Peculiar Knob Peculiar Knob DSO Iron Ore Project DSO Iron Ore Project It’ ’s the Grade that Counts! s the Grade that Counts! It Bob Duffin Bob Duffin Executive Chairman – – WPG Resources Ltd WPG Resources Ltd Executive Chairman Presentation to Sydney Mining Club Presentation to Sydney Mining Club 7 October 2010 7 October 2010
Key Corporate Information Directors: – Bob Duffin (executive chairman) – Heath Roberts (executive) – Gary Jones (executive) – Bob Richardson (independent non executive) – Len Dean (independent non executive) – Lim See Yong (non executive ) – Dennis Mutton (independent non executive) Executives – Martin Jacobsen (COO) – Greg Harding (CFO) – Myles Fang (Iron Ore Marketing) – Larissa Brown (Company Secretary) Issued shares 121.7m – Adrian Horne (PK Mine Manager) Cash: $13.6 m (30 September 2010) Unlisted options 5.8m Directors control 23m voting shares (19%) Share rights 2.1m Good core group of top 50 shareholders both retail and professional Fully diluted 129.6m TSR (pa): 212% 1 year, 36% 5years (Bloomberg) Market $117m capitalisation (at $0.90/share) Sydney Mining Club Presentation 7 October 2010 2
Our Key Project Assets IRON ORE • DSO: Peculiar Knob, Buzzard and Tui deposits Magnetite BIF: Kestrel and Goshawk, Harrier, Eagle, Kite and Falcon at Hawks Nest • Haematite BIF: Buzzard and Tui footwall COAL • Penrhyn, Perfection Well, Pidinga, Lochiel EXPLORATION • Mt Brady, Windy Valley Sydney Mining Club Presentation 7 October 2010 3
Peculiar Knob DSO • BFS updated Sep-Oct 2010 • Specular haematite deposit with silica gangue; high grade Fe with virtually no impurities • Very sharp break between ore and wall rocks • Lies beneath 15 to 30 m cover • Effectively all measured and indicated resource reports to reserves • LOM W:O strip ratio 4.75:1 • Will market all-fines product at reserve grade Sydney Mining Club Presentation 7 October 2010 4
Development Plan – Peculiar Knob • 3.3 mtpa to start late 2011; maximise use of contractors • We will build haul road to Wirrida Siding • Accommodation village for 190 • Crushing plant at siding • Rail haulage 11,200 tonnes per train 6 days per week to Port Pirie • Transhipment to Capesize ships in deep water in Upper Spencer Gulf • One ship every 3 weeks Sydney Mining Club Presentation 7 October 2010 5
Mineral Resource Estimates Peculiar Knob Category Million Fe P SiO 2 Al 2 O 3 LOl Tonnes % % % % % Measured resource 13.6 64.0 0.01 7.11 0.27 0.4 Indicated resource 4.1 63.8 0.02 7.69 0.20 0.4 Inferred resource 1.5 64.6 0.03 6.15 0.20 0.2 Total resource 19.2 64.0 0.01 7.16 0.25 0.4 Sulphur: 0.009%; Cu, Pb, Zn, Ni, Cr; V, Cl, Ba, As, Zr, Sr, etc: at or BLD To WPG’s knowledge, Peculiar Knob is Australia’s highest grade undeveloped Fe deposit Sydney Mining Club Presentation 7 October 2010 6
Ore Reserve Estimates Peculiar Knob Category Million Fe P SiO 2 Al 2 O 3 LOl Tonnes % % % % % Proved reserve 13.5 63.2 0.01 8.2 0.35 0.45 Probable reserve 3.2 63.2 0.02 8.6 0.28 0.40 Total reserve 16.7 63.2 0.01 8.3 0.34 0.44 Sydney Mining Club Presentation 7 October 2010 7
Permitting and Approvals FINALISED • Mining lease • Native title mining agreement • Department of Defence: mining access agreement for mine development, haul road, accommodation village, rail loader and crusher • Access and compensation agreements with pastoralists • Authorities to build infrastructure on all third party exploration licences • MPLs and EMLs for haul road, infrastructure and borrow pits (offered by PIRSA and subject to agreeing final documentation) • Stafford borefield – licensed by SA DWLBC (subject to agreeing final documentation with Defence) • Train paths (reserved) • 10 – 30 year port access agreement for iron ore and coal • Purchase of Port Pirie land (subject to final documentation) STILL OUTSTANDING • MARP (will be lodged this month) • Port Pirie Development Application (will be lodged in November) Sydney Mining Club Presentation 7 October 2010 8
The Importance of Grade Iron Ore Prices CNF Tianjin Source: The Steel Index 200.0 180.0 160.0 140.0 US$/tonne 120.0 100.0 80.0 60.0 40.0 62% Fe 20.0 58% Fe 0.0 Nov-08 May-09 Nov-09 May-10 Nov-10 Current price: 62% Fe: US$141/tonne; 58% Fe US$110/t Premium is US$8/t per 1% change in Fe content [Don’t fall into the trap of calculating the price of 58% Fe fines by back - calculating the US cents per dmtu price then applying the multiplier: (141/0.62)*0.58 = US$132/tonne, not US$110/tonne!!!] Sydney Mining Club Presentation 7 October 2010 9
