Reed Resources Company Presentation June11
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Transcript of Reed Resources Company Presentation June11
Page 1
INVESTOR PRESENTATION
28 June 2011
Chris Reed – Managing Director
ASX: RDR
www.reedresources.com
Page 2
Important Notice
Disclaimer
This document has been prepared by Reed Resources Ltd (“Reed” or “the Company”) to provide an update of the Company to investors and potential new shareholders.
Any statements, opinions, projections, forecasts or other material contained in this document do not constitute any commitments, representations or warranties by Reed and associated entities or its directors, agents and employees. Except as required by law, and only to the extent so required, directors, agents and employees of Reed shall in no way be liable to any person or body for any loss, claim, demand, damages, costs or expenses of whatsoever nature arising in any way out of, or in connection with, the information contained in the document.
This document includes certain statements, opinions, projections, forecasts and other material, which reflect various assumptions. The assumptions may or may not prove to be correct. Recipients of the document must make their own independent investigations, consideration and evaluation of the opportunity to invest in the Company. By accepting this document the recipient agrees that if it proceeds further with its investigations, consideration or evaluation of the opportunity to invest in the Company it shall make and rely solely upon its own investigations and inquiries and will not in any way rely upon the document.
All figures in this document are in Australian dollars (AUD) unless stated otherwise.
Page 3
Market Capitalisation
Last price (28-June-11) $ 0.52
Shares on issue $ 262.2
Market capitalisation $m 136
Cash (est. end May) $m 27.0
Debt (due 30-Jun-11) $m 9.0
Enterprise value $m 118
Directors
David Reed Executive Chairman
Chris Reed Managing Director
Steven Cole Non-Executive Director
Peter Collins Non-Executive Director
Ian Junk Non-Executive Director
Vanessa Guthrie Non-Executive Director
Reed Resources Ltd (ASX: RDR) is a WA-focused resource developer
Proven strategy to acquire and develop undervalued assets across varying commodities
3 world class projects across gold, lithium and vanadium
$40 million raising in February 2011 to fund the purchase and feasibility study of the 2.7Moz Meekatharra gold project
Re-optimisation has since yielded a second million tonne open pit reserve and a 32% increase in total reserve base to 559koz prior to start of drilling campaign
Mt Marion lithium (Reed 70%) – constructing the world’s 2nd largest spodumene producer, commissioning Dec Qtr 2011
Barrambie vanadium (Reed 100%) – Australia’s highest grade reserve now in approvals/financing stages, new capex/opex under review
12 Month Share Price
Background
Reed Corporate Snapshot
$0.40
$0.50
$0.60
$0.70
$0.80
May-10 Aug-10 Nov-10 Feb-11 May-11
Page 4
Reed Project Snapshot
LITHIUM Mt Marion, 70%
GOLD Meekatharra, 100%
VANADIUM Barrambie, 100%
Exploration Au, Fe, Ni
Asset Stage
Resource 10.5Mt @ 1.4% Li2O 2.7Moz (contained) 65.2Mt @ 0.82% V2O5
Under construction Care & maintenance Financing/Approvals
JV Partners Mineral Resources (ASX: MIN) MIN fully funding
evaluation, construction and further exploration
Earning 30% on completion of plant
China Nonferrous Metal Industry (NFC) Chinese-listed
industrials company with a market cap of A$3.2bn
MOU for fixed price EPC and financing
Gold (Reed 100%) High grade Sand
Queen mine on production hiatus pending suitable toll treat arrangement
