ABN Construction Underway at Poplar Grove Mine

Transcription

1 ABN Construction Underway at Poplar Grove Mine Company Presentation October 2017

2 Paringa Highlights: Construction on-track at the first mine (Poplar Grove) ~90% of Capex locked-in under fixed price contracts The Next Major Illinois Basin Coal Producer 45% of 1 st 5 years of production pre-sold under fixed prices Poplar Grove EBITDA 1 : US$67m; Combined EBITDA 2 : US$167m Short timeline to first coal production at Poplar Grove Permitted pathway to 6.6 Mtpa (Poplar Grove + Cypress) Rebound in US thermal coal now underway Pro-growth and pro-coal US regulatory tailwinds Upcoming listing on major US stock exchange Building a safety first culture Notes: (1) Relates to average annual EBITDA over the steady state production, refer to the ASX announcement dated 28 March 2017 for all results from the Final Bankable Feasibility Study ( Final BFS ). (2) Note, combined EBITDA relates to average annual EBITDA from both the Poplar Grove and Cypress Mines during steady state production, refer to Final BFS announcement. 2

3 Permitted Production Profile (Final BFS) 1 8 Mtpa 6 Mtpa Cypress Mine 4 Mtpa 2 Mtpa Poplar Grove Permitted, Low Cost Pathway to High Returns 0 Mtpa Low Capex Intensity (Final BFS) 1 on Capital High Return on Capital (Final BFS) 1 US$ 655m US$ 310m US$ 163m US$45 m US$ 67m Poplar Grove Capex Poplar Grove EBITDA Combined EBITDA Poplar Grove NPV Combined NPV Notes: (1) Refer to the ASX announcement dated 28 March 2017 for all results from the Final Bankable Feasibility Study ( Final BFS ). Note, capex figure has increased to US$48.5 million following execution of fixed price contracts totaling almost 90% of the capex total. Capex intensity = Capex + Leased equipment / Production) 3

4 7 Aug 17 Construction Underway at Poplar Grove Mine 16 Aug 17 (Construction began in August 2017 and is expected to finish by August 2018) 21 Sep 17 4

5 Location of Poplar Grove and Cypress Mines and Access to the Ohio River Market Poplar Grove Mine has been Significantly De-Risked Poplar Grove Mine Significantly De-Risked: Permitted and Financed Established local mining industry Simple, low cost mine construction Simple room-and-pillar operations Capex: ~90% Fixed Price Contracts Simple processing techniques Production: 45% of 1 st 5yrs pre-sold Low cost barge transportation US$205 million sales contract First world jurisdiction 5

6 Poplar Grove Mine Plan View ~90% of total Capex now under Fixed Price Contracts (Revised total Capex of US$48.5 million falling within funded contingency) Best in Basin Construction Contractors Secured Site Development: Pollard & Sons Shafts: North American Drilling Slope: Frontier-Kemper Plant: Fricke Mgt & Contracting 6

7 Slope Entry And Site Office Simple, well understood Mine Operations & Processing Techniques (Simple room-and-pillar underground mining operations and simple coal processing techniques similar to adjacent Alliance operations) Coal Prep. Plant and Stockpile Green River Barge Load-Out Facility 7

8 US$ per Ton Illinois Basin Mine Gate Cost Curve Permitted, Competitive, Low Cost Illinois Basin Supply 40 Poplar Grove Cypress Mine Illinois Basin Production 50 mt 100 mt Factors Supporting Paringa s Low Cost Structure Paringa coal seams are +90% in-seam yield (i.e. almost pure coal) Enhanced plant yield and productivity due to high coal quality (Poplar Grove and Cypress Mines sit comfortably at the beginning of the 2 nd quartile of the Illinois Basin cost curve) Simple, low cost, room-and-pillar mine operations Simple, well understood processing techniques Highly skilled, non-union workforce in a mining friendly jurisdiction Access to low cost power and utilities Notes: (1) Source: Wood Mackenzie. Refers to cost curve for forecast 2017 production totaling 98 mt plus the costs for an additional 6.6 million tons from Paringa s Poplar Grove and Cypress Mines 8