Summary of BFS CAPEX: OPEX: • Site $84.9m • Average cash opex over LOM: $64.35/t to FOB • Port Pirie $53.6m • Royalties add another $5.61/t • Total capex: $138.5m • Total cash opex: $69.96/t to FOB • Sea freight $17/t WORKING CAPITAL: • Cash opex to delivery in China: $87/t • Pre-strip, mine, process and transport (rounded) first 160,000 t: $29.3m REVENUE TOTALS • Spot price CNF: US$141/t • Total initial capital: $167.8m • In A$: $148/t MARGIN FACILITIES • Cash operating margin: $61/t • Expect banks to offer a very satisfactory debt facility • Margin on 3.3 mtpa: $201m pa Peculiar Knob’s Cash Generation Capacity is Very Strong and it is WPG’s Intention to Monetise the Deposit ASAP!! Sydney Mining Club Presentation 7 October 2010 10
PK: Low Capex Intensity is Attractive • Capex site only $84.9m for 3.3 mtpa => US$24/annual tonne • Increases to US$37/annual tonne if Port Pirie capex of $53.6m is included • Current benchmark US$70- 90/annual tonne (source: Metalytics, London conference Sept 2010) • For example: Marillana US$68/annual tonne (no rail spur) or US$100/annual tonne (with rail spur) (source: BRM ASX announcement 29 Sep 2010) Sydney Mining Club Presentation 7 October 2010 11
Port Pirie • Operated by Flinders Ports • We have 30 year agreement with Flinders Ports to use Berth 7 • State government has agreed to sell LMC land to us to build facilities • Sale is contingent on approval of MARP and DA • We will develop facilities with 7 mtpa capacity but will use only half; excess capacity to be offered to others • Will be suitable for Hawks Nest magnetite and Penrhyn coal exports too Sydney Mining Club Presentation 7 October 2010 12
Port Pirie • We will use a transhipment operation similar to Whyalla • But we will use a small ship, not tugs and barges • First anchorage 11 nm offshore, top up 12 nm further out • Capacity 7 mtpa => commercial opportunity Sydney Mining Club Presentation 7 October 2010 13
Port Access is the Key! Iron Ore Ports - WA 100 90 80 70 60 $/tonne 50 40 30 20 10 0 Hedland Dampier Cape Lambert Oakajee Anketell Point Simple Average Capex per Tonne of Annual Capacity Coal Ports - NSW and QLD 90 80 Iron ore ports: $36/annual tonne 70 60 capacity (average) $/tonne 50 40 30 Coal ports: $40/annual tonne capacity 20 10 0 Port Pirie: $8/annual tonne capacity Wiggins Island Balaclava Abbott Point Newcastle Port Waratah Simple Island Average – Outstandingly Attractive Metric! Capex per Tonne of Annual Capacity Sydney Mining Club Presentation 7 October 2010 14
The Upside #1 – Depth Extensions at PK • Whittle pit optimiser wants to push pit deeper • Bottom of orebody not defined by drilling to date • Reserves of 16.7 mt calculated to maximum depth of 175 m but orebody is covered by 20 m of overburden • So reserve is ~110,000 t per vertical metre in the orebody • If we extended drilling depth by 60 m there is potential to increase total reserves by ~7 mt • This would add 2 more years to life of mine Sydney Mining Club Presentation 7 October 2010 15
The Upside #2 – Hawks Nest Iron Ore But First Understand the WPA! • Administered by the Department of Defence and run by the RAAF Covers 127,000 km 2 - same size as • England • Occupies 13% of South Australia but 25% of Gawler Craton • It is used for weapons testing, and more often now than 5-10 years ago • Includes a “Core Area of Operations” Sydney Mining Club Presentation 7 October 2010 16
The WPA – Then and Now Originally covered more than 250,000 km 2 • (including much of the East Pilbara in WA and also Olympic Dam) but has been halved in size • Formerly used for Cold War era military activities and some space research; now used for the testing of war materials • More than 7,000 rockets have been launched there including 2 satellites (1967 and 1971) • The WPA is the Western World’s largest land- based weapons testing area • But it is highly prospective for minerals! • The Commonwealth engaged Dr Allan Hawke to review the WPA in May 2010; report expected this year (interim report this month or early November) • WPG is optimistic that an outcome satisfactory to both the military and the mining industry will eventuate (time sharing model?) Sydney Mining Club Presentation 7 October 2010 17
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