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Objective Capital's Rare Earths, Speciality & Strategic Metals ...

Objective Capital's Rare Earths, Speciality & Strategic Metals
Investment Summit 2012
Ironmongers' Hall, City of London
13-14 March 2012
Speaker: Caroline Wilson, Matamec

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  • 1. RARE EARTHS, SPECIALITY& STRATEGIC METALSINVESTMENT SUMMIT Zeus: home of the heavies Caroline Wilson – Director Business Relations, Matamec IRONMONGERS’ HALL, CITY OF LONDON TUESDAY-WEDNESDAY 13-14 MARCH 2012 www.ObjectiveCapitalConferences.com
  • 2. The Kipawa HREE-Y-Zr Deposit March, 2012
  • 3. Cautionary Statement Concerning Forward-Looking Statements This document contains “forward-looking information” including without limitation statements relating to mineral reserve estimates, mineral resource estimates, realization or mineral reserve and resource estimates, capital and operating costs estimates, the timing and amount of future production, costs of production, success of mining operations, the ranking of the project in terms of cash cost and production, permitting, economic return estimates, potential upsides, and the future price and supply and demand for rare earths. Readers should not place undue reliance on forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Corporation to be materially different from any future results, performance or achievements expressed or implied by the forward- looking statements. The preliminary economic assessment study results are estimates only, are preliminary in nature and are based on a number of assumptions, any of which, if incorrect could materially change the projected outcome. Until a positive feasibility study has been completed, and even with the completion of a positive feasibility study, there are no assurances that Kipawa will be placed into production. Factors that could affect the outcome include, among others: the actual results of development activities; project delays; inability to raise the funds necessary to complete development; general business, economic, competitive, political and social uncertainties; future prices; alternative rare earth sources or substitutes; actual rare earth recovery; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; accidents, labour disputes and other risks of the mining industry, political instability, terrorism, insurrection or war; delays in obtaining governmental approvals, necessary permitting or in the completion or development or construction activities. Although the corporation has attempted to identify important factors that could cause actual actions, events or results to differ materially for those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward-looking statements contained herein are made as of the date of this presentation and the Corporation disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or results or otherwise, except as required by applicable securities laws. NI 43-101 Compliance The technical information pertaining to the Kipawa HREE Project in this presentation is based on the news release entitled “Matamec PEA Study Shows Robust Economics for the Kipawa HREE Project” published on January 30th, 2012 that describes the results of the Kipawa HREE Project Preliminary Economic Assessment (“PEA”) study and was prepared in accordance with Canadian regulatory requirements by, or under the supervision of Guy Saucier, ing. of Roche Ltd. 3
  • 4. Market Summary (TSXV:MAT) 0.7 6.0COMPANY STATISTICSCurrent share price $0.3152 week range $0.20 to $0.70 0.6 5.0Basic shares 120 millionFully diluted shares 138 million 0.5 4.0Market capitalization $37 million Price ($CAD per share)Entreprise value $33 million 0.4 Volume (MM)Cash & cash equivalents $4 million 3.0 0.3CAPITAL STRUCTURE 2.0Issue and outstanding 120 million 0.2Warrants 11 million Weighted average exercise price $0.41 1.0 0.1Options 7 million Weighted average exercise price $0.221 0.0 0.0 Weighted average exercise price 3/3/2011 4/3/2011 5/3/2011 6/3/2011 7/3/2011 8/3/2011 9/3/2011 10/3/2011 11/3/2011 12/3/2011 1/3/2012 2/3/2012 3/3/2012 Shareholder Base Research Coverage Institutional ownership 30% Byron Capital Markets Dr. Jon Hykawy Insider ownership 2% Cormark Securities Edward Otto Pinetree Capital, Mineralfields ~20% Jacob Securities Luisa Moreno Source: Capital IQ, Bloomberg and company. Data as of March 5, 2012. 4
