Platt's Coal Properties & Investments Presentation by Tim Alch from Behre Dolbear on March 7 2013

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Platt's Coal Properties & Investments Presentation by Tim Alch from Behre Dolbear on March 7 2013

  1. 1. Platt’s 21st Annual CoalProperties & Investment Conference The Coal Business from a Global Capital Markets Perspective -------- Tim Alch V.P & Senior Minerals Business Analyst Behre Dolbear & Company (USA), Inc. New York, New York +1.845.480.1434
  2. 2. From a Lender’s, Investor’s and Owner’s View – Perspective is Important• Who is driving business• What else has changed• What capital looks for• Prepare for the best/worst• Be realistic BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  3. 3. Who is Driving the Bus(iness)?• This is a Decade of the Emerging Market Consumer People want and May get what ‘we’ enjoy.• Urbanization and rising middle class continues to drive energy and coal consumption, esp. in China• In the next 20 years, the US may be out spent by a rising ‘middle class’ in China (330M) and elsewhere• GDP growth in China, Asia, Latin America, etc. will likely exceed growth in the OECD nations• Struggling to keep pace will be commodity supply chain logistics including coal, fueling price volatility• Growth may exceed current expectations BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  4. 4. Asia is Where Most People Live and Emerging Markets Grow FasterSource: The Economist BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  5. 5. More Consumers, More Money & Minerals Consumed BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  6. 6. China Now Consumes as Much Coal as the Rest of World (Source: USA EiA)• China’s coal use grew by 325 million tons in 2011, equal to 87% of the 374 mt global increase in coal use. Of the 2.9 billion tons of global coal demand growth since 2000, China accounted for 2.3 bt (82%) (US EIA) BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  7. 7. China’s Share of Global Copper, Steel, Iron Ore, Etc. Consumption Also ExplodedSource: UBS BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  8. 8. Behre Dolbear Recent Coal Related Engagements (Some Detail About Behre Dolbear’s Work is Shown at Back)• Australia • Mexico• Botswana • Mongolia• Brazil • Mozambique• Canada • New Zealand• China • Nigeria• Colombia • Philippines• Germany • Russia• India • USA• Indonesia • Vietnam BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  9. 9. China and Other Emerging Markets are Expanding• China’s GDP is growing at ±8% pa and adding power gen capacity equal to UK’s capacity in each of past/next 10± years• China is largest consumer of minerals• China shifts from export led to consumer based economy as other emerging market nations expand resource intense sectors consuming resources, energy, coal, etc. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  10. 10. China’s Recent Population Growth is Hard to Fathom BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  11. 11. China is Urbanizing & Powering On• In each year for the next 15 years, China will move 20 million people into cities, consuming more resources BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  12. 12. China Produces Half Global Steel Source: http://designbuildsource.com.au BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  13. 13. The BIC’s Growth in the Past 10 Years Broke a Long Period of Flat Pricing Nominal Industrial Metal Average Prices 1970 - 2012 Aluminum Copper Lead Zinc Nickel $ Per Tonne (Copper, Lead, Zinc, Aluminum) 10,000 40,000 9,000 Capital Capital Capital 35,000 8,000 Destruction ? Destruction Creation 30,000 7,000 $ Per Tonne Nickel 6,000 25,000 5,000 20,000 4,000 15,000 3,000 10,000 2,000 1,000 5,000 0 0Data Source: USGS and LME BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  14. 14. Coal is Different• 96% of coal is used by PowerGen & Steel• Two KPIs of modern economic growth• Not as fungible as precious & base metals• Demand patterns are more predictable• Markets and end users are more specifically defined• Transport can be (a near) dominant factor BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  15. 