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Corporate Presentation February 2014 Corporate Presentation February 2014 Presentation Transcript

  • Western Areas Ltd Corporate Presentation – February 2014 “Think Nickel, think Western Areas”
  • Disclaimer and Forward Looking Statements This presentation is being furnished to you solely for your information and for your use and may not be copied, reproduced or redistributed to any other person in any manner. You agree to keep the contents of this presentation and these materials confidential. The information contained in this presentation does not constitute or form any part of any offer or invitation to purchase any securities and neither the issue of the information nor anything contained herein shall form the basis of or be relied upon in connection with any contract or commitment on the part of any person to proceed with any transaction of, with, transaction. The distribution of this presentation in jurisdictions outside Australia may be restricted by law, and persons into whose possession this presentation comes should inform themselves about, and observe, any such restrictions. The information contained in this presentation has been prepared by Western Areas Ltd. No representation or warranty, express or implied, is or will be made in or in relation to, and no responsibility or liability is or will be accepted by Western Areas Ltd, employees or representatives as to the accuracy or completeness of this information or any other written or oral information made available to any interested party or its advisers and any liability therefore is hereby expressly disclaimed. No party has any obligation to notify opinion changes or if it becomes aware of any inaccuracy in or omission from this presentation. All opinions and projections expressed in this presentation are given as of this date and are subject to change without notice. This document contains forward‐looking statements. These statements are based on assumptions and contingencies that are subject to change without notice, forward looking and certain risks and uncertainties that could cause the performance or achievements of Western Areas Ltd to differ materially from the information set forth herein. Western Areas Ltd undertakes no obligation to revise these forward‐looking statements to reflect subsequent events or circumstances. Individuals should not place undue reliance on forward‐looking statements and are advised to make their own independent analysis and determination with respect to the forecasted periods, which reflect Western Areas Ltd’s view only as of the date hereof. The information within thi P Th i f ti ithi this PowerPoint presentation was compiled b W t P i t t ti il d by Western A Areas management, b t th i f t but the information as it relates t mineral resources and ti l t to i l d reserves was prepared by Mr. Dan Lougher and Mr. Andre Wulfse. Mr. Lougher and Mr. Wulfse are full time employees of Western Areas Ltd. Mr. Lougher and Mr. Wulfse are members of Australian Institute of Mining and Metallurgy (AusIMM) and have sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which they are undertaking to qualify as Competent Persons as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’(2012 JORC Code). Mr. Lougher and Mr. Wulfse consent to the inclusion in this presentation of the matters based on the information in the form and context in which it appears. The information contained in this presentation in relation to the Flying Fox Mine was prepared and first disclosed under the 2004 Edition of the JORC Code. It has not been updated since to comply with the 2012 JORC Code on the basis that the information has not materially changed since it was last reported. For the Purposes of Clause 3.4(e) in Canadian instrument 43‐101, the Company warrants that Mineral Resources which are not Mineral Reserves do not have demonstrated economic viability. 2
