Esperanza Resources Corp. Presentation - A Clear Path To Gold
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Transcript of Esperanza Resources Corp. Presentation - A Clear Path To Gold
A CLEAR PATH TO GOLD
2
LEGAL DISCLAIMER
Some statements in this presentation constitute “forward-looking statements” within the meaning of applicable U.S. securities
laws and “forward-looking information” within the meaning of applicable Canadian securities laws, which are collectively referred
to as “forward-looking statements”. The United States Private Securities Litigation Reform Act of 1995 provides a “safe harbor”
for certain forward-looking statements. Such statements include but are not limited to statements as to the completion of the
transactions between Esperanza Resources Corp. (the “Company”) and Pan American Silver Corp., the potential of the Esperanza
Gold Project property, the Company’s plans in respect of exploration and development, including: significant costs and timing
thereof and other exploration properties. The forward-looking statements involve risks and uncertainties and other factors that
could cause actual results to differ materially, including those relating to permitting, availability of equipment, exploration results
and bringing properties into production. Please refer to a discussion of these and other risk factors in the Company’s public
filings with the Canadian regulators and the Form 20-F of the Company filed with the US Securities and Exchange Commission.
The forward-looking statements contained in this presentation constitute management’s current estimates as of the date of this
presentation with respect to the matters covered herein. We expect that these forward-looking statements will change as new
information is received and that actual results will vary, possibly in material ways. While we may elect to update this forward-
looking information at any time, we do not undertake to do so.
This presentation is not, and under no circumstances is to be construed as, a solicitation or an offer of any kind. The matters set
forth in this presentation do not constitute an agreement or offer that may be accepted. Accordingly, no person may bring a
claim or action against another for a failure to negotiate, agree or enter into any agreement with respect to matters contained in
the presentation.
TSX.V: EPZ OTCQX: ESPZF
STRONG MANAGEMENT TEAM Proven mine builders, led by former Minefinders executive and operating team.
ESPERANZA GOLD PROJECT Accelerating to production and positive cash flow.
$38 MILLION IN CASH AND SECURITIES Well funded to bring our first asset into production.
LONG-TERM OBJECTIVE Building a multi-mine precious metals producer.
HIGHLIGHTS
3
THE NEW TEAM
MANAGEMENT
GREG D. SMITH
President & CEO
Former CFO Minefinders, Chartered Accountant
DANIEL O’FLAHERTY
Executive VP
Former Director, Investment Banking at Scotia Capital
ANDREW POOLER
COO
Former COO of Abacus Mining and Exploration Corp
Senior Vice President, Mine Operations for Pan American Silver
KYLIE DICKSON
CFO
Former Controller of Minefinders
JOHANNES J. MILLER
VP Operations
Former Operations Manager and Acting VP Operations for
Minefinders
NON EXECUTIVE DIRECTORS
WILLIAM J. PINCUS
Chairman
Former CEO of Esperanza with over 30 years experience as a
certified professional geologist
ANDREW SWARTHOUT
Director
CEO of Bear Creek Mining Corp. and former officer of Southern
Peru Copper
MARCEL DE GROOT
Director
Founder and President of Pathway Capital Ltd.
BRIAN E. BAYLEY
Director
Resource Lending Advisor for Sprott Resource Lending Corp.