MoU sale of Nimbus processing plant for $4.5m plus toll-treatment and royalty
Iron ore (Reed 20%)
JV with Cliffs Natural Resources for DSO at Mt Finnerty
Maiden JORC resource 4.7Mt @ 53.5% Fe
Nickel (RDR earning 60%) JV with Barranco
Resources at Mt Finnerty
Prospective for nickel sulphide
Cost to Reed
Target Production
0%
December Qtr, 2011 200ktpa +6% Li2O Mining approval
granted (Feb 2011) Assessing
downstream processing options
$33 million (to DTM)
December Qtr, 2012 +120koz pa and 4-5
year production plan BFS underway Reserve re-
optimisation and new drilling program
July 2011
Est. 2014 US$110m EBITDA pa Fixed price EPC
estimate from NFC due June 2011
Final approvals September Qtr 2011
Reed to fully fund and develop
Near ready production with 3Mtpa mill and camp
Total Funding
$40 million (inc. BOO)
100% TBA
Page 5
Mt Marion Fly Through
Page 6
Mt Marion Lithium Project Update (Reed 70%)
Joint Venture (MIN earning 30%) Incorporated JV with Mineral Resources (ASX: MIN), an ASX
200 diversified contractor with a $2.1 billion market cap
Under the JV terms, MIN will:
» Operate the project
» Fully fund evaluation and development costs
» BOO processing plant - construction underway
» Complete wet commissioning by 15 December 2011
Operations Initial output 200,000 tpa of +6% Li2O (chemical grade)
» First shipment March Qtr 2012
» By-products include mica and tantalum
Mt Marion will be the world’s 2nd largest spodumene producer
Financial Lithium carbonate PFS completed by Hatch in 2010 indicating:
» NPV of US$404 million (12% discount) and IRR of 68% providing a <2 year pay back
» Capital cost US$63m (China) - US$70m (Malaysia)
Downstream processing options/partial sale – under consideration
Construction and site preparation underway at Mt Marion: [1] part of the tertiary rolls crusher (top) and [2] administration office pad (foreground) and site construction offices (at rear)
Page 7
Clearing – Deposit 1
Page 8
Lithium Strategy – Integrated Producer
Page 9
Lithium Resource Estimate
5 deposits all open along strike and at depth
Potential for significant addition to current resource base
» Only 1 of 3 pegmatite groups have been explored
Currently drilling with an additional exploration target of 10-15Mt @ 1.1 –1.4% Li2O
» Average intercept first 50 drill holes 10m @ 1.44% Li2O
Mt Marion (100% basis)
Tonnes (Mt)
Li Grade (% Li2O)
Fe Grade (% Fe2O3)
Measured 2.1 1.5 1.1
Indicated 3.9 1.4 1.2
Inferred 4.5 1.3 1.9
Total 10.5 1.4 1.4
Page 10
Comparison – Australian Lithium Mineral Producers
Source: Reed Resources Ltd
Assumptions
1. 1 AUD = 1.03 CAD
2. Talison net cash based on results reported for the period ending 31 March 2011
3. Talison production annualised based on 37,500t LCE for 9 months to 31 March 2011
4. Galaxy net cash based on $185 million cash (presentation 24 May 2011) and loan facilities of $89.7 million and convertible debt of $61.5 million (reported 31 March 2011)
5. Galaxy production based on planned annual production from Mt Cattlin of 137,000t @ 6% Li2O for 20,325t LCE
Talison - Greenbushes
Incline vein pegmatite
Head grade 3% Li2O
Glass, ceramic, chemical grade
Strip ratio 5.6 :1
Mt Marion project valuation (EV) using: Talison = $182m Galaxy = $286m Hatch study >$600m
Deposit Comparisons Reed – Mt Marion
Flat lying vein pegmatite
Head grade 1.3% Li2O
Chemical grade
Strip ratio 3.3:1
Galaxy – Mt Cattlin
Flat lying pegmatite
Head grade 1% Li2O
Chemical grade
Strip ratio 2.4:1
Source: Reed Resources Ltd