  • Agenda “Western Areas has an enviable track record of  exploring, finding, developing and producing  profitable mines.”  Introduction  O Operations i  Financials & Balance Sheet  Ni k l i d Nickel industry   Exploration & Growth Outlook Explore p Develop Sales Produce 3
  • Corporate Overview WSA vs ASX 200 Resources (FY14 YTD)1 Key Information 5,000 5 000 4,000 $3.00 3,000 $2.50 2,000 $2.00 $1.50 Jul 13 Source: IRESS as at 19 February 2014 1,000 Volum (000s) me Share pric (A$/share) ce $3.50 $3 50 Share price 52 week high/low (A$) 4.70 / 1.97 Shares outstanding (m) 226.5 Market Capitalisation (A$m) 4 729.3 Cash (A$m)2 200.0 (A$m)2 235.2 Debt Sep 13 Volume Top Shareholders Nov 13 WSA Jan 14 ASX 200 Resources 3 3.22 Undrawn ANZ Facility 125.0 Board  & Senior Management 12.2 Schroder Investment Management 9.3 JCP Investment Partners 8.8 Commonwealth Bank 8.0 Notes: Market data as at [10 February 2014] 1. ASX 200 Resources Index rebased to WSA Share Price 2. Cash as at 31 December 2013 half yearly report, plus $89m Equity Raise and convertible bond debt 3. Based on Beneficial Owner analysis and ASX substantial shareholder notices (Form 604) 4. Market cap includes 29.5m shares to be issued on 25/2/14 from the Placement completed on 19/2/14 Ian Macliver Non-Executive Chairman Managing Director & CEO David Southam Executive Director Chief Financial Officer & Company Secretary Julian Hanna Non-Executive Director Richard Yeates Independent, Non-Executive Director Robin Dunbar Terry Streeter Position Joseph Belladonna (%) Name Dan Lougher Name Independent, Non-Executive Director Non Executive 4
  • Investment Highlights  A high grade and low unit cash cost nickel producer  A proven explorer, developer and operator led by an experienced management team  An S&P/ASX 200 index member  Market cap of approximately A$730m million at current prices (incl Placement) Market cap of approximately A$730m million at current prices (incl. Placement)  Profitable, even at the current low nickel price Balance Sheet, flexibility and strength  Balance Sheet, flexibility and strength  A proven dividend payer  Strategic owner of sought after nickel in concentrate from traders and smelter operators. Offtake tender due to commence second half of CY2014  Employer of approximately 500 staff, either directly or through contractors  14 consecutive quarterly reports with no downside operational surprises 14 consecutive quarterly reports with no downside operational surprises  Committed to stable organic growth from the current solid platform p g p  Improving nickel price sentiment and outlook 5
  • Strong Asset Base  Production  Assets Flying Fox Fl i F • 1st nickel mine • 15kt nickel per annum Exploration  & Growth Forrestania & WA  F t i & WA Regional • Nickel  • Traka JV Spotted Quoll Canadian Assets  • 2nd nickel mine nickel mine • 10kt to 15kt nickel per  annum • Nickel/Copper • PGEs Cosmic Boy Finland • Nickel concentrator – treats ore from both  mines Disciplined  Acquisition  A iii Potential  (Nickel &  Base Metals) Base Metals) • VMS • Outokumpu Cu 6
  • Location  WSA concentrate to  BHP Billiton WSA operations WSA  concentrate  exports 7
  • Western Areas are Safe Areas  Continuous Safety Improvement  7.0  LTIFR 1 83 LTIFR  1.83 6.0  Flying Fox >175 days LTI free 5.0  Spotted Quoll >990 days LTI free  Exploration >1,887 days LTI free  Cosmic Boy Concentrator >192 days LTI free  MTIFR 7.4  Contractors and employees fully integrated  into a site wide commitment LTIFR 4.0 3.0 30 2.0 1.0 0.0 00 Jan Feb Mar Apr May Jun 2013 Jul Aug Sep Oct Nov Dec Environment & Social Environment & Social  No environmental breaches  Strong local commitments from the Hyden  Respite Centre, Perth Zoo (Northern Quoll)  and Starlight Children’s Foundation WA 8
  • Operations 9
