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Emerging Strategic Metal & Coal
Producer
Investor Presentation May 22 2009TSX – “FT”
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FORWARD-LOOKING INFORMATION
Some of the statements contained in the following material are forward-looking statements and not statements of fact. Such statements are based on the current beliefs of management, as well as assumptions based on management information currently available. Forward-looking statements are subject to various risks, uncertainties and other factors that could cause actual results to differ materially from expected results. These are described in the Company’s current Annual Information Form on page 1. Readers must rely on their own evaluation of these uncertainties. Copies of the Annual Information Form can be obtained from the SEDAR website at www.sedar.com or by calling the Company. Fortune Minerals Limited does not assume the obligation to update any forward-looking statement.
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CorporateInformation
Ownership
AnalystCoverage
Listing: TSX: FTShare Price: ~C$0.59 (52 week high/low : C$2.60/C$0.38)Issued Shares: 64 millionFully Diluted: 79.2 million, includes:
5.4 million warrants @ $3.75 before July 26, 20096.1 million warrants @ $0.80 before Sept. 2, 2010
Market Capitalization: ~C$40 millionCash: ~ C$7 million (Q1 2009) + $4.2 million (May Private Placement)
Canadian & international institutionsSprott Asset Management ~ 12.5%Officer & Director Holdings ~ 14.8%
Cliff Hale-Sanders, CIBC World Markets (C$2 target price)David Davidson, Paradigm Capital (C$5 target price)Standard & Poor’s (no target price)Blue Sky Registration in most U.S. States
As of May 22, 2009
FORTUNE MINERALS INVESTMENT HIGHLIGHTS
2 development stage projects with positive feasibility studies, test mining, pilot plant processing & in permitting to develop minesLeverage to commodities with demand growth & gold counter cycle hedgeNICO Gold-Cobalt-Bismuth-Copper deposit, Northwest Territories
Cobalt – Feasibility Base Case US$ 16.50 / lb - Today ~US$ 18 / lbGold – Feasibility Base Case US$ 525 / oz - Today ~US$ 950 / ozBismuth – Feasibility Base Case US$ 4.50 / lb - Today ~US$ 8 / lbCopper & nickel by-product
Mount Klappan Anthracite Coal Deposits, British Columbia PCI – Feasibility Base Case US$ 150-175 / tonne - Today US$ 125 / tonnePremium products – higher prices ~ US$ 300+ / tonne)
Advanced Stage Sue-Dianne copper-silver-gold deposit - 25 km north of NICOGolden Giant Mine buildings & equipment purchased to reduce NICO CAPEXExperienced board of directors & management teamCurrent ~C$40 million market capitalization undervalues assets, cash & equipmentStrategy to deliver near-term and longer-term shareholder value
JV Coal & develop NICO independently
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EXPERIENCED BOARD & MANAGEMENT TEAM WITH PROVEN RECORDS
DIRECTORS: George Doumet, MSc, MBA, Chairman
Chemical Engineer - President Federal White Cement Ltd. & control of other industrial companiesRobin Goad, MSc, PGeo, President & CEO
Geologist with 28 yrs experience in mining & explorationDavid Knight, BA, LLB, Secretary
Partner with Macleod Dixon LLP – securities & mining lawyerJames Excell, BASc
Metallurgist – 30 yrs senior management @ BHP Billiton, former CEO North American PalladiumWilliam Breukelman, BASc, MBA, PEng
Chemical Engineer – Chairman Gedex - Co-owned & chaired IMAX CorporationMahendra Naik, BComm, CA
CFO Fundeco - founding director & former CFO IAMGOLD CorporationJames Currie, B.Sc. (Hons.) PEng
Mining Engineer – COO New Gold Inc. - 28 yrs experience in operations & developmentCarl Clouter
Commercial pilot with 35 yrs of prospecting experience in Canada
MANAGEMENT:Julian Kemp, BBA, CA, VP Finance & CFO – 20 yrs mine financial experienceThomas Rinaldi, BSc (Mining Engineering), VP Operations – 26 yrs engineering and operations experienceMichael Samuels, BEng, Director of Technical Services – 12 yrs experience mine processing Richard Schryer, PhD, Director of Regulatory & Environmental Affairs – 20 yrs mine permitting experienceJames Mucklow, MESc, PEng, Manager Environment & Community Relations – 20 yrs environmental experienceAdam Jean, HBA, CA, ControllerPat Moloney, BEd, BSc. (Hons.), Human Resources ManagerEd Farrell, Hemlo Site Superintendent
