AQUILA · PDF filewith Orion Mine Finance: •Acquisition of 75% of Aquila’s life of...
Transcript of AQUILA · PDF filewith Orion Mine Finance: •Acquisition of 75% of Aquila’s life of...
TSX: AQA | INVESTOR PRESENTATION
AQUILA RESOURCESAdvancing the gold- and zinc-rich Back Forty Project
TSX: AQA
Investor Presentation | January 2016
TSX: AQA | INVESTOR PRESENTATION
Disclaimer
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This presentation contains certain forward-looking statements within the meaning of applicable Canadian securities legislation. In certain cases, forward-looking
statements can be identified by the use of words such as "plans", "expects" or "does not anticipate", or "believes", or variations of such words and phrases or
statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" and similar expressions suggesting
future outcomes or statements regarding an outlook.
Forward-looking statements relate to any matters that are not historical facts and statements of our beliefs, intentions and expectations about developments,
results and events which will or may occur in the future, which out limitation, statement with respect to: (i) the economic analysis contained in the PEA; (ii) the
development plan of the PEA and results thereof; (iii) capital expenditure programs; (iv) the quality or quantity of the mineral resources subject to estimates by
Aquila; and (v) work plans to be conducted by Aquila.
These and other forward-looking statements and information are subject to various known and unknown risks and uncertainties, many of which are beyond the
ability of Aquila to control or predict, that may cause their actual results, performance or achievements to be materially different from those expressed or implied
thereby, and are developed based on assumptions about such risks, uncertainties and other factors set out herein. Aquila expressly disclaims any obligation to
update forward-looking information except as required by applicable law. Such forward-looking information represents Aquila’s best judgment based on
information currently available. No forward-looking statement can be guaranteed and actual future results may vary materially. Accordingly, readers are advised
not to place undue reliance on forward-looking statements or information. Furthermore, mineral resources that are not mineral reserves do not have
demonstrated economic viability.
Thomas O. Quigley, Vice President of Exploration for Aquila Resources, is the Qualified Person for the Company as described in National Instrument 43-101 and isresponsible for the contents of this presentation.
TSX: AQA | INVESTOR PRESENTATION 3
• Focused on high-grade polymetallic assets in the Great Lakes Region
• Flagship Back Forty demonstrates strong economics
• Strong balance sheet post close of $20.75M financing by Orion
• Upside potential to improve economics and expand deposit
• Potential to unlock value with near-term permitting and feasibility study milestones
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Investment Highlights
TSX: AQA | INVESTOR PRESENTATION
$282.2MPre-tax NPV
38.8%Pre-tax IRR
TSX: AQA | INVESTOR PRESENTATION
Orion Transaction | Highlights
Funding drives next phase of project development
• Closed multi-level financing agreement with Orion Mine Finance:
• Acquisition of 75% of Aquila’s life of mine silver production for US$17.25 million
• $3.5 million equity financing
• Each $0.13 Unit consists of one common share and one-half of a warrant
• Pay an additional US$4.00 per ounce of silver delivered under the streaming agreement
• Repurchased existing royalties at Back Forty• Net smelter return (NSR) royalty from Hudbay
for US$1 million in cash and issue $225,000 worth of common shares
• Distributable net income (DNI) royalty from Vale Exploration USA for $4 million in cash
$20.75MMulti-level financing agreement
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TSX: AQA | INVESTOR PRESENTATION 5
• Strategic focus on high-grade assets
• Back Forty, Bend Copper-Gold, and Reef Gold located along the Penokean Volcanic Belt
• Flagship Back Forty is a gold- and zinc-rich deposit
• Expected to be a low-cost producer located in Michigan’s Upper Peninsula
• $70M invested to-date
• Region marked by permitting and acquisition activity
Focus on the Great Lakes Region
Region with World-Class Potential
Lake Superior
BENDREEF
BACK FORTY
Upper Peninsula
MichiganWisconsin
IllinoisIndiana
Ohio
LakeMichigan
PENOKEAN VOLCANIC BELT
OTHER MININGPROJECTS
MIDCONTINENTRIFT SYSTEM
Copperwood Project White Pine Mine Eagle Nickel/Copper Mine
Flambeau Mine Crandon Deposit
TSX: AQA | INVESTOR PRESENTATION
Back Forty | PEA Economics
Strong PEA Results Validate Decision to Acquire 100% Interest in Back Forty
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• New PEA includes 2013 resource estimate
• Contemplates mining 16.1Mt over 16 years • 12.5Mt open-pit• 3.6Mt underground
• Average OPEX of $29.25/tonne for open-pit & $66.20/tonne for underground
• Total estimated initial capital cost of $261M • $177M direct pre-production CAPEX; • $44M contingency; and,• $40M of indirect and owner’s costs.
