RNC Update Conference Call. Sudbury Platinum Corporation Transaction. Nickel Market Update. April 14, 2014

Transcription

1 RNC Update Conference Call Sudbury Platinum Corporation Transaction Nickel Market Update April 14, 2014

2 Disclaimer Cautionary Statement Concerning Forward-Looking Statements This presentation contains "forward-looking information" including without limitation statements relating to the upside and potential of the Aer-Kidd property, nickel prices and the structural shortage in nickel supply, concentrate anticipated to be produced at Dumont, the impact Tsingshan s plant could have on the nickel sector and RNC, and the possibility of RNC concluding an agreement or transaction with Tsingshan. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of RNC to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Factors that could affect the outcome include, among others: future prices and the supply of metals; the results of drilling at Aer-Kidd; inability on the part of SPC to raise the money necessary to incur the expenditures required to earn an interest in the Aer-Kidd property; environmental liabilities (known and unknown); general business, economic, competitive, political and social uncertainties; accidents, labour disputes and other risks of the mining industry; political instability, terrorism, insurrection or war; or delays in obtaining governmental approvals. For a more detailed discussion of such risks and other factors that could cause actual results to differ materially from those expressed or implied by such forwardlooking statements, refer to RNC's filings with Canadian securities regulators available on SEDAR at Although RNC 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 to differ from those anticipated, estimated or intended. Forward-looking statements contained herein are made as of the date of this presentation and RNC disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise, except as required by applicable securities laws. Information Concerning Aer Kidd and Neighbouring Properties: Information concerning Aer-Kidd and neighbouring properties in this presentation is taken from sources, some of which are historical, that RNC believes to be reliable, but RNC has not verified the information and does not assume responsibility for such third party information. NI Compliance The disclosure of the technical information contained in this presentation has been approved by Alger St-Jean, P. Geo., Vice President Exploration of RNC, and a Qualified Person under NI All currency references in U.S. dollars, unless otherwise stated. TSX: RNX 1

3 Introduction Recent Developments RNC investment of C$1.5 million in Sudbury Platinum Corp allows it to gain exposure to one of the world s highest potential nickel exploration opportunities with an exploration team that has a proven track record of success in the Sudbury basin The investment is consistent with RNC s strategy to target high quality Ni-Cu-PGM and other base metal opportunities and RNC s market outlook for nickel with a structural shortfall in supply through the end of the decade On March 24, RNC announced that Tsingshan Holding Group ( Tsingshan ), a party with whom RNC entered a strategic alliance in March 2013, is currently constructing the world s first integrated nickel pig iron ( NPI ) plant to utilize nickel sulphide concentrate as part of the stainless steel production process. The plant is expected to begin operation within this year This significant innovation represents the first time that nickel sulphide concentrate will be directly used to create stainless steel and offers significant potential benefits to the producers of suitable nickel sulphide concentrate feed including lower costs due to simpler processing compared to traditional smelting and refining, and greater flexibility for more potential partners and customers Dumont project moving into next phase of permitting process on-track for permits by year-end Nickel prices have already moved by ~$2/lb to $8/lb since our last update in January as the implications of the Indonesia ban are beginning to be understood by the market RNC believes that nickel prices could return to ranges of $15-20/lb ($30-50,000+ per tonne) as prices will once again have to rise to force demand in line with available supply There are multiple clear signs that market conditions are improving. Indonesia s parliamentary election was held on April 9 and was a non-event for the status of the unprocessed nickel ore export ban 2