  • 5. Properties: Main Focus - Kipawa Deposit• Located in the Témiscamingue region of Quebec, some 160 km south of Rouyn-Noranda and 50 km east of the town of Témiscaming• Accessed by a nearby network of logging roads, railway, electric grid and airport• Use of Hydro-Quebec’s power grid at the mine site instead of diesel power• High capacity of rail freight service by CN-CP-OVR-ON 5
  • 6. REE: 5 Critical Elements for 4 Clean Energy Technologies La Ce Pr Nd Sm Eu Gd Tb Dy Ho Er Tm Yb Lu Y HV electric motor & generator ・Neodymium ・Praseodymium ・ Terbium ・ Dysprosium Source: U.S. Department of Energy, “Critical Materials Strategy”, Dec. 2011. 6
  • 7. Rare Earths are Not Commodities!The Needs of the End User must be Met•They are customer-specific chemicals, produced to precisechemical and physical specifications.•The customer needs are continually evolving.•It requires the suppliers to become an integral link in the supplychain.Source: Dudley Kingsnorth (IMCOA), March 2010. 7
  • 8. Developing a Rare Earth ProjectMust develop 3 aspects simultaneously: •Drill off a NI43-101 resource •Define mineralogy and extraction process •Find an end user 8
  • 9. Company Overview • Focused on developing the Kipawa deposit, 100% owned property located in Quebec - One of the top 5 HREE assets outside of China • Signed an MoU with a high profile end-user, Toyota Tsusho Corp. (“TTC”), as a strategic partner – TTC will provide an off-take agreement for 100% of production at market prices and CAPEX financing • Experienced management team and directors • Fast tracking to production – Mining lease application and environmental permitting to be filed by Q1 2012 – Hydrometallurgical pilot plants to be completed by Q2 2012 – Feasibility study by Q1 2013 – Environment and permitting by Q2 2014 – First production as early as Q2 2016 (Able to accelerate production by mid 2015 with help of TTC) 9
  • 10. Strong projecteconomics Before tax NPV8% of $606 million (36.9% IRR)Robust Average annual production of 5,072 tonnes of mixedproduction TREO concentrate with at least 200 tonnes ofprofile dysprosiumLow projectedcash costs $16.97/kg mixed TREO concentrateSimple Straightforward mineralogy, ideal deposit geometry,metallurgy simple processing flow-sheet, most infrastructure in placeUpside Significant upside potential from several by-productspotential and deposit expansion drilling 10
  • 11. Kipawa HREE Project: Location and Infrastructure Rouyn-Noranda Val d’OrMining services are found in Sudbury, Rouyn-Noranda and Val d’Or Témiscaming KipawaSudbury Deposit North Bay Montréal Ottawa 11
  • 12. Mineral Resource TREO Enriched Zones SW NE Schematic Cross- Section with TREO enriched envelopes Mining – open pit, Zirconium Zone low strip ratio, small op 2011 discovery Deposit Open Laterally and at Depth 12
  • 13. Resource Update• Indicated resources represent 79.8% of the total resource• Mineral concentrate grade of 1.11% TREO; overall REE recovery of 81%• Heavy rare earth oxides and yttrium combine for an average of 36% TREOs totaling 22,940 tonnes of indicated and 6,300 tonnes of inferred HREO + Y2O3 Grade (%) Tonnes Cut-off Grade Category Tonnage 1 2 3 ZrO2 Y2O3 HREO TREO (H+Y) /TREO HREO Dy2O3 Y2O3 Tb2O3 Eu2O3 Nd2O3 Indicated 17,645,000 0.909 0.097 0.060 0.435 36% 1,58,700 2,823 17,116 423 300 10,234 0.2% TREO Inferred 6,805,000 0.866 0.080 0.051 0.371 35% 347,055 885 5,444 136 95 3,403 Indicated 12,472,000 0.913 0.114 0.070 0.512 36% 873,040 2,245 14,218 349 249 8,481 0.3% TREO Inferred 3,842,000 0.912 0.101 0.063 0.463 35% 242,046 653 3,880 100 69 2,420 1 Sum of all heavy rare earths in oxides (terbium to lutetium) 2 Sum of all rare earths in oxides plus yttrium in oxide; TREO = LREO + HREO + Y 2O3 3 HREO plus Y2O3 In-Pit Mineral Resources* Tonnes Grade (%) Indicated (79.8% of the deposit) 15,161,000 0.434 Inferred (20.2% of the deposit) 3,843,000 0.403 Open pit design at Kipawa HREE Total 19,004,000 0.428 Project mine site 13
