanded from adjacent Hobbit – Broatch deposit
Current resource only identified to 300 meters – Additional coal seams identified at depth
Budget in place for additional drilling
3rd Party contribution to railway capital costs increases NPV3rd Party contribution to railway capital costs increases NPV
BC Government extending electrical grid & connection lowers power costs & enables use of lower cost mining equipment
Lease-to-purchase of mobile equipment fleet lowers upfront capital costs & increases IRR
One of world’s largest undeveloped deposits – Railway transportation solution provides scalable expansion potential
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provides scalable expansion potential
JV partner now secured & accelerated development program underway
ACCELERATED DEVELOPMENT STRATEGY
JV partner now secured & accelerated development program underway
Next steps include:
Update reserve estimate
Complete updated feasibility study on the Lost Fox MineComplete updated feasibility study on the Lost Fox Mine
Complete engineering on railway transportation with CN Rail
Continue community & stakeholder engagement
C l t i t l ittiComplete environmental permitting process
Conduct additional expansion drilling
Deloitte engaged to secure 2nd stage strategic partner
Mi i i i h j l lMinority equity investor at the project level
Provision of debt & equity tied to off-take
Expertise in coal end market with strong financial position
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Objective of announcing fully financed, permitted project at conclusion of currently planned programs
NICO GOLD-COBALT-BISMUTH-COPPER PROJECT100% Ownership – No 3rd party royaltiesO it & d d i & ill i N th t T it i (NT)Open pit & underground mine & mill in Northwest Territories (NT)
Saskatchewan Metals Processing Plant (SMPP) Vertically integrated hydrometallurgical facility to produce gold doré, cobalt sulphate or cathode, bismuth ingot & copper metal
$ 100 million work completed to date, includes:$ 20 million test mining$ 12 million metallurgy & process pilot plants
2007 iti f ibilit t d & 2008 d t2007 positive feasibility study & 2008 update 32.3% Pre-tax IRRPre-tax $ 361 million 8% NPVSignificant recent improvements not includedg p
31 Million tonne reserve – 4 Million eq gold ozs*
Golden Giant (Hemlo) buildings & equipment purchased & dismantled to reduce capital costsE i t l A t d d f i & SMPP itti
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Environmental Assessments advanced for mine & SMPP permitting
* Using Metal Price Assumptions: US$ 900/oz Au, US$ 20/lb Co, US$ 10/lb Bi, US$ 2.75/ lb CuTest mining 2006/2007
MINE LOCATION & INFRASTRUCTURE5,140 Ha lease in southern NT
Winter access roads
All-weather road planned by governments to Hwy (135 km)
$18 million in place for stage 1 –realignment, bridges & roadbed
Engineering & environmental work underway
450 km from railway at Hay River for transport of concentrates to SMPP
160 km from City of Yellowknife
50 km from Town of Whati
22 km from Snare Hydro
Tlicho First Nation
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Settled land claim
Co-operative Relationship Agreement
Hydrometallurgical plant to process bulk concentrate from NICO mine & mill to produce gold doré, cobalt sulphate or cathode, bismuth ingot & copper metal
SASKATCHEWAN METALS PROCESSING PLANT (SMPP)
High concentration ratio of ore (low mass pull) using simple flotation4,650 tonnes of ore / day reduced to only 180 tonnes of concentrate (3.8% sulphide fraction)Allows concentrate to be shipped to Saskatchewan for lower cost processing
Advantages to Saskatoon siteAdvantages to Saskatoon siteLocated on CN Rail line - Close to Trans Cda HwyInexpensive power (5.7 cents / kWh)Close to natural gas & reagent sourcesSkilled worker / engineer pool 85 employeesSkilled worker / engineer pool – 85 employees5 year tax holiday
SMPP capital cost ~ $200 million
NICO
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Saskatoon
CN Rail Canadian Route Map
DIVERSIFIED EXPOSURE TO GOLD & SPECIALTY METALS
Gold the most valuable component by value
Front end gold recovery - largest source of revenue in first year of operation
Value by Metal at Spot Prices
Copper2%
y p
Bismuth is second largest by value – Largest bismuth deposit world-wide
Gold35%Bismuth
33%
High purity cobalt metal (99.8%) or sulphatecommands premium price.