Focus Canada - Operating in mining friendly jurisdictions
PROPERTY INTERESTS
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NICO GOLD-COBALT-BISMUTH-COPPER DEPOSIT, NORTHWEST TERRITORIES
100% Ownership – No 3rd party royalties
C$ 65 million work to date - Includes C$ 25 million test mining & process pilot plant
2007 positive feasibility study -Update in 2008 indicates 32.3% IRR & C$ 361 million 8% discounted NPV
Purchased Golden Giant (Hemlo) mill for relocation & reduce capital costs for mine
Environmental Assessment in progress for mine permitting & 2012 planned production
Aker Solutions conducting Front-End Engineering
Test mining 2006-07
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LOCATION & INFRASTRUCTURE 5,140 Ha mining lease in south part of NWT
Winter road access
New all-weather road planned by governments to Hwy 80 km south
$18 million in place for stage 1 –realignment, bridges & roadbed
Engineering & environmental work underway
Power 22 km east
Railway terminus at Hay River 450 km south
City of Yellowknife 160 km southeast & Town of Whati 50 km to south
Settled land claim with Tlicho
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DIVERSIFIED EXPOSURE TO GOLD & SPECIALTY METALSGold: Significant co-product – Counter cyclical hedgeCobalt: Consumption ~65,000T @ 8% annual growth
Metallurgical markets - high strength alloys, cutting tools, cemented carbides & magnetsChemical markets – rechargeable batteries, catalysts, agriculture & pigmentsKey growth areas – batteries (electronic devices & hybrid-electric vehicles) & catalysts (petroleum refining)
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DIVERSIFIED EXPOSURE TO GOLD & SPECIALTY METALSBismuth: Consumption +15,000T @ ~10% / yr annual growth
Traditional markets – fusible alloys, cosmetics, chemicals, ointments, medicines, lubricants, electronics & flame retardantsNew markets – super conductors, CD’S & replacing lead for solder (plumbing & electronics), hot-dip galvanizing, auto anti-corrosion, plumbing brasses, ceramic glazes, ammunition, radiation shielding, paint pigments & free cutting steelMCP Group (World’s largest bismuth consumer) will purchase all mine production
Fortune will be a major cobalt producer & the largest bismuth producer in the world
Kazakhstan, Bolivia, Other3%
Teck Cominco, Canada
1%
Recycled Metal4%Doe Run,
Peru5%
Penoles, Mexico
6%
NICO13%
China68%
Average Forecast NICO Bismuth Production vs. 2008
World Production
China28%
Recycling, Intermediate
& Small Producers
20%
OMG14%
Xstrata6%
Sherritt5%
Umicore5%
Chambishi4%Norilsk
4%
Vale Inco3%NICO
3%
Minara3%
CTT3%BHP Billiton
2%
Average Forecast NICO Cobalt Production vs. Major 2008
Producers
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2007 Study (Updated 2008) by Micon International + Met-Chem Canada, Golder & others Production: 4,000 tonnes / day (Jan 2009 announced increase to 4,650 tonnes / day)Primarily open pit mine - underground mining also in years 1 & 2
Maximize gold recovery & high grade during initial production –Accelerate payback
Proven hydrometallurgical process methods to high value products
Gold DoréCobalt 99.8% MetalBismuth 99.5% MetalCopper & nickel by-products
DEFINITIVE (BANKABLE) FEASIBILITY STUDY
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FEASIBILTY STUDY RESULTSProven & Probable Reserves
21.8 million tonnes - 1.08 g/t Au, 0.13% Co, 0.16% Bi15-year mine life (feasibility study) - 13 years with production increaseCobalt: 60,603,000 lbs (27,950 tonnes)Gold: 759,700 ozsBismuth: 76,956,000 lbs (34,916 tonnes)
Larger 57 million tonne resource - ScaleableCapital costs: C$215.2 million (feasibility study)
Does not include escalation, bismuth cathode facility & tonnage throughput increaseAverage life-of-mine operating costs: C$ 39.40 / tonne
Does not include throughput increase & bismuth cathode improvementsAnnual metal production
Cobalt: 3.46 million lbs (4.01 million lbs with production increase)Gold: Yrs 1 & 2 avg 70,000 oz; Yrs 3-15 avg 24,000 oz (81,200 / 27,840 ozs with increase)Bismuth: 3.59 million lbs (4.16 million lbs with increase)