Australian Lithium Market Cap Net Cash EV (1) Prodn (2) EV/Prod ImpliedMineral Producers $m $m $m kt pa LCE $/t LCE EV (1x2)Talison Lithium (TSX: TLH)Greenbushes 387 82 306 50.0 6,111 $182mConcentrate producerReed Resources (ASX: RDR)Mt Marion ? 29.7LiC developerGalaxy Resources (ASX: GXY)Mt Cattlin 230 34 196 20.3 9,633 $286mIntegrated LiC developer
Page 11
Meekatharra Gold Project Update (Reed 100%)
3 Mtpa processing plant
180 man camp
Low Capex re-start
Resource Upgrade Feb 2011 44Mt @ 1.7g/t 2.5Moz
NOW 48Mt @ 1.7g/t 2.7Moz
Reserve Upgrade Feb 2011 3.8Mt @ 3.4g/t 420Koz
NOW 4.2Mt @ 3.4g/t 559Koz
Page 12
Project Background
Geology Located 640km northeast of Perth and 10km south of
Meekatharra, in the Murchison Region of Western Australia
800km2 tenement holding covering over 100km strike length over prolific Murchison greenstone belt, a proven fertile greenstone
» Past production >13Moz
» Hosts multi-million ounce deposits at Mt Magnet, Big Bell, Tuckabianna, Reedys, Yaloginda and Paddys Flat
» Reed’s project area past production circa 4.5Moz
History Previously owned by Mercator, who purchased Meekatharra
from St Barbara Mines in 2004
Mercator spent $26m to establish a JORC resource of 2.5Moz and reserve of 0.4Moz by 2007
Mercator spent $6m refurbishing Bluebird mill to produce 120koz pa
Mining commenced in 2007 and produced 44,000 ounces prior to suspension of operations in October 2008
Page 13
In Progress
Advanced
Advanced
Reed Turnaround Strategy
Initial 4-5 year sustainable production profile – 120Kozpa
Re-modelling and re-estimation of resources using current economic parameters
Commenced BFS – due Feb 2012
First Steps
Dedicated gold team in place led by Reed’s chief geologist and GM – Gold, Craig Fawcett
Intensive evaluation of historical open-pit and underground ore bodies
Results to Date Target
Substantial increases in grade and/or tonnes
Page 14
$0
$20
$40
$60
$80
$100
$120
DRM SLR FML RMS SAR SBM RDR WGR CRE AXM NGF NAV *RDR
$ Market Cap / Resource oz
Gold Peer Comparisons
Meekatharra represents a world class project that can develop into a strong long term producer of gold
Reed is acquiring 100% of the Meekatharra project from Mercator for $28.5m with no outstanding obligations being passed onto Reed (refer ASX release 12 January 2011)
Highly attractive pricing with an acquisition cost of $11/oz resource inclusive of +A$100m infrastructure
Current peer median of $56 market cap per contained resource ounce
Average $56/oz
Reed acq. $11/oz
Source: IRESS, ASX, company reports
Australian Gold Peers ASX Shares Price Mkt Cap Resource Mkt Cap/Res(*close to Reed project area) Code (m) ($) ($m) (Moz) ($/oz)Apex Minerals NL AXM 5,550.2 0.01 38.9 2.2 17.5Crescent Gold Limited CRE 1,100.8 0.05 58.3 2.8 21.0Doray Minerals Limited* DRM 61.8 0.79 48.5 0.1 348.7Focus Minerals Ltd FML 3,440.5 0.07 234.0 2.3 104.0Navigator Resources Limited NAV 465.8 0.04 16.8 1.7 10.0Norton Gold Fields Limited NGF 685.9 0.13 89.2 6.1 14.7Ramelius Resources Limited* RMS 291.8 1.21 353.0 3.5 101.6Saracen Mineral Holdings Limited SAR 492.3 0.55 268.3 3.3 81.3Silver Lake Resources Limited* SLR 178.9 1.78 318.4 3.0 107.3St Barbara Limited SBM 325.6 1.80 584.5 7.7 75.9Westgold Resources Limited WGR 414.2 0.21 87.0 3.0 29.0Average (ex Doray) 56.2Reed Resources Ltd RDR 262.2 0.50 131.1 2.9 44.6Meekatharra acquisition (January 2011) *RDR 28.5 2.5 11.0
Page 15
Project Area 1 - Paddys Flat
Historical Production 1.5Moz open pit mining 1989-2004
0.8Moz underground pre-1985
Forward Work Resource conversion at Red Spider/Fenian West
Metallurgical test work on 600koz Mickey Doolan/Phar Lap
Exploration at “Old Mill” - fold axis defined by magnetics “Old Mill” Area
Paddy’s Flat Tonnes (Mt)
Grade (g/t)
Gold (koz)
Resource 28.6 1.7 1,550
Reserve (u/g) 2.0 4.8 308