  • 14. Kipawa Deposit: Simple Mineralogy -Main bearing-REE mineral is Eudialyte, contains 70% of TREO of the deposit -Simple mineralogy: medium grained, well-crystallized and not intergrown - can eliminate 65% of ore through magnetic concentration with 90% recoveries = less ore to heat and leach = less cost 14
  • 15. Low Cost Ore Processing with Simple Mineralogy 3 steps for low-cost chemical extraction for a competitive edge vs. current producers Step 1 Step 2 Step 3 Mineral ConcentrateOre from Open Pit (0.42%) (1.11%) Mixed TREO Concentrate Regrind Crushing Heat: Room temp. Acid: 150 kg/t Rare Earth Separation Leaching Time: 2 hours + Water Grinding Solid/Liquid Separation Solid Tailings Stabilization Individual REE Oxide Physical Concentration Liquor Purification/Precipitation Mineral Concentrate Mixed TREO Concentrate 90 % of TREO in 35% of 88% of TREO 79% of TREO Recovered inOriginal Mass Recovered in Recovered in Step 2 Steps 1& 2 to the liquor Step 1 Up to Purification / Precipitation stage 15
  • 16. 16
  • 17. PEA Highlights (January 30, 2012) CAPEX OPEX CAPEX Items Initial Cost OPEX Items Annual Cost Per kg of (million CAD) Cost Mixed TREO (Million $/y) concentrate Kipawa site 100.778 ($/kg) Temiscaming site 85.999 General & 8.841 1.682 Administration Other Infrastructure 10.730 Mining(including 16.619 3.161 Total Direct Cost 197.507 Mine Manpower) Total Indirect Cost 55.103 Total Process 58.350 11.099 Contingency (25%) 63.153 Tailings 0.240 0.046 Transportation 5.160 0.982 Total 315.763 Total 89.210 16.970•Kipawa deposit: Mining and mineral pre-concentration Plant•Temiscaming: Hydrometallurical processing Plant 17
  • 18. Financial Analysis - Assumptions Economic Assumptions Technical Assumptions REOs Price deck Item Unit Base Case Value Market Prices (US $/ Kg) Total Ore Mined M tonnes 19.0Ce2O3 5 Processing Rate Tonnes / year 1,500,000La2O3 10Nd2O3 75 Life of Mine years 12.9Pr2O3 75 Average Combined % 81.0Sm2O3 9 Process Recovery Average Mining Cost ($ / tonne mined) 4.67Eu2O3 500 Average Processing Cost ($ / tonne milled) 38.90Gd2O3 30Tb2O3 1 500 Average General & ($ / tonne milled) 5.90 Administration CostsDy2O3 750 Concentrate Transport ($ / tonne concentrate)Ho2O3 65 8.00 between Process PlantsEr2O3 40 Mixed TREO Transport to ($ / tonne concentrate) 183.00 AsiaLu2O3 320 Refining Charges $ /Kg 18.34Y2 O 3 20Exchange 1.00Rate(CAD $/US $)Discount Rate 8.0(%) 18
  • 19. Financial Analysis 0.02 Er Tm 0.00 Lu Ce Yb 0.02 0.02 0.00 La 0.02 Revenue Base Case Y Ho 0.07 Pr (million CAD) Nd 0.05 Total At-mine Revenue 2,822.1 0.01 0.16 Sm 5 Critical Pre-production Capital 315.8 0.00 Elements Expenditures Sustaining Capital Eu (DOE) 38.3 Dy 0.03 Expenditures Tb Initial Working 0.44 Gd 0.14 Capital 9.9 0.01 Requirement Mine Reclamation Costs 7.5 Lu Production Total Operating 0.003 Cost 1,142.5 Y Total Before-tax 0.223 Ce Cash Flow 1,679.6 Tm Yb 0.291 Before-tax NPV @ 0.004 0.023 8% 606 Before-tax NPV @ Er 811 Dy 0.025 Ho 5% Before-tax NPV @ 0.036 0.008 La 500 10% Tb 0.148 Before-tax IRR (%) 36.9 0.006 Nd Before-tax Payback Gd Eu 0.132 Period (years) 2.4 0.030 0.004 Sm Pr 0.030 0.038 19
  • 20. Management and Technical Team Board of Directors 6 members Officers President and CEO Andre Gauthier (2003) VP Exploration Aline Leclerc (2003) VP Project development and construction Bertho Caron (2012) Director of metallurgy Paul Blatter (2012) Director of environment Hiring in progress 20
  • 21. Kipawa Deposit – Main Project Tasks Schedule 2011 2012 2013 2014 2015 2016 PEA 43-101 Feasibility Study Environment & Permitting EPCM & Construction Mining Pre-Prod. And Tailing Facilities Const. 21
  • 22. A Strategic Partner: Toyota Tsusho Corp. Source: TTC-Annual Report 2011 22
  • 23. MoU with Toyota Tsusho Corp. (December 7, 2011)• Signed a MoU with Toyota Tsusho Corp. (“TTC”), a trading company of Toyota Motor Group, in order to secure a HREE supply for the production and marketing of hybrid and electric vehicles – Mutual collaboration to accelerate the development of the Kipawa Deposit – Technical assistance will be provided in association with TTC’s chain of suppliers• MoU is divided into three stages with a final decision at the end of the first two stages Stage 1) Due diligence period which may extend to the end of March 2012 • Evaluation of PEA/ preparing joint venture and off-take agreements Stage 2) If TTC decides to pursue further, TTC will reimburse Matamec $1.5 million for its historical metallurgical expenditures • Negotiate/receive internal approval for the joint venture, off-take agreement and other agreements Stage 3) A definitive joint venture agreement would then be established for the Kipawa Deposit between TTC (49%) and Matamec (51%) with an off-take agreement • Contribution from TTC based on up to 49% of Matamec’s market capitalization for the 90-day period ending on November 30, 2011 (~CAD$17.23 million) • Off-take agreement for 100% of the mixed rare earths concentrate to be sold at a price equal to 70% of the fair market value of the processed form of such elements• Expected definitive joint venture between TTC and Matamec (TTC: 49%/ Matamec: 51%) which covers 1,000 hectares on and around the Kipawa Deposit. Source: Capital IQ. 23
  • 24. MOU - Matamec Gets:Mutual collaboration to accelerate the development of the Kipawa Deposit• Feasibility study paid for• Access to TTC balance sheet (financing arranged for capex)• Technical expertise from TTC supply chain (huge intangible value in terms of cost and time)• Accelerated development program (enables “first to market” with HREE)• A buyer for 100% of the production• A mine not a story! 24
  • 25. Zeus (HREE-Y-Zr) Property Upside Potential TTC may negotiate in good faith to participate in the exploration and development of all other REE prospects found on the Zeus Property Showing potential outside of Kipawa • Surprise REE-Nb-Ta (16 samples) – Average of 3.2% TREO at 27% HREO+Y2O3 • Certitude REE-Y-Nb-Ta (13 samples) – 5.2% TREO at 36% HREO+Y2O3Spring 2012Follow-up ground exploration to define potential drill targets in the areaGround traverses, mechanical trenching, line cutting, ground geophysicsand geochemical surveys 25
  • 26. REE Deposit Comparables Price Projections for Key 45% $2,400 $1,000 REOs 40% $2,100 $900 35% $1,800 Market Capitalization (US$ Million) $800 30% $700 $1,500 HREO/TREO% $600 25% $1,200 First year of $500 20% expected production by $900 $400 Matamec 15% $300 $600 10% $200 5% $300 $100 0% $0 $0 2016E 2017E 2018E 2019E 2020E HREE (Eu, Tb, Dy, Y*) LREE (La, Ce, Pr, Nd) Source: Capital IQ, Technology Metals Research LLC and company filings. 1 Byron Capital Markets Research Department. * The economic assumption for Y2O3 is based on the cash flow model used in the PEA. 26
  • 27. HREE Company ComparablesDeposit Company Mine TREO HREO/ OPEX/kg Required Pre-Tax NPV IRR Full Type (Project) Type* In-situ TREO TREO CAPEX ($ MM) (%) CAPEX Grade (%) ($) ($ MM) Financing (%) Partner Frontier Rare Earth OP 3.2% 7.8% $13.1 910 $4,340 57.6% KORES (Zankopsdrift) at 11% (PEA) Great Western UG 17% 7.8% N/A N/A N/A N/A Minerals (Steenkampskraal) LREE Rare Element OP 3.75% 3.3% $4.6 446 $1,300 44.9% Resources at 10% (PFS) (Bear Lodge) Avalon Rare Metals UG 1.35% 15.5% $5.5 1,200 $1,770 39.0% (Nechalacho) at 10% (PFS) Matamec OP 0.42% 36.9% $16.9 315 $606 36.9% Toyota Explorations at 8% (PEA) (Kipawa) HREE Quest Rare Minerals OP 1.3% 43.2% $16.0 560 $1,826 36.4% (Strange Lake) at 10% (PEA) Ucore Rare Metals UG 0.75% 39% N/A N/A N/A N/A (Bokan Mountain) Source: Technology Metals Research LLC and company filings. * OP = Open-pit; UG = Underground 27
  • 28. 1010 Sherbrooke West, Suite 200Montreal, QuebecCanada H3A 2R7Tel (514) 844 5252Fax (514) 844 0550Email info@matamec.comWebsite www.matamec.com 28