Company. Acquisition of. Peregrine Metals. July 11, Marathon Project Altar Project

Transcription

1 Stillwater Mine East Boulder Mine Stillwater Mining Company Acquisition of Marathon Project Altar Project Peregrine Metals July 11, 2011

2 Disclaimer Forward-Looking Statements SOME STATEMENTS CONTAINED IN THIS PRESENTATION ARE FORWARD-LOOKING WITHIN THE MEANING OF SECTION 27A OF THE U.S. SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE U.S. SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AND, THEREFORE, INVOLVE UNCERTAINTIES OR RISKS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY. ADDITIONAL INFORMATION REGARDING FACTORS WHICH COULD CAUSE RESULTS TO DIFFER MATERIALLY IS FOUND IN THE SECTION ENTITLED RISK FACTORS IN THE OFFERING MEMORANDUM. THE COMPANY INTENDS THAT THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN BE SUBJECT TO THE ABOVE-MENTIONED STATUTORY SAFE HARBORS. INVESTORS ARE CAUTIONED NOT TO PUT UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS. THE COMPANY DISCLAIMS ANY OBLIGATION TO UPDATE FORWARD-LOOKING STATEMENTS. THIS PRESENTATION USES THE TERM RESOURCES TO DESCRIBE THOSE QUANTITIES OF PLATINUM-GROUP METALS, COPPER, GOLD AND OTHER METALS THAT ARE POTENTIALLY RECOVERABLE FROM ACCUMULATIONS YET TO BE DISCOVERED. BECAUSE OF THE UNCERTAINTY OF COMMERCIALITY AND LACK OF SUFFICIENT EXPLORATION DRILLING, THE RESOURCES CANNOT BE CLASSIFIED AS RESERVES. INVESTORS ARE ADVISED THAT THE SECURITIES AND EXCHANGE COMMISSION ("SEC") DOES NOT RECOGNIZE RESOURCES. ONLY PROVEN AND PROBABLE RESERVES MAY BE DISCLOSED TO INVESTORS IN AN SEC FILING. RESOURCES HAVE A GREAT AMOUNT OF UNCERTAINTY AS TO THEIR EXISTENCE. THERE IS NO CERTAINTY THAT ANY PORTION OF THE RESOURCES WILL BE DISCOVERED AND, IF DISCOVERED, WHETHER THEY COULD BE DEVELOPED ECONOMICALLY. THEREFORE, INVESTORS ARE CAUTIONED NOT TO ASSUME THAT ALL OR ANY PART OF OUR RESOURCES EXIST, OR THAT THEY CAN BE DEVELOPED ECONOMICALLY. ACCORDINGLY, INFORMATION CONCERNING DESCRIPTIONS OF RESOURCES CONTAINED IN THIS PRESENTATION IS NOT COMPARABLE TO INFORMATION INCLUDED IN SEC FILINGS. 1

3 Acquisition of Peregrine Metals Stillwater to acquire Peregrine Metals for US$451 million Peregrine Metals 100% owned Altar project is a copper and gold porphyry project located in San Juan, Argentina Altar has the potential to become a significant, large-scale copper and gold mine NI compliant measured and indicated resource of 7.41 billion pounds of copper and 1.53 million ounces of gold and an inferred resource of 4.32 billion pounds of copper and 880 thousand ounces of gold Favorable mining jurisdiction; approximately 23 km (14 miles) from Xstrata s El Pachon property Unanimous support from Stillwater and Peregrine Metals boards of directors 2