9 US$ per mmbtu Low Delivered Cost to initial Target Ohio River Market Delivered Cost to LG&E s Trimble County Plant 1 (natgas equivalent prices) $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $- Poplar Grove Proxies for: Illinois Longwall Paringa: Foresight: Poplar Grove Sugar Camp Illinois Basin Other US Coal Basins Delivered Natgas Markets West Ken. Non-River Mine Alliance: Dotiki Indiana Surface Mine Peabody: Sommerville CAPP NAPP PRB Natgas ($3.00) Natgas ($3.50) Natgas ($4.00) The Chart above compares the delivered cost at LG&E s Trimble County plant on the Ohio Rvier for Paringa s two mines (i.e. Opex FOB Barge plus barge transportation costs) to the parts of the Illinois Basin, other US coal basins and natural gas based on Henry Hub Natgas prices at US$3.00, US$3.50 and US$4.00. Source: Wood Mackenzie; natural gas costs account for weighted average heatrate efficiencies between a natural gas combined cycle (7,400 Btu/KWhr) vs coal-fired unit (10,500 Btu/KWhr) (Paringa s low cost, high quality coal and its significant transportation advantages results in Poplar Grove and Cypress Mines being among the lowest delivered cost coal to the Ohio River Market in the US) Factors Supporting Paringa s Low Cost Structure: Prime location in the heart of the Eastern US power market Low mine costs from favorable geology and high quality coal High heating content and low chlorine coal quality Low transportation costs to market Notes: (1) Refer to Slide 10 for location of Trimble County power plant 9

10 Ohio River Market and LG&E s 3 River Power Plants (including Trimble County) 45% of First 5 Years of Production Sold at Fixed Prices (Production from Poplar Grove during First 5 years totals million tons) Summary of Key LG&E Contract Terms (2018 to 2022) Contracted Production Fixed Contract Price (FOB Barge; 11,200 btu/lb) 0-750,000 tons US$40.50 per ton 750,001 1,750,000 US$ ,750,001 2,750,000 US$ ,750,001 3,750,000 US$ ,750,001 4,750,000 US$45.75 Total Sales Contract Value US$205 million 10

11 Ohio River & South East Markets for Illinois Basin Coal Initially Targeting the Ohio River & South East Markets Tier-1 Customer Base (Total annual demand for Illinois Basin coal from both markets is over 70 million tons) 11

12 Million Tons Illinois Basin Demand 1 (2017 to 2030) Base Case High Natural Gas Price 134 Mtpa Mtpa 116 Mtpa Illinois Basin Remains a Growth Market (Under a no carbon regulation environment, Wood Mackenzie forecasts Illinois Basin Production to grow from 98 Mtpa in 2017 to 125 Mtpa by 2030) Mtpa 106 Mtpa 98 Mtpa Factors Facilitating Illinois Basin Growth Lowest delivered cost to Eastern US power markets Highly productive, low cost mine operations Access to low-cost transportation infrastructure Highly skilled, non-union workforce Continues to displace higher delivered cost US Coal Basins (i.e CAPP) Improving regulatory outlook Potential change in weather patterns (i.e. Il Nino to La Nina) Notes: (1) Source: Wood Mackenzie under no carbon regulations and 1H2017 assumptions 12

13 US$ per mmbtu Million tons US Thermal Coal Stockpiles Depleting from Historical Highs 200 EIA Actual (2009 to Q217) EIA Forecast (12 months) Recovery in Average US Thermal Coal Continues as Coal Stockpiles Deplete (US thermal coal stockpiles continue to deplete from their historical highs, with US natgas increasing from its historical lows, providing an improving environment for US domestic coal prices) US Natural Gas Prices Set to Continue to Rebound from Historical Lows Average Actual US Natural Gas Prices Future Natural Gas Prices? Notes: (1) Source: EIA 13

