Sintering of Laterite ores

The technology & economics of Reduction Sintering

Confidential

19th June 2010

GITS Sintering Services Inc.

The issue facing most Nickel Laterite producers in the Philippines is…

How to Add Value to a large resource of low grade laterite?

Ore Coke Flux

The Philippines has a large resource base of laterite nickel…

GITS

The majority of nickel laterites is exported to China for processing…

4

13%

8%

11%

7%

16%

17%

23%

3%2%

World Nickel Laterite Resources

Philippines [2189 Mt@1.28% Ni] Indonesia

[1576 Mt@1.61% Ni]

Carribean[944 Mt@1.17% Ni]

C & S America[1131 Mt@1.51% Ni]

Africa[996 Mt@1.31% Ni]

Australia[2452 Mt@0.86% Ni]

Asia & Europe

12,622MillionTonnes

Other Australasia

New Caledonia [2559 Mt@1.44% Ni]

4

Approx. 16Mt laterite imported into China in 2009 Imports are equivalent to > 110,000 t Ni metal For higher grade Ni ores, Indonesian ore is preferred over Philippine ores Philippine exports are mainly lower Ni grade ores

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China Laterite ImportsPhilippines New Caledonia Indonesia

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Ore Coke Flux

Direct shipping of Nickel laterite ore is of low intrinsic value…

Laterite NickelGrade, % Ni

Chinese PurchasePrice, US$/t

1.0% US$12/t1.5% US$20/t1.75% US$30/t2.0% US$50/t

>30% “water” shipped to China with every tonne exported

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Ore Coke Flux

Traditionally, value added processing has been too expensive…

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$20,000

$30,000

$40,000

$50,000

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World Lateritic Nickel Operations Capital Intensity The Y axis values are based on total nickel production - not just payable nickel amount.

Heap Leach HL

HPAL

Agitation Leach Al

Electric Arc Furnace

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Ore Coke Flux

Sintering is significantly cheaper & has significantly lower barriers to entry

Sintering is the intermediate step in producing either- laterite nickel feed for an EAF/Blast Furnace [Ni PI], or iron ore feed for the steel industry

Capital Costs for a sinter plant are low- Approx. US$4M per 100,000 tpy production module

Sintered products command a higher price then DSO- Laterite nickel sinter @ ~1.8% Ni = US$130/t FOB Iron ore feed @ ~60% Fe = US$85 to US$100/t FOB

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Ore Coke Flux

What is Reduction Sintering?

A process of heating laterites to 900oC – 1,200oC, under reducingconditions, to induce a phase change of hematite to magnetiteresulting in a semi-fused metallic sinter which can be furtherupgraded by simple magnetic means.

Nickel Laterites: Upgrades Ni content in sinter product & eliminates water

Iron Laterites: Upgrades 40% to 50% Fe in limonite to>60% magnetite sinter & eliminates water

GITS

Ore Coke Flux

Why is Reduction Sintering economic today?

Historical low iron ore prices (<US$30-US$40/t @ 60% Fe) have prevented the industry from expanding, until recently. As iron ore prices increase, the economics of sintering improves The Chinese are a ‘test-bed’ and very innovative when it comes to seeking alternatives to high grade iron ore prices

GITS

(Nickel) Laterites&

Processing Options

ChineseBlastFurnaceProcess

AlloyStreamProcess

Ore Coke Flux

1% Ni to 1.5% Ni Ore 3% to 5% Ni Pig Iron

1% Ni to 3% Ni Ore 3% to 50% Ni Pig Iron

Requires high Fe lateriteLow Capital...but environmental issues

ElectricArcFurnaceProcess

>1.5% Ni to 2% Ni Ore 5% to 15% Ni Pig IronRequires low Fe lateriteHigh electrical consumption

No constraints on Ni or FeLow electrical consumptionUntested – only ferromanganese

Ferronickel technologies suitable for nickel laterite ores… [Pyrometallurgy]

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Leaching technologies suitable for nickel laterite ores… [Hydrometallurgy]

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HighPressureAcid Leach[HPAL]

AtmosphericAgitation Leach[AL]

HeapLeach[HL]

ProcessingPlant – same for all Tech.

High TempHigh Pressure$$$$Recovery > 90%

Low TempLow Pressure$$$Recovery 70%-85%

Low TempLow Pressure$$Recovery 60%-75%

Autoclave

Agitation Tanks

Laterite Ore Heaps

Intermediate Product -Ni Hydroxide

Cathode Nickel

>75%

Ni P

ay10

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i Pay

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Bedrock

Saprolite

Limonite

TraditionalProcessing

Routes

HPAL- Coral Bay- Goro- Revensthorpe

Ferro-nickel- Chinese Blast Furn.- Elect Arc Furnace- Reduction process

NewProcessing

Routes

HeapLeaching-Turkey [ENK]- Phil. [Rusina]

AgitationLeaching- Toledo Mining (TMC)