4
THE ESPERANZA GOLD PROJECT • 100% ownership
• 15,025 hectares
• Gold oxide deposit
Planned conventional open-pit heap-leach operation with short construction lead-time & manageable capital requirements Updated PEA completed in September 2011
5
ESPERANZA GOLD PROJECT HIGHLIGHTS
6
WELL DEFINED GOLD RESOURCE
LOW CAPITAL REQUIREMENTS
STRONG ECONOMICS
FAVOURABLE LOCATION IN MEXICO
LOW RISK CONVENTIONAL OPERATION (OPEN-PIT HEAP-LEACH)
SILVER BYPRODUCT CREDIT
EASY ACCESS TO INFRASTRUCTURE
EXPLORATION UPSIDE
STRONG COMMUNITY SUPPORT
EXPERIENCED MINE BUILDERS
QUICK TIMELINE TO PRODUCTION
Landfill
Calabazas Hilltop
Leach Pad Fields
Power Lines
Cerro Jumil
ESPERANZA GOLD PROJECT PIT & EXPLORATION UPSIDE
7
Southwest Extension
PEA HIGHLIGHTS: SEPTEMBER 2011
SEPTEMBER 2010 RESOURCE (USED AS THE BASIS FOR THE PEA)
TONNAGE (000’S)
GOLD GRADE (G/T)
SILVER GRADE (G/T)
GOLD (KOZS)
SILVER (KOZS)
M&I 34,406 0.83 1.8 913 1,951
INFERRED 8,596 0.83 6.9 230 1,904
TWO-STAGES OF CRUSHING
AVERAGE ANNUAL GOLD PRODUCTION (KOZS) 103
OPERATING COSTS (NET OF BY-PRODUCTS) ($/OZ AU) 499
INITIAL CAPITAL COST ($MM) 114
PRODUCTION RATE (KTPD) 20
GOLD RECOVERY 65-75%
SILVER RECOVERY 25%
OVERALL STRIP RATIO (WASTE:ORE) 2.2:1
NSR ROYALTY 3%
Note: Totals may not sum to 100% due to rounding
Based on Sept. 2010 Resource including 41,500 meters of drilling (does not include positive 2011 & 2012 drilling of 22,000 meters)
8
VALUE CONSIDERATIONS As per Esperanza Gold Project 2011 Preliminary Economic Assessment
9
0%
10%
20%
30%
40%
50%
60%
70%
$0
$50
$100
$150
$200
$250
$300
$350
$1,
00
0
$1,
05
0
$1,
100
$1,
150
$1,
20
0
$1,
25
0
$1,
30
0
$1,
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0
$1,
40
0
$1,
45
0
$1,
50
0
$1,
55
0
$1,
60
0
$1,
65
0
$1,
70
0
INT
ER
NA
L R
AT
E O
F R
ET
UR
N (
%)
AF
TE
R-T
AX
NE
T P
RE
SE
NT
VA
LU
E (
US
$M
)
PRICE OF GOLD (US$/OZ)(1)
IRR
5% NPV
7% NPV
$1,250/oz Au
After-Tax NPV5% of $165M
IRR of 35%
$1,550/oz Au
After-Tax NPV5% of $270M
IRR of 53% (1) Silver price based upon a Ag:Au price ratio of 55:1
Based on initial 6 year mine life does not include 0.5 Moz Au resource increase
913 @ 0.83 gpt
1,474 @ 0.91 gpt
230
169
2.0
16.0
1.9
2.8
0
5
10
15
20
25
30
35
40
45
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
SIL
VE
R R
ES
OU
RC
ES
(MO
Z)
GO
LD
RE
SO
UR
CE
S (
KO
Z)
10
SEPTEMBER 2012 RESOURCE
10
September 2010 Resource Gold Silver
September 2012 Resource Gold Silver
M&I Resources Inferred Resources
SEPTEMBER 2012 RESOURCE STATEMENT (63,500 METERS OF DRILLING)
TONNAGE (000’S)
GOLD GRADE (G/T)
SILVER GRADE (G/T)
GOLD (KOZS)
SILVER (KOZS)
M&I 50,336 0.91 9.9 1,474 16,015
INFERRED 7,970 0.66 10.9 169 2,793
INCREASE TO M&I FROM 2010
+46% +10% +466% +61% +729%
6 year mine life
CAPITAL COST ESTIMATE New management to review and optimize capital costs from PEA PEA Operating Costs: <$500/oz +3% NSR TOTAL PEA CAPITAL $114 million + $15 million working capital
$15 million Crusher
$6 million Heap Leach Phase II
$20 million Truck Fleet
$25 million Support Equipment
$65 million Infrastructure Leach Pad Mine Development Owner Costs Working Capital