Cobalt 30%
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Gold – 907,000 oz @ $1651/ozCobalt – 82 Mlbs @ $16.00/lb
Bismuth – 109 Mlbs @ $13.25/lbCopper – 27 Mlbs @ $3.35/lb
Prices as at Oct 24, 2011
GOLD – COUNTER CYCLICAL HEDGE
Gold price increased consistently in past 9 years, especially after recent economic downturn
Historical & Forecast Gold Price
$1,591
$1,900
$1 600
$1,800
$2,000
While mine supply remains relatively flat, future demand continues to grow:
Growing physical demand from Asia & Central banks$873 $873
$1,211
$1,000
$1,200
$1,400
$1,600
Asia & Central banks
Growing investment demand based on currency protection & safe haven status$310
$363 $410 $445
$604 $697
$873 $873
$400
$600
$800
Provides a flexible financing opportunity$-
$200
25
Source: Bloomberg; Energy & Metals Consensus Forecasts, Oct 2012
COBALT – ROBUST MARKET WITH INCREASING DEMAND
World cobalt production (in tonnes) Wide application of industrial usageWorld cobalt production (in tonnes) Wide application of industrial usage
51%
30%
40%
50%
60%
27%
7%
6%
5%4% Batteries (27%)
Superalloy (19%)
Hard Materials (13%)
Colours (10%)
12%7% 7% 5% 5% 4% 3% 2% 2% 2%
0%
10%
20%
30%
19%
13%
10%
9%Catalysts (9%)
Magnets (7%)
Hardfacing & Other Alloys (6%)
Tyre Adhesives, Soaps, Driers (5%)
Feedstuffs (4%)
• Vast majority of cobalt sourced from regions that are politically unstable or prone to export restrictions C (DRC) tl t f 51% f l b l
• 80,000 t market with demand growing by ~10% / year• Wide metallurgical & chemical market applications in:• Congo (DRC) currently accounts for 51% of global
supply • China has the largest refining capacity (43% in 2010)
but limited mine supply• LME initiated futures market trading for cobalt in
Wide metallurgical & chemical market applications in: batteries, high strength alloys, cutting tools, catalysts, etc.
• Largest growth is in lithium ion & nickel metal hydride batteries for electronic devices & hybrid/electric vehicles
• High purity cobalt (99.8%) used in aerospace applications
26
g2010, resulting in a more liquid market
• NICO will be a reliable North American producer
• Cobalt sulphate (21%) used for batteries
Source: USGS Industry Survey Source: Cobalt Development Institute
BISMUTH – ENVIRONMENTAL FRIENDLY WITH GROWTH POTENTIALBismuth prices continue to increaseWorld reserves (in tonnes)Growing number of applications
240,000
150,000
200,000
250,000
300,000
Metallurgical additives, 27%
Alloys, solders and others, 8%
11,000 10,000 10,000 5,000 5,000
39,000 48,661
-
50,000
100,000
Chemicals and pharmaceuticals,
65%
• Bismuth prices have risen, supported by steady demand & constrained supply
• World market ~ 20,000 tonnes per year
• China is the principal source of bismuth & has total reserves of 240Kt, accounting for 80% of world reserves
• Traditionally used in fusible alloys, cosmetics, chemicals etc.
