gorham nickel

Three case studies demonstra0ng Gorham & Partners’ recent work on nickel market and product strategies

Summer 2013

Gorham and Partners Nickel Case Studies

What Gorham does

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• Over 20 years’ experience • 10 years focusing exclusive on mining and metals

Global metals and mining consultants

• We supplement engineering-‐led evalua>on projects with • Data-‐driven compe>tor analysis • Deep understanding of end-‐users and other par>cipants in the value chain (gained through face to face mee>ngs and economic modelling)

Focus on strategic ques0ons

• For junior miners, securing finance post the global financial crisis is the key challenge • Gorham has a twofold approach to assist in the search for funds • Through our rigorous work down the resource value chain, we are able to iden>fy and introduce non-‐tradi>onal investors who will directly benefit from the development of your project

• We also have a rigorous process to introduce exci>ng mineral projects to a wide range of high net worth global investors, currently struggle to iden>fy higher risk/return opportuni>es for their porMolios

Alterna0ve paths to funding

Evalua0ng the product and commercial op0ons for nickel and the cobalt by product from the Alpha mine

May 2012

Gorham and Partners Nickel Case Studies 1 1

What we set out to deliver

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Accurate and detailed analysis to support detailed feasibility

study

1. Market analysis for nickel hydroxide

precipitates (NHP) vs nickel market 2014-‐2018

2. Customer tes0ng and development for

NHP and cobalt (10-‐20 interviews for NHP, 5-‐10 for cobalt)

3. Op0mal strategy for commercialisa0on of cobalt by-‐products

4. Price outlook NHP/nickel metal/selected

cobalt product op0ons

5. Recommended strategy for Alpha

6. Sales forecast for Alpha, 2014-‐18

How we went about it

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What we found

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Drivers of global

Ni market

Ni price outlook 2014-‐21

Market impact of non-‐ferrous Ni alloys

Impact of nickel pig iron on

ferronickel market

Economics of direct feed vs. intermediate products

Customer preferences

for intermediate Ni products

Economics of alterna0ve cobalt

products

Op0mal product/market

strategy for Alpha

Price forecasts for

chosen strategy

Resultant sales

forecasts for Alpha

What we wrote

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What happened

•  Reframed Alpha’s view of the market for intermediate products

•  Opened possibility for radically different go-‐to-‐market op>ons, with huge implica>ons for feasibility study •  Increased price forecasts for contained Ni and Co metal •  Improved compe>>ve outlook •  Changed geographic focus for marke>ng effort •  Opened doors to new sources of partnership and finance

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Evalua0ng the product op0ons for laterite nickel from the Sigma mine

December 2012



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Evaluate alterna0ve product op0ons for new laterite nickel project (Sigma mine)

1. Quan0fy degree to which stainless steel producers will shi] towards lower grade

Ni feeds

2. Evaluate feedstock alterna0ves for relevant stainless steel producers

3. Outline latest view of global nickel

outlook and client’s posi0on within that, including compe0tor

analysis

4. Price for nickel based on refreshed understanding of

supply and demand

5. Compara0ve evalua0on of product op0ons for the Sigma

mine

6. Evalua0on of strategic op0ons for

Sigma’s parent company

7. Recommended course of ac0on for

Sigma


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Ni NPI FeNi STS Scrap

Associa0on + Expert 9 9 8 9 9

Ni Producer 2 1 1 1 0

STS Producer 13 7 9 13 9

Trader 2 2 1 0 1

Recycler 1 0 0 0 1

Product Info Value

Chain Level

Structure of the inves0ga0on

Interviewing 5 experts on the G&P nickel expert panel

Market inves>ga>on •  8 Interviews in China

•  8 Interviews in India

•  5 Further Asian interviews

•  5 Interviews in ROW

Desktop research

Quan>ta>ve and qualita>ve analysis

What we found

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1. Will STS producers switch feeds?