Potential to pay for out of cash flow
Potential for contract mining
11
Currently under revision
Q1 2012 Q2 2012 Q3 2012 Q4 2012 2013–2015
ESPERANZA GOLD PROJECT MOVING FORWARD
INAH Completes Archaeological Review
Prepare Permit Application
Resource Update
Submit Permit Application
Expansion Drilling
Initiation of Feasibility Study
Addition of Experienced Operating Team
Completed $34M Equity Placement
Construction Surface Land Agreement
Obtain All Permits
Production
Feasibility Study
12
13
ESPERANZA RESOURCES & PAN AMERICAN SILVER
TRANSACTION ANNOUNCED FEBRUARY 25, 2013
TRANSACTION STRUCTURE
14
Esperanza’s Pro Forma Asset Profile Mineral Property Acquisition
La Bolsa
Pico Machay
Calcatreu
$68 million Cash
$15 million Standby Facility
Esperanza
26% of Global Minerals
Exploration Properties
Royalty Portfolio
La Bolsa, Pico Machay, Calcatreu
50.9 million shares 10 million warrants
Private Placement into Esperanza
$35 million cash $15 million standby facility
20.6 million shares $1.70 / share
LA BOLSA OPEN PIT PROJECT
15
Avg. Annual Production 42,000 oz Gold
Cash Costs US$510 / oz (2011)
Initial Mine Life 6+ years
Development Capital US$31 million (2011)
Resources (M&I)
427,000 oz Gold 6.2 million oz Silver
Resources (Inferred)
222,000 oz Gold 3.3 million oz Silver
Source January 2011 PFS
Status Permitted Construction Ready
PICO MACHAY OPEN PIT PROJECT
16
Resources (M&I) 270,000 oz Gold
Resources (Inferred) 450,000 oz Gold
Source 2011 resource update (resource only)
Status Drill ready targets Further work required
CALCATREU OPEN PIT PROJECT
17
Avg. Annual Production ~90,000 oz Gold
Cash Costs US$226 / oz (2007)
Initial Mine Life 5+ years
Development Capital US$79 million (2007)
Resources (M&I)
676,000 oz Gold 6.6 million oz Silver
Resources (Inferred)
226,000 oz Gold 1.8 million oz Silver
Source 2007 feasibility 2008 resource update
Status Feasibility stage project Further work required
PRO FORMA ASSET PROFILE
18
Note: La Bolsa M&I inclusive of P&P material Source: La Bolsa resource based on January 2011 technical report; Esperanza resource based on October 2012 technical report; Pico Machay resource based on April 2011 technical report press release; Calcatreu resource based on April 22, 2008 Aquiline Resources press release
Asset Location Reserves and Resources
La Bolsa
Esperanza
Pico Machay
Calcatreu
Measured & Indicated Inferred
Gold Silver Gold Silver
Contained Grade Contained Grade Contained Grade Contained Grade
(koz) (g/t) (koz) (g/t) (koz) (g/t) (koz) (g/t)
La Bolsa 427 0.6 6,232 9.0 222 0.5 3,343 7.6
Esperanza 1,470 0.9 16,010 9.9 170 0.7 2,790 10.9
Pico Machay 270 0.8 -- -- 450 0.6 -- --
Calcatreu 676 2.6 6,606 25.7 226 2.1 1,821 16.6
Total 2,843 28,939 1,068 7,954
CORPORATE PROFILE
19
Potential Annual Gold Production (000 oz)
Note: production values based on 5-year averages; Pico Machay and Calcatreu based on internal estimates, further study required. La Bolsa IRR is pre-tax and Esperanza is post-tax. Sequence is conceptual and subject to further study.