• New markets focus on super conductors, CDs & auto anti-corrosion materials accounting for 80% of world reserves
• China has closed 20% of its production due to environmental concerns
• NICO contains over 48Kt of bismuth, equivalent to 15% of world reserves & the world’s largest deposit
materials
• Environmentally safe replacement for lead in plumbing & electronic solders, brass, ceramic glazes, free cutting steel, hot dip galvanizing & paint pigments
• Global framework to eliminate lead could
27
increase bismuth consumption by 25%
• European legislation to eliminate lead in electronics
Source: Asian Metal, Metal BulletinSource: USGS Industry Survey 2010Source: USGS Industry Survey
NICO MINERAL RESERVES (TO BE UPDATED SHORTLY)
Underground Mineral Reserves Tonnes Au (g/t) Co (%) Bi (%) Cu (%)Underground Mineral Reserves Tonnes Au (g/t) Co (%) Bi (%) Cu (%)Proven 1,403,000 2.23 0.16 0.22 0.04
Probable 767,000 2.92 0.17 0.19 0.03
Total 2,170,000 2.47 0.16 0.21 0.03
Open Pit Mineral Reserves Tonnes Au (g/t) Co (%) Bi (%) Cu (%)Proven 15,019,000 0.85 0.12 0.16 0.04
P b bl 13 797 000 0 71 0 12 0 15 0 03Probable 13,797,000 0.71 0.12 0.15 0.03
Total 28,816,000 0.79 0.12 0.15 0.04
Combined Mineral Reserves Tonnes Au (g/t) Co (%) Bi (%) Cu (%)Proven 16,422,000 0.97 0.12 0.16 0.04
Probable 14,564,000 0.83 0.12 0.15 0.03
Total 30,986,000 0.91 0.12 0.16 0.04
28Reserve estimate by P&E Mining Consultants Inc., Eugene Puritch, P.Eng. & Fred Brown, CPG PrSciNat, Qualified Persons as defined by NI-43-101
Contained Metal 907,000 ounces
82 million pounds
109 million pounds
27 million pounds
2010 DRILL PROGRAM
38 holes drilled in 2010Drilling successfully expanded deposit & intersected high-grade gold intervals
51.3m averaging 2.2 g/t Au & 0.11% Co, g g g & % ,including 3m averaging 15.59 g/t Au, 0.46% Co, 0.05% Bi & 0.20% Cu8.00m averaging 4.74 g/t Au & 0.16% Bi, including 1m grading 35 g/t Auincluding 1m grading 35 g/t Au3.38m averaging 11.59 g/t Au, 0.37% Co, 0.16% Bi & 0.14% Cu, including 1.67m averaging 20.04 g/t Au, 0.36% Co 0 24% Bi & 0 13% CuCo, 0.24% Bi & 0.13% Cu5.00m averaging 4.84 g/t Au, including 2.5m averaging 9.21 g/t Au20.1m averaging 0.38% Co & 0.37% Bi
29
New Mineral Reserve estimates pending
UNDERGROUND TEST MINING & PILOT PLANTS
Mining conditions geometry & grades forMining conditions, geometry & grades for deposit confirmed
Environmental impacts assessed
Portal, decline ramp & 2 mine levels t bli h d ith til ti i t festablished with ventilation raise to surface
~$ 20 million pre-production development completed
Large sample collected for $ 8 million pilotLarge sample collected for $ 8 million pilot plant tests
Proved process flow sheet
Verified production of high value metal productsproducts
Increase in metal recoveries over feasibility study
Tangible demonstration of successful project
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g p jto governments & communities
Reduced project risk
GOLDEN GIANT MINE (HEMLO) MILL, ONTARIO
Buildings, equipment & spare parts acquired from Newmont Canadau d gs, equ p e & spa e pa s acqu ed o e o Ca adaRelocation to NICO for significant reduction in capital costs & project riskNo environmental liability for Hemlo siteDismantling & removal completed for net cash cost of ~$ 19 millionD t ti f j t ti b d t & h d lDemonstration of project execution on budget & schedule
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Micon, Met-Chem, Golder, SGS Lakefield & metallurgical & engineering experts
2008 DEFINITIVE FEASIBILITY STUDYMicon, Met Chem, Golder, SGS Lakefield & metallurgical & engineering experts Results:
