SouthGobi Resources Ltd. · TSXV:SGQ
SouthGobi Resources — Investor Presentation (March 2014)
30 slides from SouthGobi Resources's investor presentation, March 2014
Slide 1: Investor presentation
Investor presentation March 2014 December 2013 | 1
Slide 2: Cautionary statement
Cautionary statement Forward-looking statements This presentation includes certain “forward-looking statements.” All statements, other than statements of historical fact, are forward-looking statements that involve various risks and uncertainties. There can be no assurances that such statements will
Slide 3: Solid platform to create value for shareholders
Solid platform to create value for shareholders • Strategic location near the border with China, the major coal growth market • Large resource base Investment highlights • Several growth options • Flexibility of product offering • SouthGobi’s financial performance has been impacted by the recent dec
Slide 4: Key facts
Key facts • An integrated coal mining, development • Balance sheet (as of March 24, 2014): and exploration company Cash $10.0m • Four significant coal projects in Mongolia: Debt (CIC convertible debenture) $250.0m – Ovoot Tolgoi Mine (producing mine); – Three development projects: • Soumber Deposit
Slide 5: Corporate timeline
Corporate timeline New management team in place 2002 - 2005 2006 - 2008 2009 - 2011 2012 2013 CIC invested Production Resumption of Incorporation US$500m as at Ovoot production at convertible Mining license Tolgoi Acquired coal Ovoot Tolgoi debenture for Soumber halted assets from Deposit Ivanhoe MI
Slide 6: Key assets overview
Key assets overview Key assets overview Flagship Ovoot Tolgoi Mine and the Ovoot Tolgoi Underground Deposit Ovoot Tolgoi Mine in production since 2008 Ovoot Tolgoi Complex Target annual production of total of 9 million tonnes of ROM coal Ongoing work to optimise the mine plan and product mix
Slide 7: SouthGobi's assets strategically located
SouthGobi’s assets strategically located • Short-haul to China infrastructure • Approximately 45km to Ceke • Typical truck haul for coal operations • Coal storage and rail loading available at Chinese border • Border upgrade completed • In May 2012 four dedicated inbound and four dedicated outbound
Slide 8: At the doorstep of China, the major growing coal market
At the doorstep of China, the major growing coal market Ovoot Tolgoi 45km Tavan Tolgoi, Mongolia 245km South Sumatra, Indonesia 3,350km Land Sea South Yakuta, Russia 4,650km Bowen Basin, Australia 7,000km Greenhills, Canada 10,000km Central Appalachia, USA 19,900km 0 5,000 10,000 15,000 20,000 Sourc
Slide 9: A large resource base
A large resource base Summary of resources by mine and deposit(1) 1,000 388 296 106 45 835 53 888 900 2 9 51 800 36 84 304 700 22 302 123 600 Resource (mt) 500 173 400 86 300 584 533 200 302 100 Inferred Measured & Indicated 0 Ovoot Tolgoi Complex Soumber Deposit Zag Suuj Deposit Tsagaan Tolgoi Tota
Slide 10: Flexibility of product offer
Key assets overview Flexibility of product offer Type Specification 7,100-7,300Kcal/kg (current raw products) Ovoot Tolgoi Complex Semi-soft coking coal Ash: 8-10% CSN (FSI): 4.5-6.5 6500Kcal/kg nar Medium-ash coal Ash: 11.5-12.0% CSN (FSI): >2.5 6,000-6,200Kcal/kg Higher-ash/ sulphur
Slide 11: Ovoot Tolgoi update
Ovoot Tolgoi update • Resumed operations in March 2013 • Produced 3.06 million tonnes and sold 3.26 million tonnes of coal in 2013 – 1.73 million tonnes of coal produced and 1.72 million tonnes of coal sold in the fourth quarter of 2013 • In the fourth quarter 2013 operated at production schedule of
Slide 12: Growth optionality at Soumber
Growth optionality at Soumber Current status Action plan • Located 20km east of Ovoot Tolgoi • Bulk sampling to confirm coking Complex characteristics • Operational synergies via sharing of • Evaluate funding options common infrastructure • Complete detailed Environmental Impact • Premium hard cokin
Slide 13: Solid platform to create value for shareholders
Solid platform to create value for shareholders • Strategic location near the border with China, the major coal growth market • Large resource base Investment highlights • Several growth options • Flexibility of product offering • SouthGobi’s financial performance has been impacted by the recent dec
Slide 14: Market conditions for Mongolian coal continue to be challenging
Market conditions for Mongolian coal continue to be challenging Chinese coking coal prices Chinese coking coal imports RMB/t incl VAT Mt 1,400 9 8 1,200 Baotou primary coking 7 1,000 6 800 5 600 4 Wuhai washed 1/3 coking 3 400 2 200 Ceke 1/3 coking coal ex-stock 1 0 0 Jun-13 Nov-13 Mar-13 Apr-13 May
Slide 15: But the longer term outlook remains strong
