Turning the Knob On - SAEMCsaemc.com.au/archive/2010/10duffin.pdf · The Upside #3 - Penrhyn Coal...

WPG Resources LtdWPG Resources Ltd

Turning the Knob OnTurning the Knob On

Development of Peculiar Development of Peculiar Knob is Getting Close!! Knob is Getting Close!!

SA Conference PresentationsSA Conference PresentationsNovember 2010November 2010

SA Conferences November 2010 2

Our Key Project AssetsIRON 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, LochielEXPLORATION• Mt Brady, Windy Valley


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


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


Mineral Resource Estimates Peculiar Knob

Category MillionTonnes

Fe %

P %

SiO2%

Al2O3 %

LOl %

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


Ore Reserve Estimates Peculiar Knob

Category MillionTonnes

Fe %

P %

SiO2%

Al2O3 %

LOl %

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


Permitting and ApprovalsFINALISED• 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• Stafford borefield – licensed by SA DWLBC• Train paths • 10 – 30 year port access agreement for iron ore and coal• Purchase of Port Pirie land (sale contract being finalised now)

STILL OUTSTANDING• MARP (lodged 16 November)• Port Pirie Development Application (lodged 5 November)


The Importance of Grade

Spot price: 62% Fe: US$165/t, 58% Fe US$129/t; 3 month average 62% Fe US$150/t, 58% Fe $118/t

Premium is ~US$8/t per 1% change in Fe content

Also potential for premium for low phos, low alumina over and above high Fe

Iron Ore Prices CNF TianjinSource: The Steel Index

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

160.0

180.0

200.0

Nov-08 May-09 Nov-09 May-10 Nov-10

US$

/tonn

e

62% Fe

58% Fe


PK – Australia’s Best Quality FinesPeculiar Knob Total Fines Sample

Wet size distribution - % wt passing

0.010.020.030.040.050.0

60.070.080.090.0

100.0

0.01 0.10 1.00 10.00Size (mm)

% w

t pas

sing

WPR Hyundai Sinter SamplePilbara Blend Fines

Fines ProductAssay (%)

Fe SiO2 Al2O3 P LOI 1000%

Robe River CID 56.30 5.96 2.87 0.041 9.11

Yandi CID 59.22 5.26 1.09 0.044 8.73

Pilbara Blend BID 62.20 4.26 2.07 0.075 4.14

Cliffs BID 62.10 3.96 1.96 0.079 4.26

WPG Fines 63.21 8.28 0.34 0.012 0.44

The combination of:

• high Fe grade

• low P

• low Al2O3

• low %age of ultrafines

makes PK the best quality fines

produced in Australia

WPG has 7 sales MOUs in place for 4.9 – 5.5 mtpa which is much more than we will produce


BFS – Key MetricsCAPEX:• Site $85m• Port Pirie $54m• Total capex: $139m

WORKING CAPITAL:• Pre-strip, mine, process and transport first

160,000 t: $29m

TOTALS• Total initial capital: $168m

UPSIDE• Imported steel price has fallen in A$ terms

as A$ rises• Diesel price falls as A$ rises and opex

would now be $2/t cheaper

OPEX:• Average cash opex over LOM: $66/t to

FOB• Royalties add another $6/t• Total cash opex: $72/t to FOB• Sea freight $17/t to north Asia• Cash opex to delivery in China: $89/t

REVENUE• 3 month average CNF: US$150/t• In A$: $150/t (at parity)

MARGIN• Cash operating margin: $61/t at 3 month

average price• Operating surplus on 3.3 mtpa: $203m pa

at 3 month average price

Peculiar Knob’s Cash Generation Capacity is Very Strong and it is WPG’s Intention to Monetise the Deposit ASAP!!