Pre-tax IRR 32.3%Pre-tax C$361 million 8% NPVPre production capital cost C$230 millionPre-production capital cost C$230 millionCash Cost US$1.41/lb Co (1)(2)
Cash Cost US $259/oz Au equivalent (2)
April 2008 metal price sensitivity increases IRR to 97.2% & NPV (8%) to $1.5 billion(3)
St d td t dStudy now outdatedNew reserves & operational improvements not includedCapital costs will be significantly higher
32
(1) Net of credits for gold and bismuth sales
(2) Base Case metal prices of US$750/oz Au, US$20/lb Co, US$10/lb Bi and US$/C$ 0.97
(3) April 2008 metal prices of US$900/oz Au, US$50/lb Co, US$16/lb Bi and US$/C$ 0.97
43% increase in reserves to 31 Mt – 18 Yr mine life - Excludes results of 2010 drilling
POST-DEFINITIVE FEASIBILITY STUDY IMPROVEMENTS
16% production rate increase to 4,650 tpdMore efficient mine plan - Eliminated underground backfillingIdentification of low strip starter pit – Eliminates pre-strippingCo disposal of waste rock & tails Reduces dam structures & reclamation costsCo-disposal of waste rock & tails – Reduces dam structures & reclamation costsCommodity price assumptions higher for gold & bismuthImproved recoveries from pilot plant:
Gold 56-85%, Averages 76%, gCobalt 84%Bismuth 73%Copper 58% - Not previously included
Higher value end products: Cobalt 21% cobalt sulphate option – Lower capital & operating costs - PremiumBismuth 99.9% ingot – Feasibility study assumed concentrateCopper Copper metal – Not included in feasibility study
Hydrometallurgical process plant relocated to Saskatoon
33
Hydrometallurgical process plant relocated to SaskatoonLower OPEX (~$7 million per yr) – Mitigates capital cost increase (~$30 million)
Higher forecast annual metal production
RESULTS OF NICO PROJECT IMPROVEMENTS
Higher forecast annual metal production
Gold yrs 1 & 2 of mine life ~70,000 ozs, yrs 3-18 ~35,000 ozs
Cobalt ~ 3.4 million lbs (1,550 tonnes)
( )Bismuth ~ 3.65 million lbs (1,650 tonnes)
Copper ~ 770,000 lbs (350 tonnes)
Cost ~$ 56 / tonne, ~$ 90 million / yr
Revenue ~$ 100 / tonne, ~$ 180 million / yr
Capital costs expected to be ~$400 million
Updated economics pending receipt of Front End Engineering & Design (FEED) Study by p p g p g g g ( ) y yJacobs Engineering & other engineering Co.’s
34
NICO FINAL PRODUCTS
Cobalt CarbonateCo 50-51 %Ni 0.005 %Ni 0.005 %Ca 0.018 %Mg <0.005 %Cu 0.005 %Cobalt Cathode Metal
Co >99 8%
Cobalt Sulphate (heptahydrate)
Co >99.8%
Co 21 %Ni <0.003 %Fe <0.001 % Cu <0 001 %
35
Cu <0.001 %Zn <0.001 %
Bismuth IngotBi >99.9%
Reliable North American source of supply of critical specialty metals
ADVANTAGES OF NICO PROJECT
Reliable North American source of supply of critical specialty metals
Diversified product mix reduces exposure to metal price volatility
Cobalt supply coupled with world’s largest bismuth deposit
Strong leverage to gold Counter cyclical hedge Financing optionsStrong leverage to gold – Counter-cyclical hedge – Financing options
Low operating cost net of co-products
Vertical Integration – Fortune controls process from mine to product reducing risk of third party metal supplier or custom processorsmetal supplier or custom processors
Sulphide cobalt source
Lower capital & operating costs compared to laterites
High concentration ratio allows transport to low cost processing environmentHigh concentration ratio allows transport to low cost processing environment
Exothermic reaction in autoclave reduces energy consumption & generates its own acid
SMPP flowsheet allows for flexible & diversified product mix
36
New reserve estimates pending – Focus on expansion of gold
DEVELOPMENT STRATEGY
New reserve estimates pending Focus on expansion of gold