GROWTH
HIGH MARGIN, LOW CAPEX
LOW RISK
PROVEN TEAM
Near term gold production in Mexico Substantial production potential Leading mid-tier gold producer by 2016 Focus on open-pit low infrastructure projects Focus on cash flow and financial returns Strong balance sheet Supportive major shareholder Diversified in stable jurisdictions in Americas Executives with significant operating
experience Strong Board with Pan American Silver
support
42
105
~150
La Bolsa Esperanza Pico Machay/Calcatreu
~300
95% IRR @ $1,200 Au
32% IRR @ $1,200 Au
147
20 20
Esperanza Gold Project
Caballo Blanco
Cerro del Gallo
San Antonio
La India San Francisco
El Castillo
La Colorada
0.20
0.40
0.60
0.80
1.00
0 500 1,000 1,500 2,000
M&
I R
ES
OU
RC
E G
OL
D G
RA
DE
(g
/t)
MEASURED & INDICATED GOLD RESOURCE (koz)
Open-Pit Heap Leach Mines / Projects in Mexico
Producing
Development
Size of bubble denotes est. annual production
La Bolsa
Source: Scotia Capital, Company Reports
Resource grades may not be diluted for mining
PEER BENCHMARKING
Luna Timmins
McEwen Primero
Argonaut
Alamos
AuRico
Rio Alto
EPZ + LB
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
100 120 140 160 180 200 220
MA
RK
ET
CA
PIT
AL
IZA
TIO
N (
US
$M
M)
2013 ANNUAL GOLD PRODUCTION FORECAST (000 OZ)
PEER COMPARISON – PEER COMPARISON – RERATE POTENTIAL
21
Market Capitalization vs Gold Production Per Year
Note: 2012 production shown for peer group from BMO equity research, annual production shown for Esperanza, La Bolsa based on 2012 and 2011 technical reports, respectively; Pico Machay and Calcatreu based on internal estimates, further study required.
RE
RA
TE
P
OT
EN
TIA
L
PEER COMPARISON – COST METRICS
22
Operating Cash Costs (US$/oz)
$1,026 $1,011
$907 $852 $842
$766 $753 $695 $671 $633
$589
$436 $510 $499
Kirkland LakeLake ShoreOsiskoBrigusAllied NevadaAuRicoNew GoldAurizonArgonautPrimeroRio AltoLa BolsaEsperanzaAlamos
Note: 2012 cash costs shown for peer group from BMO equity research; Esperanza and La Bolsa cash costs based on January 2012 and January 2011 technical reports, respectively, net of by products; Esperanza cash cost does not include 3% NSR royalty
$499 $510
$42
$184 $138
$33 $55
$780 $703
$1,200
Esperanza La Bolsa Peer Average
Cash Costs Royalty Dev. Capex Sus. Capex Spot Gold
PEER COMPARISON – BREAK-EVEN METRICS
23
Break-Even Gold (US$/oz)
Spot Gold: US$1,400 /oz
Significant Margin
Source: Peer Average based on BMO and Canaccord equity research. Esperanza and La Bolsa are based on the January 2012 Preliminary Economic Assessment and the January 2011 Preliminary Economic Assessment, respectively.
PAN AMERICAN SILVER
24
Market Capitalization $1.8B
30 Day Average Volume 2.6M
2012 Silver Production 25.1 Moz
# Producing Mines 7
Second largest primary silver producer in the World
Operating 7 mines in 4 countries
Reputation as strong mine builder and operator
Highly liquid with a diverse shareholder base
Committed to being a supportive EPZ shareholder
Ability to lend technical assistance through board positions
AN INDUSTRY LEADING PARTNER
PRO FORMA CAPITAL STRUCTURE
25
Shares Outstanding 150.3 million
Private Placement Price @ $1.70 / share
Warrants Outstanding 23.6 million
Cash From Warrant Exercise $36 million
Pro Forma Market Capitalization $110 million
Cash and Marketable Securities $69 million
Enterprise Value $40 million
Major Shareholders
Pan American 48%
Sprott 11%
Wexford 4%
Note: Capital Structure on a basic basis.
26
VALUE PROPOSITION
26
FULLY-FUNDED WITH
STRONG BALANCE
SHEET NEAR TERM PRODUCTION
EXPLORATION UPSIDE AT MULTIPLE
ASSETS
ENHANCED CAPITAL
MARKETS PROFILE
RISK DIVERSIFICATION
EXCEPTIONAL BOARD &
MANAGEMENT
STRONG CORE SHAREHOLDER
3 MILLION OZ GOLD (M&I)
29 MILLION OZ SILVER (M&I)
APPENDIX
APPENDIX: CORPORATE INFORMATION
ESPERANZA RESOURCES CORP.