14 US Liquified Natural Gas (LNG) Export Capacity (2016 to 2019) Positive Outlook for US Natural Gas Prices as LNG Exports Ramps-up Unprecedented LNG Export Capacity in the US US produces 72.5 Bcf/d of natural gas and is now a net exporter LNG export capacity to increase from 1.4 Bcf/d to 9.5 Bcf/d by 2019 (LNG Exports are set to rival and could surpass weather as a core driver of electricity and natural gas prices in the United States in the next few years) Declining pipeline natgas imports from Canada Near doubling of export pipeline capacity (14 Bcf/d) to Mexico by 2019 Mexico installing +50 GW in new energy generation, mostly powered by natgas 14

15 US Thermal Coal Exports (million tons) Export Markets Opening up for Illinois Basin Coal European Thermal Coal price (US$/tonne) European Thermal Coal Price 1 (API2) vs US Thermal Coal Exports 140 European Thermal Coal Price (LHS) US Thermal Coal Exports (RHS) Illustrative Illinois Basin Netback for Export Sales to Europe (ARA) Current European Coal Price (API2) US$90 per metric ton (MT) Sulfur Discount (range $5 to $20) - US$15 per MT (Sustained high European thermal coal prices will provide a third target market for Illinois Basin Producers, particularly the higher chlorine longwall producers who historically have relied on the European export market from to the US Gulf of Mexico) Freight from US Gulf to ARA US Gulf (FOB) Convert to Short Tons Handling at US Gulf Port Barge Transportation to Illinois Basin Effective Illinois Basin Price (FOB) - US$10 per MT US$65 per MT US$59 per ton - US$4 per ton - US$16 per ton US$39 per ton Notes: (1) Source: Bloomberg 15

16 +40 US Based attendees at September Mine Site Visit Growing Support from US Financial & Government Institutions Presentation to the Governor of Kentucky 16

17 Current State of Play for Federal Regulations Clean Power Plan (CPP) Following President Trump s executive order for Energy Independence, Head of the Environment Protection Authority, Scott Pruitt, announced full repeal of the CPP Grid Resiliency Pricing Rule Proposal Rapidly Improving Pro-growth & Pro-coal US Regulatory Environment Could essentially prevent coal and nuclear plants from closing even if they re not economic to run and could guarantee coal plant owners a rate of return based on their costs rather than prices set by wholesale markets Stream Protection Rule Congress passed the Congressional Review Act, voiding the EPA s Stream Protection Rule, protecting up to 1/3rd of US coal production Reduction in Corporate Tax Rate Trump administration initiated action to reduce the Corporate Tax Rate from 35% to 20% Current State of Play for State Regulations Illinois Assistance to Install Scrubbers If enacted, Illinois coal power plants that have been incentivized by the state of Illinois to install scrubbers, would then base their coal buying decisions on economics, giving preference to the lowest delivered cost Illinois coal over the lower sulfur PRB coal. Kentucky Potential to Give Preference to Burn Kentucky Coal Commonwealth of Kentucky may be now assessing whether to introduce incentives for Kentucky utilities (who are scrubbed) to burn thermal coal sourced from Kentucky. 17

18 PNL: Significant Value Creation not Currently Reflected in Share Price A$0.70 A$0.60 A$0.50 A$0.40 A$0.30 A$0.20 A$0.10 A$0.00 Paringa Share Price and Milestones Acquired Buck Creek Complex Complete technical Studies at Cypress Mine Start technical Studies at Cypress Mine Start technical Studies at Poplar Grove Mine Complete Permitting at Cypress Mine Complete technical Studies at Poplar Grove Mine Discovery of Second Coal Seam at Poplar Grove Mine US$205 Million Sales Contract with LG&E Start Construction at Poplar Grove Mine Complete Financing at Poplar Grove Mine Complete Permitting at Poplar Grove Mine Completed 6 technical studies at Poplar Grove and Cypress Mines Fully permitted two coal mines in Kentucky Maiden US$205 million sales contract with investment grade utility Financed Poplar Grove and started construction Cypress Mine remains construction ready Notes: (1) Source: Bloomberg 18

