THE RIVERSDALE ANTHRACITE COLLIERY (RAC) PROJECT LOW IMPURITY ANTHRACITE FOR BLUE CHIP CUSTOMERS FEBRUARY 2017 ASX:AJC
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RIVERSDALE ANTHRACITE COLLIERY (RAC) – A HIGH VALUE PROJECT STRONG DEMAND FOR RAC’s PRODUCT DUE TO DECLINING REGIONAL SUPPLY, SIGNIFICANT BARRIERS TO IMPORTS AND EXCEPTIONAL RAC QUALITY PRODUCT The RAC project Meets our Preferred Criteria for Project Generation Project acquired from a Major Resource Company Mining Right in place Total Resources of 9Mt in the Gus Seam Reported in accordance with the JORC 2012 Code Alfred Seam previously excluded from resources being drilled with a view to growing the resource base Stable jurisdiction with access to rail, road, power and water in a <7km radius The market needs this product today – high demand for RAC product in the market Non binding Letter of Intent to buy the production received from a major customer and trading house Strong Relationships with Blue Chip customers who lead their industry sectors – minimal marketing risk Highly Skilled Management Team with relevant experience and demonstrated success 3
RAC COAL RESOURCES THE RESOURCES ARE REPORTED IN ACCORDANCE WITH THE JORC 2012 CODE The RAC resource is a high quality coal resource, with the ability to produce high value metallurgical coal products for the ferroalloy, ilmenite and steel industry as a substitute for coking coal and coke. ABBREVIATIONS GUS SEAM RESOURCES Seam Block Classification Area Thick RD GTIS TTIS RCV RA RIM RV RFC RS GTIS: Gross tonnes in situ RS: Raw Sulphur Content (%) Central 1 Indicated 592180 0.93 1.47 809,500 688,100 29.09 14.90 1.94 7.58 75.58 0.84 TTIS: Total tonnes in situ PY: Product Yield % Relative Density g/cm 3 RD: RCV: Product Calorific Value (MJ/kg) Central 2 Indicated 208350 1.13 1.47 346,000 294,100 27.61 17.17 1.87 10.63 70.33 0.63 RCV: Raw Calorific Value (MJ/kg) PA: Product Ash Content (%) Central 3 Inferred 1699500 0.83 1.55 2,186,400 1,639,800 26.50 20.96 2.11 7.99 68.94 0.69 RA: Raw Ash Content (%) PIM: Product Inherent Moisture (%) Central 4 Indicated 292920 0.98 1.55 444,900 378,200 24.96 22.17 2.64 8.56 66.63 0.72 RIM: Raw Inherent Moisture (%) PV: Product Volatile Matter Content (%) Gus Seam South Inferred 602870 0.89 1.61 863,800 647,900 23.66 26.90 2.37 8.02 62.71 0.82 RV: Raw Volatile Matter Content (%) PFC: Product Fix Carbon Content (%) West Indicated 1604690 1.03 1.60 2,644,500 2,247,800 23.69 26.01 2.62 8.38 62.99 1.15 RFC: Raw Fix Carbon Content (%) PS: Product Sulphur Content (%) North-West Inferred 165190 1.15 1.53 290,600 218,000 26.77 20.24 2.33 9.22 68.21 0.82 North-East Indicated 515760 0.95 1.51 739,800 628,800 27.54 15.89 2.53 6.14 75.44 0.77 South-East Indicated 404850 1.00 1.59 643,700 547,100 24.17 26.14 1.98 7.48 64.40 0.75 Total 6,086,310 0.95 1.5591 8,969,200 7,289,800 25.53 22.32 2.32 8.05 67.31 0.87 GUS SEAM: 16% ASH PRODUCT Seam Block Classification Area Thick RD GTIS TTIS PY PCV PA PIM PV PFC PS Central 1 Indicated 592180 0.93 1.47 809,500 688,100 90.46 30.36 16.00 1.83 7.51 74.66 0.83 Central 2 Indicated 208350 1.13 1.47 346,000 294,100 87.49 30.20 16.00 1.60 11.34 71.06 0.50 Central 3 Inferred 1699500 0.83 1.55 2,186,400 1,639,800 79.15 30.39 16.00 1.79 8.35 73.86 0.61 Central 4 Indicated 292920 0.98 1.55 444,900 378,200 70.00 29.19 16.00 3.10 9.56 71.34 0.65 Gus Seam South Inferred 602870 0.89 1.61 863,800 647,900 58.58 29.29 16.00 2.09 9.09 72.82 0.60 West Indicated 1604690 1.03 1.6 2,644,500 2,247,800 67.39 29.85 16.00 2.02 9.25 72.73 0.59 North-West Inferred 165190 1.15 1.53 290,600 218,000 84.76 30.21 16.00 1.68 10.73 71.59 0.51 North-East Indicated 515760 0.95 1.51 739,800 628,800 83.37 29.62 16.00 2.56 5.86 75.58 0.64 South-East Indicated 404850 1.00 1.59 643,700 547,100 63.93 30.60 16.00 1.88 7.90 74.22 0.59 Total 6,086,310 0.95 1.5591 8,969,200 7,289,800 74.03 30.00 16.00 2.01 8.63 73.36 0.62 4
