Andromeda Resources Inc. Corporate Presentation


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Andromeda Resources Inc. Corporate Presentation

  2. 2. Forward Looking StatementsThis presentation may contain "forward-looking" statements within the meaning of Canadian securities legislation and the UnitedStates Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to future events or the anticipatedperformance of the Company and reflect managements expectations or beliefs regarding such future events and anticipatedperformance. In certain cases, forward-looking statements can be identified by the use of words such as "plans", "expects", "isexpected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "believes", or variations of such words andphrases or statements that certain actions, events or results "may", "could", "would", "might", or "will be taken", "occur" or "beachieved", or the negative of these words or comparable terminology. By their very nature forward-looking statements involveknown and unknown risks, uncertainties and other factors which may cause the actual performance of the Company to bematerially different from any anticipated performance expressed or implied by the forward-looking statements. Such factorsinclude various risks related to the Companys operations, including, without limitation, fluctuations in spot and forward marketsfor zinc, copper and other metals, fluctuations in currency markets, changes in national and local governments in Mexico and thespeculative nature of mineral exploration and development, risks associated with obtaining necessary exploitation andenvironmental licenses and permits, and the presence of laws that may impose restrictions on mining. A complete list of riskfactors are described in War Eagles management information circular for its special meeting to approve the reverse-takeovertransaction with the Company and will be detailed from time to time in the Companys interim and annual financial statements andmanagements discussion and analysis of those statements, all of which will be available, for review on SEDAR presentation uses the terms "measured resources", "indicated resources" and "inferred resources". The Company advisesreaders that although these terms are recognized and required by Canadian regulations (under National Instrument 43-101Standards of Disclosure for Mineral Projects ("NI 43-101")), the United States Securities and Exchange Commission does notrecognize them. Readers are cautioned not to assume that any part or all of the mineral deposits in these categories will ever beconverted in to reserves. In addition, "inferred resources" have a great amount of uncertainty as to their existence, and economicand legal feasibility. It cannot be assumed that all or any part of an inferred mineral resource will ever be upgraded to a highercategory. Under Canadian rules, estimates of inferred mineral resources may not form the basis of feasibility or pre-feasibilitystudies, or economic studies, except for a Preliminary Assessment as defined under NI43-101. Investors are cautioned not toassume that part or all of an inferred resource exists, or is economically or legally mineable.Although the Company has attempted to identify important factors that could cause actual performance to differ materially fromthat described in forward-looking statements, there may be other factors that cause its performance not to be as anticipated. TheCompany neither intends nor assumes any obligation to update these forward-looking statements or information to reflectchanges in assumptions or circumstances other than required by applicable law. There can be no assurance that forward-lookingstatements will prove to be accurate, as actual results and future events could differ materially from those currently anticipated.Accordingly, readers should not place undue reliance on forward-looking statements.Unless otherwise indicated, financial amounts are denominated in Canadian dollars (“$”). Amounts expressed in United Statesdollars are indicated by “US$” or “US¢”. 2