19 Paringa Timeline: Short Timeline to First Coal with Value Add Catalysts Q4 17 Q4 17 Q4 17 Q4 17 Q1 18 1H 18 Complete permitting at Poplar Grove Mine (2.8 Mtpa) Fully finance the Poplar Grove Mine Start mine site development at Poplar Grove Final mine engineering optimization at Poplar Grove Start listing process on major US stock exchange Pre-listing US investor roadshow campaign Start construction of the Coal Handling and Preparation Plant Start construction of the Barge Load-out Facility List on major US stock exchange and begin trading Potential additional coal sales contracts Q3 18 Complete construction of the Poplar Grove mine Q3 18 First coal production 2019 Start construction of the permitted Cypress Mine (3.8 Mtpa) 19

20 Capital Structure ASX Code Key Corporate Statistics Shares on Issue Options Performance Rights PNL 317 million 15 million 16 million Paringa Shareholder Mix (%) Directors, Management & Associates 19% Market Capitalisation (9 Oct 17) Cash (30 Jun 17) Undrawn Debt Facility (Macquarie) US$ 95 million US$ 35 million US$20 million Australian Super 9% JORC Compliant Resource 1 JORC Compliant Recoverable Reserves million tons 136 million tons Institutional & Retail Investors 65% Silver Lake Resources 7% Notes: (1) JORC Compliant Resource totaling million tons is comprised of million tons in the Measured category and million tons Indicated category. (2) JORC Compliant Recoverable Reserves totaling million tons is comprised of 43.5 million tons in the Proven category and 92.3 in the Probable Category 20

21 Building a Winning Team Grant Quasha CEO David Gay President Rick Kim COO Adam Anderson Senior VP, Coal Sales & Marketing Nathan Ainsworth VP, Business Development Will Scates Senior Mine Engineer Brent Hawley Manager of CHPP & Surface Facilities Formerly Chief Commercial Officer of Bowie Resource Partners, LLC, the largest producer of Western bituminous coal in the United States, where he was responsible for corporate strategy, business development, sales, marketing, and logistics. Board member of the National Mining Association. Bachelor of Arts degree, Cum Laude, from Harvard College and a Master of Business Administration degree with Distinction from Harvard Business School. Mining Engineer with over 30 years of experience in developing coal resources projects covering the entire coal development chain and former Vice President Mergers and Acquisitions and Business Development at Alpha Natural Resources, one of the USA s largest coal producers. Mining Engineer with over 13 years experience working in the US coal industry managing continuous miner coal operations for Arch Coal and other major US coal producers. MBA from the University of Pittsburgh and Bachelor of Mining Engineering. Former Vice President of Sales and Marketing for Armstrong Energy, Inc, the second-largest thermal coal producer based in Western Kentucky. Served on active duty with the U.S. Air Force for almost 13 years and subsequently continued his service in the Air National Guard, retiring after 27 years at the rank of Lieutenant Colonel. Bachelor of Science Degree in Engineering and Legal Studies in 1995 from the United States Air Force Academy and received an MBA with honors from St. Mary's University in Over 15 years experience in Resources Project Development, Investment Banking and Investment Advisory. Co-founder of Piedmont Lithium Ltd (ASX:PLL NASDAQ: PLLLY). Charterholder of the CFA Institute and member of Institute of Chartered Accountants. Engineer with 8+ years of experience in the mining industry. Senior Mine Engineer for the largest room and pillar operation in the Illinois basin (Alliance s River View mine) mining multiple seams simultaneously with an annual clean production in excess of 8 million tons. Engineer with 10+ years experience in the mining industry. CHPP Manager for a 2,100 ton / hour preparation plant which washed multiple feeds from surface and underground operations to serve metallurgical, thermal and PCI markets. 21

