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December - Champion and Mamba Merger - Corporate Presentation
The document summarizes a proposed business combination between Mamba and Champion Iron Mines to acquire 100% of Champion. Key points: - Mamba will acquire Champion through a plan of arrangement valued at C$59.8 million, with Champion shareholders receiving 11 Mamba shares for every 15 Champion shares. - The transaction strengthens the management team and balance sheet with over A$26 million in cash to expedite development of the economically robust Consolidated Fire Lake North Project in Labrador, Canada. - The combined company will have an enhanced capital markets profile and ability to access project financing due to its international institutional investor base and strengthened financial position.
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December - Champion and Mamba Merger - Corporate Presentation
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- 2. Forward Looking Statements Certain informationcontained herein regarding Champion Iron Mines Limited, including management’s assessment of future plans & operations, may constitute forward‐looking statements under applicable securities law & necessarily involve risks, including but not limited to risks associated with mining exploration, operating costs, production costs, volatility of share prices, currency fluctuations, imprecision of resource & reserve estimates, environmental risks & ability to access sufficient capital from internal & external sources. As a consequence, actual results may differ materially from those anticipated in any forward looking statements. Plans, intentions or expectations disclosed in any forward‐looking statements or information should not be read as guarantees of future results or events, & will not necessarily be accurate indications of whether or when or by which such results or events will be achieved. Except as required by law, Champion Iron Mines Ltd., expressly disclaims any intention & undertakes no obligation to update any forward looking statements or information as conditions change. The historical mineral resources mentioned are strictly historical in nature & are non‐compliant to National Instrument 43‐101 mineral resources & mineral reserves standards, & should therefore not be relied upon. A qualified person has not done sufficient work to upgrade or classify the historical mineral resources as current National Instrument NI‐43‐101 compliant. The technical information in this news release pertaining to the Consolidated Fire Lake North Project as well as the Snelgrove Lake Project was reviewed and approved by Mr. Bruce Mitton, P.Geo., Vice‐President Exploration for Champion Iron Mines Limited who is a Qualified Person under NI 43‐101 standards. 2
- 3. Transaction Summary Business Combination Overview • Proposed Transaction • • • • • • • • • • • • • Deal Protection • • • Conditions • • 1. Champion shareholders will be entitled to receive 11 ordinary shares of Mamba in exchange for every 15 common shares of Champion Champion shareholders who are Canadian residents will have the option to receive all or a part of their consideration in the form of exchangeable shares of Canco to defer recognition of capital gains ‒ Consideration Concurrent Financing Mamba, togetherwith a wholly‐owned Canadian subsidiary of Mamba (“Canco”) will acquire, by way of a plan of arrangement (Arrangement), 100% of the outstanding securities of Champion Offer values Champion at approximately C$59.8 million on a fully diluted in‐the‐money basis (“FDITM”) as at December 5, 2013 Pro forma ownership on a FDITM basis of 40.9% Mamba and 50.5% Champion1 Closing of the Arrangement is subject to regulatory approvals and is expected in April 2014 Mamba will continue to be listed on the ASX and it is a condition of closing that Mamba will apply for and be listed on the TSX New company to be named Champion Iron Limited Each Exchangeable Share will be exchangeable, at no additional consideration, into one Mamba Share 42% premium over Champion’s December 5, 2013 closing price of C$0.275 and a 72% premium calculated on the 20‐day volume weighted average price (VWAP) of each respective company Subject to requisite shareholder approvals, Mamba will convert the existing 32 million Mamba performance shares into ordinary shares at a rate of 1 for 10 Mamba will undertake an equity financing of at least A$10 million to be completed immediately after the effective date of the Arrangement at a price of no less than A$0.50 per share Strengthens the combined company’s balance sheet and provides financial flexibility with its development plans Customary non‐solicitation covenants, subject to normal fiduciary outs Right to match Termination fee of C$1.0 million payable by either party under certain situations Unaminous support for the transaction and lockup agreements from the Board of Directors and Officers of Mamba and Champion Champion securityholder vote (approval of (i) at least 662/3% of shares cast, (ii) 662/3% of shares and options cast, voting together, and (iii) a majority of the minority) Mamba shareholder vote (approval of at least 75% of shareholder votes cast as well as at least 50% of the number of shareholders voting) Customary regulatory, exchange and court approvals Remaining 8.6% pro forma FDITM ownership in the new company will be comprised of shares issued in the Concurrent Financing, which assumes gross proceeds of A$10.0 million and an issue price of A$0.50/share 3
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- 5. Transaction Rationale Benefits to Mamba Shareholders Upside from the Consolidated Fire Lake North Project • Provides Mamba shareholders an interest in the large scale and economically robust Consolidated Fire Lake North (“CFLN”) Project Expands Mamba’s interests in the Labrador Trough • Significant upside through 12 iron ore brownfield projects covering 755 km2in the Fermont district Strengthens balance sheet • Arrangement and concurrent equity raise will strengthen the combined company’s balance sheet Enhanced capital markets profile • Mamba shareholders to benefit from Champion’s significant research coverage, greater share liquidity and North American institutional and retail investor base Benefits to Champion Shareholders Strengthened balance sheet • Combined company will have sufficient funding for the completion of the BFS on the CFLN Project Immediate and significant offer premium • Offer premium to Champion shareholders of 72% based on Mamba and Champion’s 20‐day VWAP Addition of key mining executives and directors with a proven track record • Addition of Michael O’Keeffe as Executive Chairman significantly enhances the ability to bring in international institutional and strategic investors as well as the capital required to advance the CFLN Project through to commercial production Exploration upside from the Snelgrove Lake Project • Highly prospective iron ore project located in the Labrador Trough with excellent access to infrastructure and the potential for hematite and multi‐billion tonne magnetite project Broadens investor base • Provides the combined company access to a larger base of institutional and retail investors in North America, Australia and Asia 5
- 6. Strong Management & Board Michael O’Keeffe │ Execu ve Chairman • • Chairman of Mamba Executive Chairman of Riversdale Mining Limited (“Riversdale”) from 2004 to 2011 ‒ ‒ • Managing Partner of Glencore Australia (Pty) Limited from 1995 to 2004 ‒ ‒ • Led the development of Riversdale from a junior with a market cap of A$7 million until it was acquired by Rio Tinto for A$4 billion During his period at Riversdale, Mr. O’Keeffe raised approximately A$780 million for Riversdale Responsible for Glencore’sAustralian acquisitions, of which a large component was vended into Xstrata at the time of the LSE listing Increased Glencore’s market share in Australia and southeast Asia, growing the turnover from US$100 million to US$2.4 billion Held a series of senior operating positions at Mt Isa Mines from 1975 to 1994, rising to the Executive Management level in commercial activities Thomas Larsen │ CEO and Director • • • • President and CEO of Champion since 2006 Over 30 years of experience in the investment industry, specializing in corporate finance and management of junior mining companies, raising in excess of C$150 million to date Previously held senior executive positions at a number of junior resource companies Director of Eloro Resources and Bear Lake Gold Ltd. Paul Ankcorn│ Non‐Executive Director • • • • Former President and director of the Cartier Iron Corporation from 2012 to 2013 Chief Financial Officer of Tartisan Resources Corp. and Shield Gold Inc. since 2008 President of Remington Resources Inc. from 2005 to 2010 Director of ACME Resources Corp., Shield Gold Inc.; Tartisan Resources Corp. and Fancamp Exploration Ltd. Alexander Horvath│ Non‐Executive Director • • • • Joined Champion as a Director in September 2007 and Executive VP, Exploration in March 2008, bringing with him over 28 years of experience in mineral exploration and mining President of A.S. Horvath Engineering Inc., an Ottawa‐based exploration/mining geological services firm, since 2006 Spent over 20 years with Asarco Inc. in progressively senior operational roles, where he was involved in managing base and precious metals exploration, mineral resource estimates, feasibility studies, reserve audits and acquisition due diligence reviews Director of Bear Lake Gold Ltd. and Eloro Resources Ltd 6
- 7. Strong Management & Board Niall F. Lenahan│ Non‐Executive Director • • • • Finance Director and Company Secretary of Mamba Non‐Executive Director for Discovery Metals Ltd. Mr. Lenahan has served as a director and CFO in both ASX‐listed and medium sized organizations involved in mineral resources, construction/engineering and shipping/transport industries both in Australia and overseas The following are companies that Mr Lenahanhas previously successfully held executive positions at: ‒ ‒ ‒ Riversdale (2006‐2011), CFO & Company Secretary Kingsgate Consolidated Limited (2003‐2005), CFO AurionGold/Goldfields (1992‐2002), CFO and Company Secretary Richard Melville Wright│ Non‐Executive Director • • • Currently a Non‐Executive Director of Mamba Engineer with significant expertise in the development and delivery of multi‐billion dollar resource projects Many companies have achieved significant results under his stewardship. Some of those companies include: ‒ ‒ ‒ ‒ Hancock Prospecting Pty Ltd (2008‐2011), Project Director for Roy Hill Decmil Group Ltd (2004‐2008) (previously Paladio), Founding Executive Chairman and Managing Director Adrail (2001‐2004), Executive Chairman Fluor Corporation (1990‐1999), CEO of Fluor Daniel Pty Ltd (Australia) Don Sheldon│ Non‐Executive Director • • • • • Director or Champion since September 2008 Executive Officer of Sheldon Huxtable Professional Corporation, a Toronto‐based law firm, where he has been advising mining companies for over 30 years Chief Financial Officer and Chief Administrative Officer and Director of Carlisle Goldfields Ltd. Chief Executive Officer and Director of Metalcorp Limited and Rockex Mining Corporation as well as an officer of The Temagami Iron Corporation Director of Crown Gold Corporation, Gold Train Resources Inc. and Bending Lake Iron Group Limited James Wang│ Non‐Executive Director • • Representative of Baotou Chen Hua Investments Limited MBA (New York Institute of Technology, 2006), Bachelor of Engineering (Major in Archtecture)(North‐Western Institute of Architectural Engineering, 1991) 7
- 8. Capitalization Strong balance sheet provides financial flexibility with development plans Mamba1 Champion2 A$0.55/share C$0.275/share Basic Shares Outstanding 70.6 million 152.4 million4 209.7 million5 Options 20.8 million 9.7 million 27.9 million Nil 7.0 million 5.1 million 32.0 million N/A Nil4 123.4 million 169.1 million 242.7 million Basic Market Capitalization A$38.8 million C$41.9 million A$115.3 million Cash and Cash Equivalents A$3.3 million C$15.5 million6 A$26.4 million7 Long‐Term Investments Nil C$2.6 million8 A$2.7 million EnterpriseValue (Basic) A$35.5 million C$23.8 million A$86.3 million As at December 5, 2013 Share Price Warrants Performance Shares FD Shares Outstanding 1. 2. 3. 4. 5. 6. 7. 8. Pro Forma3 Mamba’s cash and debt balance is as of September 30, 2013 Champion’s balance sheet information is as of September 30, 2013. Champion’s cash and cash equivalent balance includes C$66,000 in short‐term investments Pro forma balance sheet assumes an A$:C$ exchange rate based on the December 5, 2013 closing price of A$1.0365:C$ Champion’s basic shares outstanding assumes that prior to the closing of the Transaction, Baotou Chen Hua Investments will exercise its 15,000,000 warrants exercisable into 15,000,000 Champion common shares at an exercise price of C$0.25/share generating cash proceeds of C$3,750,000 Basic shares outstanding has been adjusted for the Concurrent Financing, which assumes Mamba will complete a A$10.0 million equity financing at an offer price of A$0.50/share for the issue of 20.0 million Mamba shares. Adjustments also includes 32.0 million Mamba performance shares to be converted on a 10 for 1 basis into 3.2 million ordinary shares of Mamba as well as shares issued to Champion management and board member due to change of control payments Champion’s cash balance has been adjusted for the repayment of approximately C$0.2 million in convertible debentures Includes A$10.0 million in expected gross proceeds from the Concurrent Financing less brokerage fees less cash transaction fees paid to advisors Champion’s long‐term investments includes its C$0.4 million investment in Cartier Iron Corporation plus the market value of shares of Fancamp Exploration Ltd. as well as shares and warrants of Century Iron Mines Corporation 8
- 9. Consolidated Fire Lake North (“CFLN”) Project Large‐Scale, Feasibility Stage Project with Robust Economics Located in the most established iron ore district in the Labrador Trough • Contiguous to the north of ArcelorMittal’s operating Fire Lake Mine and located 60 km south of Cliffs Natural Resources’ Bloom Lake Mine • 52 million tpa of concentrate production capacity in the region Excellent access to infrastructure • Access to low‐cost hydro and skilled labour • Government of Quebec is completing a Pre‐Feasibility Study for a new multi‐user railway connecting to the Port of Sept‐Îles • Construction of a 50 million tpamulti‐user port facility at the Port of Sept‐ Îles is on schedule and on budget Large tonnage, high quality hematite iron ore deposits • CFLN Project contains a total resource of 3.6 billion • CFLN resource is of sufficient size to support a 35‐40 million tpa operation • Metallurgical coarse‐grained hematite mineralization that is easy to liberate Production of high quality, 66% Fe sinter concentrate with very low deleterious elements • High weight recovery of 39.9% with no magnetic separation required • Alumina is 0.52% (industry standard of 2%) with <5% silica content • Low alumina to silica ratio ‐ ideal as a blending product for steel mills Significant upside through expanded feasibility study • Increase in annual production to 18‐20 million tpy through the addition of a 2nd concentrator, which would increase the pre‐tax NPV8% to C$6.5 billion (based on preliminary company estimates) Management’s development plan • Completion of a bankable feasibility study within the next 12 months • Significant potential to commence production over the next several years 1. 2. 3. Includes C$9.47/t of concentrate of costs over life of mine associated with railway capital debt and interest payments C$200 million equity component is included in the C$1.4 billion initial capex Based on 62% Fe concentrate spot price forecast of US$115/t in years 1‐5 and US$110/t in years 6‐20. Assumes exchange rate of US$1:C$1 February 2013 Pre‐Feasibility Results Mine Life P&P Reserves LOM Strip Ratio LOM Average Annual Concentrate Production Concentrate Grade Average Operating Cost1 Initial Capital Cost Rail Capital Contribution2 Project Economics3 19.6 years 465M tonnes at 32.4% Fe 2.74:1 9.3M tonnes 66% Fe C$44.05/t of concentrate C$1,394 million C$200M in equity C$1,133M in debt Pre‐Tax NPV8% of C$3.3B Pre‐tax IRR of 30.9% Pre‐tax payback of 3.4 years Fermont Holdings Global Resources Tonnage (M t) CFLN Project M&I Inferred Total Grade (Fe %) 746 2,821 3,567 31.1% 28.8% Harvey‐Tuttle and Moire Lake Deposits M&I 164 30.5% Inferred 1,364 25.1% Global Resource 5,095 9
- 10. Snelgrove Lake Project Hematite and Multi‐Billion Tonne Iron Ore Resource Potential Excellent access to infrastructure • Located in Labrador approximately 65 km east of a heavy gauge rail connection at Schefferville, Quebec with available capacity • Low cost at C$0.04/kWh hydropower available from the Menihek Hydropower station located 45 km from the project Strong potential for hematite and a multi‐billion tonne magnetite deposit • Exploration conducted by AltiusMinerals Corp. (“Altius”) between 2009‐2011 defined coexisting geophysical anomalies with a 33 km strike length and 170 m width that were later successfully drilled • Samples from the northern half of the Snelgrove Lake Project contain predominately lower grade (30% to 35% Fe) taconite style mineralization • Hematite‐bearing grab samples, from the southern part of the property, yielded 55% to 64% Fe in domains of DSO‐type mineralization Positive results from drill programs • Three initial drill holes identified hematite mineralisation in the southern CLC region to an approximate vertical depth of 235 m and a true width of 170 m ‒ • Location of Project Hole MM 13‐05 returned an aggregate thickness of 101 m grading 52% Fe with low alumina and phosphorus The summer 2013 drill program demonstrated hematite mineralization over 4 km strike length to at least 100 m deep ‒ ‒ A second 6‐hole, 635 m summer 2013 drill campaign intersected hematite mineralisation similar to that identified in hole MM 13‐05. Assays are pending A further 1,500 m strike length remains untested Option Agreement with Altius • Option to acquire Atlius’ 100% interest in the Snelgrove Lake Project by September 2017 • Exercising option is conditional upon the following: ‒ ‒ ‒ Completing C$6.5 million in exploration spending by September 2017 (largely completed to date) A$5.75 million option payment to Altius due three months after exercising option Granting 3% NSR royalty to Altius 10
- 11. Thank You Mamba.com.au Suite301, Toronto, ON M5C 2T6 20 Adelaide Street East, Championironmines.com | 416 866 2200 ASX:MAB TSX:CHM, FSE:PO2