  3. 3. Investment Highlights  Recently formed private company focused on the commercialization of theWorld-class Terrazas Zn-Cu oxide project near Chihuahua City, Mexico  One of only a few world-wide zinc oxide projects that has the economies ofzinc project scale to support a standalone hydrometallurgical facility  Comparables include Skorpion, Boleo and Jabali High grade  NI 43-101 compliant M&I resource of 2.6 billion lbs Zn and 638 million lbs Cu  Discrete M&I resource of 1.9B lbs Zn at 3.17% Zn and 189 M lbs Cu at 0.30%open-pittable Cu at the high grade Cerro Verde zone resource  All to be mineable by open pit Significant  Expected zinc cathode production between 100 and 125 M lbs per year  Expected copper production between 8 and 10 M lbs per yearlow-cost zinc  Potential for a +40 year mine life with known additional sources of feed production  Cash costs expected to be <US$0.30/lb Zn due to copper credit Major  Completing an RTO with War Eagle Mining  Andromeda’s immediate focus is to continue optimization of the Terrazas milestones Project followed by the completion of a feasibility study ahead  Progressing towards production 3
  4. 4. Project Location No ejidos on the property Surface rights on the Cerro Verde ore body are under purchase rights option agreements with AndromedaEasy access to rail, power lines, and water 4
  5. 5. Project InfrastructureSignificant infrastructure in place 5
  6. 6. Terrazas Project HistoryEarly 20th Historical copper producer, including an on-site century smelter in the early part of the 20th century 1980s Shallow zinc mineralization defined 2000 Optioned by Constellation Copper Constellation completed a pre-feasibility study 2002 based on an acid heap leach 2004 Discovered high grade zone at Cerro Verde The discovery of the high-grade Cerro Verde deposit and further studies indicated improved 2007 economics with an agitated leach, and a scoping study was completed in 2007 Constellation Copper was embarking on a feasibility study on Terrazas, when it went into 2008 receivership in 2008, due to its Lisbon Valley operations, and the project reverted back to the project vendor due to the final missed property payment. Total project expenditures by Constellation Copper exceeded US$15 million Andromeda entered into agreement to acquire Terrazas for cash consideration of US$5.0 2010 million payable in installments over two years and a 2% NSR, sliding up to 3% at US$2.00/lb Zn Past-producing mine with extensive economic analysis completed 6
  7. 7. Terrazas Project Overview Located close to the city of Chihuahua Project site has extensive infrastructure in place, including railway, power, water, and a nearby four-lane highway  Allows low cost delivery of acid or sulfur for manufacture of acid Contains the high grade Cerro Verde zone  M&I resource of 1.9 billion lbs Zn at 3.17% and 184 million lbs Cu at 0.30% Looking west from Cerro La Gloria towards Terrazas Demonstrated resource, no exploration risk Project was previously optioned to Constellation Copper  Spent ~US$15 million on exploration and economic studies over an 8 year period to 2008  Although a 2007 Constellation Copper scoping study was never formally published, the agitated sulfuric acid leach study was positive enough to lead Constellation Copper directly into a feasibility study 7
  8. 8. Terrazas Project Overview The mine life at Cerro Verde and the Main Zone is likely to exceed 20 years  Could exceed 40 years with the addition of satellite deposits and slag piles Extensive testwork shows zinc recovery at ~90% and copper recovery at ~75% using conventional sulphuric acid leaching Final products would be Zn cathode and an intermediate Cu product  100 – 125 M lbs Zn / year  8 – 10 M lbs Cu / yearPotential for low pre-production and operating costs  Cash costs expected to be low at <US$0.30/lb Zn due to the copper credit  Capital costs are expected to be manageable for a junior to solely finance into productionLong-life, low cost production potential 8