Ni > 1.8%Fe < 20%

Ni < 1.3%Fe > 30%

SchematicLaterite Profile

The laterite ore types will dictate the processing routes…GITS

Sintering is an intermediate step in the value-added chain… [Pyrometallurgy]

Bedrock

Saprolite

LimoniteNi < 0.9%Fe > 40%

SchematicLaterite Profile

Sintered Iron Ore>60% Fe

BF or EAF Feed>3% - 6% Ni PINi < 1.2%

Fe > 30%

Ni > 1.8%Fe < 20%

A

B

C

A

EAF Feed>10% Ni PI

C

B

IntermediateProducts

Sinter Reduction

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Ore Coke Flux

Reduction Sintering is a proven technology and is widely used around the world?

Krupp Renn in Germany: 1930-1940 Nippon Yakin in Japan: currently processing Ni laterites Minnesota low grade iron ores (35% Fe – 50% Fe) Chinese - today

GITS

Sintering is a relatively simple process with basic inputs…

Product

GITS

Ore Coke Flux

Plan view and layout of a typical Reduction Sintering plant…GITS

“The Size of the Prize”

The economics of the sintering process are compelling…

Project Life 12 YearsProduction Rate 500,000 tpy Sinter ProductCapital Cost US$20 M [5 Units @ 100,000 tpy]NPV10% US$133 M [BOI Incentive]IRR % 129%Payback 10 Months

Laterite Tonnage 1.021 M wmt/yearLaterite Price US$12.00/wmtPlant Recovery 90.00 %Electricity Consumpt. 1.71 MW/Yr [@US$0.13/kwh]Sinter Selling Price US$130 /tCost of Production US$62.96/t Sinter Product

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Total cash operating costs are approx. US63/t sinter product…

‘Margin’ over current SP of US$130/t= ~US$67/t

Direct Site Costs 50.21Overhead Costs 3.00S & Mkt Costs 0.65Excise/Royalties 9.10

Total[/t SP] 62.96

Operating Costs:

Mining 24.51Processing 21.48Maintenance 1.60Site Labour 2.62

Total[/t SP] 50.21

Direct Site Costs:

Limestone 2.04Coal 11.71Coke 0.48Water 0.39Power 4.00Fuel Oil 1.67Beneficiation 1.20

Total[/t SP] 21.48

Processing Costs:

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Assumes BOI income tax holiday for 6 years

Annual cash flow [US$M] is healthy in all years [500,000 tpy SP]…

P & LUS$M

Cash FlowUS$M

Year 2 Year 7Gross Revenue 65.00 65.00- Operating Costs 31.48 31.48= EBITDA 33.52 33.52- Deprec & Amort 2.00 2.00= EBIT 31.52 31.52- Income Tax 0.00 9.46= Net Profit 31.52 22.06

Net Profit 31.52 22.06+ Deprec & Amort 2.00 2.00- Sustaining Capital 5.00 5.00- WC Increase 0.00 0.00= Cash Flow 28.52 19.06

GITS

The modular nature of the plant allows for financial flexibility…

1 Unit 3 Units 5 UnitsNPV10% US$M 26.62 79.87 133.11IRR % 129% 129% 129%

Project Life Yrs 12 12 12Sinter Product tpy 100,000 300,000 500,000Capital Cost US$M 4.00 12.00 16.00

Laterite Feed wmt 204,248 612,745 1,021,242

P & L [Year 2] 1 Unit 3 Units 5 UnitsGross Revenue US$M 13.00 39.00 65.00Op. Costs incl Depr. US$M 6.30 18.89 31.48EBITDA US$M 6.70 20.11 33.52Income Tax US$M 0.00 0.00 0.00Net Profit US$M 6.30 18.91 31.52

Cash Flow [Year 2] 1 Unit 3 Units 5 UnitsNet Profit US$M 6.30 18.91 31.52+ Depreciation US$M 0.40 1.20 2.00- Sustaining Capital US$M 1.00 3.00 5.00- WC Inc. US$M 0.00 0.00 0.00Cash Flow US$M 5.70 17.11 28.52

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0 25 50 75 100 125 150 175 200 225

Exchange Rate [45] +/- 10%

Laterite Ore Price [US$12/t] +/- 10%

Capital Cost [US$20M] +/- 10%

Plant Recovery [90%] +/- 10%

Discount Rate [10%] +/- 10%

Operating Costs +/- 10%

SP Selling Price [US$130/t] +/- 10%

Philippine Corp - Tax Regime[US$118M]

PEZA Tax Regime - Pioneer [US$183M]

PEZA Tax Regime - Non-Pioneer [US$181M]

BOI Tax Regime - Pioneer [US$162M]

BOI Tax Regime - Non Pioneer [US$150M]

Change in NPV10% - US$m

Base Case NPV@10% = US$162M IRR=151% Payback=<1 Year

Sensitivities indicate a robust project is achievable…GITS