5 June 2012 Developing an African iron ore project Africa Iron Ore Conference Presentation by Ernst Venter Executive General Manager, Business Growth Exxaro Resources Limited
Disclaimer 2 2 Opinions expressed herein are by nature subjective to known and unknown risks and uncertainties. Changing information or circumstances may cause the actual results, plans and objectives of Exxaro Resources Limited (the Company ) to differ materially from those expressed or implied in the forward looking statements. Financial forecasts and data given herein are estimates based on the reports prepared by experts who in turn relied on management estimates. Undue reliance should not be placed on such opinions, forecasts or data. No representation is made as to the completeness or correctness of the opinions, forecasts or data contained herein. Neither the Company, nor any of its affiliates, advisors or representatives accepts any responsibility for any loss arising from the use of any opinion expressed or forecast or data herein. Forward-looking statements apply only as of the date on which they are made and the Company does not undertake any obligation to publicly update or revise any of its opinions or forward looking statements whether to reflect new data or future events or circumstances.
We achieved what we set out to do 3 Extract from MININGMX, 11 Jan 2012: EXXARO Resources has learned a bunch since its last attempt at a takeover, the failed A$123m bid for Territory Resources, an Australianlisted firm. As evidence, just look how much more difficult Exxaro has made it for an interloper to table a rival bid. 7 June 2011 Moving into iron ore, targeting Africa Africa Iron Ore Conference Presentation by Ernst Venter Executive General Manager, Business Growth Exxaro Resources Ltd Even before announcing it s A$338m bid for African Iron, all the relevant documents for shareholders had been prepared such the deal can be closed by February 14. Barely a week into the new year, as investors are dusting off their laptops, Exxaro springs a transaction which was at least a year in the making with a 30-day expiry. Similarly, all regulatory boxes have been checked both on the South African and Australian side. African Iron s board fully supports the offer; even Cape Lambert Resources has agreed to sell, in two stages, its full 25% stake in African Iron. As if discouraging a rival bid, Exxaro is also paying a handsome 49% premium, assuming 75% shareholder acceptance is given to the deal, enough to see African Iron delisted although an analyst tells me this kind of premium is standard fare now for valuable exploration in growth assets.
Activities since the successful acquisition 4 2 months into the project ü Delisted African Iron Limited from the ASX ü Changing all companies to Pty Ltd s ü Direct Exxaro management and operational control ü Broad-based financial, technical and operational review in progress ü Technical and project work moved to Exxaro in South Africa ü Revised exploration programme and accelerated drilling ü Team familiarisation with local conditions ü Strengthening of project support structures and functions
Mayoko welcomes Exxaro 5
Improving the Exploration Camp 6
Exxaro s Mayoko Iron Ore Project 7 Location The Project is located in the south west corner of the Republic of Congo and is approximately 300km north east of the port city of Pointe Noire. Country The Republic of Congo ( RoC ) is a French speaking country with a population of ~3.7 million. The country has a stable government and enjoys good relationships with the South African Government. Exxaro has established a very healthy relationship with the Congolese Government. Infrastructure Existing rail infrastructure New port will be developed Mt Lekoumou and Mt Mipoundi: Exploration Target Currently have a 121Mt resource Increase resource with >430Mt Upside potential >2Bt Regional Targets: Largely untested Products 1. Lump ore 2. Sinter fines 3. Pellet feed
Exxaro s Mayoko Project Location 8 Ngoubou-Ngoubou 944km2 Mayoko-Lekoumou ~1000km2
Exploration Drilling 9 MIPOUNDI NORTH: LEKOUMOU: 25 holes ~5 000m 116 holes ~23 200m Execute reconnaissance work Outline a measured/ indicated resource statement JORC Resource 121Mt Exploration target >400Mt Potential >2.5Bt MIPOUNDI: 50 holes ~10 000m LEKOUMOU SOUTH: 25 holes ~5 000m Execute reconnaissance work Execute reconnaissance work and resource drilling
Regional Potential Investigate the license areas outside the 4 main target areas in terms of size and quality. Limited exploration of the ~1000km2 Lekoumou license area to date. 944km2 Ngoubou-Ngoubou license area is untested. 10
Geological section through Lekoumou deposit
Ore Types DSO (direct shipping ore) Soft goethite/limonite/gibbsite 12 The upper enriched iron cap (DSO) contains >50% Fe which can be upgraded. Soft & hard goethite/ limonite/gibbsite Mainly hard goethite/limonite with less gibbsite
Ore Types bdso (beneficiable DSO) 13 The bdso (or enriched BIF) contains between 40% and 50% Fe (in-situ), which is a mixture of hematite and magnetite. The enrichment is mainly due to the weathering and depletion of silica and results in a friable BIF, which becomes harder with depth as the weathering decreases. Upper bdso - more weathered & enriched bdso - less weathered & enriched This material can be beneficiated/upgraded.