15. China’s Power is Fueled by Coal• China had an estimated total installed electricity generating capacity of 1,073 GW in 2011. The largest in the world and increased by 9+% from 2010 and doubled from 519 GW in 2005• Installed capacity may double again by 2030 to meet rising demand, particularly from main urban areas in the East and South of the country (FACTS Global Energy) with gas-fired capacity too BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  16. 16. Robust, Tempered Coal Outlook• Continuing modernization in Developing World is driving energy, metals at greater rates• Estimates vary e.g. 300 GW of new coal fired plants may come online requiring about 900 mt of new supply – equal to US output now• Declining ore grade, fewer large deposits, high capital costs, Best Practices, larger Gov ‘takes’, changing political winds etc. curtail investments and reduced capex throughout mining sector• Thus, production may struggle to meet future demands and lead to sporadic price spikes BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  17. 17. Coal is Forecast to Fuel a Large Share ofFuture Total Global Electricity Generation EIA AEO2013 Reference BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  18. 18. Future Growth of Global Electricity Production Will Be in the Non OECD and Be Coal Fueled BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  19. 19. A Rising Standard of Living is Often Measured by Electricity & SteelBBC News 20 February 2013 Last updated at 05:53 ETBulgaria government to resign, PM Boiko Borisov says• The governments resignation follows nationwide protests against high electricity prices• Bulgarias government has announced it is resigning after nationwide protests against high electricity prices and austerity measures, Prime Minister Boiko Borisov has said. The PM said he had decided to go after protesters against rising electricity prices clashed with police in Sofia…… ________________________________________________________• There are weekly rolling ‘Black Outs’ in 1/3 of India• Brief widespread outages after recent storms in USA• In today’s world, People without Power is Not Good BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  20. 20. In the Top Ten Commodities by Global Projects in 2011: Gold 1; Coal 7• Investors, lenders and speculators have been attracted to the precious metals markets: Is the world investing enough in coal?Source: Intierra BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  21. 21. Closer to Home: What Has Changed• USA crude oil production increased by 790,000 bbl/d from 2011 to 2012, the largest increase in annual output since the beginning of U.S. commercial crude oil production in 1859• U.S. EIA expects U.S. crude oil production to continue rising over the next two years• Fuel Switching to Nat Gas by Generators drove coal share to ~36% in Sept/Oct 2012• Greater efficiency and slow GDP growth have impacted U.S. power consumption BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  22. 22. Share of Total US Generation by Coal was Hit by Natural Gas (Source: US EIA Short-Term Energy Outlook Feb 2013)U.S. Electricity Generation by Fuel, All Sectorsthousand megawatthours per day 14,000 Forecast 12,000 10,000 Coal 42.3% 37.4% 39.1% 39.1% Natural gas 48.5% 48.2% 44.8% 49.6% 49.0% 44.4% 8,000 Petroleum Nuclear 6,000 30.3% 28.2% 27.6% Hydropower 23.9% 24.7% 18.8% 20.1% 21.6% 21.4% 23.3% 4,000 Renewables Other sources 2,000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  23. 23. Coal Prices in USA Basins are Down in 2012 and Off from 2008 Highs (US EIA Feb 2013) BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  24. 24. Be Realistic about Near Term Coal Use – Impact of Nat Gas Can Not Be Underestimated U.S Coal Consumption Forecast by U.S. EIA – Feb 2013 BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  25. 25. Higher Rail Costs Challenge USA Coal Operators = Another Not So Favorable Trend• From 2001 to 2010 average cost of railing coal to power plants rose by almost 50% in USA• Railroad transport accounts for more than 70% of U.S. coal destined to generators• So rail rates impact cost of coal delivered to power plants – often borne by producers BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  26. 26. What Capital is Looking for – More Hard Work Will/Can/May Help• Offset higher capital, operating costs• Other than higher prices – What can offset higher costs?• Hard Work, Implementing Best Practices, Process Improvements, New Markets, etc.• Dig in and focus on doing best possible• There is no panecea – especially with low Natural Gas prices BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS © 2011 Behre Dolbear Group Inc. All Rights Reserved
  27. 27. Coal Production Costs are Rising• Transport logistics are big factor• Quality, grade and usage are related• Rising costs reflect mining method:  Surface coal in the Powder River Basin cost is (±US$6.00+ per ton)  Underground coal in Alabama cost is (±US$45.00+ per ton)• Competition is fierce BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  28. 28. US Coal Exports Are Trending Higher (US$ Billions)• Exports to Asia have grown, though not without challenges BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  29. 29. Can New Export Terminals on West Coast help Boost U.S. Coal Exports to 200 mtpa = Black GoldSource: U.S. EIA, Short-Term Energy Outlook, U.S. Census data. Note: Data for 2012 are through August. Export share bycoal type assumes a continuation of current volumes. October STEO forecast used in chart. The steam coal 95% growthestimate assumes the STEO forecast with current year-to-date steam/met export ratio. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  30. 30. Export Markets = USA’s Coal Hope• China’s efforts to consolidate and improve its coal industry is a massive undertaking• China will continue to rely upon coal imports to fuel its power generating sector for many years to come• Likewise, as India modernizes and expands its coal- fueled generating capacity – it too requires significant imported coal for blending and primary fuel• India’s metals, steel industry is forecast to be another large consumer of metallurgical coal BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  31. 31. Coal Trade Has Its Challenges• There continues to be a shortage of skilled laborers and experienced professionals• The U.S. needs to resolve export logistics to compete and aggressively expand into seaborne markets• Others face logistical, transport, etc. hurdles• Environmental, permiting and social concerns defer investment and development of new capacity• Increased government take and NGOs slow expansion BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  32. 32. Global Growth and Fear – Suggest Coal Acquisitions• Global paradigm shifts as Middle Class and Urbanization drives resource demand• Minerals markets subject to price spikes may provide sufficient investment returns to attract capital from some investors• Stability and security of fuel supply is key• Valuations of USA coal on a long term basis – may now be attractive BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS © 2011 Behre Dolbear Group Inc. All Rights Reserved
  33. 33. Some See the Value in Coal –M&A Targeted Coal in 2012 (US$B) (Source E&Y) 2012 M&A Activity by Target Commodity 25 21.4 20 17.9 15 14.2 13.4$ Billions 10.6 10 7.3 5.3 5 4.0 3.9 3.6 2.3 0 BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  34. 34. China’s Outbound Acquisitions Have Grown (US$ Billions and Volume) BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  35. 35. China’s Coal Deals Rank #2 After GoldSource: Ernst and Young BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  36. 36. M&A Drivers in Coal• Coal share valuations over corrected in 2H12• Low profits force sale of low margin, downstream assets• Significant cross-border investment and M&A likely• Majors and Strategic investors with strong balance sheets may opportunistically acquire key assets• Increased price volatility and resource nationalism, including higher government taxes and royalties may contribute to stability of supply and quality concerns• Risk management is very important to acquirers• There are less undeveloped attractive assets in developed countries BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS © 2011 Behre Dolbear Group Inc. All Rights Reserved
  37. 37. Consolidation Likely to Continue• Valuations are less expensive than greenfield investment• Consolidation to form Super and Larger Majors is likely• Strategic M&A may buoy coal assets and share prices• SOEs, SWFs e.g. Japan, Korea, India may continue to acquire strategic metals and coal resources, etc.• Fewer companies control larger share of minerals – giving some producers greater market leverage BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  38. 38. Where are Assets are On Value Curve - and Cost Curve Source: BMO BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  39. 39. Getting and Keeping Business• Quality Control is essential & challenging• Consistent quality product is key• Bid realistic achievable coal specs• Respond to customer problems• Focus on What you are Best at: Remind all stakeholders, What that is BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  40. 40. Capital Ideas for 1H2013• Equity markets in 2012 were turbulent and hit lows• Banks, investors, and operators are risk adverse• Alternative, strategic interests, private equity, SWFs, SOEs are opportunistically stepping into resources• This trend may / will likely continue in 2013• Management, stakeholders, employees, partners, and customers should be realistic about options• Now is not the best time to over reach• Thank you BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS © 2011 Behre Dolbear Group Inc. All Rights Reserved
  41. 41. Behre Dolbear’s Coal Services• Specializes in executive level consultancy to financial institutions, independent investors, large and small coal producers, coal consumers, and government agencies.• Our technical advisories address full spectrum of engineering and operating activities, including exploration, resource and reserve definition and review, mine design, project development, coal preparation, production and operations planning, sales, transportation, coal characterization, and coal utilization.• Our business advisories address project justification and finance, capital budgets, operating costs, organizational structures, and planning for profit optimization.• We also support legal and accounting firms and insurance companies with litigation and arbitration assistance, business interruption valuations, and expert opinion statements. BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS © 2011 Behre Dolbear Group Inc. All Rights Reserved
  42. 42. The Behre Dolbear Group• Behre Dolbear has 12 offices in 8 countries and completed 210+ jobs in 55+ countries in each of the last 5 years using our global network of 125+ professionals in all major mining markets• We perform studies and advise a wide range of entities in the mining, banking, investment, financial, legal and accounting sectors, and government agencies around the world• Our experience spans technical, operating, and financial issues in the base, precious and ferrous metals, coal, uranium, fertilizer and industrial minerals, gemstones, and construction materials THANK YOU Tim Alch V.P. & Senior Minerals Business Analyst Behre Dolbear & Company (USA), Inc. 100 Park Avenue, New York City 10017 +1.845.480.1434 Tim.Alch@dolbear.com BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS © 2011 Behre Dolbear Group Inc. All Rights Reserved
  43. 43. The Behre Dolbear Group BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  44. 44. Appendix• Characteristics of Scoping, Pre Feasibility and Full Scale Feasibility Studies BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  45. 45. Characteristics of Scoping, Pre-Feasibility, and Full-Scale Feasibility Studies – A1 Potential Areas of Investigation for Proposed Mining Projects PROPERTY INFORMATION MANAGEMENT AND LABOR Location, topography and climate Management organization requirements Land ownership and royalties Labor requirements Property history Current status PRODUCTS, MARKETS AND SALES Products GEOLOGY AND RESOURCES Markets Geological description Prices Mineralogy Sales Drilling, sampling and assaying Evaluation techniques ENVIRONMENTAL AND PERMITTING Mineral resource estimate Permit list Environmental impact MINING Compliance costs Ore reserve estimate Compliance cost timing Mining method and plans Mining equipment Reclamation expenses Material handing Material handling equipment FINANCIAL ISSUES Historical and forecast production Taxes Consumables Royalties Mining capital estimates Fees Mining operating cost estimates Licenses PROCESSING DEVELOPMENT COSTS AND SCHEDULE Ore sampling and testwork Development cost estimate Processing method Development schedule Other required processes Development methodology Process equipment Historical and forecast production POLITICAL & SOCIAL CONSIDERATIONS Consumables Economic benefits and costs Processing capital estimates Government considerations Processing operating cost estimates Other issues  INFRASTRUCTURE PROJECT ECONOMICS Industrial infrastructure facilities Social infrastructure facilities Economic parameters Utilities, power, water Discount rate determination Infrastructure capital estimates Cash flows Infrastructure operating cost estimates Investor returns Debt analysis Sensitivities BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  46. 46. Characteristics of Scoping, Pre-Feasibility, and Full-Scale Feasibility Studies – A2 (continued) CONCEPTUAL CATEGORY PRE-FEASIBILITY STUDY FEASIBILITY STUDY STUDY/SCOPING STUDYINTRODUCTIONLocation, Topography, and ClimateSite location map •Yes •Yes •YesOwnership and RoyaltiesClaims list •No •No •YesClaims map No Yes YesCurrent Status and HistoryHistorical chronology No No YesInformation on past production, if any No No YesGEOLOGY AND RESOURCESGeological DescriptionGeological map Yes Yes YesGeological cross-sections No Yes YesDrilling, Sampling, and AssayingParameters Yes Yes YesDrill hole location map Yes Yes YesSampling/assaying flow diagram and assessment No Yes YesAssay check assessment and graph No Yes YesMineral Resource EstimateResource methodology determination and approach Yes Yes YesGeologic model limits Yes Yes YesLithology/tonnage factors/code No Yes YesCumulative frequency of samples verses grade No Yes YesVariograms No Yes YesResource Estimate Industry Standards (NI 43- Industry Standards (NI 43- Industry Standards (NI 43- 101, JORC, etc.) 101, JORC, etc.) 101, JORC, etc.) BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  47. 47. Characteristics of Scoping, Pre-Feasibility, and Full-Scale Feasibility Studies – A3 (continued) CONCEPTUAL PRE-FEASIBILITY CATEGORY FEASIBILITY STUDY STUDY/SCOPING STUDY STUDYMININGOre Reserve Estimate Reserve and resource calculation parameters Assumed Values Test-Based Values Test-Based Values Cutoff grade equations No Yes Yes Reserve and resource estimate Industry Standards Industry Standards Industry StandardsMining Method and PlansMining parameters Yes, minimal engineering basis Yes, some geotechnical data YesHydrology/geotechnical parameters No Yes YesMining equipment list No Yes YesConsumables list No Yes YesMaterial handling systems No Yes YesMaterial handling equipment No Yes YesPersonnel list No Yes YesSurface mining No Yes Yes Final pit and dump outlines Yes, simple outline Yes Yes Incremental pit and dump outlines No Yes YesUnderground mining General mine development Yes, general outline Yes Yes Mining approach (stoping, cut and fill, etc.) Yes, general approach Yes YesProduction Schedule Historical production, if any Yes Yes Yes Annual ore and waste tonnage and grade Yes, division of total Yes YesMining Capital and Operating Cost Estimates Mining operating cost estimates Yes, factored ±45% Yes, ±30% Yes, ±15% Mining capital cost estimates Yes, factored ±45% Yes, from engineering Yes, from vendor quotes and manuals ±30% take-offs ±15% BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  48. 48. Characteristics of Scoping, Pre-Feasibility, and Full-Scale Feasibility Studies – A4 (continued) CONCEPTUAL CATEGORY PRE-FEASIBILITY STUDY FEASIBILITY STUDY STUDY/SCOPING STUDYPROCESSINGOre Sampling and Test WorkTest work data No, assumed values No, preliminary data No, preliminary dataProcessing Methods and PlansProcessing methods Yes, general approach Yes YesProcessing parameters Yes, minimal engineering Yes YesEquipment list No Yes YesConsumables list No No YesPersonnel list No Yes YesMaterial balance No Yes YesFlow diagram No Yes YesSite plan Yes, simple block diagram Yes YesGeneral arrangement drawings No No YesProduction ScheduleHistorical production, if any No Yes YesAnnual production tonnage and grade Yes Yes YesOff-site Processing Cost EstimatesConcentration charges Yes, division of total Yes, preliminary estimate Yes, quoteSmelting and refining charges No Yes, preliminary estimate Yes, quoteOther charges No Yes, preliminary estimate Yes, quoteMaterial handling and transport No Yes, preliminary estimate Yes, quoteInsurance and sales charges No No Yes, quoteProcessing Capital and Operating Cost EstimatesProcessing operating cost estimates Yes, factored ±45% Yes, ±30% Yes, ±15%Processing capital cost estimates Yes, factored ±45% Yes, from engineering Yes, from vendor quotes and manuals ±30% take-offs ±15% BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  49. 49. Characteristics of Scoping, Pre-Feasibility, and Full-Scale Feasibility Studies – A5 (continued) CONCEPTUAL CATEGORY PRE-FEASIBILITY STUDY FEASIBILITY STUDY STUDY/SCOPING STUDYINFRASTRUCTUREIndustrial Infrastructure FacilitiesFacilities list Yes, with minimum detail Yes YesPower and water parameters Yes, preliminary Yes YesFull site plan No Yes YesSocial Infrastructure FacilitiesFacilities list Yes, with minimum detail Yes YesHousing No Yes, preliminary YesSchools No Yes, preliminary YesHospitals No Yes, preliminary YesOther No Yes, preliminary YesInfrastructure Capital and Operating Cost EstimatesConsumables list No Yes YesPersonnel list No Yes YesInfrastructure operating cost estimates Yes, factored ±45% Yes, ±30% Yes, ±15%Infrastructure capital cost estimates Yes, factored ±45% Yes, from engineering Yes, from vendor quotes & manuals ±30% take-offs ±15%MANAGEMENT, LABOR & ADMINISTRATIONPersonnelPersonnel lists No Yes YesTraining requirements No Yes YesPersonnel Capital & Operating Cost EstimatesConsumables list No No •YesPersonnel operating cost estimates Yes, factored ±45% Yes, ±30% Yes, ±15%Personnel capital cost Yes, factored ±45% Yes, ±30% Yes, ±15% BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  50. 50. Characteristics of Scoping, Pre-Feasibility, and Full-Scale Feasibility Studies – A6 (continued) CONCEPTUAL PRE-FEASIBILITY STUDY FEASIBILITY STUDY STUDY/SCOPING STUDY CATEGORYMARKETS, PRODUCTS AND SALESMarkets, Products and SalesProducts Yes, preliminary Yes YesVolume Yes, preliminary Yes YesPrices Yes, preliminary Yes YesSales organization No Yes, preliminary Yes, preliminarySales Related Capital and Operating Cost EstimatesPersonnel list No Yes YesConsumables list No No NoSales related operating cost estimates Yes, factored ±45% Yes, ±30% Yes, ±15%Sales related capital cost estimates Yes, factored ±45% Yes, ±30% •Yes, ±15%ENVIRONMENTAL AND PERMITTINGEnvironmentalPermit list No Yes YesEnvironmental Impacts Yes, preliminary Yes YesEnvironmental Compliance Cost EstimatesPersonnel list No Yes YesEnvironmental related operating cost estimates Yes, factored ±45% Yes, ±30% Yes, ±15%Environmental related capital cost estimates Yes, factored ±45% Yes, ±30% Yes, ±15% BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  51. 51. Characteristics of Scoping, Pre-Feasibility, and Full-Scale Feasibility Studies – A7 (continued) CONCEPTUAL CATEGORY PRE-FEASIBILITY STUDY FEASIBILITY STUDY STUDY/SCOPING STUDYDEVELOPMENT SCHEDULE AND COSTSDevelopment ScheduleDevelopment methodology •Yes, preliminary •Yes •YesDevelopment schedule Yes, preliminary Yes YesDevelopment CostsPersonnel list No Yes YesDevelopment related operating cost estimates No Yes, ±30% Yes, ±15%Development related capital cost estimates No Yes, ±30% Yes, from vendor quotes & take-offs ±15%PROJECT ECONOMICSFinancial IssuesTaxes Yes, preliminary Yes YesRoyalties Yes, preliminary Yes YesFees Yes, preliminary Yes YesLicenses Yes, preliminary Yes YesEconomic IssuesEconomic parameters Yes, preliminary Yes YesDiscount rate determination Yes, preliminary Yes YesCash flows Yes, preliminary Yes YesInvestor returns Yes, preliminary Yes YesDebt analysis No No Yes 1.Sensitivities No Yes, preliminary Yes BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS
  52. 52. Characteristics of Scoping, Pre-Feasibility, and Full-Scale Feasibility Studies – A8 (continued) CONCEPTUAL CATEGORY PRE-FEASIBILITY STUDY FEASIBILITY STUDY STUDY/SCOPING STUDYSUMMARY AND RECOMMENDATIONSOperational Parameters Mostly assumed and factored Some engineering basis Some engineering basisTitle and ownership Yes Yes YesGeology Yes Yes YesOre reserves Yes Yes YesMining and processing rates Yes Yes YesDevelopment period and mine life Yes Yes YesMetal/mineral recoveries Yes Yes YesSales Yes Yes YesOperating cost estimates Yes Yes YesCapital cost estimates Yes Yes YesFinancial ParametersCash Flows Yes Yes YesNPV, IRR, and ROI Yes Yes Yes BEHRE DOLBEAR founded 1911 MINERALS INDUSTRY ADVISORS

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