• Potential to develop reduced-CAPEX high-grade initial phase operation
Pre-Tax After-TaxNPV @ 6%
$282.2M $210.8M
IRR
38.8% 32.0%
Payback Period
1.4 years 1.8 years
PEA Metal Prices: Gold: $1,293/oz; Zinc: $0.96/lb; Silver: $20.46/oz; Copper: $3.18/lb; Lead: $0.96/lb
The PEA is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the preliminary economic assessment will be realized.
TSX: AQA | INVESTOR PRESENTATION
Back Forty | Production Highlights
Diverse Revenue Streams
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Production Parameters
Mine Life 16 years
Throughput 5,350 tpd
Total Payable Production
Gold 532K oz
Zinc 721M lbs
Copper 74M lbs
Silver 4,645K oz
Lead 21M lbs
Payable Metals Mix
Gold | 40%
Zinc| 40%
Copper| 14%
Silver | 5 % Lead | 1%
TSX: AQA | INVESTOR PRESENTATION
Back Forty | Recovery Rates
Solid Recovery Rates Contribute to Strong Project Economics
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Average Metallurgical Recovery*Ore Type Recovery %
Flotation Only
Cu**
82.5%
Pb**
72.9%
Zn**
91.0%
Au 50.5%
Ag 46.6%
LeachOnly
Au 90.1%Ag 45.3%
The Project will support 4 product streams:
Gold – Silver doréZinc concentrate Copper concentrate Lead concentrate
*As calculated from 2014 PEA (Base Case). **Values are weighted averages of ore types where the specified metal is recovered
TSX: AQA | INVESTOR PRESENTATION
Economically Viable Against Commodity Price Fluctuations
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Back Forty | Sensitivity Analysis
Base Case-15%
Base Case Base Case+ 15%
Gold $1,099/oz $1,293/oz $1,487/oz
Silver $17.39/oz $20.46/oz $23.53/oz
Zinc $0.82/lb $0.96/lb $1.10/lb
Copper $2.70/lb $3.18/lb $3.66/lb
Lead $0.82/lb $0.96/lb $1.10/lb
Pre-Tax
NPV @ 6% $122.3M $282.2M $440.6M
IRR 23.7% 38.8% 52.0%
Payback Period 2.8 years 1.4 years 0.9 years
After-Tax
NPV @6% $95.2M $210.8M $324.8M
IRR 20.2% 32.0% 42%
Payback Period 3.1 years 1.8 years 1.2 years
TSX: AQA | INVESTOR PRESENTATION 10
~90% of Resources are in M&I Category
Back Forty | Mineral Resources*
*Mineral resources are not mineral reserves and do not have demonstrated economic viability. NSR cut-off values for the 2013 resource estimate were based on metal price assumptions of US$0.96 per pound zinc, US$3.65 per pound copper, US$1.01 per pound lead, US$1456.36 per troy ounce gold and US$27.78 per troy ounce silver. Metallurgical recoveries were determined and applied for each of the metallurgical domains determined for the deposit. Cut off values were determined for each of the metallurgical domains contained in the optimized open pit were based on NSR values. Average cut-off value for the open-pit resource contained within an optimized pit shell was US$27.75. Cut off values were determined for each of the metallurgical domains based on NSR values. Average cut-off value for the underground resources outside of the optimized pit shell was US$66.45. Refer to the February 4, 2013 press release for full cautionary language and disclosures.