FEED studies nearly complete – Currently reviewing draft
Revised capital & operating costs & financial model
Environmental Assessments advanced for mine & SMPP permittingEnvironmental Assessments advanced for mine & SMPP permitting
Public Hearing Stage in NT – Targeting recommendation to Minister in 2012
Targeting receipt of permits in Saskatchewan in 2012 for SMPP
E diExpanding management team
Production targeted in 2014Deloitte engaged to secure strategic partner - Ideal partner:
Minority equity investor at the project levelMinority equity investor at the project level
Ability to arrange & guarantee project finance facility
Expertise in cobalt or specialty metal end markets/off-take partner
37
Committed to an accelerated development plan
Mount Klappan2012 TARGETED MILESTONES
Revised Project Description submission to BC EAO (Q2)New reserves (Q2)Revised economics (Q2)MOU with CN Rail (Q2)MOU with Gitxsan BC First Nation (Q2)Second stage strategic partner(s) and project financing
NICONICONew reserve estimates (Q2)Revised economics (Q2)Initiate Tlicho Participation Agreement (PA) Negotiations (Q4)SMPP permits (Q4)Initiate discussions with the Wek'èezhìi Land and Water Board to advance EA process (Q4)Closure of Public Registry in the DAR Review process (Q4)St t i t ( ) d j t fi i
38
Strategic partner(s) and project financing
CorporateOTC QX Listing (Q2)
DirectorsMahendra Naik, B Comm, CA Chairman, Director CFO Fundeco - Founding director & former CFO, IAMGOLD
George Doumet, MSc, MBA Honorary Chairman, Director Chemical Engineer – President & CEO, Federal White Cement
Robin Goad, MSc, PGeo President & CEO, Director Geologist - 30 yrs mining & exploration experience
David Knight, BA, LLB Secretary, Director Partner, Norton Rose specializing in securities & mining law
James Excell, BASc Director Metallurgical Engineer – 35 yrs mining experience BHP-Billiton
William Breukelman, BASc, MBA, PEng Director Chemical Engineer – Chairman, Gedex
James Currie, BSc (Hons), PEng Director Mining Engineer – COO, Kimber Resources
The Honorable Carl L. Clouter
Shou Wu (Grant) Chen, MSc, MBA
Director
Director
Commercial pilot - former owner of charter airline in NWT
Geologist – Deputy Chairman & CEO, China Mining Resources Group
ManagementJulian Kemp, BBA, CA VP Finance & CFO Chartered Accountant – 20+ yrs mining financial experience
Thomas Rinaldi, BSc VP Operations Mining Engineer – 30 yrs engineering & operations experience
Michael De Carlo, BSc, BBA Project Manager Mining Engineer – 40+ yrs engineering & managerial experience
Bill Shepard Logistics Manager 15 yrs experience in procurement and logisticsDr. Richard Schryer, PhD
Adam Jean, HBA, CA
Director Regulatory & Environmental AffairsController
Aquatic Scientist –20+ yrs experience in mine permitting & environmental assessmentsChartered Accountant previously with Ernst & Young
James Mucklow MESc PEng Manager Env & Community Geological Engineer 20+ yrs geological & environmental experience
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James Mucklow, MESc, PEng
Keith Lee, BSc
Carl Kottmeier, MBA, Peng
Joon Kim, MASc, PEng
Manager Env.& Community
Senior Process Engineer
Project Manager
Mine Planning Engineer
Geological Engineer – 20+ yrs geological & environmental experience
25 yrs operations, engineering & mineral processing experience
Mining Engineer – 24 yrs engineering & operations experience
Mining Engineer – 10+ years operations and engineering experience
APPENDIX ARecent Coal M&A Metrics
Asset Buyer Stake
Resources
(mt) Reserves
(mt)
Reserves + Resources
(mt) Price ($mln) Price/Resources