  9. 9. Terrazas Acquisition Terms Title transfer after US$5.0 million in payments US$1.2 million paid to date. 2.0% NSR, sliding up to 3.0% at US$2.00/lb Zn 2Q-2010 Payment of US$1.0 million US$2.0 million payment Dec. 15, 2011 ($200,000 advance payment paid Sept. 30) May 31, 2012 US$2.0 million payment on second anniversary 9
  10. 10. Terrazas NI 43-101 Resources Andromeda completed an updated NI 43-101 resource estimate in October 2011 The resources are contained in a floating cone pit shell, developed only to satisfy the criterion of potential recoverability The expected strip ratio for Cerro Verde is between 3:1 and 4:1 At US$1.00/lb Zn and US$3.15/lb Cu, the Zn Eq Cerro Verde M&I grade is 4.0%1 or US$88/tonne ore Cerro Verde Zone2 Tonnes Zn Grade Cu Grade Zn Eq Grade Cu Eq Grade Zn Cu (%) (%) (%) (%) (M lbs) (M lbs) Measured 3.9 3.66 0.31 4.5 1.21 311 27 Indicated 23.9 3.09 0.30 3.9 1.07 1,628 157 Total M&I 27.8 3.17 0.30 4.0 1.09 1,939 184 Inferred 4.3 1.99 0.34 2.9 0.84 189 32 Main Zone3 Tonnes Zn Grade Cu Grade Zn Eq Grade Cu Eq Grade Zn Cu (%) (%) (%) (%) (M lbs) (M lbs) Measured 23.5 0.60 0.41 1.8 0.56 313 211 Indicated 29.2 0.61 0.38 1.7 0.53 393 243 Total M&I 52.7 0.61 0.39 1.7 0.54 705 454 Inferred 2.3 0.77 0.40 1.9 0.59 39 20 1. Also considers difference in recovery. At 4:1 Cu:Zn price ratio, in situ Zn eqiv grade for M&I is 4.36% 2. 0.89% Zn Eq Cut-off using US$1.00/lb Zn and US$3.15/lb Cu 3. 0.94% Zn Eq Cut-off using $1.00/lb Zn and US$3.15/lb Cu 10
  11. 11. Section 100NW 11
  12. 12. Section 850NE (Cerro Verde) 12
  13. 13. Terrazas NI 43-101 Block Model 13
  14. 14. Cerro Verde Drill Results  Significant oxide intersections have been drilled at the Cerro Verde zone  Exploration upside exists, including additional skarns and possible “hidden” porphyry Drill HighlightsHole ID From To Intercept Copper Zinc (m) (m) (m) (% Cu) (% Zn)MT04-16 79 103 24 0.23% 5.02%MT04-17 19 169 150 0.49% 5.67%MT04-18 58 223 165 0.35% 4.25%MT04-73 22 160 138 0.38% 7.46%MT04-76 130 295 165 0.44% 7.60%MT04-77 64 229 165 0.36% 3.43%MTDD04-11 45 105 60 0.60% 7.12%and 213 297 84 0.31% 4.17% Significant drill hole oxide intersections 14
  15. 15. Terrazas Site from the West 15
  16. 16. Predominant Mineralogy All mineralization on the Terrazas property is almost entirely comprised of oxide minerals of zinc and copper. Zinc Minerals ZINC MINERALS Copper Minerals COPPER MINERALS• Hemimorphite • Malachite• Willemite • Chrysocolla• Smithsonite • Tenorite• Sphalerite • Chalcopyrite 16
  17. 17. Simplified Terrazas Flow Diagram The following flowsheet was developed by Constellation Copper as a basis for conceptual capital and operating cost estimates Tecnicas Reunidas S.A., which designed Anglo American/Vedanta’s Skorpion Zinc Refinery in Namibia provided significant input for this estimate and offered metallurgical Although the flowsheet shows a viable process, Andromeda believes that there is significant optimization potential 17
  18. 18. Project Development and OptimizationAndromeda will focus on optimizing the Terrazas Project in advance ofcompleting a definitive feasibility study.Optimization will include: 1. Flowsheet optimization 2. Investigate the use of pre-concentration such as optical sorting techniques, flotation and dense media separation 3. Identification of other potential high-grade satellite deposits including skarns, carbonate replacement and a porphyry as possible targets 4. Identification of additional sources of metal (e.g. slags) 18
  19. 19. Project Timeline COMPLETE Update 43-101 resources report 3 months PEA based on current and historical data Lab testwork and prefeasibility study to define 7 – 9 months project economics after optimization 12 – 15 months Process pilot plant and feasibility engineeringMultiple near-term milestones 19