4 SPC - Transaction Overview RNC has acquired 6 MM units of Sudbury Platinum Corporation ( SPC ) for C$0.25 per unit, each unit comprising a share and full warrant. Each warrant is exercisable at C$0.45 per share for 18 months SPC is private subsidiary of Transition Metals Corp. (83% interest). RNC s investment represents a 25% interest of the issued and outstanding shares RNC would obtain 1 seat on the SPC Board (1 of 5 members) RNC has right to maintain pro rata share SPC s key asset is an option to earn up to a 70% interest in the Aer-Kidd property located on the Worthington Offset Dyke in the Sudbury Basin The investment is consistent with RNC s strategy to target high quality Ni-Cu-PGM and other base metal opportunities and RNC s market outlook for nickel with a structural shortfall in supply through the end of the decade The investment allows RNC to gain exposure to one of the world s highest potential nickel exploration opportunities with an exploration team that has a proven track record of success in the Sudbury basin Aer-Kidd is also one of few properties in the Sudbury basin that does not have a captive offtake with either Vale or Glencore 3

5 Aer-Kidd on Productive Worthington Offset Dyke Mineral-rich, Highly Productive, 10 km Long 100+ years of production 4 mines along 10 km offset dyke Polymetallic: Ni Cu Pt Pd Au 2 newest mines: Totten (Vale): $760M capex (2013) Victoria Project (KGHM): $750M capex (2017) Source: Sudbury Platinum Corp. 4

6 Aer-Kidd Significant Untested Potential Worthington Offset Longitudinal Section, Looking Northwest Totten Vale 2.6 km 4.3 km Aer-Kidd Howland Robinson Rosen McIntyre Vale Victoria KGHM (QuadraFNX) Untested Potential At Depth Mined Out Massive & Disseminated Sulphide DDH Pierce Point Mineralized Non-mineralized Totten (deep): 10.1 Mt 1.5% Ni, 1.97% Cu, 4.8g/t PGM 1 1. Resource reported by Inco Limited in news release dated January 18, 2001 Victoria (deep): 14.5 Mt 2.5% Ni, 2.5% Cu, 7.6 g/t PGM 2 2. Resource reported by KGHM in news release dated January 16, 2012 Source: Sudbury Platinum Corp. 5

7 SPC Management Team Significant Sudbury Experience Scott McLean Chairman & CEO - B.Sc. P.Geo. 23 years with Falconbridge/Xstrata (Responsible for the Sudbury Exploration Investment) 10 years exploration in Sudbury Basin, responsible for 100k m drilling/yr & employees 2004 PDAC Prospector of Year (Nickel Rim South) Past president of APGO (Association of Professional Geoscientists of Ontario) Grant Mourre President & COO- M.Sc., P.Geo. 14 years minerals exploration within NA focused primarily on Ni-Cu-PGE s. 7 years with Falconbridge/Xstrata & Inco in Sudbury Basin 10 years deep drilling in the Sudbury Basin Masters thesis funded by Inco (Vale) & NSERC on Copper Cliff offset dyke Kevin Stevens Chief Geophysicist - M.Sc. P.Geo. 27 years mineral exploration and research geophysics 12 years as Falconbridge Principal Geophysicist in the Sudbury Basin 2004 PDAC Prospector of Year (Nickel Rim South) Geophysics (EM modeling) expert Developed key geophysics techniques for sulphide detection at depth (3D EM and Radio-Imaging) 2004 Prospector of the Year Nickel Rim South Mine Source: Sudbury Platinum Corp. 6

8 SPC Management Team Track Record of Sudbury Discoveries Nickel Rim South Mine (Xstrata ) # Year Deposit Resources (t) Status Onaping Depth 17,000,000 Study (deep) Norman West 7,500,000 Idle (deep) Creighton West 10,000,000 Idle (deep) 1.5 % Ni 2.7 % Cu 0.03% Co 1.7 g/t Pt 1.8 g/t Pd 0.6 g/t Au Fraser Morgan 8,000,000 Development Nickel Rim South 17,400,000 Production Beeper 3,904 Idle Roland Lake 500,000 Idle 2004 PDAC Prospectors of the Year Rapid River 70,000 Idle Bowell Open Pit 363,000 Idle Capre Lake South 580,000 Idle Onaping-Craig Corner 250,000 Depleted Onaping 2 Zone 80,000 Depleted Total Ni Discovered 61.7 million Source: Sudbury Platinum Corp. 7