4 Transaction overview Transaction structure Stillwater to acquire 100% of the outstanding shares of Peregrine Metals in a Canadian plan of arrangement Stillwater will exchange common shares of Stillwater common stock and US$1.35 in cash for each outstanding share of Peregrine Metals Implied Consideration per Peregrine share is US$3.28 or C$3.16 based on Stillwater s closing price as of July 8, 2011 offer value Results in an implied equity value of US$451 million and an enterprise value of US$445 million (1) Pro forma ownership Key approvals Financing Pro forma for the transaction, Peregrine Metals shareholders will hold ~10% of the pro forma combined company on a fully diluted basis (1) Peregrine Metals shareholder approval (66 2/3% of shares present at the meeting) is required The transaction is subject to review under Investment Canada and Competition Canada Stillwater t has secured US$200 million of committed financing i from Deutsche Bank Transaction is not contingent on financing Indicative timetable Support agreements The transaction is expected to close prior to the end of 2011 Peregrine directors and officers holding approximately 17% of current shares outstanding have entered into support agreements with Stillwater to vote in favor of the transaction (1) Based on fully diluted shares outstanding under treasury stock method. 3

5 Strategic rationale Creates a leading Americas mid-cap mining company Exposure to PGMs, gold and copper; metals with bullish long-term fundamentals Improved capital markets profile through increased scale Strong cash flow to help supplement project development expenditures Significantly improves Stillwater s strategic positioning and enhances the Company s growth pipeline Increases leverage to gold and copper Combination of producing assets, near-term and long-term growth creates an attractive investment proposition Staged project development In-line with corporate strategy of growing and diversifying the business with the acquisition of highquality assets Gold and copper are an attractive means for diversification Provides exposure to a third established mining geography in the Americas Highly attractive value creation potential Acquisition of an early-stage asset Implied valuation is in-line with recent comparable transactions Financial capacity to execute growth strategy Altar has limited near-term capital requirements Acquisition not expected to impact timing or execution of the Marathon project Altar spending expected to ramp up as Marathon comes into production 4

6 Benefits to Peregrine shareholders Consideration mix provides immediate cash liquidity while allowing shareholders the opportunity to share in the upside of the combined company Offer de-risks the Altar project and accelerates value realization for Peregrine shareholders Access to strong balance sheet and cash flow to advance and fund Altar development Stillwater Management has a proven development and operating track record Leverages Stillwater Management s experience in the mining industry Significant experience in developing and operating large-scale copper mines 5

7 Altar key investment highlights Resource (in-pit) (1) Size (Million t) Cu Equivalent Grade (2) Copper (Billion lbs) Gold (oz) Measured and Indicated % ,530,000 Inferred % ,000 Stillwater Management believes Altar has the potential to become a significant, large scale copper and gold mine in Argentina Preliminary management estimates suggest potential for average annual production of ~280 million pounds of copper and ~24 thousand ounces of gold with a 36 year mine life Preliminary management estimates suggest aggregate capital cost of $2.0-$2.5 billion Attractiveness of Altar: Strategic in size, significant scale Porphyry copper deposit with meaningful gold production Exploration upside Prospective land package Resources open in all directions Additional discrete target with significant gold potential on propertyp Favorable mining region Project is in close proximity to a number of large scale mines Upcoming preliminary economic assessment (PEA) in late 2011 will provide framework for understanding project economics (1) Measured: % CuEq; Indicated: % CuEq; Inferred: % CuEq. (2) The copper equivalent ( CuEq ) calculation is based on a copper price of US$2.80/lb and a gold price of US$850/oz. 6

8 Project location San Juan, Argentina Chile Barrick Pascua-Lama Copper Gold R Chile Argentina Barrick Veladero Copper Gold Resource Resource Altar Mendoza Santiago Argentina Antofagasta Los Pelambres Copper Gold Resource 67, Minera Andes Los Azules Copper Gold Resource 12, Pan American Highway Altar Illapel Los Vilos Salamanca San Juan Province Calingasta Barreal San Juan Yamana Gold Gualcamayo Copper Gold Resource Xstrata El Pachon Copper Gold Resource 20, Ventanas Smelter Chagres Smelter Santiago 80 km SSE Mendoza = Gold Access to an established mining geography with significant copper and gold resources Close proximity to Chilean border (8 km / 5 miles), Xstrata s El Pachon property (23 km / 14 miles), and Pacific Ocean (120 km / 75 miles) Potential infrastructure synergies with other regional projects Topography suitable for full mine infrastructure, concentrator and tailings Relatively low elevation of 3,100 to 3,500 metres (10,200 to 11,500 feet) = Copper Source: Company filings. Note: Copper and gold resources shown inclusive of reserves and include 100% of measured, indicated and inferred resources. Copper resource figures shown in million pounds. Gold resource figures shown in million ounces. 7

