company presentation - sierra rutile limited · gunson resources 0.74mt white mountain titanium...

> COMPANY PRESENTATION

June 2013

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Disclaimer

Forward-Looking Information This document may contain forward-looking statements. These forward-looking statements are made as of the date of this document and Sierra Rutile Limited (the “Company”) does not intend, and does not assume any obligation, to update these forward-looking statements, except as required under applicable securities legislation. Forward-looking statements relate to future events or future performance and reflect Company management’s expectations or beliefs regarding future events and include, but are not limited to, statements with respect to the estimation of mineral reserves and resources, the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production, capital expenditures, success of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage. In certain cases, forward-looking statements can be identified by the use of words such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “occur” or “be achieved” or the negative of these terms or comparable terminology. By their very nature forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements. Such factors include, among others, risks related to actual results of current exploration activities; changes in project parameters as plans continue to be refined; future prices of mineral resources; possible variations in ore reserves, grade or recovery rates; accidents, labour disputes and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion of development or construction activities; as well as those factors detailed from time to time in the Company's interim and annual reports. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward- looking statements.

Working for a better Sierra Leone

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Highlights

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Highlights

> One of the largest primary rutile mines, which has achieved transformational operating improvements

– World’s largest primary rutile asset with a JORC-compliant resource in excess of 840 million tonnes at 1.0% rutile

– Capital investment initiated in 2010 continues to yield significant operating improvements

– H2 2012 rutile production run-rate of over 103,000 tonnes per year, up from 54,000 tonnes in H1 2011

– 2013 target production of 125,000 tonnes of rutile

> Lanti Dry Mining project has been commissioned, providing a step-change in production

– Delivered on budget and ahead of schedule, the operation is currently operating above name-plate capacity

– Forecast production of 30,000-35,000 tonnes per annum at a highly-competitive operating cost

> Gangama Dry Mining project will deliver continued production growth and unprecedented financial returns

– Gangama Dry Mining project, which will treat 1,000tph of ore, is a scaled-up (2x) version of the Lanti Dry Mining project

– Scheduled to start production in 2014

– Targets high-grade resources, resulting in production of over 83,000 tonnes of rutile per annum

– Pre-tax IRR of 228% and NPV10 of US$507 million

> Substantial cash flow being generated

– Significant revenue growth resulting from a substantial production increase

– Declining per tonne operating costs resulting from realized economies of scale and a continual focus on cost efficiency

> Strong project pipeline provides additional long-term value

– Both the Sembehun Dredge project and Mogbwemo Tailings project provide low-cost, long-life development opportunities

Working for a better Sierra Leone 1

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Established Operation, Exceptional Growth

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Gunson Resources 0.74mt

White Mountain Titanium 3.46mt

Sierra Rutile 8.4mt

Kenmare Resources 4.5mt

Mineral Deposits 0.44mt

Base Resources Ltd 0.95mt

Iluka Resources 8.6mt

World Titanium Resources 1.35mt

Astron Limited 3.60mt

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Rutile Production Growth 2013-2015 (kt)

Bubble Size: In-Situ Rutile Resources

(2013 rutile guidance: 200kt2)

(2013 rutile guidance: 125kt)

(Rutile production not reported)

A Unique World-Class Deposit


> The largest primary rutile asset in the world

– JORC Mineral Resource in excess of 840 million tonnes at 1.0% rutile

– Lanti: 63 Mt at 1.42% rutile

– Gangama: 48 Mt at 1.44% rutile

– Gbeni: 63 Mt at 1.20% rutile

– Sembehun: 274 Mt at 1.34% rutile

> Exceptional, high value assemblage

– 76% of payable heavy mineral1 is rutile

– 22% of payable heavy mineral1 is zircon

Source: Company announcements, IBMA, Credit Suisse, Sierra Rutile estimates 1. Pricing assumptions based on broker LT prices: Zircon 1,515 US$/t, Ilmenite: 180 US$/t, Rutile 1,200 US$/t 2. Source: Iluka; Includes both natural rutile and synthetic rutile

