Broken Hill Prospecting | ASX:BPL | RIS2014 Broken Hill Investor Presentation

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Broken Hill Prospecting ASX:BPL - Investor presentation delivered at the 4th annual Resources Investment Symposium held in Broken Hill NSW Australia, 26-28 May 2014.

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Broken Hill Prospecting | ASX:BPL | RIS2014 Broken Hill Investor Presentation

  1. 1. ‘Strategic Evaluation of Sulphuric Acid Production’ 1 Study group report, Graduate MBA course Australian Graduate School of Management (AGSM), University of NSW * Managing Director, Broken Hill Prospecting Ltd Alexia Combet Aristotle Solomon Tushar Gupta Rico Xiong Presented by Ian Pringle*
  2. 2. Cautionary Notes Investors are advised that this study has not established the economic viability or definite value of the Thackaringa Project. While the study was based on the Company’s existing and previously announced Inferred Mineral Resource estimates , they are not in themselves sufficient to define the economic viability of producing sulphuric acid from concentrate produced from the Thackaringa Project. Under the JORC Code, Inferred Mineral Resource estimates are not sufficient to permit the application of the type of technical and economic parameters required to imply economic viability. Disclaimer This presentation contains forward-looking statements that involve subjective judgement and analysis and accordingly, are subject to significant uncertainties and risks, many of which are outside the control of, and are unknown to, Broken Hill Prospecting Pty Ltd ( “BPL”). In such circumstances, the forward-looking statements can be identified by the use of forward-looking words such as “may”, “will”, “expect”, “intend”, “seek”, “estimate”, “believe”, “continue” or other similar words. No representation, warranty or assurance is given or made in relation to any forward-looking statement by BPL or it’s representatives, In addition, no representation, warranty or assurance is given in relation to any underlying assumption or that any forward-looking statements will be achieved. Actual future events may vary materially from the forward-looking statements and the assumptions on which the forward-looking statements are based. Accordingly, presentation readers are cautioned not to place undue reliance on such forward-looking statements as a result of the uncertainties. In particular, BPL wishes to caution readers that these forward-looking statements are based on economic predictions and assumptions on reserves, mining method, production rates, metal prices and costs (both capital and operating) developed by BPL management in conjunction with consultants. This presentation and the forward-looking statements made in this presentation, speak only as of the date of the presentation. Accordingly, subject to any continuing obligations under the Corporations Act and the New Zealand and Australian Stock Exchange Listing Rules, BPL disclaims any obligation or undertaking to publicly update or revise any of the forward-looking statements in this presentation, whether as a result of new information, or any change in events, conditions or circumstances on which any such statements is based. Competent Person Statement Exploration activities and results contained in this presentation are based on information compiled by Dr Ian Pringle, a Member of the Australasian Institute of Mining and Metallurgy. Dr Pringle is the Managing Director of Broken Hill Prospecting Ltd and also a Director of Ian J Pringle & Associates Pty Ltd, a consultancy company in minerals exploration. He has sufficient experience which is relevant to the style of mineralisation and types of deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). The Inferred Mineral Resource was prepared and first disclosed under the JORC Code 2004. It has not been updated since to comply with the JORC Code 2012 on the basis that the information has not materially changed since it was last reported. The Potential is reported under JORC Code 2012. It is conceptual in nature and more drilling is required to further define it. However, there is no certainty that additional work will result in an upgrade of potential to Mineral Resource. Dr Pringle has consented to the inclusion in this report of the matters based on his information in the form and context in which it appears. 2
  3. 3. Agenda for talk Project and Resources Sulphuric Acid: Production, Use, World Market, Supply & Demand Sulphuric Acid: Australian Market MBA Study: Summary, Potential Customers, Cost Estimates MBA Study: Broken Hill Option, Financial Analysis & Sensitivity Overall Business Model Summary 3
  4. 4.  Unique style of cobalt pyrite mineralisation  Located beside main railway & highway, 25km SW of BH  Outcropping, very large surface deposits  In 2012/2013 BPL discovered new extensions & considerable potential for more  Processing of pyrite to recover Co by sulphide roasting to produce sulphuric acid Pinnacles mine EL 8143 Excellent location 4
  5. 5. Area of next slide Offset Resources and potential…. are very large & near surface 5
  6. 6. 6 Sulphuric acid global production forecast (‘000 tonnes) Courtesy of Dr Robert Boyd, Elkbury Sulphur Consultants Inc, March 2014 Sulphur based Smelter by-product Pyrite roasting Spent acid
  7. 7. 7 Sulphuric acid production by region ~90% produced in the northern hemisphere Courtesy of Dr Robert Boyd, Elkbury Sulphur Consultants Inc, March 2014
  8. 8. 8 Sulphur/sulphuric acid use Source: International Fertilizer Association (IFA) Other sulphur uses: 9pc Other fertilizers: 6pc Fertilizers: 46pc