  • December Quarterly ‐ Outperformance 2012/2013 Tonnes Mined Flying Fox Ore Tonnes Mined Grade Ni Tonnes Mined Spotted Quoll ‐ Underground Ore Tonnes Mined Grade Ni Tonnes Mined Ni Tonnes Mined Mar Qtr Jun Qtr 2013/2014 Sep Qtr Dec Qtr HY Total Tns Ni % Tns     82,668      73,716      86,642     83,095 4.9% 4.7% 4.8% 4.6%        4,081           3,447         4,200        3,791      169,737 4.7%          7,991 Tns Ni % Tns      59,335         53,465       77,097      74,720 5.2% 4.8% 5.3% 4.8%       3 066        2 584        4 090       3 616 3,066 2,584 4,090 3,616      151,817 5.1%          7 706 7,706 Tns Ni % Tns    142,003       127,181     163,739    157,815 5.0% 4.7% 5.1% 4.7%        7,147           6,031         8,290        7,407      321,554 4.9%        15,697 Ore Processed Grade Ave. Recovery Ni Tonnes in Concentrate Tns % % Tns Mar Qtr Jun Qtr Sep Qtr Dec Qtr    145,348       146,256     150,475    148,901 5.0% 5.1% 4.9% 4.9% 91% 89% 90% 88%        6,611           6,634         6,593        6,427 Ni Tonnes in Concentrate Sold Ni T i C t t S ld Tns T       6 845 6,845       6 409 6,409        12 963 12,963 Total Nickel Sold Tns        6,845           7,222         6,554        6,409        12,963 Total ‐ Ore Tonnes Mined Grade Total Ni Tonnes Mined 2012/2013 Tonnes Milled and Sold T Mill d d S ld        7 222 7,222 2012/2013 Financial Statistics Group Production Cost/lb Mining Cost  Mi i C t Haulage Milling Admin By Product Credits Cash Cost Ni in Con  Cash Cost Ni in Con Cash Cost Ni in Con/lb  Exchange Rate US$ / A$ 2013/2014        6 554 6,554 2013/2014 HY Total l      299,376 4.9% 89%        13,020 DEC Mar Qtr A$/lb A$/lb A$/lb A$/lb A$/lb A$/lb US$/lb  Jun Qtr Sep Qtr Dec Qtr YTD         2 23 2.23          0.05          0.41          0.19         (0.02)          1 87 1.87             0.05             0.38             0.18          (0.02)          1 65 1.65           0.06           0.40           0.19          (0.02)         1 88 1.88          0.06          0.44          0.19         (0.03)          2.46          2.28 1. Continued low unit cash costs for  1 Continued low unit cash costs for the Dec half.  10% down on  previous half. 2. Positive reserve reconciliation on  grade/tonnes plus cost reduction  grade/tonnes plus cost reduction program delivering results. 3. Production of nickel in ore and  concentrate remain ahead of the  guidance run rate. guidance run rate 4. Cash at bank increased to  A$100m with A$19m free  cashflow for the half. 5. 14 quarters in a row of on target  or better operational  performance.            1 76 1.76            0.06            0.42            0.19           (0.02)         2.86 Comments         2.54            2.41          2.97           2.44           2.09          2.36            2.22         1.04           0.99           0.92          0.93            0.92 10
  • Bottom Quartile Producer 50% of nickel production  at a loss, including NPI Top Tier assets will  survive Grade is King 20 Nickel Grade Mined Comparison FY2013 6.0% 15 Cash  Co ost (US$/lb) ) 5.0% 5.0% Losing Money  10 4.0% 3.8% 3.1% 3.0% 5 Spot LME Nickel Price, Spot LME Nickel Price US$6.30/lb  2.0% 1.7% Western Areas  0 1.0% 0.5% 0.0% -5 WSA Company 3 Company 1 Company 4 Company 2 11
  • Flying Fox Mine Mineral Resource and Ore Reserve  High Grade (excluding disseminated sulphide  resource) Mineral Resource: 1.64Mt @ 5.6% Ni  containing  92,600 Ni Tonnes  Ore Reserve: 1.55Mt @ 4.0% Ni containing  61,920 Ni Tonnes  Underground drilling program to extend  Mineral Resource is ongoing Mineral Resource is ongoing  Over 700m strike length in T5 Production P d i  FY2013 – 348,448t @ 4.9% Ni  for 17Kt nickel  Low cash cost operation  Estimated Life of Mine – 5‐6 Years, extensional  drilling in progress 12
  • Spotted Quoll Mine Mineral Resource and Ore Reserves  Ore reserve now 2.9mt @ 4.3% containing 125,440t nickel  Remains open at depth and to the North  Surface drilling program complete to improve  conversion of inferred resource to indicated  resource  Already >10 year mine life on reserve  New Spotted Quoll North Indicated and  Inferred Resource of 140kt @ 9.3% for  12,906 nickel tonnes 12 906 i k l Production  FY2013 – 207,288t @ 5.1% Ni for 10.6Kt FY2013  207,288t @ 5.1% Ni  for 10.6Kt  nickel  Successfully ramped up nickel production to a  sustainable 12ktpa run rate in FY2014  Top‐down mining using paste fill. Plant fully  operational 13