Debt and Equity PackagesDEBT:

WPG and Deutsche Bank AG have signed commitment letter to provide US$120 million debt funding package

Package consists of:

• US$70m senior secured notes• US$50m iron ore pre-pay

Notes carry 8% coupon and are repayable in 3.5 years

Notes also have detachable warrants totalling 6% of WPG’s capital exercisable at 30% premium to VWAP

Iron ore facility is to be satisfied by delivery of 526,000t iron ore fines over 18 months

Deutsche Bank will also purchase as an arms-length customer a further 1.1mt of iron ore fines at market price

EQUITY:

Equity raising of $85 million comprising:

• $12.4m placement (done)• $9.5m rights issue (underwritten)• $62.6m placement (subject to shareholder approval)


PK: Low Capex Intensity• Capex site only $85m for 3.3

mtpa => US$26/annual tonne• Increases to US$42/annual

tonne if Port Pirie capex of $54m 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)


Low Capex Intensity for the Port as Well

0102030405060708090

100

Hedland Dampier Cape Lambert Oakajee Anketell Point SimpleAverage

$/to

nne

Capex per Tonne of Annual Capacity

Iron Ore Ports - WA

0102030405060708090

Wiggins Island BalaclavaIsland

Abbott Point Newcastle Port Waratah SimpleAverage

$/to

nne

Capex per Tonne of Annual Capacity

Coal Ports - NSW and QLD

Iron ore ports: $36/annual tonne capacity (average)

Coal ports: $40/annual tonne capacity

Port Pirie: $8/annual tonne capacity – Outstandingly Attractive Metric!


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


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


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


The Upside #2 – Hawks Nest Iron Ore

• WTF covers 127,000 km2 - same size as England

• Occupies 13% of South Australia but 25% of Gawler Craton

• Highly prospective• Defence does use WTF regularly

but most activities are in SE corner (“Red Zone”)

• Government Review Nov 2010 recommends opening up of most of WTF for mining


Mineral Resource Estimates Totals – DSO Deposits

(Peculiar Knob, Buzzard, Tui)Category Million

TonnesFe %

P %

SiO2%

Al2O3 %

LOl %

Measured resource 25.7 63.1 0.03 7.6 0.8 0.7

Indicated resource 9.3 61.8 0.05 9.2 0.8 0.8

Inferred resource 2.6 63.1 0.05 7.9 0.5 0.4

Total resource 37.6 62.8 0.04 8.0 0.8 0.7

NB: Addition of Buzzard and Tui would double the DSO tonnage


Mineral Resource Estimates Magnetite Deposits

• Kestrel

• All magnetite

Category Million Tonnes

Fe %

P %

SiO2%

Al2O3 %

LOl %

Measured resource 100 37 0.06 37 0.8 0.6

Indicated resource 60 36 0.06 38 1.0 0.8

Inferred resource 60 36 0.06 39 1.1 0.8

Total resource 220 36 0.06 38 0.9 0.7

Category Million Tonnes

Fe %

P %

SiO2%

Al2O3 %

LOl %

Kestrel – measured, indicated and inferred

220 36 0.06 38 0.9 0.7

Goshawk - inferred resource

148 35 - - - -

Harrier - inferred resource

54 35 - - - -

Eagle - inferred resource

92 31 - - - -

Kite - inferred resource

30 51 - - - -

Falcon - inferred resource

25 32 - - - -

Total resource 569 36 - - - -

Clear potential to increase total resource to >1 billion tonnes with further drilling


The Upside #3 - Penrhyn Coal Project

Coal Category Exploration TargetTonnage Range (mt)

Sub-Bituminous Coal 200 – 300

Permian semi-bituminous coal in the Arckaringa Basin 40 km SW of Coober Pedy and 20 km from Peculiar Knob haul road and rail loader

• Ash 6.5% - 20%• Moisture 32% - 36%• CV Seam 4: 27.7 MJ/kg; increases to

28.5 MJ/kg after washing• Similar to Lake Phillipson coals (sold to

WEC for >$35m August 2010 but no access then on ground)

• Water washing is effective in salt removal• WPG sees Penrhyn as domestic power

station coal or suitable for upgrading for export using emerging clean coal technology


The Upside #4 – Leverage off Port Access

WPG has a number of opportunities to leverage the 3-4 mtpa spare capacity in its port access agreements:

• Clip the ticket

• Joint venture into projects

• M&A

The port access agreements represent a very valuable asset to the Company.

WPG intends to run the port as a separate profit centre.