255 employeesReserves, mining & metallurgy verified by test mining & pilot plants
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1 2007 Base Case: Using US$16.50/lb cobalt, US$525/oz gold, US$4.50/lb bismuth @ C$1.20 = US$ 1 (83 Cents)2 2008 Base Case: Using May 2008 metal prices - US$20/lb cobalt, US$750/oz gold, US$10/lb bismuth @ C$ 1.03 = US$ 1 (97 Cents)3 By-Product accounting4 April 2008 metal prices – US$50/lb cobalt, US$925/oz gold, US$16/lb bismuth @ C$ 1.03 = US$ 1 (97 Cents)
2008 UPDATED FEASIBILTY STUDY ECONOMIC RESULTSExcludes Bi metal processing option & tonnage throughput increase
4 April 2008 metal prices produce 97.2% IRR and C$1.5 billion NPV
1 2
Cash Costs - Gold Eq
$304$249
2007 Base Case 2008 Base Case
US
$/
oz
1 2
Pre-Tax IRR
18.3%
32.3%
2007 Base Case 2008 Base Case
1 2
Pre-Tax NPV (8%)
$143.7
$360.7
2007 Base Case 2008 Base Case
C$
mm
1 2
Cash Costs – Cobalt 3
$6.34
$1.41
2007 Base Case 2008 Base Case
US
$/
lb
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UNDERGROUND TEST MINING & PILOT PLANT
Mining conditions, geometry & grades for deposit confirmed
Environmental impacts assessed
Portal, decline ramp & 2 mine levels established with ventilation raise to surface
~C$ 20 million pre-production development completed
Sample collected for C$ 5 million pilot plant test
Proved process flow sheet
Verified production of high value metal products
Substantial increase in recovery for all metals over feasibility study
Tangible demonstration of project to governments & communities
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GOLDEN GIANT MINE (HEMLO) MILLAcquired in 2006 & 2008 for C$3.3 milion from newmontIncludes surface facilities, buildings, equipment & C$ 2 million in spare partsRelocation to NICO for significant reduction in capital costs & project riskNo environmental liability for Hemlo site – 2 yr window to relocateDismantling 90% complete & sale surplus equipment & metals in progressDemonstration of Fortune’s ability to plan & execute major project
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Work to date completed for ~$11 million vs. $17+ million initially budgeted ~$4 million revenues from sale of surplus equipment, scrap & precious metals
GOLDEN GIANT MINE DISMANTLING & DEMOLITION
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GOLDEN GIANT EQUIPMENT TO BE RELOCATED TO NICO
Equipment & buildings salvaged for NICO valued at C$40 million
SOUTHERN HYDOMETALLURGICAL COMPLEXStudies indicate significant capital & operating cost reductions & accelerated construction schedule from relocating downstream hydrometallurgical process plant to southern CanadaFlotation concentrates from NICO transported by truck & / or rail to southShort list of sites in Alberta, Saskatchewan & Manitoba with access to CN Rail, business friendly communities, proximity to reagent sources & access to skilled labour poolSavings ~C$ 30 million CAPEX & ~C$ 10 million annual OPEX anticipated from:
Reduction in materials transport, labour & construction costsReduction in imported skilled labour at NICO site – reduces camp costsReduction of site power requirements from 17MW to 10MWReduction in power costs by up to 17 cents / kWh at southern facilityConcentrate transportation costs partially offset by reagent transportationEnvironmental impacts at NICO site reduced – speeds permitting & lowers bonding costs
Planned purchase of southern hydrometallurgical complex site Q2 / Q3 - 2009
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MOUNT KLAPPAN COAL PROJECT, BRITISH COLUMBIA
100% ownership – C$1/tonne royalty to ConocoPhillipsWorld Class reserves & resources (2.8 billion tonnes) of premium anthracite coal Largest undeveloped deposit in North America – one of world’s largestPositive feasibility study on Lost Fox deposit - only 3.6% of total depositTest mining, pilot plant processing & 100,000 tonne trial cargo completedSupply shortages of metallurgical coalsC$85+ million invested in project by Gulf & Fortune
Railway sub-grade
Test mining 1985-86
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LOCATION & INFRASTRUCTURE
15,866 Ha licenses in northwest B.C.
Proximity to deep water shipping ports
Stewart (150km) – Truck access
Prince Rupert (330km) – Rail access
Leases straddle railway right-of-way
Track installed 150km south of mine
Road access from railway subgrade
Government feasibility study to extend railway to Alaska
Tahltan First Nation Traditional Territory – EA cooperation agreement
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WORLD ANTHRACITE MARKETS
Anthracite - highest quality coal with very high carbon & energy content -represents only 1% of world coal reserves (uncommon premium coal)World production: ~ 400 million tonnes - China (200 million tonnes) & Vietnam (40 million tonnes) reducing &/or eliminating exports – new deposits will not meet existing & growing demandMultiple additional premium products for metallurgical & thermal use –heating & cooking briquettes, coke replacement & binder for iron ore pellets
Filter Media US$ 300 / tonne Metallurgical Reductants US$ 300 / tonne Ultra-Low Vol. Pulverized Coal Injection (PCI) US$ 125 / tonne Sinter US$ 110 / tonne Power Generation US$ 85 / tonne
Source: Company Information.
2323
MOUNT KLAPPAN PROJECT HISTORY
C$ 85 million invested in project - C$ 20 million (Fortune)Fortune purchased project from ConocoPhillips after its takeover of Gulf
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Gulf Canada Fortune Minerals
ENGINEERING & FEASIBILITY
ENVIRONMENTAL
TRANSPORTATION
ENGINEERING & FEASIBILITY
TRANSPORTATION
POWER STUDIES
SOCIOECONOMIC & ENVIRONMENTAL
TRIAL CARGO MARKETING
DRILLINGLEASE MAINTENANCE
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In Situ Coal Reserves 10% Ash Product Reserves Measured Indicated Total In Situ Proven Probable Total Product
85.6 16.1 101.7 51.6 9.2 60.8
MOUNT KLAPPAN RESOURCES and RESERVESMount Klappan Resources (million tonnes)1
Lost Fox Reserves (MT)2
Area Measured Indicated Demonstrated Inferred Speculative Lost Fox 107.9 109.5 217.4 91.5 749.6 Hobbit-Broatch - 13.5 13.5 258.4 753.0 Summit - - - 9.6 508.9 Nass - - - - 201.5 Total 107.9 123.0 230.9 359.5 2,213.0
1 2.8 billion tonne resource in all classes - Estimates by Marston & Marston Inc. (NI 43-101 compliant).2 9.7 Bcm / tonne finished product strip ratio at 1.5 MT/yr.
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BANKABLE FEASIBILITY STUDY (2008 UPDATE)Lost Fox Deposit study by Marston & Marston Inc.
Open pit mine, wash plant & site infrastructure Rail & truck transport options from mine to portsProduction of 3 million tonnes / yr clean coal60.8 Mt of product coal reserves – sufficient for 20+ yrs productionPremium ultra-low volatile PCI product (82.6% carbon, 7,423 Kcal/Kg,13,352 Btu/lb, 31.1 GJ/t, 10% ash, 6.5% volatiles, 0.5% sulphur, 0.9% residual moisture, 40-45 HGI)
2008 FEASIBILITY STUDY UPDATE RESULTS3 Mtpa Ultra-Low Volatile PCI Product Trucked to Port of Stewart @ C$ 1.20 = US$ 1
BASE CASEUltra-Low Volatile PCI - US$ 175 / tonne (Yrs. 1-5) US$ 150 / tonne (Yrs. 5-20)
PRE-TAX AFTER TAX
IRR 40.9% 31.2%
NPV (8% DISCOUNT) C$ 1,280 Million C$ 749 Million
CAPITAL (1ST 3 YEARS) C$ 655 Million
COAL PRICE SENSITIVITIES
FOBT PRICE PRE-TAX IRR PRE-TAX NPV (8%) AFTER TAX IRR AFTER TAX NPV (8%) CASH COST / TONNE
US$ 110 7.8% (C$ 8.2 M) 4.2% (C$ 119 M) US$ 84.77
US$ 120 14.8% C$ 280 M 10.5% C$ 83 M US$ 85.17
US$ 130 20.6% C$ 536 M 15.3% C$ 256 M US$ 87.14
US$ 140 26.0% C$ 790 M 19.9% C$ 428 M US$ 88.72
US$ 150 31.3% C$ 1,052 M 24.2% C$ 599 M US$ 90.00
US$ 175 43.6% C$ 1,690 M 33.9% C$ 1,013 M US$ 93.55
US$ 200 55.9% C$ 2,346 M 43.2% C$ 1,436 M US$ 96.63
US$ 225 67.8% C$ 2,991 M 52.1% C$ 1,852 M US$ 99.94