  • Spotted Quoll North 14
  • Forrestania Nickel Concentrator Concentrator Summary  Current nameplate capacity of 550,000tpa of ore (but being  exceeded)  Nickel concentrate output circa 25,000tpa Ni  Concentrate grades of around 14.0% Ni   Premium blending  product (Fe/Mg ratio >15:1)  Desirable to smelters as it enables lower quality  concentrates to be economically utilised after blending  14,000t of concentrate storage capacity Export Infrastructure and Logistics   Access to >1400 sealed shipping containers  No environmental issues No environmental issues  Using 25 trucks for concentrate transportation  Shipping contract in place, FOB Esperance Port 15
  • Independent Producer ‐ Offtake Contracts Concentrate Supply  1000  Tightness in smelter supply to be experienced from  2014.  Closures have impacted supply  Reliable nickel sulphide concentrate supply dwindling   Laterites and Nickel Pig Iron do not fill the void – Indonesian Ban should severely impact NPI production 900 850 Nickel in Conc/ Kt  Global nickel sulphide grades in decline Global Smelter Demand vs Global Concentrate Supply 950 800 750 700 650 600 550 500 2009 Offtake Contracts Offtake Contracts 2010 2011 2012 2013 2014 2015 Nickel in Concentrate Supply 2016 2017 2018 2019 2020 Smelter Demand  Offtake to BHP 2017 – 12ktpa nickel in concentrate  Offtake to Jinchuan expires around Feb 2015  FOB Terms FOB Terms  Very competitive payable terms  WSA in a unique position being an independent  producer  producer  Jinchuan tender will commence around Sept 2014, with  expressions of interest already being lodged NOTE: The graph FORRESTANIA – OFFTAKE CONTRACTS is based on Western Areas’ 10 Year  The graph FORRESTANIA  OFFTAKE CONTRACTS  is based on Western Areas 10 Year Production Targets.  These Targets include estimates and assumptions on production rates of  existing ore reserves, conversion of existing mineral resources to ore resources and assumptions  on potential extensions to existing mineral resources, based on current information.  These  Production Targets may vary due to future drilling results, nickel prices, costs and market  conditions.  Refer to Disclaimer and Forward Looking Statement in Presentation 16
  • Financials and Balance Sheet Management Lounge Lizard 10m wide face of 7% Massive Nickel Sulphide Spotted Quoll face at average 10.6% Nickel Sulphide 17
  • Key Takeaways – Half Year  LTIFR of 1.83 – one of the lowest in the hard rock mining industry  15 697t nickel in ore production grade averaging 4 9% nickel 15,697t nickel in ore production, grade averaging 4.9% nickel  Nickel in concentrate production of 13,020t Nickel in concentrate sales 12,963t to Jinchuan and BHP  Nickel in concentrate sales 12 963t to Jinchuan and BHP All ahead of guidance ll h d f d  A$2.41/lb cash cost in concentrate:   Remains best in class in Australia 10% lower than FY13 10% lower than FY13  Capital and Exploration Expenditure incurred A$25.8m – guidance now <A$60m full year  EBITDA margin improved 20% to 45.6% from 2nd half FY13:  Reflects impact of cost reduction activities and successful ramp up of Spotted Quoll underground  Underlying NPAT of A$4.3m on reported NPAT of A$2.7m (post FinnAust expenditure):    2nd Half FY13 was an underlying Net Loss after Tax of –A$0.7m  Positive Quotation Period adjustment of A$1.0m Interim fully franked dividend of 1c per share  Free cashflow generation A$19.2m:  2nd half FY13 was a net cash outflow of A$5.1m  18
  • Financial Snapshot Half Highlights Mine Production (tonnes Ni) Mill Production (tonnes Ni) Recovery y Sales Volume (tonnes Ni) Cash Costs (A$/lb) Exchange Rate USD/ AUD g / Nickel Price (U$/tn) Sales Revenue (A$'000) EBITDA (A$ 000) EBITDA (A$'000) Underlying EBIT (A$'000)* Underlying NPAT (A$'000)* Reported NPAT (A$ 000) Reported NPAT (A$'000) Free Cashflow (A$'000) Cash at Bank (A$'000) Dividend (cents) Dividend (cents) * Underlying removed the impact of FinnAust Plc costs 2H 2013 1H 2014 14,872 15,697 12,596 13,020 90% 89% 14,067 12,963 2.68 2.41 1.01 0.92             15,146             14,212           152,721           143,374 58,302 65,411 17,220 20,723 (689) 4,267 (96,222) (96 222) 2,671 (5,127)             19,181 80,719 99,900 0.0 00 1.0 10 2H FY13 had record  shipments  and sales  delayed from the  previous half Unit cash costs reduced  by 10% through cost  savings initiatives Sales revenue lower on  lower volume EBITDA increased $7.1m  and EBITDA margin  improved 20% NPAT increased $5.0m,  prior to FinnAust costs i Fi A Lower capex in 1HFY14  and no financing  transactions. A$24.2m  turnaround from 2HFY13 19
  • Balance Sheet Management Equity Raise Completed 19 January 2014   Fully underwritten placement to institutional and sophisticated investors raised A$88.6m  y p p $ (“Placement”) A share purchase plan to raise up to A$15 million (“SPP”) was offered to retail shareholders together the “Equity Raising”.  SPP offer closes late March  Placement completed at A$3.00 per share, being a 3.2% discount to 5 day VWAP  Multiple times over subscribed – strong take‐up of existing shareholders and entrance of  q quality new shareholders y Funds raised from the Equity Raising will be used to:   Together with existing cash, repay the A$110m convertible bond due on 2 July 2014 and provide  majority coverage for the July 2015 convertible bond of A$125m     Provide earnings accretion to shareholders    WSA generated A$19m of free cashflow during H1 FY2014 and held A$100m cash at bank as at 31/12/2013 Assuming an Equity Raising of A$103m (pre raising costs) the cash balance will increase to over A$200m* Combined with an existing undrawn loan facility with ANZ for A$125m, provides over A$300m of coverage Retiring the July 2014 bond with cash, rather than more debt, results in approx A$12m in interest and bond  accretion costs per annum being removed The Board intends to potentially replace the interest costs into a higher and more sustainable dividend stream  Provide additional balance sheet flexibility for Western Areas to consider value adding capital  y g p projects such as in‐tank leaching (mill recovery enhancement) *this balance uses the 31 December closing cash balance 20
  • Sources and Uses of Funds Enhanced flexibility to repay debt and pursue growth Sources A$m $ Uses A$m $ Cash on hand (as at 31 December 2013) [99.9]1 July 2014 Convertible Bond redemption [110.2] Placement and SPP [103.6]2 Potential July 2015 Convertible Bond redemption [125.0] ANZ undrawn debt facility [125.0]1 1H2014 Dividend Declared3 [2.3] Cash / Facility ‘buffer’ Total [328.5] [91.0] Total [328.5] Comments  The available cash and facilities combined equates to over A$300 million in available facilities and cash at a time when Western Areas’ operations are significantly cashflow positive ’ f l hfl  July 2014 Convertible Bond will be retired by Cash  After the redemption of the July 2014 convertible bonds, Western Areas will still retain sufficient cash and facility capacity to  cover the July 2015 Convertible Bond redemption when it falls due along with other growth options (excluding any positive  cashflow generation from operations over the next 17 months) hfl f h h)  ANZ has, in principle, agreed to a longer dated facility (March 2017, was March 2016) which allows financial flexibility past the  maturity date of the 2015 Convertible Bond Notes: 1. 2. 3. 4. Cash and debt numbers contained in the Half Year Financial Statements Gross proceeds (pre‐Offer costs) assuming maximum amount of A$15 million raised under the SPP Refer to H1 FY2014 results announcement Refer to comments on potential capital projects such as the in tank leaching project – subject to decision to proceed
  • Nickel Industry Whilst best  known for it’s  use in coins,  nickel has far  more  strategic uses It can be  alloyed with  ll d ith other metals  to create  truly  truly extraordinary  materials 22
  • Nickel Price Drivers There are a number of factors that influence the nickel price including: 1. Level of global nickel supply 1 Level of global nickel supply 2. Cost and capacity of Chinese nickel pig iron (“NPI”) production 3. Indonesian nickel laterite export ban – implemented January 2014 4. Stainless Steel demand in China, Europe and North America What we believe is occurring: 1. Any perceived nickel oversupply is marginal – a supply response is beginning to occur:      Glencore – all Australian sulphide production ceased, Falcondo operation closed Norilsk – all Australian operations ceased, ex‐Russia projects up for sale Votorantim – nickel smelter being closed down in South America Talvivaara – well publicised production and funding issues Large HPAL projects still facing technical and high cost issues 23
  • Nickel Price Drivers (cont’d.) 2. Chinese NPI production capped between 450kt to 500kt of contained nickel.  Unit costs  range from US$6/lb to US$9/lb:     Latest RKEAF technology relies on Indonesian laterite Laterite must be >1.8% Ni and <25% Fe – Philippines laterite is out of spec Large power consumer – power costs rising in China Total Chinese market for nickel is estimated to be between 800kt to 900kt per year – with  growth forecast to be at 5% per annum* 3. Indonesian ban implemented and exports have ceased:     China is estimated to have between 6 and 9 months of Indonesian laterite supply* Uncertainty on ban staying in full force  Indonesian election process during April/ May Uncertainty on ban staying in full force – Indonesian election process during April/ May Potential exists to raise laterite export taxes  Believe there is now a cap on NPI production at worse 4. Stainless steel demand remains strong in China – moving to consumer based and  building project demand   5. European stainless steel demand is muted, whilst US showing signs of a small recovery * Based on global bank and industry publications and research from many sources, plus estimates based on discussions with Chinese counterparties  24
  • Nickel Pig Iron (NPI) to become expensive NPI is too expensive to continue to fill the gap…….. 2012 and 2016 estimated NPI cash cost (US$/lb) Cost Pressures 14 1. Electricity (25‐75% of cost) 1 Electricity (25 75% of cost) 11.90 12 10.80 C Cash cost (US$/l Ni) lb 10 9.10 2. Labour costs increasing 8.10 7.50 8 6.80 6 3. Indonesian Laterite the only  supplier for low cost RKEAF 4. Increase ore export taxes 4 Increase ore export taxes 4 2 0 Blast Furnace Electric Arc Furnace 2012 Rotary-Kiln Electric Furnace 2016 NPI is already a high cost method of nickel production, and domestic economic forces in  l d h h h d f k l d dd f China may adversely impact economics 25
  • Exploration and Growth Outlook 26
  • Pillars for Growth Western Ultramafic Belt: Organic Growth O i G h New Morning channel New Morning channel Between Spotted Quoll & Flying Fox Selected Overseas Exploration Leverage from WSA’s Concentrate off‐take Joint Ventures Traka Resources Southern Cross  Base Metals – many opportunities being  presented Acquisitions Base Metals Bottom Half of the Cost Curve Bottom Half of the Cost C r e Use WSA expertise – exploration,  development and operations The 3  D discipline and due diligence The 3 “D” – discipline and due diligence 27
  • Forrestania Tenements Regional Geology Regional Geology  120km strike length (900 sq km) of  prospective Forrestania Nickel Project,  within 400km long nickel province within 400km long nickel province  Six ultramafic belts p p  Nickel sulphide deposits and most  occurrences in two belts (Eastern and  Western) este U t a a c e t osts t e g  Western Ultramafic Belt hosts the high  grade Flying Fox, Spotted Quoll and new  Morning deposits 28
  • Short Term – Near Mine Exploration  Exploration budget of A$15M for FY14, majority spent on drilling at Forrestania Drilling priority within 8km long zone (below).  New discovery would access existing mine   Drilling priority within 8km long zone (below) New discovery would access existing mine infrastructure. Systematic approach  Recent New Morning massive sulphide and Sunrise discoveries  29
  • High Grade Discovery at New Morning  WSA’s latest new high grade discovery,  g g y 2.5km from Flying Fox and 2.8km from  Spotted Quoll  All material approvals in place,  potential major capex savings &  i l j i & accessible from either mine  Massive sulphide discovered below  New Morning: New Morning:  4.4m @ 7.4% nickel including 3.6m  @ 8.7% nickel  3.0m @ 6.3% nickel including 2.4m  @ 7.6% nickel   1.5m @ 5.6% nickel including 0.7m  @ 10.2% nickel  Major drilling program continues with  d ll h use of DHEM data 30
  • West Musgrave  JV  Attractive entry point for highly prospective Attractive entry point for highly prospective  landholding where significant pre‐work  completed  Up to 70% earn into prospective West Up to 70% earn into prospective West  Musgrave tenements (1,075km2) with Traka  Resources  Demonstrated strong endowment Demonstrated strong endowment (BHPB’s Nebo – Babel – Succoth deposits)  Targeting massive sulphides (nickel/copper)  Geophysical surveys commenced on priority  targets (MLEM)  A number of highly conductive targets A number of highly conductive targets  identified and drilling has commenced 31
  • Finland – FinnAust Mining Plc Projects  Listing on AIM completed in December 2013 and 68%  WSA owned post listing WSA d t li ti  Current market cap circa A$20m 300km long base metal province in Finland  300km long base metal province in Finland  Numerous nickel/copper/zinc mines & occurrences yp j  Focus on two key projects:  Outokumpu Copper Project  Hammaslahti VMS Project  Drilling commenced for potential extensions and  repetitions to known copper deposits  Geophysics proving very effective in defining targets ‐ ZTEM survey completed  18 months worth of drilling funds 32
  • Investor Equation • High Grade =  Margin • Survival • Returns to  shareholders in  shareholders in Dividends • Guidance  continually  continually met or  exceeded Highest Grade  Nickel Globally Cashflow Positive Strong Track  Record of  Delivery • Current global  g production at   marginal cost • New mine  successfully  brought on in  24 months 24 months • Flexibility in  y meeting future  demands or  opportunities Nickel Price  Primed for  Upside History of  Discovery and  Development Strong Balance  Sheet 33
  • Questions and Appendices 34
  • Income Statement Commentary (2H 2013 v 1H 2014) Earnings Data ($ 000) Earnings Data ($'000) Exchange Rate USD/ AUD Nickel Price (U$/tn avg) 1H FY 2013 1H FY 2013 2H FY 2013 2H FY 2013 1H FY 2014 1H FY 2014 1.03 1.03                 0.92 17,122 15,146            14,212 Revenue         158,963 , EBITDA             67,565            58,302            65,411 EBITDA Margin % Depreciation & Amortisation Underlying EBIT Interest Expense Tax 38.2% 45.6% (44,186) (41,082) (44,688)            23,379            17,220            20,723 (13,671) (13,065) (13,431) (3,429) (4,845) (3,025)                6,279 FinnAust expenditure                         ‐ Reported NPAT Dividend (cents)         143,374 , 42.5% Underlying NPAT Tax effected Impairment         152,721 , (689)                4,267                         ‐ (1,596) (4,162) (95,533)                         ‐             2,117  Sales revenue impacted by record higher volume in 2H2013 due to shipment timing versus 1H2014.  EBITDA dollars and margin improvement a direct reflection of cost improvement p and productivity initiatives delivering.  D&A expense increased due to higher volume Lounge Lizard ore mined.  FinnAust 68% owned and therefore consolidated. Expenditure mainly related to listing on AIM. Commentary (1H 2013 v 1H 2014)  R Revenue $20 l $20m lower d due to realised li d nickel price.  EBITDA dollars steady improved by 10%. but margin (96,222)               2,671 2.0 0.0                   1.0 35
  • Income Statement Waterfall – Half Year WSA NPAT  2H FY 2013 vs 1H FY 2014 WSA NPAT ‐ 2H FY 2013 vs 1H FY 2014 80 1.6 39.1 39 1 Tax Reven nue (Vol) Other FinnAust Reve enue (FX) Cost t of Sales Revenu ue (Price) ‐60 1H H FY 2014 $2.7 ‐$96.2 Impa airments ‐40 14.5 136.5  136 2H H FY 2013 $m 20 ‐20 8.3 14.3 40 0 1.8 13.4 60 ‐80 ‐100 Comments: 1. 2. 3. 4. Impairment charge in 2H 2013 related mainly to historical exploration Reduced volume of sales and nickel price was largely offset by a stronger AUD Cost of Sales decrease reflects cost improvement realisations, partially offset by increased depreciation & amortisation FinnAust expenditure of $1.6m primarily relates to listing costs of FinnAust on the London AIM 36