22 World-Class Board Ian Middlemas Chairman Todd Hannigan Deputy Chairman Grant Quasha Managing Director David Gay Executive Director Tom Todd Director Jonathan Hjelte Director Highly respected resource executive with extensive finance, commercial and capital markets experience Current Chairman of Berkeley Energy Limited, Prairie Mining Ltd & former Chairman of Mantra Resources Limited & Papillon Resources Ltd Formerly the CEO of Aston Resources Ltd and was instrumental in developing the company into one of the largest publicly listed coal companies in Australia before merging with Whitehaven Resources Limited in a deal valued at over $5 billion Graduate of the University of Queensland, holds a Bachelor of Engineering (Mining) with Honours, holds a Queensland first class mine manager's certificate and has a MBA from INSEAD Formerly Chief Commercial Officer of Bowie Resource Partners, LLC, the largest producer of Western bituminous coal in the United States, where he was responsible for corporate strategy, business development, sales, marketing, and logistics. NMA Board member. Bachelor of Arts degree, Cum Laude, from Harvard College and a Master of Business Administration degree with Distinction from Harvard Business School. Mining Engineer with over 30 years of experience in developing coal resources projects covering the entire coal development chain Business Unit President at Pittston Coal Group (20 years experience) Vice President Mergers and Acquisitions and Business Development at Alpha Natural Resources, one of the USA s largest coal producers Chief Financial Officer of Aston Resources from 2009 to November 2011 and prior to this role, was Chief Financial Officer of Custom Mining, where his experience included project acquisition and funding of project development for the Middlemount project to the sale of the company to Macarthur Coal Graduate of Imperial College, Bachelor of Physics with first class Honours Highly respected New York-based fund manager and has extensive experience in investment and portfolio management specializing in the mining, utilities, and energy sectors. Mr Hjelte is a portfolio Manager at Citadel LLC Graduated Summa Cum Laude from Lehigh University where he received an M.S. in Statistics and a B.S. in the Integrated Business and Engineering honors program. He also holds the Chartered Financial Analyst (CFA) designation Rick McCormack Director Previously CEO of DRA Taggart (and Taggart Global), global leaders in coal processing plants, having constructed processing capacity in excess of 250 million tons per annum since 2000, including in the Illinois Basin Registered Professional Engineer and has Bachelors of Science degree in Mechanical Engineering from West Virginia University 22

23 Buck Creek Complex and Surrounding Historical and Current Operations Last, large Contiguous Block of High Quality Coal in Western Kentucky Since 2008, the Group has secured a total of +300 individual leases, comprising of over 510 individual property tracts and covering an area totaling almost 40,000 acres Paringa s permitted Poplar Grove and Cypress Mines are the last large contiguous blocks of undeveloped low capex, high margin coal in western Kentucky 23

24 Final BFS Results Combined BFS Results Annual Production 1 Initial Total Capital 2 Average EBITDA Mtpa US$45 million US$163 million BFS Summary (Mine Level) Poplar Grove Cypress Annual Production (Steady State) 2.8 Mtpa 3.8 Mtpa Total Saleable Coal 67 million tons 67 million tons Mine Life 25 years 18 years Product Heating Content 11,200 Btu/lb 11,200 Btu/lb Average Product Yield 76% 76.7% Underground Mining Method Room-and-Pillar Room-and-Pillar Construction Start Date Mid First Coal Production Date Mid Ramp-up Period to Full Production 12 months 18 months Net Present Value 4 US$655 million Average Annual Opex (steady state) US$29.24 /ton US$27.37 /ton Average Annual EBITDA (steady state) US$67 million US$100 million Net Present Value (8%, ungeared) US$310 million US$315 million IRR 42% 36% Notes: (1) Nameplate production including both the Poplar Grove and Cypress Mines (2) Represents total initial capital of the Poplar Grove Mine, figure has subsequently increased to US$48.5 million after locking in 90% of the capital in fixed price contracts (3) Based on steady state production, inclusive of leased equipment costs, royalties and severance taxes (4) After-tax, ungeared, discount rate of 8% 24