  20. 20. Valuation  Comparable zinc exploration and development companies are currently trading at Market Cap / Resource multiples of US¢2.05/lb Zn and US¢1.24/lb Zn Eq.  Implies a market cap for Andromeda of between US$33 and US$40 million based on Terrazas’ high grade M&I resource only, and between US$59 and US$70 million based on the total MI&I Terrazas resource Market Cap / Resource – Comparable Zinc Companies Attributable ResourceCompany Market Cap1 Key Project Location Stage Zn Zn Eq. Market Cap / Resource (US$M) (M lbs) (M lbs) (US¢/lb Zn) (US¢/lb Zn Eq.)Selwyn Resources Ltd. $90 Selwyn Project Yukon, Canada Feasibility 21,634 26,722 0.41 0.34Silver Bull Resources, Inc. $77 Sierra Mojada Mexico Adv. Exploration 6,437 10,671 1.20 0.72Canadian Zinc Corporation $87 Prarie Creek NWT, Canada Feasibility 3,032 6,828 2.86 1.27Canada Zinc Metals Corp. $78 Akie British Columbia Adv. Exploration 3,953 4,695 1.97 1.66Zazu Metals Corporation $60 Lik Alaska, US PEA 2,312 3,300 2.59 1.82Zincore Metals Inc. $52 Accha Peru Pre-Feasibility 2,184 3,113 2.38 1.67Chieftain Metals Inc. $41 Tulsequah B.C., Canada Pre-feasibility 1,084 3,456 3.78 1.19Foran Mining Corp. $39 McIlvenna Bay Saskatchewan, Canada Adv. Exploration 1,737 2,915 2.27 1.35Donner Metals Ltd. $35 Bracemac-McLeod Quebec, Canada Feasibility 542 852 6.51 4.14Tamerlane Ventures, Inc. $11 Pine Point NWT, Canada Feasibility 2,311 2,975 0.48 0.37Messina Minerals, Inc. $4 Tulks South Newfoundland, Canada Adv. Exploration 312 746 1.16 0.49Minco plc $17 Pallas Green Ireland Adv. Exploration 1,012 1,142 1.65 1.46Firestone Ventures Inc. $7 Torlon Hill Guatemala Pre-Feasibility 331 432 2.18 1.67Average (excluding high/low) 2.05 1.24Implied Market Cap of Andromeda ResourcesTerrazas High Grade MI&I Resources (M lbs) 1939 2,674Applied Market Cap / Resource Average (US¢/lb) 2.05 1.24Implied Market Cap of Andromeda (US$M) $40 $33Total Terrazas MI&I Resources (M lbs) 2872 5,633Applied Market Cap / Resource Average (US¢/lb) 2.05 1.24Implied Market Cap of Andromeda (US$M) $59 $70 *1. Based on share prices as of October 31, 2011 2. Zn Eq. calculated using US$1.00 /lb Zn and US$4.00/lb Cu 20
  21. 21. Case Study: Skorpion Zinc Mine On-site production at Terrazas will be very similar to the successful Skorpion Zinc Mine in Namibia  Terrazas and Skorpion are two of the few zinc oxide projects in the world that have the economies of scale to support a standalone hydrometallurgical facility Formerly operated by Anglo American, the Skorpion Zinc Mine commenced commercial production in May 2004 and had achieved 95% of its design capacity by year-end Skorpion Zinc Mine in Namibia, southern Africa  Tecnicas Reunidas S.A, who desgined Skorpion’s zinc refinery, provided significant input into the Terrazas design  Vedanta Resources acquired the Skorpion Zinc Mine from Anglo American in 2010 for approximately US$707 million  Only 5.5 years after initial production  Comparable total metal content, proved the process, and sold at a significant value 21
  22. 22. Zinc Market Environment  Zinc is well-positioned to outperform over the next three to five years  Continued growth in demand, scheduled closure of several globally significant zinc operations, and a lack of investment in new projects capable of filling the widening supply gap  Supply deficit expected in 2014 → will apply significant upwards pressure on zinc prices  Zinc industry will need to develop 7 Mt by 2020 and 14 Mt by 2025 to meet expected demand Significant Production Coming Offline Supply Deficit on the Horizon 2.0 2013 2014 2015 2016 2017 1.0 0.0 (1.0)(442) Kt (2.0) (3.0) (716) Kt (4.0) (5.0) (6.0) (1,310) Kt 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 18.0 (1,720) Kt 17.0 (1,884) Kt 16.0 15.0 14.0 13.0Major Mine 12.0Closures 11.0 10.0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Consumption (Mt) Production (Mt) 22
  23. 23. Share Structure Current Share Structure Shareholder # Shares Value at $3.00/shareFounders 2,000,000 $6,000,000Private Placement 325,000 $975,000Consideration to Vendor 75,000 $225,000War Eagle Investment 500,0001 $1,500,000TOTAL 2,900,000 $8,700,000 Post-RTO and Financing Share Structure Shareholder # Shares Value at $0.45/shareCurrent Andromeda 16,000,000 $7,200,000ShareholdersWar Eagle Shareholders 7,442,272 $3,349,022Financing2 22,222,222 $10,000,000TOTAL 45,664,494 $20,549,022 23