Construction stage Existing Producer

Well positioned to take advantage of the positive market fundamentals for rutile

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Planning stage

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The Natural Rutile Advantage

Source: TZMI, Sierra Rutile Data based on performance of a typical chlorination plant, indexed to performance of natural rutile

Natural rutile is far more efficient than all other feedstocks in manufacturing TiCl4, superior performance yields premium prices

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Synthetic Rutile

Ilmenite

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Natural Rutile

17-times less waste than ilmenite

13-times less chloride consumption than

ilmenite

Natural rutile is more

efficient than other

feedstocks in manufacturing

TiCl4

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Existing producers Potential new projects Underlying demand

Limited Ability for a Supply Response

Working for a better Sierra Leone 5

> Limited supply response

– Greenfield supply response is muted by long project development times and financing requirements

> Limited near-term expansion potential

– Sierra Rutile is one of few producing assets capable of significant, near-term expansion

> Significant challenges facing other projects

– Various development constraints are being experienced by mineral sands companies globally

– Likely to further prolong strong supply side fundamentals

Global Rutile Supply/Demand Forecast

Natural Rutile Supply Additions

Source: TZMI, Company Estimates

Project Company Country Existing Production ktpa Expansion Production

ktpa Potential

Production ktpa Total Production

ktpa Earliest Possible

Production Status

Sierra Rutile Sierra Rutile Sierra Leone 125 80 - 205 - Construction

Kenmare Resources Moma expansion Mozambique 6 10 10 26 - Construction

Mineral Deposits Grande Côte Senegal 10 0 10 2013 Construction

Base Resources Ltd* Kwale Kenya 73 0 73 2013 Construction

Gunson Resources Coburn Zircon WA 0 10 10 2014 Feasibility

Trimex* Trimex Group India 8 0 8 2014 Feasibility

Tronox Fairbreeze S.Africa 120 25 0 145 2015 Construction

White Mountain Cerro Blanco Chile 0 95 95 2015 Feasibility

Astron* Astron Ltd Australia 60 0 60 2015 Feasibility

Diatreme & Image Resources Cyclone Australia 0 6 6 2015 Investigation

Total Potential Production 206 246 201 653

Source: Sierra Rutile, * IBMA, Credit Suisse


Assumes all projects

announced are developed on plan

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Established Infrastructure and Skilled Workforce


> Significant infrastructure already in place

– Mineral separation plant, currently capable of operating at a rate of 165,000 tonnes of rutile per annum is easily expandable to >200,000 tonnes of rutile per annum

– Established export port and shipping fleet with capacity to ship >500,000 tonnes of product per annum

– A modern MFO (Marine Fuel Oil) power plant capable of producing 23MW of power (current utilisation under 9MW)

– Over 80km of established haulage roads

– Modern engineering and camp facilities in place

> Skilled and experienced workforce

– Experienced management team

– +40 years of experience operating in Sierra Leone and with these deposits

– >95% of workforce are Sierra Leonean nationals

– Highly educated employees

– Significant recruitment from premier universities of Sierra Leone, Fourah and Njala

Nitti Port

Centralised mineral separation plant

Substantial infrastructure and experienced workforce provide a strong foundation for growth

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Significant Improvement in Existing Operations


> Lanti Dredge and process plants upgraded

– Following a capital investment programme initiated in October 2010, operational improvements have driven significant production increases

– 2012 production of 94,493 tonnes of rutile, a 39% increase on 2011 production

– Record six-month production of 51,833 tonnes of rutile in H2 2012 – 91% growth in run-rate production relative to H1 2011

– 2013 production target of 125,000 tonnes of rutile

– Substantial improvements in process recoveries have contributed to increased production and enhanced operating margins

Rutile Production Performance

Lanti Dredge operations

Source: Sierra Rutile

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Process Recovery Improvements


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Lanti Dry Mining: A Step Change in Production