US$ 250 79.3% C$ 3,636 M 60.8% C$ 2,268 M US$ 103.22
US$ 275 90.7% C$ 4,281 M 69.1% C$ 2,684 M US$ 106.50
US$ 300 101.9% C$ 4,921 M 76.9% C$ 3,096 M US$ 109.90
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4-phase drill program to upgrade & expand resources
Positive government feasibility study for Alaska Rail Connection
Reduction of haulage distance to Prince Rupert from 1400km to 600kmReduces transportation costsAllows expansion to > 5 Mtpa
Slurry pipeline to Stewart studyLower transportation costs Higher capital costsAllows expansion to 5+ Mtpa
Conveyor Option to Hwy 37Lower transportation costs to StewartHigher capital cost
Connection to BC electrical gridReduction in operating costs
Lease – Purchase major equipmentUndiscounted capital increases IRR
MOUNT KLAPPAN VALUE ENHANCEMENT OPPORTUNITIES
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SUE DIANNE COPPER-SILVER-GOLD DEPOSIT, NWT
100% interest – subject to royaltiesLow strip open pit Highest grades close to surfaceOnly 25 km north of NICO with attractive synergiesSue-Dianne Resources @ 0.4% Cu cut-off
Resource estimate by Micon International Ltd. & P&E Mining Consultants Inc.
Classification Tonnes Cu (%) Ag (g/T) Au (g/T)
Indicated 8,444,000 0.80 3.2 0.07
Inferred 1,620,000 0.79 2.4 0.07
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Current Market Capitalization
NICO NPV: C$ 361 million (2008 Base Case) Mount Klappan NPV: C$ 530 million (Current coal price)NICO + Mount Klappan: C$ 890 million2008 commodity prices produce higher valuationsFortune cash & equipment ~C$ 50 million
Current Market Cap: ~C$ 40 million
Volatile market conditionsDiscount for development stage companies Complicated asset mix – coal / metals2 large projects on parallel development schedule
Value Gap Issues
Attractive Economics
STRATEGY TO REALIZE SHAREHOLDER VALUE
Joint venture Mount Klappan with strategic partnerSimplifies corporate focusMonetizes & / or values coal projectResolves financing both projects - speeds development & reduces riskDiscussions ongoing with coal, steel, oil & gas & trading companies
Independent development of NICOCapital to develop NICO project within Fortune’s capacity & expertiseCompany in discussions with large bank for credit facilityCompany becomes specialty metals & gold producer with significant coal / energy investment
Production – NICO & Klappan
Investor recognition of Fortune’s undervalued Canadian mineral assets
OBJECTIVES FOR 2009 & EARLY 2010NICO Objectives
Complete environmental assessment & permittingPurchase site for southern hydrometallurgical complexComplete agreements with Tlicho GovernmentComplete front-end engineering & commence equipment procurementComplete Hemlo dismantling & recondition equipment for relocation to NICORetain construction manager & contractors
Mount Klappan ObjectivesComplete strategy for stategice alternatives - joint venture - sale - spin-out
Corporate ObjectivesComplete negotiations with lead bank for NICO credit / debt facilityAssess options for Company’s share of project financing – proceeds from Klappan transaction – gold sale – equity raise – M&A – joint ventureContinue building management team for operations
RESULT - Investor recognition of Company’s undervalued assets
Emerging Strategic Metal & Coal
ProducerFor further information, please contact:
Robin Goad, PresidentLindsay Simmons, Investor Relations Coordinator
140 Fullarton Street, Suite 1902London, Ontario, Canada
N6A 5P2Tel. (519) 858-8188Fax. (519) 858-8155
E-mail. [email protected]. www.fortuneminerals.com
Toronto Stock Exchange – Symbol “FT”