  24. 24. Financing Financing BudgetsSize $7 - $10 millionCash Requirement to $12 - $15 million To Process and CostFeasibility Definition StageUse of Proceeds Feasibility study, ~$4.25M permitting, pilot plant construction Financing will cover the balance of acquisition costs Financing will be completed in Andromeda shares resulting in free trading stock Andromeda’s vision is to use the most reputable engineering and environmental To Feasibility and firms, and develop a strong management, Permitting Stage ~$9.00M board and advisory group $7- $10 million equity raise to progress Terrazas 24
  25. 25. Management and DirectorsChris Davie | CEO and DirectorMining engineer and metallurgist with 40 years experience in the mining industry. Background includes processdevelopment, project management and investment fund and corporate management. Extensive junior miningexperience including finance, mergers, acquisitions and IPO’s. Managed a number of juniors including QueenstakeResources, Virgin Metals and Quia Resources.Andres Tinajero | CFO15 years of experience across a broad range of industries including mining, manufacturing, not-for-profit and retail. Hehas served in a number of leadership roles in the extractive industriesRene Mladosich | Mexico Manager and Director20 years + experience in mine and project management in Mexico. Experience includes permitting, environmental andcommunity relations management. Former positions include logistics manager for the Dolores project, generalManager of the Starcore project in Queratero and Country manager for Alamos de SonoraDavid Winfield | DirectorCanadian diplomat specialized in trade and economic affairs. 30 years experience including Canadian Ambassador toMexico 1989 to 1995. International experience in leadership and corporate governance in financial services. Served onboards of directors of not-for-profit organizations, a mining company in Mexico and Mexico’s largest bank, Bancomer. 25
  26. 26. Management and DirectorsAnthony Dutton | DirectorA seasoned business executive and entrepreneur with a successful track record as an early stage investor and businessfounder. His areas of expertise are corporate finance, business development and strategic management.Brian Murray | DirectorMr. Murray has over 15 years of experience in both the resources and investment markets. Mr. Murray is the presidentand a director of Nebu Resources Inc., a TSXV listed company exploring for gold in Ontario and president and a directorof Rainbow Resources, a company exploring for silver and gold in British Columbia. Mr. Murray has also been thePresident of Murcon Ltd., a private financial consulting company involved in merchant banking, since 1990. He is aChartered Accountant and holds a Masters degree in Business AdministrationGary Parkison | AdvisorA QP with 30 years experience in exploration, project evaluation and project development for base and preciousmetals, primarily in US and Mexico. Chief geologist for Cambior, USA and VP exploration for Constellation CopperCorporation. Discovered the Cerro Verde ore body and was responsible for ongoing economic studies on Terrazas.Rick Moscone | Corporate SecretaryA partner with Fogler Rubinoff LLP specializing in financing and M&A for mining companies and investment dealers. Afounding director of Andromeda and has served as director and secretary for several TSX and TSXV listed companies. 26
  27. 27. Summary  Extraordinary opportunity to invest in an advancedWorld-class property with a proven resource and excellentopportunity infrastructure  Potential for annual production of 100 – 125 M lbs ZnSignificant and 8 – 10 M lbs Cuproduction  Mine life of +/– 20 years with additional known sources potential of feed that could extend it to 40 years  PEA within 3 months Majornear-term  Process optimization ongoingmilestones  Prefeasibility study within 7 to 9 months 27