Reserve (o/p) 1.1 2.7 96
Page 16
Prohibition Open Pit Project Area 1 - Paddys Flat
Probable Reserve 1.1 Mt @ 2.7 g/t Au for 96,000 ozs
Page 17
Project Area 1 - Paddys Flat Underground Reserve Location
Page 18
Project Area 2 – Yaloginda
3 Mtpa Bluebird processing plant
18 historical open pits and 3 underground operations
Probable o/p reserves of 1.7 Mt @ 2 g/t for 114,000 ounces
Evaluating re-modelling and estimation of South Junction (o/p) and Gibraltar (u/g)
New (?) copper-gold discovery at Chunderloo
Page 19
Bluebird Pit
Reserve (o/p) of 1.4 Mt @ 1.9 g/t for 87,000 ounces
De-risked through previous mining
Porphyry/felsic host (~ 30m wide)
Projected cash cost $885/oz
Additional inferred 13Koz in planned pit
Target cash cost $700-750/oz
Potential for bulk underground operations post open-pit phase
Project Area 2 – Yaloginda
Page 20
Chunderloo Copper-Gold Prospect Project Area 2 – Yaloginda
Page 21
Project Area 3 - Reedys
Historical Production 230,000 ounces Triton Underground 1937-48
750,000 ounces Metana/Homestake 1990’s
Closed in 1997 when gold price was US$300/oz
Exploration Potential Significant open pit and underground reserve
conversion/expansion potential
High priority targets:
» Jack Ryan Repeats
» Cullculli Line
» South Emu
Underground mining evaluation to be undertaken
Reedys Tonnes (Mt)
Grade (g/t)
Gold (koz)
Resource 4.9 2.5 395
Reserve (o/p) 0.4 2.9 37
Page 22
Southern Group Long Section Project Area 3 - Reedys
Emu, Triton, Rand (o/p)
Tonnes (Mt)
Grade (g/t)
Gold (koz)
Resource 2.8 2.6 234
Indicated 0.6 2.4 49
Reserve 0.1 2.4 8
Jack Ryan (o/p)
Tonnes (Mt)
Grade (g/t)
Gold (koz)
Resource 1.0 2.5 79
Indicated 0.3 2.9 32
Reserve 0.2 3.1 22
Callisto (o/p)
Tonnes (Mt)
Grade (g/t)
Gold (koz)
Resource
Indicated
Reserve 0.1 3.1 7
Page 23
Underground Potential
CONTINUITY
Structure
Geology
Grade
Depth
Project Area 3 - Reedys
Page 24
Meekatharra Summary
Reed is quickly re-establishing the integrity, credibility and value of the
Meekatharra Gold Project
Careful planning and compliance
Disciplined and thorough exploration
Detailed evaluation and feasibility studies
Reliable development schedules
Sustainable operations
Page 25
Barrambie Fly Through
Page 26
Barrambie Vanadium Project Update (Reed 100%)
Location of the Barrambie vanadium project showing proximity to the Windimurra vanadium project and key infrastructure including the Midwest gas pipeline and Geraldton port
Joint Venture MOU signed with Sino construction giant NFC
» Shenzhen-listed, market cap of +US3.2B
» Construct international non-ferrous metal projects
Fixed price EPC arrangements and financing assistance
» Significant savings on DFS and next step towards successful development
Operations 65.2Mt @ 0.82% V2O5 JORC resource includes highest grade
vanadium reserves in Australia
Environmental Approval expected in September Qtr 2011
Native Title Agreement in place
Significant exploration upside along strike and at depth with potential to add to existing resources and extend project life
Financial DFS completed in May 2009 indicating total capex of A$630m
for an initial 12.5 year mine life
US$110 m annual EBITDA at five year average vanadium price
Reed and NFC currently in discussions with lenders and potential equity financing partners
Barrambie (100% basis)
Tonnes (Mt)
V2O5 (%) TiO2 (%)
Indicated 49.2 0.82 17.3
Inferred 16.0 0.81 17.2
Total resource 65.2 0.82 17.3
Probable reserve 39.7 0.82 15.7
Total reserve 39.7 0.82 15.7
Page 27
Vanadium Market – Strong Long Term Fundamentals
+ = ? Vanadium Redox (Liquid) Batteries Renewable energy storage, peak shaving, load
