For personal use only. Annual General Meeting Presentation

Transcription

1 Annual General Meeting Presentation 25 February 2016

2 2 Important Notice & Disclaimer The information contained in this presentation is current as at February All statements are based upon the Company s best information as at February This presentation includes forward-looking statements regarding future events and the future financial performance of Heemskirk Consolidated Limited ( HSK or Heemskirk ). All forward looking statements are based on the beliefs of Heemskirk management. These statements reflect Heemskirk s current views with respect to future events and are subject to various risks, uncertainties and assumptions. Heemskirk makes no representation or gives any assurance that these statements will prove to be accurate as future circumstances or events may differ from those which have been anticipated by the company. No representation or warranty, express or implied is given to the accuracy of the information or opinions contained in this document and no liability is accepted by Heemskirk or any of its directors, members, officers, employees, agents or advisers for any such information or opinions. This presentation is being supplied to you, in whole or in part, for information purposes only and not for any other purpose. This presentation and the information contained in it do not constitute a prospectus and do not form any part of an offer of, or invitation to apply for, securities in any jurisdiction. Potential investors should not rely solely on the information contained herein prior to making any investment decision. Investors should seek independent advice from a properly qualified advisor, giving due regard to their own personal circumstances, prior to forming any investment decision.

3 3 Corporate Metrics Capital Structure ASX listed code HSK Ordinary shares on issue 562m Current market cap at 3 $16.9m Employee ordinary shares 1.645m Cash & cash equivalents * $14.1m Other financial assets equity investments* $1.5m * As at 31 January 2016

4 4 Heemskirk and the Moberly Silica Project Moberly Silica Project Located in British Columbia adjacent to the regional town of Golden, comprising of a granted mining lease and a freehold plant site Project designed to deliver API quality frac sand to customers predominantly in the Western Canadian Sedimentary Basin (WCSB) Stage 1 ungeared Net Present Value is estimated at C$78 million and AUD 14 cps using a Real Discount Rate of 7.5% (10.6% Nominal) Moberly

5 5 Moberly Significant Resource Moberly JORC Resource 37.5 million tonnes with estimated 70% frac sand recovery and is open in several directions* Resource Category Measured^ Indicated^ Total Measured + Indicated^ Dry tonnes 30 mesh to 140 mesh frac sand 12.5 million 70% frac sand 25.0 million frac sand 37.5 million frac sand ^ Mineral Resources for frac sand include that proportion modified to produce Ore Reserves of frac sand 300,000 tpa frac sand would suggest +60 years of mine life if complete conversion to reserves, expanded pit engineering and permitting was achieved If production was expanded, 600,000 tpa frac sand would suggest +30 years of mine life again, with hurdles achieved * See Reserves and Resources announced on 15 December The information in this presentation that relates to the Moberly Resource estimate is extracted from the report entitled Annual Statutory Update of Resources and Reserves which was based on information compiled by Malcolm Ward, (Bsc (Hons), MSc (Queens) who is a member of the Australasian Institute of Mining and Metallurgy and released to the market on 15 December 2015 and is available to view on the Company s website, The Company confirms that it is not aware of any new information or data that materially affects the information included in this market announcement, and in the case of estimates of Mineral Resources and Ore Reserves, that all material assumptions and technical parameters underpinning the estimates in the relevant market announcement continue to apply and have not materially changed, except that with new equipment now to be used in the plant, recoveries are expected to be in the order of 75% based on test work. The Company confirms that the form and context in which the Competent Person s findings are presented have not been materially modified from the original market announcement.

6 6 Moberly Project Finance Package Conditions precedent for Stage 1 US $25m funding package for Moberly Project provided by Taurus Funds Management satisfied Construction contract now executed Project build timeline 14 months

7 7 Project Metrics - Key Assumptions: Stage 1 Development Nameplate production output capacity 300,000 metric tonnes Recoveries in appropriate frac sand product size range of approximately 75% Capital costs with contingencies US$26.6m* Plant construction US$23.9m Other US$2.7m Funding Stage 1 US$25m Project Free Cash Flow Undiscounted annual average C$11.2m Ungeared Project Internal Rate of Return Stage 1: 33% Current C$/US$ exchange rate is 0.73 * Based on currency exchange rates at October Cost will fluctuate with movements in C$/US$ exchange rates.

8 8 Project Metrics - Key Assumptions: Stage 1 Development Payback Period Stage 1: 2.9 years Project ungeared NPV is C$78 million for Stage 1* and AUD 14 cps Estimated time to completion of construction - 14 months Customer demand remains API specification frac sand product Defined in situ JORC Reserve is more than sufficient to satisfy current 20 year mine plan Appropriate permits in place The Project has an estimated terminal value of up to $360 million^ assuming Stage 1 construction only *Using a Real Discount Rate of 7.5% (10.6% Nominal). The discount rate has been recently reviewed with the real WACC calculated at 6.37% and hence the chosen discount rate of 7.5% is regarded as being conservative. The Project model was independently audited by EY with no material issue identified in model structure or inputs. ^ Depending on valuation method used

9 9 Proppant quality and strength matrix Moberly quality is high with broad oil and gas application

10 Proposed layout - Moberly plant site On site rail spur 2. Load out truck and rail 3. Existing building/store 4. Existing Silica Flour Plant 5. Office & Mine dry 6. ROM pad 7. Finished product silos 8. Frac Sand plant 9. Waste/Fines stockpile 10. Primary crusher and feed 11. Trans Canada Highway 12. Canadian Pacific Rail - mailine 13. Blaeberry River 14. Columbia River

11 11 Western Canada Oil & Gas Industry

12 12 WCSB - Oil & Gas Locations Moberly

13 13 Fracturing Trends ~75% of wells drilled horizontally are utilising multistage fracturing Proppant intensity is increasing Lateral sections continue to lengthen Frac density / stages per well continue to grow

14 14 Proppant Demand Trends Commodity Price Dependent Positive Structural Demand Trends for Proppant Recent decline in overall drilling activity largely due to pull back in oil price Drilling Rig Count North American oil & gas production increasingly from unconventional resource plays Pad drilling and fitfor-purpose rigs driving efficiency gains Well Per Rig Longer wells typically equate to more proppant use Lateral Length Per Well Frac Stages Per Lateral Trend towards tighter spacing between fracs equates to more proppant use Proppant Per Stage Trend towards more proppant per frac driven by increasing evidence of resulting increased flow rates and extended well lives % Horizontal Rigs Not to scale Lower oil price environment but more proppant use Source: Industry charts

15 15 Fracturing Outlook North American rig counts have fallen off materially; down ~60% from Q4/14 Source: Baker Huges Substantial completions backlog Currently estimating over 4,500 drilled but uncompleted wells in the US market Bodes well for an increase in facturing demand coming out of the downturn before drilling increases Stage count/well and sand/stage continue to increase

16 16 Moberly & Frac Sand Market Outlook in the WCSB The Moberly Stage 1 Project is estimated to represent slightly less than 10% of regional consumption Mount Moberly White Frac Sand meets all API parameters and meets customer technical approvals within the region

17 17 Key Targets / Milestones Moberly Project Construction from Feb 2016 Seek offtake from Jun 2016 Evaluate expansion from Mar 2016 Commissioning by Mar 2017 Full production by Jun 2017 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Construction Evaluate expansion Seek offtake Commission Full production

18 18 Project Snapshot - Conclusion Funding in place and construction underway Short build time Project Project high value with very favourable logistics Located in a first world country Quality product (API standard) Unique Canadian project located within the market environs of the WCSB Simple, scaleable, saleable

19 19 Heemskirk our position FUTURE Expansion Value add Current position Source: Brent Cook s Life cycle of a mine project

20 Annual General Meeting Presentation 25 February 2016