Category Tonnes Au (g/t) Ag
(g/t) Cu (%) Pb (%)
Zn
(%) Au (oz) Content
Zn (lbs)
Content
Measured 6,700,000 2.16 27.30 0.47 0.18 3.95 465,000 583,000,000
Indicated 8,430,000 1.92 22.24 0.22 0.26 2.36 520,000 439,000,000
M&I 15,130,000 2.03 24.48 0.33 0.22 3.06 985,000 1,022,000,000
Inferred 2,340,000 2.07 26.53 0.36 0.33 2.20 156,000 113,000,000
TSX: AQA | INVESTOR PRESENTATION 11TSX: AQA | INVESTOR PRESENTATION
Maximize Capital Return in Early Years of Production
$129.4MPre-tax NPV
38.6%Pre-tax IRR
$100.8MInitial Capital Cost
Project Potential
Low-CAPEX , High-grade Initial Phase Operation
• Focus on mining near-surface, high-grade zones
• Benefits include:• Attractive economic returns• Mitigation against start-up risks• Significant optionality over the long-
term
• Feasibility study will better define economics
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Potential to Extend Mine Life and Improve Project Economics
• Potential to expand underground resource
• Ore body open at depth in two directions
• VMS deposits occur in clusters
• Focus is on identified gossans
• Q4 2015 - 1,000 metre near-mine drill program produced encouraging assay results
Project Potential | Exploration
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Back Forty | Near-Surface Mineralization
Deposit Open at Depth Creates Upside Potential
2014 PEA Underground Resource (diluted and
extracted)2,734,002 tonnes (M +I)
911,334 tonnes
(Inferred)
2014 PEA Open Pit Resource (diluted)
12,256,000 tonnes M+I244,000 tonnes inferred
Approx. 200 meters
Pit Shell #32 (brown) and Underground Mining Shapes (blue) from 2014 PEA
TSX: AQA | INVESTOR PRESENTATION 1414
Unlocking Shareholder Value
Short-term*
Milestone Timing Status
Orion financing agreement Q1 2015 Completed
Submission of permit application Q4 2015 Completed
Start of feasibility study Q4 2015 Ongoing
Near-mine exploration program Q4 2015 Ongoing
Metallurgical test work H1 2016 In progress
Completion of feasibility study H2 2016 In progress
Upcoming Catalysts
Longer-term
Mine development
Exploration/development of Aquila’s second generation assets
Generating value from REBgold’sassets
*Activities are dependent on financing and macro-economic conditions
TSX: AQA | INVESTOR PRESENTATION
TSX: AQA | INVESTOR PRESENTATION
Expanded Management Team
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Management Directors Barry Hildred, CEO - Current Chairman of Aldridge Minerals. Founder and Former President of TMX Equicom + 20 years of capital markets experience.
Edward Munden, Interim Chairman - Currently a Director and Co-Founder of private investment company and a Director of Mustang Minerals. Co-founded a NASDAQ-traded energy company and held senior positions until it was sold in 2001, +35 years of experience in energy, mining and technology industry.
Andrew Boushy, Vice President , P.Eng - 25+ years of experience in project delivery, engineering design, strategic planning, contract management, construction and operational improvement. Previously with Ausenco Canada, Mining and Minerals, Xstrata Nickel, Kinross Gold, Hatch Africa and the Nuclear Waste Management Organization.
Barry Hildred (refer to Management column)
Stephanie Malec, CFO – 15+ years of experience combining accounting, financial reporting, public markets and mining sector work. Previously with Malbex Resources, Starfield Resources, Dundee Precious Metals, Falconbridge and PriceWaterhouseCoopers
Peter M.D. Bradshaw - Currently a Director with First Point Minerals, 45 years of international mineral exploration experience in over 30 countries with Barringer Research, Placer Dome and Orvana Minerals.
Tom Quigley, VP Exploration P. Geo - Former President and CEO of Aquila Resources Inc. & current President of Minerals Processing Corporation. Qualified Person for Aquila Resources.
Kevin Drover – President & CEO of Aurcana Corporation since 2014. 40+ years of experience in management, operations and project development with mining companies with assets around the world, including Kinross Gold, Benz Mining, Oracle Mining and Glencairn Gold.
Stephen Fabian – Currently a Principal and Director of Genus Capital Fund, listed on the LSE as the Baker Steel Resource Trust. Founder of South American Ferro Metals and formerly held positions with County NatWest and Rock Capital Partners. +25 years of experience in the mining and finance industry.