25 Cautionary Statements and Important Information This presentation does not constitute or form part of any offer to sell, or solicitation of any offer to buy, any securities in the United States or any other country. This presentation may not form the basis of any contract or commitment whatsoever with any person. Distribution of this presentation may be restricted by applicable law. In particular, only persons in the United States who are qualified institutional buyers (as defined in Rule 144A under the US Securities Act of 1933) may receive this presentation. This presentation has been prepared by Paringa Resources Limited ( Paringa ) as a summary only, and does not contain all information about Paringa s assets and liabilities, financial position and performance, profits and losses, prospects, and the rights and liabilities attaching to Paringa s securities. Any investment in Paringa should be considered speculative and there is no guarantee that they will make a return on capital invested, that dividends would be paid, or that there will be an increase in the value of the investment in the future. Paringa does not purport to give financial or investment advice. No account has been taken of the objectives, financial situation or needs of any recipient of this presentation. Recipients of this presentation should carefully consider whether the securities issued by Paringa are an appropriate investment for them in light of their personal circumstances, including their financial and taxation position. Forward Looking Statements Some of the statements contained in this presentation are forward looking statements. Forward looking statements include but are not limited to, statements concerning plans for its mineral projects, exploration and development activities, development plans and timing, development and operating costs, and other statements which are not historical facts. When used in this presentation, and in other published information of Paringa, the words such as aim, could, estimate, expect, intend, may, potential, should and similar expressions are forward-looking statements. Although Paringa believes that its expectations reflected in the forward-looking statements are reasonable, such statements involve risk and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Various factors could cause actual results to differ from these forward looking statements include the potential that Paringa s projects may experience technical, geological, metallurgical and mechanical problems, changes in mineral product prices and other risks not anticipated by Paringa. Competent Persons Statements The information in this report that relates to Exploration Results, Coal Resources, Coal Reserves, Mining, Coal Preparation, Infrastructure, Production Targets and Cost Estimation was extracted from Paringa s ASX announcements dated March 28, 2017 entitled Expanded BFS Results Confirms Development Pathway to A$850 million NPV and December 2, 2015 entitled BFS Confirms Buck Creek will be a Low Capex, High Margin Coal Mine which are available to view on the Company s website at The information in the original ASX announcements that related to Exploration Results and Coal Resources is based on, and fairly represents, information compiled or reviewed by Mr. Kirt W. Suehs, a Competent Person who is a Member of The American Institute of Professional Geologists. Mr. Suehs is employed by Cardno. Mr. Suehs has sufficient experience that is relevant to the style of mineralization and type of deposit under consideration and to the activity being undertaken to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves and to qualify as a Qualified Person as defined in the 2011 Edition of the National Instrument and Canadian Institute ofmining s Definition Standards on Mineral Reserves and Mineral Resources. The information in this report that relates to Coal Reserves, Mining, Coal Preparation, Infrastructure, Production Targets and Cost Estimation is based on, and fairly represents, information compiled or reviewed by Messrs. Justin S. Douthat and Gerard J. Enigk, both of whom are Competent Persons and are Registered Members of the Society for Mining, Metallurgy & Exploration. Messrs. Douthat and Enigk are employed by Cardno. Messrs. Douthat, and Enigk have sufficient experience that is relevant to the style of mineralization and type of deposit under consideration and to the activity being undertaken to qualify as Competent Persons as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves and to qualify as Qualified Persons as defined in the 2011 Edition of the National Instrument and Canadian Institute of Mining s Definition Standards on Mineral Reserves and Mineral Resources. Paringa confirms that: a) it is not aware of any new information or data that materially affects the information included in the original ASX announcements; b) all material assumptions and technical parameters underpinning the Coal Resource, Coal Reserve, Production Target, and related forecast financial information derived from the Production Target included in the original ASX announcements continue to apply and have not materially changed; and c) the form and context in which the relevant Competent Persons findings are presented in this presentation have not been materially modified from the original ASX announcements. 25

26 Head Office: 6724 E Morgan Avenue, Suite B Evansville Indiana New York Office: 6 E 46 th Street, 3 rd Floor New York NY Registered Office: Level 9, BGC Centre, 28 The Esplanade Perth WA info@paringaresources.com Website: ABN: