Ontario Graphite Corporate Presentation


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Ontario Graphite: Considerations for Financial Investors in Mining Operations as presented at Industrial Minerals Grapihte Conference in December 2011.

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Ontario Graphite Corporate Presentation

  1. 1. Considerations for Financial Investors in Mining Operations Presented at: Industrial Minerals Graphite ConferenceDecember 2011London, UK
  2. 2. Table of Contents 2I. Introduction to Ontario Graphite LimitedII. Considerations for Financial Investors in Mining OperationsIII. Conclusion
  3. 3. Company Overview
  4. 4. Kearney Mine Property Location 4 Kearney Mine PropertyCOMPANY OVERVIEW
  5. 5. Property Location 5Mine Location: Politically stable, first-rate country Close proximity to:  Major US graphite markets = dependable and timely delivery for US customers  Ports for shipment to European customers 300 km north of Toronto, Canada Accessible through Town of Kearney via main highways From Toronto to plant site – 270 km of four lane highway, 30 km of paved municipal road, 10 km of all weather logging and mine site road Surrounding area has significant mining industry support – mining process equipment vendors, readily available labour Transportation costs kept relatively low, and product delivered directly to end-use customers COMPANY OVERVIEW
  6. 6. NI43-101: Mineral Inventory and NPV(10) 6NI43-101 Technical Report indicates mineral inventory on Kearney Property of 43.5million tonnes of Measured and Indicated Resources at average grade of 2.34%Carbon Grade (Cg), plus 12.3 million tonnes of Inferred Resources at average grade of2.42% Cg, based on cut-off ore grade of 1.5% Cg Mineral Zone per NI43-101* Metric Tonnes Carbon Grade (%) Measured & Indicated Resources McGuire Zone: Measured Resources 10,613,339 2.50 Indicated Resources 16,061,706 2.46 Total Measured & Indicated Resources 26,225,045 2.48 Sheehan Zone: Measured Resources 7,662,505 2.14 Indicated Resources 9,618,875 2.11 Total Measured & Indicated Resources 17,241,379 2.12 Total Property Measured & Indicated Resources 43,466,425 2.34 Inferred Resources McGuire Zone 9,740,410 2.52 Sheehan Zone 3,176,044 2.14 Total Property Inferred Resources 12,250,454 2.42 (*) NI43-101 prepared on January 29, 2010 by Paul A. Hawkins, B. Sc(Eng)., P.Eng., principal of Paul A. Hawkins & Associates Ltd. (APEGGA Number P4521) located at 72 Strathlorne Crescent SW., Calgary, Alberta T3H 1M8. The report is compliant with National Instrument 43-101, Companion Policy 43-101 CP and Form 43-101F1. At current mining plan throughput rate, Property has more than 31 years of production Twenty year mine plan: 1MM tonnes of ore per year, producing 20,000 tonnes of concentrate  NPV(10) of US$106mm and IRR of 72.9%COMPANY OVERVIEW
  7. 7. History of Kearney Graphite Mine 7 Timeline 1979-1985 Mine Site Owned by local Family 1985 Cal Graphite Bought Mine 1985-1986 Reserves Proved Up 1988 Mill & Open Pit Construction 1989-1994 Operations by Cal Graphite 1993 Cal Graphite Became Applied Carbon Technology 1999 International Graphite Bought Mine 2007 SphereInvest Special Situations Fund Assumes Control 2008 iCarbon Becomes Ontario Graphite May 2011 Re-commissioning Capital Raise Completed 2011 Ontario Graphite Leading Reactivation Process Q2 to Q3 2012 Expected re-opening of the Kearney MineCOMPANY OVERVIEW
  8. 8. Recent Capital Raise and Ownership 8Timing  LOI signed: Jan. 19, 2011  Transaction close: May 3, 2011  104 DaysKey Terms  Securities purchased: Ordinary shares  Amount: US$23 million  Options on additional $15 millionOwnership Pre-Closing Investor Post-Closing Investorand Board Geography GeographyComposition SISSA Controlled SPV American Orionis, LLC Latam Beach Lane Investments Canadian SISSA Controlled SPV American Individual HNW Investor American Beach Lane Investments Canadian Individual HNW Investor American Management American COMPANY OVERVIEW
  9. 9. Kearney Graphite Mine Site 9 Mill Area McGuire Lake Open Pit Tailings Area in (now water-filled) narrow valley below mill Waste Rock PileTailings Pond Mine Access RoadTailings Dam COMPANY OVERVIEW
  10. 10. Kearney Property Mill Area 10COMPANY OVERVIEW
  11. 11. Considerations for FinancialInvestors in Mining Operations
  12. 12. Approach Geared to Identifying and Mitigating Risks 12I. How did you get there? What’s the Process A. Straight from the dart board? B. Studied Approach to opportunity identification C. Should you be doing the deal?II. Macro A. Are the stars aligned? B. Who are the players? C. Ease of entryIII. Industry A. Structural caps on investor returns? B. Can you get around over or under themIV.Company A. What does it need to be successful B. Are there lessons that have been learned? C. Can you create something special?V. Accessing Capital A. Do you have it? B. Can you attract it? C. Are you pricing it appropriately?