Our Vision• Bring Peculiar Knob into production at 3.3 mtpa late 2011• Bring Buzzard into production later so DSO sales are 3-4 mtpa for minimum 10 year

DSO project life• Continue exploration at Hawks Nest to discover more DSO deposits to extend life

beyond 10 years – great exploration prospectivity for DSO. No foreign investment required for DSO

• Commence BFS on Hawks Nest magnetite in 2011 and commit to project development in 2015 so that magnetite sales are 6-10 mtpa for 30 years from 2016-7

• More testwork on Hawks Nest haematite BIF to supplement magnetite concentrates with haematite concentrates and add value

• Define measured/indicated/inferred coal resource at Penrhyn of not less than 200 mt by 2013

• Commit to clean coal technology project at Penrhyn producing ~10 mtpa by 2016• Divert part of magnetite/haematite concentrates and Penrhyn coal to production of

1-2 mtpa seaborne-traded pig iron by 2017


Competent Persons The review of exploration activities and results and the mineral resource estimates for the Peculiar Knob, Buzzard and Tui DSO deposits and

the non-Kestrel magnetite deposits at Hawks Nest contained in this presentation are based on information compiled by Mr Gary Jones, a Member of the Australasian Institute of Mining and Metallurgy. He is Technical Director of WPG Resources Limited and a full time employee of Geonz Associates Limited. He has sufficient experience which is relevant to the style of mineralisation and types of deposits underconsideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the December 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). Gary Jones has consented in writing to the inclusion in this presentation of the matters based on his information in the form and context in which it appears.

The mineral resource estimate for the Kestrel magnetite deposit at Hawks Nest contained in this presentation is based on information compiled by Mr Arnold van der Heyden, a Member of the Australasian Institute of Mining and Metallurgy. He is an employee of Hellman & Schofield Pty Ltd. He has sufficient experience which is relevant to the style of mineralisation and types of deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the December 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). Arnold van der Heyden has consented in writing to the inclusion in this presentation of the matters based on his information in the form and context in which it appears.

The ore reserve estimate for the Peculiar Knob and Buzzard deposits contained in this presentation are based on information compiled by Mr John Wyche, a Member of the Australasian Institute of Mining and Metallurgy. He is an employee of Australian Mine Design and Development Pty Ltd. He has sufficient experience which is relevant to the style of mineralisation and types of deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the December 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). John Wyche has consented in writing to the inclusion in this presentation of the matters based on his information in the form and context in which it appears.

The review of exploration activities and results for the Penrhyn coal deposit contained in this presentation is based on information compiled by Mr Gary Jones, a Member of the Australasian Institute of Mining and Metallurgy. He is Technical Director of WPG Resources Limited and a full time employee of Geonz Associates Limited. He has sufficient experience which is relevant to the style of deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the December 2004 edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the JORC Code). Gary Jones has consented in writing to the inclusion in this announcement of the matters based on his information in the form and context in which it appears.

The exploration targets in this presentation are based on the currently available drill hole data and are conceptual in nature. There has been insufficient exploration to define a mineral resource, and it is uncertain if further exploration will result in the determination of a mineral resource


Important Notice This presentation contains forward looking statements concerning the projects

owned by WPG. Statements concerning mineral resources and ore reserves may also be deemed to be forward looking statements in that they involve elements based on specific assumptions

Forward looking statements are not statements of historical fact, and actual events or results may differ materially from those described in the forward looking statements as a result of a variety of risks, uncertainties and other factors. Forward looking statements are based on WPG’s beliefs, opinions and estimates as of the date they are made and no obligation is assumed to update forward looking statements if these beliefs, opinions and estimates should change or reflect other future developments

Data and amounts shown in this presentation relating to capital costs, operating costs and project timelines are based on consultant reports, contractor quotes and internally generated estimates

WPG cannot guarantee the accuracy and/or completeness of the figures or data in this presentation

All dollar amounts indicated in this presentation are in Australian dollars unless otherwise stated.

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Turning the Knob On - SAEMCsaemc.com.au/archive/2010/10duffin.pdf · The Upside #3 - Penrhyn Coal...

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