9 Upcoming catalysts 2011 PEA underway on a copper concentrator and leach operation Metallurgical and mineralogical work Scope and quality of test work which is more commonly seen in pre-feasibility studies Studies underway or completed include: Road access Preliminary water supply Power and infrastructure siting Geotechnical studies Mine scheduling Current engineering and cash flow modeling evaluates 100,000+ tpd ore mining scenarios Selected industry experts for PEA team: KD Engineering, g, Geosim Services, Nilsson Mine Services, Hydrometal Accelerating exploration program to fully define the opportunity Stillwater plans to invest ~$75 million during the next three years to fully delineate resource and advance pre-development activities 8

10 Valuing the Peregrine acquisition Recent Americas copper transactions $0.200 $0.187 $0.180 $0.160 TEV / Cu resource ($ $/lb) M&I &I $0.140 $0.120 $0.100 $0.080 $ $0.040 $0.099 $0.128 $0.038 $0.039 $0.122 $0.089 $ $0.025 $0.045 $0.130 $0.020 $0.000 Acquiror Stillwater Glencore Capstone Hudbay First Quantum Stillwater Thompson Creek CST CRCC- Tongguan Quadra Inmet Target Peregrine Mina Justa Far West Norsemont Antares Marathon Terrane Metals Chariot Corriente Centenario Petaquilla Copper resource (mm lbs) 11,730 6,820 4,043 4,093 11, ,991 6,820 25,576 1,816 10,668 Stillwater is acquiring an early stage project at an acquisition price in line with most comparable recent transactions Source: Company filings Note: Recent Americas copper transactions since September Total enterprise value (TEV) based on announced value. Copper resource shown inclusive of reserves and includes 100% of measured, indicated and inferred resources. 9

11 Stillwater is a leading, growth oriented Americas mid-cap mining company High quality operating and growth portfolio in the Americas Operating Assets Development Pipeline Stillwater Mine Marathon (Montana) (Ontario, Canada) 2010 Pd production (Koz) Pt production (Koz) cash costs ($/oz PGM) ~$380 Reserves (PGM Koz) 9,824 By-products: Cu, Au, Ni, Rh Estimated annual PGM production (Koz) Estimated annual Cu production (mm lbs) Life of mine (years) ~12 East Boulder Mine (Montana) 2010 Pd production (Koz) Pt production (Koz) cash costs ($/oz PGM) ~$442 Reserves (PGM Koz) 10,047 By-products: Cu, Au, Ni, Rh Recycling (Montana) 2010 volume sold (Koz) volume processed (Koz) 400 Blitz / Graham Creek (Montana) Focused on: Finalizing development plan Reviewing operating permits Evaluating optimization opportunities Completing necessary rehabilitation work Altar (San Juan Province, Argentina) Copper (bn lbs) Gold (K oz) M&I ,530 resource Inferred resource PEA expected in

12 Existing portfolio of projects Overview The Marathon PGM Project is located 10km north of Marathon, Ontario Geordie Lake is a promising target and is located 12km west of the Marathon PGM-Cu deposit The project benefits from access to well developed transportation infrastructure Marathon Project type Mining i to be sourced from three open pits Ore to be handled through a conventional concentrator Anticipated production 200, PGM ounces per year 37 million copper pounds per year ~12 year life of mine Development plan Company estimates that all federal and provincial approvals will be received in 2013 One year construction period, with commercial production starting in 2014 or early 2015 Blitz and Graham Creek Graham Creek East Boulder 8 Miles Stillwatert Mine Between eastern Mine edge of East Boulder and western edge of Stillwater Blitz J-M Reef is 28 Mile Long 11