  13. 13. Key Investment Preferences 13“Top-Down” vs.  The Market comes First, the Investee-Company comes second“Bottoms-Up”  Look for markets of growth and size where our Investee-Companies can winMarket Size  The target’s market should exceed $500 millionMarket Growth  Core market growth should be at least 5%  No undue cyclicality or volatility of demand – although price may fluctuate through cyclesIndustry Fragmentation  Fragmented industries with a long tail of participants that have or will achieve $125–$200 million in sales  Competitors can be acquired for their products without necessarily needing their overheadsCompetitors  Avoid companies with outstanding competitors (e.g. Apple) which can take market share from the companyManagement  Management team identified (internal or external) and vetted  Deal killer: when we cannot identify management to fill anticipated gapsValue Creation  Explicit strategy to create and capture value through operational enhancements  Measurable and identified value drivers  Ability to effect / influence and strongly prefer to control catalyst(s)Tangible Products  Prefer companies with tangible products and / or assetsM&A Opportunities  Identified M&A opportunities for growth; or  Ability to merge or “bolt-on” on existing operations; or  Ability to merge or “bolt-on” on existing portfolio companyCompany ROIC  [10%] + country risk premium + [5%] (if applicable, for small cap/less liquid targets); exceeds target company WACC  Importantly, this is not the investment’s target IRR but the investee-company’s internally generated Return on Invested CapitalCONSIDERATION FOR CAPITAL RAISING
  14. 14. Global Graphite Market 14 Global Graphite Demand (k tonnes) Flake Graphite Price (US$/tonne; +80 mesh & -100 mesh)Source: USGS and Industrial Metals Magazine Source: Industrial Minerals (Crystalline, large flake, 94-97%Cg, quoted CIF UK) • Favorable mismatch - Consumption of flake graphite is growing at the expense of amorphous graphite in most markets and accounts for at least 50% of consumption in mature industrialized economies while accounting for 40% of world production • Sustainable high prices - Significant upward pressure on the price for high carbon grade large flake graphite over the last ten years with a notable increase since 2008 refractories, crucibles, brake linings and lithium-ion batteries in hybrid high-purity or expanded material: • Growing demand and lithium-ion batteries used in portable electric, electric and plug-in hybrid graphite foil, fire retardants, uses for flake graphite - electronic equipment electric vehicles graphene CONSIDERATIONS FOR CAPITAL RAISING
  15. 15. Core Team Members: Management and Advisors 15Bobby Cooper Jerry Janik Stantec Consulting Kevin MurdockBoard Chairman General Manager Environmental and Sales and Marketing Permitting Strategy Mining industry executive with  20+ years industrial experience Bill Steibel – Senior VP 40+ years of diversified including 7 years as GM of Jim Higgins – Closure Plan  Private equity investor having multi‐site experience with industrial mineral operations specialist sourced, closed and managed open pit and underground Mina McCluskey – Water quality various platform deals  Area Operational Manager, mines involving base metals, Carmeuse Industrial Sands specialist and client rep.  McKinsey & Company: Global precious metals, coal, Piero Amodeo – Regulatory Business Building and Growth  Plant Manager, UNUMIN diamonds, and uranium, specialist; ex-MOE (18 years) Practice, and Midwest Canada’s Nepheline Syenite worldwide Healthcare Practice Operations President & CEO Kennecott  Professor of Strategic  Plant Superintendent and Corporation Becma Engineering Management at Stanford Supervisory positions plus Quality Rio Tinto Global Mining Engineering, Procurement, Graduate School of Business Control Supervisor for industrial Executive Construction Management minerals plants Various senior positions with  Duel degree in Geology and Bob Mather – Principal; worked ARCO Minerals, Kennecott Mineral Engineering with OGL predecessor in 1990’s Corp., Arch Minerals, and Kerr Hank Jenkins – Previously Chief McGee Coal Corporation Metallurgist at Kearney; very active in Canada Jr. mining co.’s Ellerton CastorTom Myatt Director of Strategy andPresident and CFO Corporate Development Miller Thompson Canadian Legal Counsel 30+ years of senior level  15+ years in investment banking and M&A advisor to variety of Dan Rothberg – Partner; mining experience in the mining industry specialist industry with involvement in companies in the US, Canada, Europe and SA Sandra Gogal – Leading expert five startup and on First Nations consultation re‐commissioning projects  Founder and Managing Director John Tidball – Certified specialist CFOI Ancash Mining Ltd, Panterra Partners, LLC on environmental law base/precious metals (Peru)  Managing Director, Latin America President & GM of Rio Tinto M&A and Merchant Banking Banc Service Inc. of America Securities Edelman Canada CFO and GM positions in Rio  Executive Director, Global M&A Public Relations Tinto business units and and Financial Institutions Groups, operations CIBC Oppenheimer Jeanette Jones – Senior VP,  Senior Associate Corporate Corporate Practice Leader Finance & M&A Morgan Stanley Sarah McEvoy – Account Director CONSIDERATIONS FOR CAPITAL RAISING
  16. 16. Experienced Advisory Board 16Keith Day Joe Strubel Mario Scarpetta Jesse Rodriguez Felipe Holguin Derek Hirsch Keith has more than 30  Joseph has 20 years of  For 22 years, Mario  With 19 years of  Felipe is a partner and  Since 2001, Derek has years of experience in experience in portfolio managed Grupo Amalfi, experience in principal the Chief Financial been President and trading financial management, trading investing in basic investing, merchant Officer of Hencorp, a Portfolio Manager of instruments and and research expertise in industry sectors such as banking and M&A in the financial services Hirsch Capital investing in hedge funds high yield, distressed and cement, energy, natural United States, Europe boutique headquartered Investments Ltd. and and commodity trading special situation gas, food products and and Latin America, Jesse in Miami, Florida with President and Startup advisors. corporate investments. financial services. He also is currently an offices throughout Latin Finance Director of Les Currently an Investment  Currently the Chief oversaw business units Investment Committee America. Gestions AKD. Committee Member and Executive Officer and that included sugar cane Member and Managing  Formerly a Managing  Formerly Director of Pan Chairman of the Advisory Investment Committee crops, real estate Director of the Private Director at Huron Asia China Commerce Board of SphereInvest Member of SphereInvest  Founded Azurita, which Market and Special Consulting Group; Corp. and Managing Group Group boasts impressive Situations Group of Managing Director of the Director of Madison growth in assets under SphereInvest Group. Latin America M&A and Williams Holdings Most recently worked  Joseph has worked for a for a large sovereign number of world class management currently in  Formerly Managing Merchant Banking Group  Held term appointment wealth fund as a Senior financial institutions, excess of $500MM. Director and Head of at Banc of America positions and part-time Investment Manager. including Renaissance  Currently a member of Latin America M&A and Securities; Vice President professional adjunct at Capital Asset The Business Council of Merchant Banking for in the Media Group and Concordia University. Keith was a Senior Portfolio Manager of Management, SBC Latin America (CEAL) Banc of America in the M&A groups of  Derek holds an M.Sc.A in Warburg Inc., the HSBC seeking to expand the Securities; Vice Salomon Smith Barney; Finance from Concordia Alternative Investments Group and Merrill Lynch role of entrepreneurs in President, Salomon Bros. Consultant in the Boston University and a B.Comm with the Abu Dhabi & Co. sectors such as mining, in New York; and and Chicago offices of in Finance and Investment Authority agribusiness, member in the M&A and the Boston Consulting Accounting from McGill (ADIA) and a member of  He has the distinguished Financial Institutions Group and treasury and the ADIA Guidelines honor of being a three- manufacturing, banking University. and services. groups, Senior Associate control functions at Committee time Euro Hedge Fund  Mario holds a M.Sc. in at Bear, Stearns & Co Inc. Smurfit Carton in Keith has a B.Sc. in Manager of the Year, in in New York. Colombia. Metallurgy from the 2006, 2007 and 2008 Professional Management from  Jesse holds an MBA from  Felipe has an MBA University of Aston, in  Joseph has a MBA and Harvard Business School degree from Harvard Birmingham BA in Economics from University of Miami, a M.Sc. degree in and a BA in Economics Business School and BS University of Rochester. and Political Science degrees, Summa Cum Management from Arthur D. Little Institute from the University of Laude, in Manufacturing and a BA in Economics California, Los Angeles Engineering and from Universidad San Management from Buenaventura in Cali, Worcester Polytechnic Colombia. Institute. CONSIDERATIONS FOR CAPITAL RAISING