9 High Priority Drill Targets Already Identified Significant Geophysics Potential Remaining Drill Targets & Historic Drilling Long Section Howland Pit AE-13: 4.43%Ni, 6.95% Cu, 23.0g/t PGE s U9E-23: 0.33% Ni, 1.3%Cu Robinson Mine U-806: 1.6%Ni, 0.80% Cu AE-1B: 1.63%Ni, 0.70%Cu U9E-2: 0.60% Cu W03-03AW1: 1.46%Ni, 0.56%Cu Rosen Mine U-610: 1.0%Ni, 1.74% Cu W03-05: 2.73%Ni, 0.35%Cu AE-07: 1.2%Ni, 0.83%Cu AE-07A: 0.30%Ni, 1.2%Cu Source: Sudbury Platinum Corp 8

10 Tsingshan Strategic Alliance Leads to World s 1 st Integrated Stainless Steel Plant Utilizing Sulphide Concentrate Tsingshan currently constructing the world s first integrated nickel pig iron ( NPI ) plant to directly utilize nickel sulphide concentrate as part of the stainless steel production process The plant, located in China, is expected to begin operation in 2014 Significant potential benefits to producers of suitable nickel sulphide concentrate feed such as RNC s Dumont Project: Lower costs due to simpler processing compared to traditional smelting and refining Higher payability than traditional smelting and refining Greater flexibility for more potential partners and customers Roasted nickel concentrate is effectively a very high grade laterite ore feed creates new source of demand for nickel sulphide concentrate notably at a time when many NPI and ferronickel producers face feed shortages as a result of Indonesia s recently implemented nickel ore export ban 9

11 Introduction Recent Developments RNC believes that nickel prices could return to ranges of $15-20+/lb ($30-50,000+ per tonne) as prices will once again have to rise to force demand in line with available supply Nickel prices have already moved by nearly $2/lb to $8/lb since the lows in January as the implications of the Indonesia ban are beginning to be understood by the market There are multiple clear signs that the ban is having a clear impact on Chinese NPI even more quickly than anticipated by RNC Ore prices for 1.8% nickel saprolite ore (primary feed for Chinese NPI producers) have more than doubled to $64.50/wmt since the ban was put in place. The over $40 increase in ore prices from late 2013 lows would increase NPI costs by almost ~$4000 Ore stockpiles in Chinese ports have declined by almost 6 Mt to ~20 Mt since their peak since the Indonesian ore export ban was put in place There are also multiple signs that world nickel/stainless markets are also improving as nickel premiums are improving and there have been a number of recent announcements of stainless base price increases Indonesia s parliamentary election was held on April 9 and was a non-event for the status of the ban. Last mention of nickel and ore ban in Jakarta Post was February 25 th 10

12 LME Nickel Prices Already Moving Sharply Higher US$/lb LME Nickel Price (Cash) 2014 to date US$/t 17,728 17,228 16,728 16,228 15,728 15,228 14,728 14,228 13,728 13,228 Source: MetalPrices.com 11

13 US$/wmt FOB Ore Prices Already Moving Sharply Higher The price of available nickel ore in China has more than doubled since the beginning of Nickel Ore Prices (2014 YTD 10-April) Laterite 1.8% Ni Ore Until Jan 12: Indonesia Post Jan 12: Philippines Laterite 1.5% Ni Ore (Philippines 25-30% Fe) Source: Ferroalloynet.com Limited 12

14 Port Ore Stocks Are Already Declining Portside nickel ore stocks have steadily declined since mid-february falling almost 6 Mt in just 2 months to 20 Mt. Chinese Nickel Ore Stocks at Major Ports Total (Mt) Source: Ferroalloynet.com Limited 13

15 Nickel Premiums Moving Higher Improved market conditions already being reflected in higher market premiums 120 Nickel Premium - Cathode (Europe (Rotterdam), US$/Mt) $0.30 Nickel Premium - Cathode (U.S.A., US$/lb) $ $