The Lanti Dry Mining project has been delivered on budget and ahead of time

> The Operation

– Targets high-grade resources, inaccessible to dredge mining, totalling 28.1 million tonnes at 1.5% rutile

– Adds production of 30,000 to 35,000 tonnes per annum of rutile as well as ilmenite and zircon by-products

> Implementation

– Ore processing plant has been commissioned, on budget and ahead of time

– The mining operation and concentrator plant are operating above design capacity

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The Minister of Mines and Mineral Resources, opening the Lanti Dry Mining project, January 2013

Lanti Operations

Dry mining operation

Lanti Dry Mining process plant in operation

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Gangama Dry Mining PFS: Key Project Highlights

Average annual production rate (ore mined) 7.0 million tpa

Average annual production rate (rutile produced) 83,400 tpa

Project life 6 years

Up-front capital expenditure $103 million

Operating cost (LOM) $307/t

Construction period 12 months

Pre-tax NPV10 $507 million

Pre-tax IRR 228%

Gangama Dry Mining: Adds Unparalleled Value


Gangama Dry Mine provides unparalleled value by accessing a high-grade resource while minimising development time and capital cost

> The Project

– The Gangama Dry Mining project is operationally identical to the Lanti Dry Mining project

– Annual production of 83,400 tonnes of rutile

– The 1,000 tph project consisting of 2x500 tonne per hour units

– Power, water and road access is already in place

– Internal pre-feasibility study has been completed, incorporating known costs, timelines and project learnings from the Lanti Dry Mining project


Gangama deposit with resource outline

Process water pond

Dams

Existing roads

Deposit outline

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Gangama Dry Mining: Near-Term Milestones


Detailed engineering has been finalized and site preparation work has commenced

> Project Update

– Detailed engineering of the plant and infrastructure has been finalised with Consulmet (Pty) Limited

– Capital costs, prior to value engineering studies, are in line with pre-feasibility results

– Pre-construction activities have begun, including:

– Dam construction for process water storage

– Draining of the Gangama dredge pond

– Upgrading of access roads Gangama Dry Mining site – after draining Gangama project design concept

Gangama Dry Mining site – before draining

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Strong Production Growth


Significant near-term production growth with further production upside

> Significant production growth

– 33% CAGR in rutile production between 2011 and 2015

– Significant installed infrastructure minimises project implementation risk and contributes to a low capital intensity

> Low-cost production growth

– Every incremental tonne produced decreases cash cost per tonne by leveraging fixed cost base

> Significant growth optionality beyond 200,000 tonnes

– Substantial growth optionality remains

– Sembehun Dredge project

– Mogbwemo Tailings project

– Additional dry mining targets


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Sembehun Dredge: Long-Term Upside Value


> The Project

– An independent scoping study, completed by Snowden Mining Industry Consultants, identified significant value in an independent dredge mining operation at Sembehun

– 274 million tonnes at 1.34% rutile in Sembehun provides the opportunity to develop a new project that delivers long-term returns

– Baseline pre-tax NPV of US$347 million with opportunity for further value enhancements

> Project Update

– An exploration programme was commenced in October 2012 to support detailed mine planning

Deposit Mining Pond Mining Lease Boundary Proposed Dam Final Product Haul Road Existing Road HMC Hauling Road

Source: Snowden Mining Industry Consultants study

Sembehun Dredge study: Key Project Highlights

Baseline Pre-tax NPV10 $347 million

Baseline Pre-tax IRR 34%

Average production rate (ore

mined) 13 million tpa

Average rutile production rate

first 5 years / LOM 135,000 tpa / 113,000 tpa

Up-front capital expenditure $305 million

Operating cost $322/t HM produced

Construction period 24 months

Project life 22 years

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Well-defined project that delivers strong financial returns for over 22 years

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Revenue

Cash Cost Per Tonne

Significant Free Cash Flow Generation


Source: Sierra Rutile internal production forecast and broker consensus (as at May 21, 2013) Note: 2013E to 2015E revenue estimates based on broker consensus price forecast (Rutile : US$1,489/t, US$1,499/t, US$1,471/t; ilmenite: US$256/t, US$251/t, US$241/t and; zircon concentrate price assumed to be US$500/t throughout 2013-2015)

