Investor Presentation - August 2013

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Investor Presentation - August 2013

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<ul><li> 1. Investor Presentation August 2013 </li></ul><p> 2. 1 Forward Looking STATEMENTS Certain information included in this presentation constitutes forward-looking statements within the meaning of the safe harbor provisions of the United States Private Securities Litigation Reform Act of 1995 and Canadian securities laws. The words expect, believe, will, intend, estimate, forecast, and similar expressions identify forward-looking statements. Such statements include, without limitation, any information as to our future exploration, financial or operating performance, including: the Company's forward looking production guidance, projected capital expenditures, operating cost estimates, project timelines, mining and milling rates, the methods by which ore will be extracted, projected grades, mill recoveries, and other statements that express management's expectations or estimates of future performance. Forward-looking statements are necessarily based upon a number of factors and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The factors and assumptions contained in this presentation, which may prove to be incorrect, include, but are not limited to: metal prices assumptions, Canadian and U.S. dollar exchange rate assumptions, that there will be no significant disruptions affecting operations, that prices for key mining and construction supplies, including labour and transportation costs, will remain consistent with the Company's expectations, that the Company's current estimates of mineral reserves and resources are accurate, and that there are no material delays in the timing of ongoing development projects. The forward-looking statements are not guarantees of future performance. The Company cautions the reader that such forward-looking statements involve known and unknown risks that may cause the actual results to be materially different from those expressed or implied by the forward-looking statements. Such risks include, but are not limited to: the possibility that metal prices, foreign exchange rates or operating costs may differ from management's expectations, uncertainty of mineral reserves and resources, inherent risks associated with mining and processing, the risk that the Lac des Iles mine may not perform as planned and that the Offset Zone and other properties may not be successfully developed, and uncertainty of the ability of the Company to obtain financing. For more details on the factors, assumptions and risks see the Company's most recent Form 40-F/Annual Information Form on file with the U.S. Securities and Exchange Commission and Canadian provincial securities regulatory authorities. The Company disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, events or otherwise, except as expressly required by law. Readers are cautioned not to put undue reliance on these forward-looking statements. All dollar amounts are in Canadian currency unless otherwise stated, all references to production refer to payable production, and all reference to tonnes refer to metric tonnes. U.S. investors are encouraged to refer to the Cautionary Note to U.S. Investors Concerning Estimates of Measured, Indicated and Inferred Resources in the appendix. 3. 2 NAPs Investment Clear Growth Strategy to Increase Production &amp; Lower Cash Costs LDI mine expansion offers production growth with a decreasing cash cost profile and expanding operating margins Leverage to Rising Palladium Prices As one of only two primary palladium producers in the world, LDI is uniquely positioned to benefit from the positive supply &amp; demand fundamentals (driven by constrained mine supply &amp; rising global vehicle production) Attractive PGM Investment Jurisdiction NAP operates in a stable political landscape, with low geopolitical risk and moderate cost inflation compared to peers in South Africa and Russia Significant Development &amp; Exploration Upside Excess mill capacity, existing infrastructure &amp; permits, gives NAP the potential to convert exploration success into production and cash flow on an accelerated timeline Operational Expertise Reduces Operating Risk New senior executive team appointed in Q1, 2013 has a strong track record in mining operations PROPOSITION 4. 3Information as at August 23, 2013, Thomson One. Shareholder ID based only on public filings. Market Statistics COMPELLING ENTRY POINT SECURITY SYMBOLS NYSE MKT: PAL TSX: PDL TSX: PDL.DB MARKET CAPITALIZATION US$213 M SHARE PRICE US$1.08 SHARES OUTSTANDING 196.8 M 52-WEEK HIGH/LOW US$2.28/$0.91 3-MONTH AVERAGE TRADING VOLUME NYSE MKT: 1.6 M TSX: 0.2 M TOP INSTITUTIONAL SHAREHOLDERS 1. Kaiser-Francis Oil (9.8%) 2. Weiss Asset Management (8.8%) 3. Franklin Advisers (2.9%) 4. T. Rowe Price Associates (2.3%) 5. AllianceBernstein (1.3%) 6. Mackenzie Financial (1.3%) 7. AGF Investments (1.0%) 8. RBC Capital Markets Wealth Mgmt (0.7%) 1. CIBC, Leon Esterhuizen 2. Cormark, Edward Otto 3. Credit Suisse, Nathan Littlewood 4. Euro Pacific, Heiko Ihle 5. Mackie Research, Matt OKeefe 6. Macquarie, Daniel Greenspan 7. Octagon, Annie Zhang 8. Raymond James, Alex Terentiew 9. RBC, Sam Crittenden 10. Scotia, Leily Omoumi $0.00 $0.50 $1.00 $1.50 $2.00 $2.50 5. 