16 Stainless Market Conditions Improving A number of stainless steel market indicators are pointing to improving market conditions, particularly outside China Stainless steel producers have announced base price increases in the U.S. and Western Europe Stainless steel prices in Japan hit highest levels since 1 st half 2012 Relatively low stainless inventories in Western World are leading to increase in lead times as demand improves Chinese stainless market remains relatively weak; however, recent small increases in stainless prices over last 2 weeks for first time have taken prices back to mid levels More importantly, multiple increases by Jinchuan in their cathode prices last week nearly halved the large discount in the Chinese nickel market Source: CRU Stainless Steel Flat Products Monitor April

17 Indonesia Ore Export Ban Likely to Stay Strictly Enforced Many commentators cite political, various economic, and other issues which will cause Indonesia to water down the ban none of which hold up well under closer observation. Recent parliamentary election was a non-event for the ban Political? When the Indonesian parliamentary committee (Commission Seven) responsible for the law was presented with potential exemptions for companies building smelters, all nine factions in the committee voted UNANIMOUSLY against any exemptions Based on RNC research to date, there appears to be little political support from ANY party for exemptions. Latest parliamentary election results had little impact. Economic? The central government derives little direct economic benefit from the $1-1.5 billion of annual nickel ore exports particularly compared to the billions of dollars of potential investment which would be required to transform even a fraction of the ore exports into finished product The central government owns 51% of PT Antam, the 2 nd largest nickel producer in Indonesia, which would directly benefit from higher nickel prices Strategic? Any changes to the export ban will reduce the incentive for investment and undercut the rationale for the ban in the first place 16

18 Significant Barriers To Building NPI/FeNi Production in Indonesia Some commentators are also suggesting that substantial capacity could be added quickly in Indonesia. There are a number of key challenges that they may be failing to fully take into account. The nickel ore is located in areas with virtually no infrastructure, few people, and none of the power required to produce NPI/FeNi Unlike NPI plants in China, projects will have to incorporate the construction of a power plant and all of the related support infrastructure. PT Antam the state nickel producer has a project with an estimated capital cost of $1.6 billion for 40ktpa of nickel output $1+ billion investments will be challenging given Indonesia s investment climate (Indonesia ranks 114 th on Transparency International Corruption Perceptions Index between Egypt and Albania) and proposed regulations which would limit foreign ownership to 49% Operating costs could be lower than Chinese NPI production due to reduced ore and coal shipping costs which can be potentially more than offset by differences in labour costs and productivity and the need to source many inputs from outside Chinese companies have a very mixed track record when investing and building mining projects outside China 17

19 RNC Forecast Supply / Demand Balance Nickel prices will once again have to rise to force demand in line with available supply as in ($30,000-$50,000+/t), particularly 2016 when demand must DECLINE by 8%+ to balance the market 2,800 2,600 2,400 2,200 2,000 1,800 1,600 1,400 1,200 1, ,542 Nickel Supply / Demand Forecast (Kt) Source: Wood Mackenzie Ltd,, RNC Analysis 2,621 Underlying Demand New NPI / Price Driven 418 Demand Destruction Demand (constrained by available supply) NPI Existing Supply 18

20 Corporate Overview Share Structure: Basic Shares Outstanding 1 : 94.4 million Options (average exercise price: C$0.67) 4.5 million Deferred/Restricted Share Units 2.1 million Contingent Shares 7.0 million Fully Diluted Shares Outstanding: million Directors and Officers Share Ownership: ~9% Largest Shareholder RAB Special Situations (Master) Fund Limited: ~17% Balance Sheet Highlights 2 : Cash and Cash Equivalents: C$11.9 million Current Tax Receivable: C$ 3.3 million Working Capital: C$13.5 million Market Capitalization: C$49 million 1. Shares outstanding, fully diluted shares outstanding and shareholdings as at March 18, Balance sheet highlights as at December 31, 2013; market capitalization at March 19, 2014 TSX: RNX 23