WHAT IS ANTHRACITE? UNIQUE QUALITY OF COAL RAC can produce the full range of anthracite products: Offers market diversification High value niche producer Maximise recovery by selling its discard INCREASING ENERGY & CARBON CONTENT / DECREASING VOLATILE CONTENT Brown coal Black coal Lignite Sub-bituminous Bituminous Semi-anthracite Anthracite Steam coal Coking coal LV PCI coal Standard grade High grade Ultra-high grade Power Power Power Coke production Blast furnace Sintering / EAF Power Blast furnace / EAF generation generation generation (Metallurgy) (Metallurgy) generation (Metallurgy) (Metallurgy) RAC quality range Anthracite Grade RAC Standard High U-High RAC RAC RAC Quality LV PCI (High grade grade grade (PCI) (HG) (UHG) Ash) Fixed Carbon (min) 78% 60% 74% 80% 79% 74% 84% 62% Sulphur (max) 0.7% 1.0% 1.0% 0.7% 0.7% 0.7% 0.7% 0.7% Phosphorus (max) 0.04% n/a 0.02% 0.01% 0.007% 0.007% 0.007% n/a Volatiles (max) 14% 12% 10% 6% 11% 9% 6% 8% 5 Ash (max) 10% 30% 18% 12% 9.5% 17% 9.5% 30%
DEMAND FOR ANTHRACITE SOUTH AFRICA EXHIBITS A UNIQUE DEMAND PROFILE GLOBAL ANTHRACITE DEMAND BY USE/APPLICATION SOUTH AFRICAN ANTHRACITE DEMAND BY INDUSTRY Global annual demand in 2016 for metallurgical By comparison South Africa’s anthracite demand in anthracite is estimated to be 115Mt , with the ferrous 2016 was 2.1Mt of which 98% was consumed by the sector accounting for over 80%. non-ferrous sectors. Source: Wood Mackenzie Source: Filippo Faralla 6
SOUTH AFRICAN ANTHRACITE PRODUCTION MINE CLOSURES, DECLINING PRODUCTION, DETERIORATING QUALITY AND RISING COSTS The industry decline is occurring in an environment of increasing demand from a globally competitive ferroalloy industry driven by a lack of viable anthracite projects – RAC is the last known long-life, high quality anthracite project in South Africa. The declining production profile is attributable to the depletion of viable resources, growing geological complexity of established mines and challenging quality. Ferrochrome, electrode paste, ilmenite and calcium carbide markets are particularly sensitive to impurities and require Sulphur<1%, and phosphorous <0.015%. At least one major competitor can no longer consistently provide this specification. The local ferrochrome market has been accepting up to 18-19% ash in order to keep low impurity mines viable. High sulphur/phosphorous mines are dependent upon the ferromanganese and export markets. All producers are benefitting from the growing market for exports of up to 35% ash anthracitic coal. No significant new projects or expansions are scheduled in South Africa. 7
SOUTH AFRICAN ANTHRACITE QUALITY RAC’S QUALITY IS REMARKABLE IN THE CONTEXT OF THE SOUTH AFRICAN MARKET The low Sulphur and phosphorous content of the RAC resource quality positions the project as a key supplier to SA’s world leading ferrochrome industry which is dependent upon low impurity anthracite. Across key quality parameters, the RAC project quality is either equivalent or superior to existing producers. SHARE OF PRODUCER QUALITY INDUSTRY SECTORS PRODUCER PRODUCER ASH VM FC SULPHUR PHOS. SEGMENT SUPPLIED SEGMENT Low impurity (ash < 10%, S < 1.0% Titanium (Ilmenite) ZAC Phos < 0.02%) Carbon electrodes 80% 9.5% 5% 86% 1.0% 0.02% low volatile (<6%) Calcium carbide SOMKHELE 63% 15 – 18% 8% 74 – 78% 0.7% 0.02% Low Phosphorus (< 0.02%) Ferrochrome KIEPERSOL 12% 15 – 17% 9% 74 – 76% 1.0% 0.02% low Sulphur (< 1.0%) Export (sinter) NKOMATI 16% 18% 8% 75 – 76% 0.4% 0.02% AVIEMORE High Sulphur (> 1.0%) Ferromanganese >80% 13- 14% 7% 80 - 81% 1.8% 0.03% RAC PROJECT Low impurity, low volatile - - 9.5 – 17% 6 - 11% 74 - 84% 0.7% 0.007% 8
THE WORLD’S LARGEST PRODUCER AND TRADER OF FERROCHROME HAS ISSUED A NON - BINDING LETTER OF INTENT TO ACACIA TO BUY ALL OF THE PROJECT’S OUTPUT AND IN 2017, DISCUSSIONS WILL PROGRESS ON BINDING OFFTAKE AGREEMENTS AND FUNDING OPTIONS. 9
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