Strong free cash flow generation due to growth in production and declining operating costs

> Dramatic growth in free cash flow generation in the near-term

– Revenue growth driven by successful execution of development projects

– Declining operating costs driven by:

–A continual focus on cost efficiency

–Realisation of economies of scale through the leveraging of a fixed-cost base across increasing production volumes

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Partnership with Sierra Leone

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Sierra Leone: An Investment Friendly Destination


“We know that countries are more likely to prosper when they encourage entrepreneurship; when they invest in their infrastructure; and when they expand trade and welcome investment. So we will partner with countries like Sierra Leone to create business environments that attract investment, not scare it away.” US President Barack Obama, Speech to the United Nations General Assembly, September 2010

Over 40 years, Sierra Rutile has forged strong relationships with the people and Government of Sierra Leone

> Investment friendly jurisdiction

– Sierra Leone is a stable and investor-friendly country

– Sierra Leone has a pro-mining investment climate attracting African Minerals’ US$1.8 billion iron ore project and London Mining’s US$1.0 billion iron ore project

– Sierra Leone is a key part of Tony Blair’s African Governance Initiative which is working to develop the capacity of the Government to set and deliver on its priorities

> Strong relationship with Sierra Leone

– The Company has a positive and long-standing relationship with the Government

– Mining leases date back to the 1970s and are valid through 2038 with the option to extend for a further 15 years

– In March 2011, a special prepayment of US$18.3m was made on a loan to Government of Sierra Leone. The monies repaid on this loan are used to fund local development projects such as roads and infrastructure. US$30.9m (€23.8m) is outstanding on the loan, which will be repaid in accordance with its terms over the next 4 years

– In April 2012, Sierra Rutile purchased the Governments 7.1% effective interest in the local subsidiary and pre-paid two years of PAYE tax for US$17m

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Sierra Rutile and the Community


Aquaculture Sustenance Programme

Sierra Rutile is a powerful force for development in the local community

Local library


> Considerable contribution to national and local economy

– Sierra Rutile makes up a significant proportion of Sierra Leonean GDP and exports

– The Company is one of the largest private sector employers in Sierra Leone

– Where possible, the Company is committed to local procurement, spending over US$45m annually on in-country procurement and wages

– Long standing and positive relations with local Mine Workers Union

> Contributions to the local community

– Over US$1.5m invested annually in the local community

– The Company’s medical facility treats over 22,000 people a year with free HIV testing, education and mosquito nets for malaria prevention

– Local technical college, sponsored by Sierra Rutile, provides education to over 300 students

– Through the Sierra Rutile Foundation, the Company funds local projects such as schools, wells, grain stores, latrines, courts, bridges, clinics, a local radio station and more

– Fish farms located in old mining ponds provide local villagers with work and a reliable source of food

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A Responsible Steward


>Ongoing Land Rehabilitation Programme

Tree planting

> Environmental management

– A survey of all legacy disturbed lands was completed in 2011, resulting in the development of a six year rehabilitation plan

– Rehabilitation plan is underway with 141.1 hectares of land restored during 2012 – 20 hectares above target

– Through the aquaculture project, Sierra Rutile successfully stocked retired dredge ponds with a total of 147,247 tilapia and cat fish during 2012

– Over 180,000 fish to be stocked during 2013

– Sierra Rutile continues to maintain strong, positive relationships with the Sierra Leone Environmental Protection Agency and Ministries of Fisheries and Agriculture

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Contact Details

John Sisay

Chief Executive Officer


Email: [email protected]

Sierra Rutile Limited 30 Siaka Stevens Street 2nd Floor, Access Bank Building Freetown Sierra Leone Website: http://www.sierra-rutile.com/

company presentation - sierra rutile limited · gunson resources 0.74mt white mountain titanium...

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