4 Financial C$44.8 M in cash (C$54.4 M pro-forma post closing $10 M flow-through financing) C$26.7 M in net working capital US$130 M senior secured term debt from Brookfield (15% interest, due Jun. 7, 2017) C$43 M convertible debentures (6.15% interest, C$2.90 conversion price, mature on Sept. 30, 2017) US$60 M operating line (fully utilized at quarter end, due Jul. 4, 2014) C$5.6 M operating leases &amp; C$11.4 M finance leases POSITION Liquidity &amp; Capital Resources as at June 30, 2013: 6. 5 Investment Case for PALLADIUM 7. 6 Notes: 1. Source: Johnson Matthey, May 2013 (estimates for 2012 supply) 2. Other producing countries (~6%) include Zimbabwe, Australia, Botswana, China, Serbia and Montenegro. 3. Excludes secondary recycling supply of 2.3 M oz. and ~250,000 oz. From Russian stock sales. NORTH AMERICA RUSSIA SOUTH AFRICA 36% 14% 44% ONLY 6.5 M oz. ANNUAL PRODUCTION WORLDWIDE ~80% OF GLOBAL MINE SUPPLY COMING FROM HIGH-RISK JURISDICTIONS Palladium Market MINE SUPPLY 8. 7 Constrained Mine Supply From Major Producers Notes: 1. Russian supply is entirely from Norilsk Nickel, which produces palladium as a by- product from nickel production. Excludes ~250,000 oz from State stockpile sales. 2. South African supply includes the major platinum producers who produce palladium as a by-product from platinum production. Palladium Market MINE SUPPLY (000s oz) 2012 global supply was at the lowest level since 2002 Moved into a deficit of 1.07 M oz (11%) in 2012 South African production particularly challenged by: Deeper mines Power/water limitations Higher operating costs Geopolitical risks Shortages of skilled labour Strengthening of currencies Strikes &amp; other stoppages Considering the recent supply disruption in South Africa &amp; a contraction of underlying output in Russia, the future production forecasts are expected to be challenged Source: CPM Group, May 2013 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 2008 2009 2010 2011 2012e 2013p 2014p 2015p Other United States Canada South Africa Russia 9. 8 Automotive 67% Electronics 12% 5% Dental 1% Other Source: Johnson Matthey, May 2013 2012 Gross Demand: 9.8 M oz. Palladium Market DEMAND 5% Jewellery 5% Chemical 4% Investment Demand diversified by geography &amp; end market Strongest demand growth in regions outside of North America, Europe and Japan BRIC economies Demand from automotive industry reached a new high of 6.62 M oz in 2012, driven by: Recovering car output in Japan after the natural disasters of 2011 Further growth in China Boom in new registrations in North America as consumer confidence and economic activity continued to improve 10. 9 Global Light Vehicle Production Forecast Source: IHS Automotive, February 2012 1. Other includes: Japan, Korea, Middle East and Africa 2. BRIC Economies include: Greater China, South America and South Asia Palladium Market DEMAND FROM AUTO SECTOR North America BRIC Economies2 Other1 Europe 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 110,000 2011 2012 2013 2014 2015 2016 2017 2018 77M 81M 85M 91M 95M 99M 102M (000s) Global vehicle production biggest source of palladium demand Strong growth to +100 M units by 2017 driven by China forecasted to be manufacturing &amp; buying approx. 31 M vehicles per year by 2018 104M 11. 10 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Europe Euro IV Euro V Euro VI China Beijing Euro III Euro IV Euro V Nationwide Euro II Euro III Euro IV India Select Cities Euro III Euro IV Nationwide Euro II Euro III Russia Euro I Euro II Euro III Euro IV Euro V USA Tier 2 &amp; LEV II Tier 2 &amp; LEV III Brazil Prconve 3 Prconve 4 Prconve 5 Prconve 6 Emerging economies have adopted emission control standards that mandate the use of catalytic converters Advancing to a higher level of emission controls results in higher PGM loadings in the catalytic converter Tightening emission control regulations for heavy-duty trucks Adoption of Stricter Emission Control Standards Source: CPM Group, May 2013 Palladium Market FABRICATION DEMAND 12. 11 Gasoline Engines Skewed towards predominant palladium usage of total required PGM content Typical loading per a gasoline car is about 3 grams of palladium Diesel Engines Historically used platinum due to technical requirements Currently use 30% palladium, with scope to increase to 50% due to advent of low sulphur diesel fuel Hybrids &amp; Other New Forms Neutral impact on PGM use Gasoline hybrids tend to use as much palladium as normal gasoline engines Electric No requirement for catalytic converters Challenged by lack of infrastructure to recharge, high costs, long charging periods and short driving range Offer less value for money compared to cars powered by internal combustion engines Technology is insufficient to enable electric cars to become mainstream Forecasted to account for only 2% of global car sales by 2020 Use of Palladium in CATALYTIC CONVERTERS 13. 