Andrew W. Dunn – Currently Managing Partner of Canadian Shield Capital and Senior Advisor of Atlas Partners. Previously spent 27 years at Deloitte, and served as Vice Chair of Deloitte Canada and Chair of its Client Cabinet
Committed to un-locking Back Forty’s Potential
TSX: AQA | INVESTOR PRESENTATION
Capital Structure
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MAJOR INSTITUTIONAL SHAREHOLDERS
Hudbay Minerals 16%
Ruffer 14%
Orion 14%
Baker Steel 8%
CURRENT CAPITAL STRUCTURE
TSX AQA
Share Price (As of Jan. 8 2016) $ 0.17
Avg. 3-mth volume 59,543
52-week range $0.10 - $0.24
Market Cap. $ 37.6M
Shares O/S 220.9M
Year End December 31
Strong Shareholder Support & Investor Backing
CURRENT OWNERSHIP STRUCTURE
Retail 40% Insiders & Institutional
60%
TSX: AQA | INVESTOR PRESENTATION 17
• Focused on high-grade polymetallic assets in the Great Lakes Region
• Flagship Back Forty demonstrates strong economics
• Strong balance sheet post close of $20.75M financing by Orion
• Upside potential to improve economics and expand deposit
• Potential to unlock value with near-term permitting and feasibility study milestones
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Investment Highlights
TSX: AQA | INVESTOR PRESENTATION
$282.2MPre-tax NPV
38.8%Pre-tax IRR
TSX: AQA | INVESTOR PRESENTATION
Contact Information
Barry Hildred, CEO
Aquila Resources
416. 477. 6985
www.aquilaresources.com
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Joe Racanelli
Investor Relations | NATIONAL Equicom
416. 586. 1943
TSX: AQA | INVESTOR PRESENTATION 1919
Appendix
TSX: AQA | INVESTOR PRESENTATION
TSX: AQA | INVESTOR PRESENTATION
Back Forty | Permitting Status
• Mine Permit application submitted to Michigan Department of Environmental Quality• Application supported by Foth Infrastructure & Environment LLC and previous
work completed by Hudbay
• Application requests permits for• Nonferrous Metallic Minerals Mining• National Pollutant Discharge• Elimination System• Wetlands Protection
• Application Aquila’s underscores commitment to mining responsibly and complying with Michigan’s regulations
Permit Precedents in Place
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TSX: AQA | INVESTOR PRESENTATION
Back Forty | Infrastructure
Power Supply
• 4.5km power transmission line will be built from an existing 138kV transmission line northeast of the property
• New power substation planned at the southeast corner of the project will provide power for the plant facility and mine site with 13.8kV distribution voltage
Roads/Access • Improvements to existing near and on-site roads, construction of new haulage roads• Rail line is situated ~13km east of the project site• Ports for ocean going vessels in Escanaba and Menominee, within 50 miles of project
Labour • Skilled local workforce readily available
Well-Developed Infrastructure
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TSX: AQA | INVESTOR PRESENTATION 22
Bend Copper-Gold Project• 100%-owned VMS occurrence located in the Penokean Volcanic Belt
• >14,000 meters of historical drilling delineating a non-43-101 compliant resource*
• 2.7 M tonnes grading 2.4% copper, 1.4 g/t gold and 13.7 g/t silver in copper zone
• 1.12 M tonnes grading 4.7 g/t gold and .31% copper in gold zone
• Aquila drilling in 2012 indicates major expansion
Reef Gold Project • 100%-owned, high- grade gold mineralization potentially amenable to low-cost, open-pit mining
• Historic drilling delineated a non-43-101 compliant resource* of 140,564 contained gold ounces (412,410 tonnes @ 10.6 g/t)
• Phase III drill program to expand and define resource
• Aquila drilling shows broad zones of gently-dipping mineralization open in all directions
*The Company is not treating the historical estimates as current mineral resources or mineral reserves and the historical estimates should not be relied upon or understood to indicate the existence of reserves or resources.
Attractive Pipeline of Future Projects
Second Generation Assets
TSX: AQA | INVESTOR PRESENTATION
Zinc | Declining Supply to Create Global Deficit
15891
16037
15000
17500
2018
Total Refined Supply Total Consumption
Supply vs. Demand*
146kt Global zinc deficit in 2018
*Source: BMO Capital Markets
• Demand continues to grow 3% - 5%annually
• Increasing in line with globaleconomic growth
• Almost 50% is used in galvanizingsteel
• 10% - 14% of global production is set tocome offline within next 2-3 years
• No significant new deposits discoveredsince 1990s
• New zinc start-ups will be delayed due tocurrent capital constraints
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(kt)
TSX: AQA | INVESTOR PRESENTATION
Other Assets from Merger with REBgold
• Potential to earn 50% - 80% interest on properties in Finland from Joint Venture with Belvedere Resources:
• Kiimala
• Seven drilled gold occurrences occurring from surface, further exploration targets have been identified
• Rantasalmi
• Multi-million ounce target potential
• Three gold deposits identified that have high-grade and bulk tonnage potential
• Mineralization open at depth and strike
• REBgold’s proprietary bioleaching technology
• Utilizes bacteria in the extraction of precious and base metals from complex refractory ores and concentrates
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Portfolio of Assets Generate Further Shareholder Value
TSX: AQA | INVESTOR PRESENTATION
Milestone Payments to Hudbay Minerals
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Amount Timeline
$3 Million • Payable upon completion of financing tied to start of construction at Back Forty
• Up to 50% payable in Aquila shares
$2 Million • Payable 90 days after start of commercial production
$2 Million • Payable 270 days after start of commercial production
$2 Million • Payable 450 days after start of commercial production
• First milestone payment due January 2024• 1% NSR was repurchased from Hudbay in April 2015 concurrent
with Orion transaction
Based on purchase of Hudbay’s 51% interest in Back Forty