($/tonne) Location Status Mineral Type Mine Type DateSouthGobi CHALCO 60% 281 176 457 $926 $3.38 Mongolia Operational Met/Thermal Open Pit Apr-12Grande Cache Winsway 100% 164 137 301 $1,000 $3.32 Canada Operational Met/Thermal Open Pit/Underground Oct-11Coal & Allied Peabody/Arcelor 100% 1,982 1,102 3,084 $10,800 $3.50 Australia Operational Met/Thermal Open Pit Aug-11MacArthur Coal Peabody/Arcelor 100% 654 181 834 $4,794 $5.75 Australia Operational PCI Open Pit Jul-11Western Coal Walter Energy 100% 257 190 446 $3,235 $7.25 Canada/US/UK Operational Met/Thermal Open Pit/Underground Nov-10Prodeco Glencore 100% 250 250 $2,009 $8.04 Columbia Operational Thermal Open Pit Mar-10Cumberland Coal Massey Energy 100% 416 416 $960 $2.31 United States Operational Thermal/Met Underground Mar-10Minas Moatize Beacon Hill 49% 33 33 $35 $2.16 Mozambique Operational Thermal/Met Open Pit May-10Raven Crest Mining Xinergy 95% 17 17 $40 $2.48 United States Operational Thermal Open Pit Mar-10Centennial Coal Ltd Banpu 100% 1,930 419 2,349 $2,232 $0.95 Australia Operational Thermal/Met Open Pit/Underground Jul-10West Virginia Coal Cliff Natural Resources 100% 119 119 $757 $6.36 Australia Operational Thermal/Met Open Pit/Underground Jul-10
Average $4.14
Xstrata - Peace River Coalfield JX Nippon Oil & Energy Corp 25% 422 - 422 $435 $4.12 Canada Planned/Announced Met Underground Mar-12Sukunka (Peace River Coalfield) Xstrata 100% 236 - 236 $500 $2.12 Canada Planned/Announced Met Underground Mar-12Lossan (Peace River Coalfield) Xstrata 100% 186 - 186 $40 $0.22 Canada Planned/Announced Met Underground Oct-11Maules Creek J-Power 10% 317 362 679 $359 $5.29 Mozambique/South Africa Under Construction Met Open Pit Oct-11First Coal (Peace River Coalfield) Xstrata 100% - - - $147 na Canada Planned/Announced Met Underground Jul-11Reversdale Rio Tinto 100% 8,040 326 8,366 $3,822 $0.46 Mozambique/South Africa Under Construction Met Open Pit Dec-10Vele Coal of Africa Limited 26% 720 720 $16 $0.09 South Africa Under Construction Thermal Open Pit/Underground Feb-10Maruwai Coal Complex PT Adaro Energy TBK 25% 774 774 $335 $1.73 Indonesia Under Construction Thermal/Met Open Pit/Underground Mar-10Maules Creek Aston Resources 100% 610 610 $429 $0.70 Australia Planned/Announced Thermal/Met/PCI Open Pit Feb-10Delta Mining Consolidated Limited Sable Mining Africa Limited 28% 200 200 $25 $0.45 South Africa/Botswana Planned/Announced Thermal/Met Open Pit/Underground Apr-10Zambeze Coal Deposit Wuhan Iron and Steel Corporation 40% 9,045 9,045 $800 $0.22 Mozambique Planned/Announced Thermal/Met Open Pit Jun-10Belvedere Coal Deposit Vale SA 25% 2,475 2,475 $92 $0.15 Australia Planned/Announced Met Underground Jun-10Collingswood Coal Deposit KEPCO/POSCO/Cockatoo 51% 115 115 $158 $2.69 Australia Planned/Announced Thermal/Met/PCI Open Pit Jul-10Bylong/Sutton Forest KEPCO/POSCO/Cockatoo 100% 732 732 $360 $0.49 Australia Planned/Announced Thermal Underground Jul-10Galilee mine Adani Enterprises 100% 7,800 7,800 $2,700 $0.35 Australia Planned/Announced Thermal Open Pit Aug-10Middlemount Gloucester Coal 28% 1,930 57 1,987 $406 $0.74 Australia Under Construction Met Open Pit Aug-10
40
p g
Source: Company reports and CIBC World Markets Inc.
Notes
41
Notes
42
Notes
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Emerging Strategic Metal & Coal
P d
For further information, please contact:Troy Nazarewicz, Investor Relations Manager
148 Fullarton Street, Suite 1600ProducerLondon, Ontario, Canada
N6A 5P3Tel. (519) 858-8188Fax. (519) 858-8155
E il t i @f t i lE-mail. tnazarewicz @fortuneminerals.comWebsite. www.fortuneminerals.com
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