12Source: CPM Group, as at May 13, 2013 Palladium Market INVESTMENT DEMAND Large increase in palladium investment demand Investment demand driven by supply/demand fundamentals for palladium -- constrained mine supply and growth in global vehicle production Exchange Traded Funds' Physical Palladium Holdings M oz. Pd. M oz. Pd. 0.0 0.5 1.0 1.5 2.0 2.5 0.0 0.5 1.0 1.5 2.0 2.5 20-Apr-07 20-Mar-08 20-Feb-09 20-Jan-10 20-Dec-10 20-Nov-11 20-Oct-12 SPPP-NYSE (Sprott) Mitsubishi SPAL-LSE Source SPDM-LSE iShares WITE-NYSE ETF Securities GLTR-NYSE ETF Securities Julius Baer PALL - NYSE ETF Securities MSL (Australia) Palladium ZKB PHPD LSE 14. 13 20-Year Historic Price Performance (US$/oz) Average Annual Forecasts (US$/oz) Historic High: US$1,090 (2001) 2012 Average Price: US$640 Recent Price: US$741 (Aug.22, 2013) Sources: Thomson One, Bloomberg and available equity research. Palladium Market PRICE PERFORMANCE $0 $200 $400 $600 $800 $1,000 $1,200 01/04/1993 01/03/1994 01/02/1995 01/01/1996 01/12/1996 01/11/1997 01/10/1998 01/09/1999 01/08/2000 01/07/2001 01/06/2002 01/05/2003 01/04/2004 01/03/2005 01/02/2006 01/01/2007 01/12/2007 01/11/2008 01/10/2009 01/09/2010 01/08/2011 01/07/2012 Firm 2013 2014 2015 Bank of America Merrill Lynch 12-Jul-13 $760 $800 $850 Barclays PLC 12-Jul-13 $748 $795 $900 BMO Capital Markets 11-Jun-13 $725 $750 Cantor Fizgerald LP 18-Apr-13 $775 $880 $900 CIBC World Markets 11-Jun-13 $750 $1,000 $1,200 Citigroup 15-Jul-13 $810 $800 $925 Commerzbank AG 15-Jul-13 $735 $770 CPM Group 14-Jan-13 $682 $753 Credit Suisse 10-Jun-13 $756 $880 $950 Intesa Sanpaolo SpA 01-Jul-13 $750 $800 $850 Macquarie 15-Jul-13 $722 $785 $838 Raymond James 08-Aug-13 $714 $825 $900 RBC Capital Markets 11-Aug-13 $750 $850 $850 Societe Generale 12-Jun-13 $780 $925 $1,000 Standard Chartered Bank 23-Jul-13 $798 $850 $800 AVERAGE $750 $831 $914 15. 14 Investment Case For NAP 16. 15 Located north of Thunder Bay, Ontario, Canada One of only two primary palladium producers in the world Deposit is unique in the world: high palladium concentration, broadly disseminated mineralization vs. narrow vein Established palladium producer since 1993 Currently undergoing an expansion to increase production and reduce cash costs per ounce Goal to increase annual palladium production to +250,000 ounces at reduced cash costs under US$300 per ounce 15,000 tpd mill has excess capacity available for production growth (currently operating at approximately 35% capacity) Significant exploration upside identified on the LDI property Strong safety record LDI Mine &amp; Mill Complex A WORLD CLASS ASSET 15 17. 16 LDI OPERATING METRICS 7 1. Non-IFRS measure. Please refer to Non-IFRS Measures in the MD&amp;A. 2. For the six month period ended June 30, 2013 Q1, 2013 Q2, 2013 YTD2 Payable Pd. ounces produced 38,654 oz. 35,428 oz. 74,082 oz. Cash cost per ounce1 US$490 US$564 US$524 Tonnes of ore mined Surface Underground 540,694 295,038 245,656 433,580 301,974 131,606 974,274 597,012 377,262 Tonnes of ore milled 503,585 483,266 986,850 Avg. milled head grade 3.3 g/t 3.1 g/t 3.1 g/t Pd. mill recovery 80.1% 80.7% 80.4% Total cost per tonne milled C$57 C$53 C$55 2013 is a transitional year cash costs are expected to decline in Q4 when shaft is in operation 18. 17 LDI Mine Expansion Phase I of mine expansion consists of: o Sinking a shaft to the 825-metre level to transition underground operations from mining via ramp to mining via shaft o Setting up underground &amp; surface infrastructure to mine the Offset Zone using a high volume bulk mining method Through the utilization of the shaft &amp; bulk mining method, operations are expected to benefit from increased mining rates &amp; decreased operating costs Targeting production via shaft by the beginning of Q4, 2013 Post Phase I development plans are under review: Potential lateral targets represent lower cost alternatives to expanding at depth while still delivering production growth PLAN FOR GROWTH ROBY ZONE OPEN PIT OFFSET ZONE 825-M Level Surface 990-M Level Shaft The underground design schematic of the underground mine, showing the deposit and underground ramp infrastructure, looking east. Offset Zone remains open to the west, south &amp; at depth. 19. 18 New Production New potential lateral targets are under review : Attractive, lower cost alternatives to expanding at depth Vision to grow to +250,000 ounces by 2015 OPPORTUNITIES ROBY ZONE OFFSET ZONE Upper Offset Zone SE Extension Target Roby Zone NE Extension Target Roby Zone SE Extension Target 20. 19 New Mining Method Under Review: Reviewing viabili...</p>