13 Robust staged growth profile Recycling Stillwater asset Peregrine asset Marathon ` Graham Creek and Blitz Altar Recently completed state-of-the-art recycling facility expansion Marathon is a strategically located, low-cost deposit Projected to support mining of ~200,000 ounces per year of PGMs Diversifies asset and commodity bases Pre-production capital costs of $400 $450 million Graham Creek and Blitz are high-gradegrade PGM opportunities adjacent to existing mines (1) Graham Creek Up to 6 million additional tons of resource that could be graded at ~0.4 oz/ton $8 million of capex over the next 5 years Blitz Up to 9.5 million additional tons of resources that could be graded ~0.7 oz/ton $180 million of capex over about 6 years Altar has long-term potential to be developed into a high quality copper and gold mine 11.7 billion pounds of copper resource (measured, indicated and inferred) Preliminary management estimates suggest potential for annual production of ~280 million pounds of copper and ~24 thousand ounces of gold with a 36 year mine life Preliminary management estimates suggest aggregate capital cost of $2.0-$2.5 billion, the majority to be spent after the completion of Marathon Source: Company filings and management estimates. (1) Both opportunities are subject to exploration and no resources or reserves have been identified. 12

14 Creating a leading diversified Americas mid-cap mining company Market capitalization (US$ millions) $5,000 $4,469 $4,372 $4,000 $3,000 $2,000 $3,043 $2,713 $2,646 $2,447 $2,350 $2,298 $1,891 $1,761 $1,000 $0 Inmet Lundin QuadraFNX Stillwater (Pro forma) (1) Hudbay Stillwater (Standalone) Hecla Coeur Capstone Thompson Creek Resource diversification (2) of in-situ value % 100% 80% 60% 40% 20% 0% Copper resource (mm lbs) Inmet QuadraFNX Lundin Pro forma Stillwater Capstone Hudbay Thompson Creek Gold Silver PGM Copper Molybdenum Zinc Lead Nickel Cobalt Iron ore Stillwater Coeur Hecla 37,241 26,373 12,364 12,227 4,840 4,704 2, Significant exposure to precious metals (PGMs and gold) Acquisition provides immediate scale in copper, 4 th largest resource among peers Source: Company filings. Note: Market data based on the closing price on July 8, (1) This represents the market capitalization of Stillwater on July 8, 2011, plus the value of approximately 11.2 million Stillwater shares to be issued to Peregrine shareholders based on the July 8, 2011 value and fully diluted shares outstanding under the treasury stock method. (2) Resources shown inclusive of reserves and represent measured, indicated and inferred, reflecting equity ownership. In-situ value of total resources calculated by multiplying the total reserve and resource of each commodity by its respective spot price as of June 30, 2011 for LME commodities and by 2011 analyst consensus estimates for non-lme commodities. Hudbay excludes Fenix and related nickel projects. 13

15 Stillwater offers unique commodity exposure Compelling PGM industry fundamentals Projected market imbalance Surging PGM demand driven by auto market An exceptional investment proposition Global mine supply constraints Stillwater is the only Americas PGM producer Growing recycling supply insufficient i to bridge of scale supply deficit Compelling gold industry fundamentals Continued economic uncertainty Multiple catalysts for additional price appreciation Strong investment demand expected to persist Strategically advantaged with high-grade, world-class PGM ore body Marathon offers mid-term growth in both PGMs and copper Altar is a significant copper and gold resource Compelling copper industry fundamentals Demand for copper is expected to remain robust as developing economies mature Peregrine Metals acquisition positions Stillwater to become a meaningful copper producer Muted supply side response Note: Based on leading industry sources and equity research. 14