TSX.V LISTING (SINCE AUGUST 2003) EPZ
OTCQX LISTING ESPZF
CURRENT PRICE (19-JUNE-13) C$0.67
HIGH – LOW (12 MONTH) C$0.60 — $1.70
AVERAGE DAILY VOLUME (3 MONTHS) 70,000
SHARES OUTSTANDING 79 M
MARKET CAP (ISSUED/OUTSTANDING) C$48 M
CASH C$34 M
VALUE OF SHARES IN GLOBAL MINERALS LTD. C$3 M
WEBSITE www.epzresources.com
28
APPENDIX: OTHER ASSETS
Operator
Project Strieborna San Luis
Biricu
El Canario
Gallos Blancos
Location Slovakia Peru Mexico
Commodity Ag, Cu Ag, Au Au
Resources
M&I INFERRED 290 koz Au Reserves
7.2 Moz Ag Reserves Exploration Stage 14.3 Moz Ag
48.1 Mlbs Cu
13.5 Moz Ag
29.8 Mlbs Cu
EPZ Interest 26% equity interest 1% NSR 100% owned
29
APPENDIX: ESPERANZA GOLD PROJECT
CAPITAL COST ESTIMATE
PEA PREPRODUCTION CAPITAL (US$M) TWO-STAGE CRUSH RUN-OF-MINE
MINE DEVELOPMENT (PRE-STRIP) $10.5 $10.5
MINING EQUIPMENT/INFRASTRUCTURE $52.0 $52.0
PLANT/INFRASTRUCTURE $32.1 $18.1
LEACH PAD $17.4 $17.4
OWNER COSTS $1.6 $1.6
TOTAL PEA PREPRODUCTION CAPITAL $113.6 $99.6
WORKING CAPITAL $13.6 $10.0
LOM SUSTAINING CAPITAL $7.0 $7.0
INCLUDED IN PREPRODUCTION CAPITAL
TRUCK FLEET $19.5
SUPPORT EQUIPMENT (E.G. DOZERS) $12.3
LOADERS $8.9
ROTARY DRILL $4.1
HEAP LEACH PAD PHASE II $5.7
SUB-TOTAL FLEXIBLE CAPITAL $50.5
The PEA Preproduction capital includes several components that can be leased, replaced with contract mining, or staged later in the mine life
PEA Operating Costs: <$500/oz + 3% NSR
30
APPENDIX: THE ESPERANZA GOLD PROJECT
EXPLORATION TARGETS
10 Target Areas Warrant Further Exploration:
4 target areas adjacent to the known resource (DRILL READY)
• Southwest Extension
• Colotepec
• Northern Contact
• NE Intrusive Contact
6 other target areas, in order of priority (DRILL READY)
• Coatetelco
• Alpuyeca
• Pluma Negra
• Mercury Mines
• La Vibora
• Jasperoid de Toros
31
DHE-12-74
25.5 meters containing 1.65 g/t Au
DHE-12-77
31.5 meters containing 2.8 g/t Au
DHE-12-81
45 meters containing 1.9 g/t Au
DHE-12-90
Two separate intervals, 27 meters
containing 1.1 g/t Au and another
interval with 121.5 meters containing
1.1 g/t Au
APPENDIX: RESOURCE EXPANSION POTENTIAL
• Mineralization remains open in several directions
• 5000 meter program expected for 2013 to pursue the Southwest Extension
DHE-12-74
DHE-12-77
DHE-12-81
DHE-12-90
32
Esperanza Gold
Project 2012 Drill Hole
Location Map
APPENDIX: ESPERANZA GOLD PROJECT PIT
33
APPENDIX: ESPERANZA GOLD PROJECT PIT
34
35
APPENDIX: LA BOLSA PFS HIGHLIGHTS: AUGUST 2010
OCTOBER 2009 RESOURCE (USED AS THE BASIS FOR THE PFS)
TONNAGE (000’S)
GOLD GRADE (G/T)
SILVER GRADE (G/T)
GOLD (KOZS)
SILVER (KOZS)
P&P 15,631 0.63 9.0 316 4,502
M&I 21,470 0.62 9.0 427 6,232
INFERRED 13,663 0.51 7.6 222 3,343
Note: Totals may not sum to 100% due to rounding; M&I resources inclusive of P&P reserves
TWO-STAGES OF CRUSHING
LIFE OF MINE GOLD PRODUCTION (KOZS) – BASED ON RESERVES ONLY 228
OPERATING COSTS (NET OF BY-PRODUCTS) ($/OZ AU) $510
INITIAL CAPITAL COST ($MM) $31
PRODUCTION RATE (KTPD) 8.5
GOLD RECOVERY 72%
SILVER RECOVERY 7%
OVERALL STRIP RATIO (WASTE:ORE) 1.9:1
PRE-TAX NPV 5% ($MM) - $1,200/OZ AU $91
PRE-TAX IRR (%) - $1,200/OZ AU 95%
APPENDIX: NET ASSET VALUE MULTIPLES
0.0x
0.2x
0.4x
0.6x
0.8x
1.0x
Unfunded Developers
Funded Developers
Junior Producers
Intermediate Producers
Senior Producers
Pri
ce