  9. 9. Sulphuric Acid Market - Australia Australian Market $- $20 $40 $60 $80 $100 $120 $140 - 100,000 200,000 300,000 400,000 500,000 600,000 700,000 2005 2006 2007 2008 2009 2010 2011 Imported Tonnes Trade Unit Value Australian Annual SA Imports Largest Australian producers: •Incitec Pivot: 965,700 tpa* •Nyrstar: 452,200 tpa •Sun Metals: 380,000 tpa •Wesfarmers, Orica, BHP Billiton, Coogee Chemicals International Market China: 120 Mtpa (2015) with 20-30 Mtpa overcapacity but importer South Korea: 2.7 Mtpa exported (2012) Net import sources (2012): (>400,000t) • South Korea: 216,400 tonnes • Japan: 178,300 tonnes • China: 12,800 tonnes 9 Demand for phosphate fertilisers and base metals processing drive sulphuric acid prices *Glencore Xstrata plan to close the Mt Isa Cu smelter by 2016 and Incitec Pivot phosphate production at Phosphate Hill may be reduced.
  10. 10. 10 Sulphuric acid supply/demand, Australia Australian issues include: • Net importer of sulphuric acid (and sulphur) • Freight, handling, storage from northern hemisphere producers • Adds to costs as well as uncertainty of supply • Future production decline is forecast for Australia • Supply is a deterrent for new projects - sulphuric acid can make up a significant proportion of CAPEX and OPEX for many projects. • East Australia contains some of the world’s largest undeveloped HMS (TiO2), phosphate, Ni laterite and REE deposits.
  11. 11. MBA Study - Executive Summary The scope of the MBA project was to analyse the potential of producing & selling sulphuric acid at three locations using pyrite roasting of concentrate feed from cobalt-pyrite deposits near Broken Hill: 1. Broken Hill 2. Central NSW 3. Tennant Creek Recommendation: Pursue Option #1 Sulphuric acid plant located at Broken Hill 11
  12. 12. Customer Demand – MBA study 12 Option #1 Broken Hill Option #2 Central NSW Option #3 Tennant Creek Demand? (tonnes/ yr) 2.5 M 0.2 M 1.4 M Industry • 3-4% expected growth for titanium due to demand from China and India • Strong REE growth as key in element in technology • Phosphate industry declining 0.9% in Australia annual to $3.8billion in 2018 • Fast growing REE market Cornerstone Customers • Cristal • Iluka (BHP Billiton, Murray Zircon, Australian Zircon) • Alkane Resources DZP (Syerston Ni-Co-Pt, Jervois Mining Ni, Tottenham Cu, Sydney markets) • Rum Jungle Resources • Arafura Resources (Minemakers, Ranger U) Upside • Supportive community • Skilled labour • Familiarity with environmental risks • CAPEX est for DZP is high • Possibility to outsource sulphuric acid production • Emerging markets • Port availability, • Close to Asia/India markets • Direct shipment of P2O5 rock is expensive Risks • FOB assumption may not be valid for all customers • Dependent on Ti industry • Single customer? • EIS approval March 2014, Production 2016? • Erratic phosphate pricing • Freight distances • Acid imports from Indonesia
  13. 13. Costs Estimation – Flow Chart for MBA Mining Cobalt- Pyrite Ore 7.5 Mtpa Concentrate Cobalt-Pyrite 1.3 Mtpa Roasting Plant 2.0 Mtpa CAPEX $ 60 M $ 14 (per tonne) OPEX Freight 1.3 Mtpa $ 190 M $ 39 (per tonne) $ 0 $ 0.04 (per tonne per km) $ 500 M $ 30 (per tonne) Key Assumptions: • Escalation factor of 0.6 (WorleyParsons) • ±50% range on cost estimates (WorleyParsons & GHD) • Breakdown between fixed cost and variable cost at 30%:70%, except for freight 0%:100% (WorleyParsons) 13
  14. 14. Customer Import Costs – MBA Study Sulphuric acid $ per tonne Broken Hill & Central NSW Tennant Creek Custom Value 2013* 61.27 61.27 Transport 56.30 51.64 Insurance 2.12 2.03 Total 119.69 114.94 14 *Value has fluctuated between $35 and $130/t between 2005-2013 Add to these…. storage, infrastructure costs, operational costs, salaries ….
  15. 15. Summary BH Scenario – Option 1 Broken Hill Annual sulphuric acid production 2Mt Capacity utilisation 100% Total Capex $769M Annual BE revenue $382M Profit Margin 30% Break Even NPV Sale Price (+/- 40%) $186 Import Price - low estimate $120 Premium to purchase from BPL 55% Of the 3 options a sulphuric acid plant at Broken Hill offers the lowest break even price and the best possibility for customer value creation 15 NOTES Cost estimates are + 50% No account for CAPEX/OPEX & value of cobalt production ?5,000-6,000tpa (Current cobalt price ~$30,000/t) No account for hematite production/sale
  16. 16. Creating Customer Value 16 Option #1 offers the best potential for customer value creation when considering cost sensitivities IRRPercentages $AustralianNetPresentValue
  17. 17. Ilmenite (FeTiO3) can be upgraded to synthetic rutile (TiO2) using concentrated sulfuric acid. The titanium oxygen sulfate (TiOSO4) is selectively extracted and converted into titanium pigment. Finishing Waste TiOHh Calcination Acid digestion ilmenite feedstock Purification H2SO4 Sulphate Process Upgrade ilmenite to TiO2 at Broken Hill? TiO2 Cristal currently operate a mineral separation plant at Broken Hill and export ~200,000tpa of ilmenite from the Ginkgo and Snapper mines. ~$150-200/t ~$2-3,000/t 17
  18. 18. Overall business model summary 18 Potential to create metal mining and chemical industry synergies Broken Hill Prospecting to develop, mine and build cobalt pyrite concentrate plant Second party - to build and operate a pyrite roast sulphuric acid plant with; – Off-take agreements with customers for the acid – Purchase agreement with Broken Hill Prospecting (Broken Hill Chemical) for supply of pyrite concentrate – JV for recovery of cobalt and sale of Fe fines Others (+BPL?) - to develop projects based on long-term security of supply of acid. Contact details: Dr Ian Pringle, Managing Director, Broken Hill Prospecting Ltd (‘BPL’) Tel: 0408 548 767 Email: ipringle@bhpl.biz Website: www.bhpl.biz

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