16 The outlook for PGMs is very favorable with a projected long-term supply deficit Demand Increasing car build rates Vast majority of car builds projected to be gas and diesel Diesel autos require much heavier PGM loadings Emissions standards tightening globally Supply (000s of oz) 1,490 1, Platinum net supply deficit (210) (10) (280) (540)(840) (1,050) (1,270) (1,770) (2,100) (2,300) (3,230) Only a few known economically viable ore bodies F 201 2F 201 3F 201 4F 201 5F 201 6F 201 7F 8F 201 9F F South African production remains challenged No significant near-term PGM expansions expected (000s of oz) Palladium net supply deficit Market balance Overall annual PGM supply deficit is still forecasted by SFA to be ~6.0 million oz by 2020 This takes into account a projected ~2.0 million oz increase in overall PGM supply from recycling Historical surpluses are expected to disappear quickly as demand increases and supply remains constrained (30) (70) (380) (710)(930) (960) (980) (820) (1,180) (1,730) (2,000) F F F F F F F F F (2,860) F Source: SFA (Oxford) as of January Note: Palladium and platinum net supply is inclusive of recycling. 15

17 Gold price remains robust $1,800 Gold price $1,600 $1,400 $1,200 US$ per ou unce $1,000 $800 $600 $400 $200 $ Historical Forward curve The price of gold continues to remain robust, with the forward curve suggesting additional appreciation through 2014 European sovereign debt crisis, US dollar weakness and higher costs provide catalysts for potential additional appreciation Investment demand continues to rise Source: Bloomberg. Note: Market data as of July 8,

18 Favorable outlook for copper Even under conservative growth assumptions there is risk of supply not keeping pace with demand Demand BRIC economies, led by China, continue to drive demand and lag developed economies on a per capita basis Current economic growth rates suggest consumption will accelerate Growth in India continues to lag China and India has yet to become a significant consumer of copper Supply Mine disruptions have persisted and have been driven by deferral of mine restarts, strikes and natural disasters Key projects continue to be delayed (permitting, shortage of labor, equipment delays) Challenging for existing mines to increase throughput; lack of infrastructure and lower grades Global copper demand Demand (mm lbs) 34,327 42,472?? CAGR (1) 3.1% Incremental supply needed to meet demand assuming: 3% annual growth (2) 15,138 5% annual growth (2) 27,242 Source: Bloomberg. Note: Copper supply defined as global refined copper mine production. (1) CAGR = compound annual growth rate. (2) Assumes 2010 production is maintained. 5 largest copper mines 2010 production (mm lbs) Escondida 2,396 Chuquicamata 1,928 Grasberg 1,330 Collahuasi 1,111 El Teniente 891 Source: Company filings and Company disclosure. 17

19 Pro forma metrics Stillwater Peregrine Stillwater pro forma Capitalization Share price (July 8, 2011) US$23.72 US$0.84 US$23.72 Fully diluted shares (mm) (1) Market capitalization ($mm) $2,447 $104 $2,713 Reserves and resources (2) Palladium (mm oz) Platinum (mm oz) Gold (mm oz) Copper (mm lbs) ,730 12,227 Silver (mm oz) (1) Fully diluted shares using treasury stock method as of July 8, (2) Stillwater figures represent proven and probable reserves. Peregrine figures represent measured, indicated and inferred resources. 18

20 Strategic rationale Creates a leading Americas mid-cap mining company Exposure to PGMs, gold and copper; metals with bullish long-term fundamentals Improved capital markets profile through increased scale Strong cash flow to help supplement project development expenditures Significantly improves Stillwater s strategic positioning and enhances the Company s growth pipeline Increases leverage to gold and copper Combination of producing assets, near-term and long-term growth creates an attractive investment proposition Staged project development In-line with corporate strategy of growing and diversifying the business with the acquisition of highquality assets Gold and copper are an attractive means for diversification Provides exposure to a third established mining geography in the Americas Highly attractive value creation potential Acquisition of an early-stage asset Implied valuation is in-line with recent comparable transactions Financial capacity to execute growth strategy Altar has limited near-term capital requirements Acquisition not expected to impact timing or execution of the Marathon project Altar spending expected to ramp up as Marathon comes into production 19