  17. 17. Significant Competitive Advantages 17Kearney Mine will be re-commissioned at low cost within one year Operating History: Past successful mine operation and strong maintenance over time = majority of processing facilities preserved in good condition Leading Mineral Inventory in Stable, Accessible First-Rate Country: Mine has largest confirmed mineral resource of any North American graphite prospect; inventory and inexpensive open pit mining combined with accessible location means reliable long-term delivery of quality product to all customers Marketing History: Past fully operational facility means Mine has production credibility and product known and highly regarded in marketplace Ability to Attract Attentive and Focused Management: Current ownership and management well- informed about requirements for efficient upgrade and re-commission of existing facilities for early and optimal future processing operations Unencumbered Asset: Property has no delinquent tax liabilities, environmental, health, or pension issues, and no ongoing litigation, social disputes, or other liabilities which could delay start-up Uncomplicated Start-up and Operational Plan: Mine will not require specialized or prototype equipment or processes for operations Easy Access to Skilled Labour: Property is close to equipment suppliers, construction services and skilled, experienced construction and operations personnel CONSIDERATIONS FOR CAPITAL RAISING
  18. 18. Framework for Typical Project Evolution and Value 18 Lac de Îles Mature Production • Execute the Mine Plan • Build an Operating Company Startup Production: • WACC: 8% - 10% Operating Year 1V A L U A T I O N • Optimize Operating Efficiency • WACC: 15% - 20% Mine and Mill Development • Capital Raise • Licensing and Permitting • Construction or Re-Commission Resource Defined • WACC: 30% - 50% • NI43-101 Report • Bankable Feasibility Study • WACC: 70% Early Stage • Early Exploration • Pre-NI43-101 • WACC: 100% (2x cash) T I M E Greenfield Operations Brownfield Operations CONSIDERATIONS FOR CAPITAL RAISING
  19. 19. Agencies and Permits 19CONSIDERATIONS FOR CAPITAL RAISING
  20. 20. Kearney Mine Agencies and Permits 20Ontario Ministry of Northern Ontario Ministry Ontario Ministry Development, of the of Natural Ontario Ministry Environment Town of Mines and Environment Resources of Labour (MOL) Canada Kearney Forestry (MOE) (MNR) (MNDMF) Closure Plan  Certificates of  Tailings dam  Health and  Environmental  Building permits and Financial Approval for structure Safety Impact Assurance emissions and approval – standards and Assessment discharges of north starter pre-development First Nations water, dust, dam and raise review (if project meets and Public exhaust and, existing south impact triggers) Consultation noise tailing dam Mining tenure –  Permit to take  Species at risk leases water for assessment dewatering pit (SARA) and operational make-up from  Water crossings Graphite Lake and roads  Plant septic  Timber cutting system on Crown landCONSIDERATIONS FOR CAPITAL RAISING
  21. 21. Mineral Processing Flowsheet 21 Wet screen relocated to above SAG mill Added regrind capacity planned Flash flotation circuit to be Cleaner added Eliminate exterior column cell feed hoppers underflow to regrind mill Adding Thickener overflow third wet redirected to screen process water tank Bagger moved to under sifter screensCONSIDERATIONS FOR CAPITAL RAISING
  22. 22. Conclusion
  23. 23. Conclusion 23In a difficult capital raising environment success demands:  Discipline  Focus  Specialized knowledge  Realistic expectations  FlexibilityWith Ontario Graphite  Proven High Quality and Full Service Capability  One of only two producers of natural flake graphite in North America  Direct Marketing to End-Users  Competitive Operating Cost CONCLUSION