Ore Types fbif (fresh banded iron formation) 14 BIF - parallel laminated The fbif (or fresh BIF) contains ~35% Fe and represents mainly magnetite and silica laminae; some iron silicates do occur. BIF - wavy laminated BIF intensely folded lamination
Iron Ore in the Jungle 15 DSO from surface level down
Rail infrastructure is in good condition and 16 upgradable The existing rail corridor is one of the most important attributes of this opportunity
Port infrastructure Port The port of Pointe-Noire is located on the Atlantic coast and is the sole port for import / export of goods for RoC PAPN is a government owned agency and the operator of the Pointe-Noire facility / infrastructure Location Port Operator 17 Port Noire /Indie to Europe (Rotterdam) 16 Days EUROPE Brazil to Europe (Rotterdam) 11 Days Freetown to Europe (Rotterdam) 11 Days CHINA AFRICA Port Noire /Indie to China 34 Days The existing port does not have capacity for iron ore exports PAPN is developing a new bulk commodities port to the north and has allocated land to AKI next to land allocated to the Zanaga project (Xstrata) and Congo Mining (Equatorial Resources) PAPN has committed to assist AKI with any information, studies, surveys and inspections required to assess the potential export of iron ore Capacity Location of port infrastructure Freetown to China 39 Days AUSTRALIA Brazil to China - 40 Days Port SAO PAULO
DMC Iron Congo concession at Point Indienne 18
Development schedule, Capex and Opex 19 Development plan under review until end July 2012 Enjoying benefit of, and building on solid ground work done by AKI Early findings/indications: Mine potential Quality of resource Possibility of bigger scale mine than AKI proposal Beneficiation considerations Infrastructure Rail stakeholder engagement Port numerous options under investigation Other green fields development of power, water and other services 3 Phase development approach over life DSO targeted for near term production 2013/14 depending on infrastructure bdso Development for Phase 2 mine benificiation test work and feasibility study Possibility of magnetite mine in future Capex expectations within international norms Opex competitive on cost curve Importance of regional exploration programme with less than 30% of area having been explored
Commodity and Market Expectations Logistical infrastructure will be key to future development Global seaborne trade is likely to >1.4Bt (1.16Bt in 2011) Lump ore production is declining (Brazil & India) 20 Shortfall in lump ore production will be made up by pellets and production could double by 2021 China could still dominate two thirds of iron ore seaborne trade Governments will continue to nationalize mining via equity participation, royalties, resource tax, etc
Challenges facing the mining industry 21 Capital intensity is a function of the: Source: Barclays, Equity Research, 18 April 2012 1. development stage of the project; Greenfield projects inflated by significant infrastructure requirements; 2. geographic location; and 3. quality of deposit (type/grade/impurities); low grade ores require large investments to beneficiate. Capital intensity of projects has increased four fold in the last 3 years The iron ore industry has been facing an increase in capital expenditure, mainly due to:. Rising equipment/labour costs: Equipment suppliers have struggled to meet rising demand (especially with price surging and substantial lead times). Labour shortages have inflated overall service prices, including engineering.. Declining ore grades: Beneficiation is required to treat lower quality resources.. Permitting challenges: Delays/complications in obtaining licences for projects is a major challenge for miners, especially with regards to environmental legislation.
Iron ore projects capital intensity (US$/ton) 22 M ar am M pa ay ok o $120/t
Project Robustness 23 The Rest The Domain of the MAJOR s MAYOKO Site Costs include the cost of moving the product to the point of loading for the customer. In terms of sea borne export, this would include moving the product from the mine site to the stockyards at the port. This may be by rail, road, pipeline, conveyor etc. i.e. The sum of the costs associated with mining and producing the material and getting it to the point of loading for the customer.. Fraser Cambell, CRU, 2011 Note: 54 of the 74 producers fall above the 75 Percentile
Exxaro s in-house skills 24 Exxaro has the in-house skills, expertise and know-how to develop an iron ore project from conceptual phase to production. Our technical skills and capabilities include: Extensive support services structure
In Summary Exceptional Quality Resource Near term DSO production Infrastructure access Experienced operational management team Strong stakeholder support Upside potential Mayoko and Ngoubou under-explored Magnetite Downstream integration 25 Powering Possibility
BUT, as we ve said before Africa is not for the faint hearted! 26
Bonjour Africa! 27