leveling, backup High efficiency, long life >20yrs Variable input/fixed output Power (cell) and capacity (concentration and
volume) varied to suit application 1MWh storage = 9t of V2O5
+ Lithium Vanadium EV Batteries Highest voltage → POWER Highest energy density → RANGE Contains 4kg Li, 20kg of V
Titanium-Vanadium Alloys Increasing intensity of
use in aerospace
$75
Page 28
$0
$100
$200
$300
$400
$500
$600
$700
$800
Largo American Vanadium
Atlantic Apella TNG Energizer Sino Vanadium
Yellow Rock
EV / Resource Multiple ($/t V2O5)
Company Exchange/Code Project/Ownership Resource
American Vanadium TSX-V: AVC Gibellini, USA (100%) 20.8Mt @ 0.33% V2O5
Apella Resources TSX-V: APA Iron-T, Canada (100%) Lac Dore, Canada (100%)
11.6Mt @ 0.40% V2O5 102.0Mt @ 0.45% V2O5 (non NI 43-101)
Atlantic ASX: ATI Windimurra, Western Australia (100%) 210.0Mt @ 0.47% V2O5
Energizer Resources TSX-V: EGZ Green Giant, Madagascar (100%) 59.2Mt @ 0.68% V2O5
Largo Resources TSX-V: LGO Maracas, Brazil (90%) Campo Alegre, Brazil (100%)
23.2Mt @ 1.27% V2O5 133.0Mt @ 0.75% V2O5 (non NI 43-101)
Sino Vanadium TSX-V: SVX Daquan, China (100%) 34.2 @ 0.93% V2O5
TNG ASX: TNG Mount Peake, Northern Territory (100%) 139.1Mt @ 0.29% V2O5
Yellow Rock Resources ASX: YRR Gabanintha, Western Australia (100%) 125.8Mt @ 0.70% V2O5
Vanadium Peer Comparisons
Potential valuation range of $100 - 400/t V2O5
Based on EV/resource benchmarking of listed vanadium peers, Barrambie has an implied
valuation of $53 - $214m
Mean $251/t V2O5
Source: Bloomberg, ASX, company reports
Potential Valuation Low Mid High
Multiple ($/t V2O5) 100 251 400
Barrambie (Mt V2O5) 0.53 0.53 0.53
Implied value ($m) 53 133 214
Page 29
Reed Board and Senior Management
David Reed FCPA, OAM Executive Chairman
Steven Cole Llb(Hons), FAICD Non-Executive Director
Dr Peter Collins BSc(Hons), PhD, MAIG Non-Executive Director
Chris Reed BCom, GradCertMinEcon, MAusIMM Managing Director and CEO
Craig Fawcett BSc(Hons), GDipMining General Manager - Gold
Ian Junk BEng(Hons), MAusIMM Non-Executive Director
Jason Carone BCom, CA Financial Controller and Company Secretary
Dr Vanessa Guthrie BSc (Hons), PhD, GDBM Non-Executive Director
Darren Wates Legal Counsel and Company Secretary
Page 30
Reed Technical Staff
David Hollingsworth Senior Exploration Geologist
Elizabeth Jones Snr Planning Engineer
Matt Schembri Resource Geologist Open Pit
James Lawrence Resource Geologist Underground
Jeremy Watkins Project Manager – Gold
Dudley Kingsnorth Consultant Lithium
Tony Simpson Consultant Vanadium
Dr Bryan Smith Consultant Geologist Lithium/Vanadium/Nickel
Bill Crossley Project Manager – Lithium/Vanadium
Page 31
Summary
Staged production profile with Mt Marion on line December Qtr 2011
Diversified cash flows across 3 strategic commodities with strong price outlook
Well funded with experienced management team
Trades at a significant discount to peers across all projects (current price $0.52)
Reed Valuation ($m) Median Peer
Lithium (70%, Concentrate Only) 130
Gold (EV/Resource Oz) 154
Vanadium (Ev/Resource t) 133
Total 417
RDR shares on issue (m) 262.2
Implied RDR share value $1.59 * Subject to Decision to Mine
Page 32
Appendix 1
COMPETENT PERSONS STATEMENT Geological aspects of this report have been compiled by Mr Craig Fawcett (MAIMM), a full time employee of Reed Resources Ltd. Mr Fawcett has sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which is being reported on to qualify as a Competent Person as defined in the Code for Reporting of Mineral Resources and Ore Reserves (2004). Mr Fawcett consents to the inclusion in this report of the matters in the form and context in which it appears.