  • Cashflow Statement Commentary (2H 2013 v 1H 2014) Cashflow Statement ($'000) ($ ) 1H FY 2013 2H FY 2013 1H FY 2014 Operating Cashflow            48,076            64,039            49,201 Less: Exploration (12,795) (7,385) (9,976) (2,297) (2,033) (2,370) Mine Development (15,475) (20,052) (15,629) Capital Expenditure (14,333) (4,719) (1,974) FinnAust Investment Pre‐Financing Cashflow            3,176         29,850          19,252 Investment activities                      ‐ (285)                      ‐ Outokumpu Royalty Payout (14,317)                      ‐ Payment for subsidiary P f b idi                     ‐ Proceeds from Share Issues            50,000            15,009                      ‐ Proceeds/(Costs) from Financing Dividends Paid Dividends Paid Repayment of ANZ facility Repayment of convertible bond Net Cashflow Net Cashflow Cash at Bank (2,231) (10,784) (10 784)                      ‐                     ‐                      ‐ (764) (71) (3,937) (3 937)                      ‐ (45,000)                      ‐ (105,500)                      ‐ (79,656)                      ‐  Operating cashflow difference driven mainly by reduced sales volume and working capital movements in 1H2014 (timing difference).  Reduced capital expenditure and mine development as mines mature.  Free cashflow improved by $24.3m. Commentary (1H 2013 v 1H 2014)  Operating cashflow slightly higher despite a significantly reduced nickel price due to the success of cost saving initiatives.  Pre‐financing Pre financing cashflow $16.1m stronger due to reduced capex spend.  Free cashflow $19.2m improved due to no financing transactions for 1H2014.  Outokumpu LOM Royalty was retired in 1H2013.                      ‐ (5,127)          19,181            85,846            80,719            99,900 37
  • Cashflow Waterfall – Half Year WSA Cashflow ‐ 2H FY 2013 1H FY 2014 WSA C hfl 2H FY 2013 vs 1H FY 2014 80 4.4 70 60 8.3 11.8 50 8.3 12.3 12 3 40 $m 2.0 15.0 30 15.6 20 45.0 10 1H FY 2014 Sa ales (Volume) SPP Sale es (Price $US) Wo orking Capital Other Mine D Development Cost of Sales Sales (FX) ‐20 $19.2 $19 2 Repay yment of ANZ  facility ‐10 ‐$5.1 $5 1 2H FY 2013 0 Free cashflow generation improved by A$24.3m from the previous six months: 1. 1 2. 3. Sales volume decrease related to the brought forward sales from the previous period. Sales volume decrease related to the brought forward sales from the previous period Gains on the depreciation of the AUD were nearly offset by a lower US dollar nickel price. Significantly less financing transactions in 1HFY2014 with no debt repayments. 38
  • Balance Sheet Commentary  Balance Sheet 1H FY 2013 2H FY 2013 1H FY 2014 Cash at Bank 85,846 80,719 99,900 Receivables 26,276 18,610 19,240 Stockpiles & Inventory 41,699 30,318 40,376 PP&E 114,413 112,110 106,314 Exploration & Evaluation 140,051 32,182 43,259 Mine Development 272,104 241,776 225,559 4,525 2,308 2,211 684,914 518,023 536,859 Trade & Other Payables Trade & Other Payables 45,216 36,911 33,526 Short Term Borrowings 45,073 4,266 112,380 Long Term Borrowings 265,296 233,842 138,267 TOTAL LIABILITIES TOTAL LIABILITIES 355,585 355 585 275,019 275 019 284,173 284 173 SHAREHOLDERS EQUITY 329,329 243,004  Improved balance sheet with A$100m cash at bank bank. 252,686 Other TOTAL ASSETS  Post equity raise (assuming full take‐up) significant cash providing low gearing and flexibility:  C Convertible b d J l 2014 – tibl bond July A$110.2m – COVERED BY CASH.  Convertible bond July 2015 – A$125.0m – COVERED BY CASH AND EXISTING UNDRAWN ANZ FACILITY.  Mine Development and PP&E reduction reflects reduced spend and amortisation charges. g  FY14 combined guidance for capital expenditure, exploration and mine development is now <A$60m. 39