\ N
et
Ass
et
Va
lue
• Industry wide value multiples have contracted over the last several years
• Within peer groups, companies that trade at the highest multiples have: o Strong balance sheets o Low capital intensity growth o Political risk diversification o Capable operators
• The NAV of an asset when it is producing is higher because capex is sunk and positive cash flows are sooner (less discounting) higher multiples then compound share price growth
0.1 – 0.2x
0.4 – 0.5x
0.5 – 0.7x
0.6 – 0.8x
0.7 – 1.0x
Average Net Asset Multiples By Peer Group
The biggest opportunity for multiple expansion is growing from an unfunded developer to a financially strong producer
2012
2014
Source: National Bank Financial equity research
36
SH
AR
E P
RIC
E
$0
DISCOVERY
SPECULATION
1–2 YEARS
DEVELOPMENT
INVESTMENT ANALYSIS
2–3 YEARS
PRODUCTION
REVALUATION
2–3 YEARS
HIGHER RISK:
Confirm Deposit
Reality Sets In
LOWER RISK:
Production Decision
Start Up
SOURCE: U.S. Global Research
37
APPENDIX: LIFE CYCLE OF A MINE
38
TSX.V: EPZ OTCQX: ESPZF
ADDITIONAL DISCLOSURES
William J. Pincus, M.Sc., C.P.G. and Chairman of Esperanza is the “Qualified Person” as that term is defined in NI 43-101 responsible for the contents of this presentation. Mineral resources that are not mineral reserves do not have demonstrated economic viability. La Esperanza: William D. Bond, P.Geo, Dean D. Turner, P.Geo., Thomas Dyer, P.E., Doug K. Maxwell, P.E., Charlie Khoury, P.E., Ernest T. Shonts Jr., P.E. are the qualified persons (“QP”) under NI 43-101 who have prepared the resources and reserves estimates, and other technical information in respect of La Esperanza Project contained in this presentation. All of the QP’s are independent of the Company as defined under NI 43-101. For additional information with respect to the assumptions and parameters related to the technical information disclosed herein, refer to the technical reports entitled: (i) “Preliminary Economic Assessment Update 2011 Cerro Jumil Project, Morelos, Mexico” dated September 2011 and Amended in January 2012, and (ii) "Cerro Jumil Project, 2012 Mineral Resources Estimate" dated October 26, 2012, which can be found under the Company’s profile at www.sedar.com. La Bolsa: For additional information with respect to the assumptions and parameters related to the technical information disclosed herein, refer to the technical report entitled “Technical Report La Bolsa Project Pre-Feasibility Study” dated January 10, 2011, which can be found under the profile of Minefinders Corporation Ltd. at www.sedar.com. Calcatreu: For additional information with respect to the assumptions and parameters related to the technical information disclosed herein, refer to the technical report entitled “Calcatreu Gold Project” dated April 5, 2007, which can be found under the profile of Aquiline Resources Inc. at www.sedar.com. Pico Machay: For additional information with respect to the assumptions and parameters related to the technical information disclosed herein, refer to the technical report entitled “Independent Technical Report and Resource Estimate Pico Machay Gold Deposit Huancavelica Province Peru” dated July 14, 2011, which can be found under the profile of Treasury Metals Incorporated at www.sedar.com.
NOTES:
39