MINERAL RESOURCE ESTIMATES 2011 Information in this report that relates to Indicates and Inferred Mineral Resources for 2011 is based upon geological domains constructed by Reed Resources internal geological team (under Craig Fawcett BSc MAusIMM – General Manager Gold) and estimates prepared by J Graindorge Bsc MAusIMM(CP) of Snowden Mining Industry Consultants Pty Ltd. Both Mr Fawcett and Mr Graindorge have sufficient experience relevant to the style of mineralisation and type of deposit under consideration and to the activity which is being reported on to qualify as a Competent Person as defined in the Code for Reporting of Mineral Resources and Ore Reserves (2004). Both Mr Fawcett and Mr Graindorge consent to the inclusion in this report of the matters in the form and context in which it appears.
ORE RESERVE ESTIMATES 2011 Information in this report that relates to the Surface Ore Reserves was compiled by Gary McCrae, a full time employee of Minecomp Pty Ltd which is a corporate member of the Australian Institute of Mining and Metallurgy. Gary McCrae is a qualified mining engineer who has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent person as defined in the Code for Reporting of Mineral Resources and Ore Reserves (2004). Gary McCrae consents to the inclusion in the report of the matters based upon the information in the form and context in which it appears.
JORC Statement
Page 33
Appendix 2
Notes:
1. Resources and Reserves comply with the Australian JORC reporting guidelines
2. Resources are inclusive of Reserves
Reed Resource and Reserve Inventory
Meekatharra Category Tonnes (Mt) Grade (g/t) Gold (koz)
Meek. North Indicated 0.7 1.3 29.0
Inferred 0.2 1.2 6.0
Paddys Flat Indicated 19.1 1.7 1,047.9
Inferred 9.5 1. 437.3
Yaloginda Indicated 9.7 1.7 536.3
Inferred 3.9 1.7 240.4
Reedys Indicated 1.8 2.7 153.4
Inferred 3.1 2.4 241.2
Total 48.6 1.7 2,754.8
Comet Vale Category Tonnes (Mt) Grade (g/t) Gold (koz)
Comet Vale Indicated 0.2 10.8 82.5
Inferred 0.3 10.9 103.5
Total 0.5 10.8 186.0
Mt Marion Category Tonnes (Mt) Li2O (%) Li2O (kt)
1, 2, 2W, 5 Measured 2.1 1.5 32.0
Indicated 3.9 1.5 55.5
Inferred 4.5 1.3 58.8
Total 10.5 1.4 146.5
Barrambie Category Tonnes (Mt) V2O5 (%) TiO2 (%)
Barrambie Indicated 49.2 0.82 17.3
Inferred 16.0 0.81 17.2
Total 65.2 0.82 17.3
Meekatharra Category Tonnes (Mt) Grade (g/t) Gold (koz)
Bluebird Probable 1.4 1.9 87.0
South Junct. Probable 0.1 1.5 4.5
Prohibition Probable 1.1 2.7 96.0
Surprise Probable 0.1 3.0 13.0
Batavia Probable 0.2 2.4 14.0
Jack Ryan Probable 0.2 3.1 21.8
Callisto Probable 0.1 3.1 7.2
Rand Probable 0.1 2.4 7.6
Total (o/p) Probable 3.3 2.3 251.1
Prohibition Probable 1.4 4.1 179.0
Vivian/Cons. Probable 0.3 10.4 83.0
Fatts/Mud. Probable 0.4 4.0 46.0
Total (u/g) Probable 2.0 4.8 308.0
Total Probable 5.3 3.3 559.1
Barrambie Category Tonnes (Mt) V2O5 (%) TiO2 (%)
Barrambie Probable 39.7 0.82 15.7
Total 39.7 0.82 15.7