But the longer term outlook remains strong • Mongolia ideally positioned to supply China import demand 100 Million tonnes CHINESE COKING COAL IMPORTS 90 CAGR 80 7% 70 60 50 40 30 20 10 0 2012 2013 2014 2015 2016 2017 Source: China Coal Resource (CCR) December 2013 | 15
Slide 16: More can be done to unlock value from Mongolian coal
More can be done to unlock value from Mongolian coal Potential to unlock more value from Mongolian coal Chinese and Mongolian coal trade are working together in response to industry challenges with key objectives including: • Stable coal trade between China and Mongolia • Bringing international pric
Slide 17: Solid platform to create value for shareholders
Solid platform to create value for shareholders • Strategic location near the border with China, the major coal growth market; • Large resource base Investment highlights • Several growth options • Flexibility of product offering • SouthGobi’s financial performance has been impacted by the recent de
Slide 18: Clear strategy for delivering value
Clear strategy for delivering value Conserve cash, improve cash flow, and achieve positive EBITDA from operations Resume production at conservative levels as a platform to respond to improving market conditions and future profitability Develop SouthGobi into a sustainable, long term operating
Slide 19: SouthGobi's objectives for 2014 and beyond
SouthGobi’s objectives for 2014 and beyond Drive operational excellence Progress growth options Bulk sampling drilling underway Further improve operational at Soumber and further efficiency in delivering production assessment of plans for the to meet market requirements Operational excellence Soumbe
Slide 20: Financial highlights
Financial highlights December 2013 | 20
Slide 21: 2013 full year highlights
2013 full year highlights • Safety continues to be a very important priority: – The all injuries frequency rate (AIFR) also reduced to 0.3 by the end of the year with this ongoing effort. – No recordable lost-time – injury (LTI) in 2013 • Resumed operations on March 22, 2013 and managed production l
Slide 22: 2013 full year operating highlights
2013 full year operating highlights 2013 2012 • The strip ratios in 2013 Raw coal production (millions of tonnes) 3.06 1.33 and 2012 were below the average life-of-mine Sales Volumes and Prices trend Premium semi-soft coking coal • 2013 production mix Coal sales (millions of tonnes) 0.54 0.78 adapte
Slide 23: 2013 full year financial highlights
2013 full year financial highlights Year ended December 31, 2013 2012 Significant items Coal sales (millions of tonnes) 3.26 1.98 Average realized price ($/tonne) $24.25 $47.49 Reflects lower product prices and change in product mix Royalties and marketing fees ($/tonne) $6.3 $8.1 Effective royalty
Slide 24: Continued focus on cash flow…
Continued focus on cash flow… Interest paid on the CIC $4.0m $4.1m $8.1m convertible debenture In $ million 40 35 30 (10.0) 25 (5.6) 20 5.7 34.8 (3.1) 15 10 21.8 5 0 Dec 31, 2012 cash balance Q1 2013 cash flow Q2 2013 cash flow Q3 2013 cash flow Q4 2013 cash flow Dec 31, 2013 cash balance Decision t
Slide 25: … and cost discipline
… and cost discipline Total cash costs of product sold (excl. idled mine costs) • Reduced total cash costs of product sold driven by: In $ per tonne – productivity improvements in manning and 30.0 equipment 23.9 25.0 20.0 – increased sales volumes 20.0 – below-trend strip ratio 15.0 12.8 10.0 – loca
Slide 26: Capital management
Capital management Evaluation and exploration expenditures • Reduction in evaluation and exploration expenditures In $million – 2013 exploration program focused on further 40.0 defining the Soumber Deposit 31.8 30.0 – Other exploration activities limited to ensure compliance with the Mongolian Miner
Slide 27: Outlook
Outlook Outlook • Market outlook: – Production in the first quarter of 2014 to be lower compared to the fourth quarter of 2013 due to seasonal holidays in Mongolia and China and overall market conditions – Market is expected to remain challenged • Cost reduction program: – Amid challenging market co
Slide 28: Appendix
• Develop better understanding and establish relationships with new potential investors in Asia Appendix December 2013 | 28
Slide 29: CIC debenture: key terms
CIC debenture: key terms December 2013 | 29
Slide 30: Experienced management team
Experienced management team Ross Tromans Mr. Tromans joined the Company in September 2012. He has over 30-years sales and marketing President & experience in the coal and energy sectors covering the Asian and North American markets. Most recently, he was General Manager Marketing at Rio Tinto Coal A
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