2. Alterna>ve STS feeds:

2a. Stainless steel scrap

2b. Nickel Pig Iron

2c. Ferronickel

2d. Nickel Oxide

2e. MSP and nickel metal

3.Nickel supply, demand

compe>tor analysis

4. Nickel price

forecast

5. Evalua>on of op>ons for Sigma project

5. Strategic op>ons &

rec.s

What we wrote

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What happened

•  Sigma project is under development for one of the top 5 global Nickel producers

•  Clarified product op>ons available to Sigma, highlighted importance of considering end user economics and preferences in final decisions

•  Established framework for client to make that decision when needed

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Evalua0ng the Commercial and Processing Op0ons for the Lambda Nickel Project

October 2008



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Evaluate alterna0ve product op0ons for new laterite nickel project (Lambda)

1. What markets/applica0ons should Lambda aim at?

2. Which products/process routes should

Lambda make/follow?

3. What compe00ve environment will

Lambda be facing in 2015 onwards?

4. What price structure will Lambda be able to achieve for its full product range in 2015 onwards?


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Forecasted costs for the duration

of the investment Revenue stream from

selected product - market combination (s)

NPV of each product - market combination

Sales forecasting Demand forecasting

Benchmarking the forecasted sales

(Competitor Analysis) Price forecast for Ni

products in their selected markets

Expert interviews on the forecasted sales

Interest rate forecast

Nickel price forecast

Market characteristics Supplier power • Company size • Financial strength • Resource bank • Potential for

differentiation • Specific customer ties • Power of suppliers’

suppliers

Customer power • Customer concentration • Financial health • Ability to switch materials • Ability to switch suppliers • Sensitivity to price • Access to captive supply

Strength of Ni Product • Availability of substitutes • Relative price of

substitutes • Range of substitute

application • Environmental regulation • Technical vulnerability

Degree of rivalry • Strength of competition • Potentially realisable sales • Sustainability of sales

Market & sales evaluation model - Porter’s 5 Forces or

Product market dynamics analysis Competitor analysis Demand supply price

analysis

Client’s task G&P task

• Size • Growth • Stability • Geography • Demand - supply balance • Uniformity of product • Barriers to entry

Value chain and process option analysis

simplified versions of the Porter model

What Markets/Applications should SNP aim at ?

Which Products/Process Routes should SNP

make/follow?

What Competitive Environment will SNP

be facing in 2015 onwards ?

What Price Structure will SNP be able to achieve for its full product range in

2015 onwards?

What we found

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1. Which are the most aerac>ve

products and markets

2. How compe>tors

will be posi>oned

3. Impact of new wave of

laterite producers on produc>on op>ons

4. Medium term price outlook and scenarios

5. Outlook for sulphur

6. Outlook for Cobalt

7. Strategic evalua>on of

product op>ons for Lambda

8. Recommended

ac>ons

What we wrote

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What happened

•  Lambda’s owners subsequently sold a controlling stake in the project to one of the global nickel majors, beeer posi>oned to exploit the market opportuni>es iden>fied

•  The project remains on track for development

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About Gorham and Partners

A specialist consul>ng prac>ce with a successful 20 year track record advising the global metals and mining sector on strategic, commercial, financial and marke>ng issues. In addi>on

to the nickel, we advise clients across all the main metals and precious metals sectors including copper, zinc, lead, chromium, molybdenum, cobalt, steel, stainless steel, gold,

pla>num and diamonds

We address the big strategic issues faced by nickel businesses,

especially product mix and market strategy. Our insights into rapidly changing markets have

led to a new approach to seeking finance for early stage projects

Demand/supply and pricing studies not just for Ni and Co metal, but all alterna>ve intermediate products | In-‐depth understanding of end-‐user demands and trends | Customer segmenta>on and alterna>ve ‘go-‐to-‐market’ strategies |

Analysis of the product and market strategies of compe>tors | Commercial and marke>ng

sec>ons of pre-‐feasibility and feasibility studies | Market entry strategy

Successful consul>ng projects for our nickel and base metals sector clients which add value to their

businesses

Including Rio Tinto | Sherrie | ENK | BHPBilliton | Corus | Rotex

Minerals

Deep experience advising and managing strategic projects in the sector – we partner you to find the answers you

need

Alec Campbell – 25+ years advising senior management with special focus on metals

and sales and marke>ng strategies J-‐P Mar0ns -‐ 20 years advising senior

management, ex senior strategic manager in Rio Tinto

Khush Nathadwarala – 6 years consul>ng exclusively to the mining and metals sector

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gorham nickel

Business