Developing a World Class Potash Basin
Transcription
Developing a World Class Potash Basin
Developing a World Class Potash Basin Investor Presentation March 2015 Cautionary Note Regarding Forward-Looking Statements All statements, other than statements of historical fact, contained in this presentation constitute “forward-looking statements” and are based on the reasonable expectations, estimates and projections of the Company as of the date of this presentation. The words “plans,” “expects,” or “does not expect,” “is expected,” “budget,” “scheduled,” “estimates,” “forecasts,” “intends,” “anticipates,” 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 identify forward-looking statements. Forward-looking statements include, without limitation, statements regarding mineral resource estimates, PEA projections, strategic transactions and financing sources, the growth of the phosphate market, expected industry demands, the Company’s business strategy, projected capital and operating expenditures, currency fluctuations, government regulation and environmental regulation. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company as of the date of such statements, are inherently subject to significant business, economic and competitive uncertainties and contingencies. The estimates and assumptions contained in this presentation, which may prove to be incorrect, include, but are not limited to, the various assumptions of the company set forth herein. Known and unknown factors could cause actual results to differ materially from those projected in the forward-looking statements. Such factors include, but are not limited to fluctuations in the supply and demand for potash, changes in competitive pressures, including pricing pressures, timing and amount of capital expenditures, changes in capital markets and corresponding effects on the company’s investments, changes in currency and exchange rates, unexpected geological or environmental conditions, changes in and the effects of, government legislation, taxation, controls and regulations and political or economic developments in jurisdictions in which the Company carries on its business or expects to do business, success in retaining or recruiting officers and directors for the future success of the Company’s business, officers and directors allocating their time to other ventures; success in obtaining any required additional financing to make target acquisition or develop an acquired business; employee relations, and risks associated with obtaining any necessary licenses or permits. Many of these uncertainties and contingencies can affect the company’s actual results and could cause actual results to differ materially from those expressed or implied in any forward-looking statements made by, or on behalf of, the Company. There can be no assurance that forward-looking statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. All of the forward-looking statements made in this presentation are qualified by these cautionary statements. These factors are not intended to represent a complete list of the factors that could affect the Company. The Company disclaims any intention or obligation to update or revise any forward-looking statements, except to the extent required by applicable law. The reader is cautioned not to place undue reliance on forward-looking statements. This presentation includes a summary of a preliminary economic assessment (“PEA”). The PEA was authored by Dr. Henry Rauche, Andreas Jockel and Ralf Linsenbarth of ERCOSPLAN, who are independent qualified persons within the meaning of NI 43-101 of the Canadian Securities Administrators. The PEA is preliminary in nature and includes inferred mineral resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the PEA results will be realized. This presentation also includes historical resources estimates that are not compliant with National Instrument 43-101. These estimates were prepared by Petrobras in 1979-1987 and should not be relied upon. David Gower, an Officer of the Company and a qualified person under NI 43-101, has reviewed the scientific and technical information herein. 2 Key Investment Highlights 1 World-class potash basin with significant additional discovery potential 2 Unrivaled access to high margin Brazilian & Regional markets with significant sustainable cost advantage 3 4 5 6 Leveraging existing export transport facilities, waterways and infrastructure PEA results demonstrate outstanding economics with levered after tax IRR of 31%(a) Favorable regulatory, fiscal and government backdrop Experienced management team with solid track-record of identifying high quality mining assets and advancing them successfully to production Note: (a) Based on 10% WACC and 60% leverage. 3 World Class Potash Basin One of the top three strategic and scalable sources of potash Geographic location of the Amazon potash basin Saskatchewan and Urals basins contain 75% of global potash reserves and 50% of current global production The 400 km long Amazon potash basin has similar scale, geology and age as the Saskatchewan basin in Canada The Amazon Potash Basin Brazil Potash is the first company to explore for potash horizons within the Amazon basin using seismic and petroleum borehole information augmented by drilling Amazon - Brazil Saskatchewan - Canada Urals - Russia 150 km Potash Deposit Source: Company information and U.S. Geological Survey (USGS) 4 Large Mineral Rights Holdings With Substantial Additional Discovery Potential Brazil Potash holds claims covering 24,300km2 within the 400km long Amazon potash basin Four potash discoveries to date by Brazil Potash: Autazes (deposit), Itapiranga, Novo Remanso and Itacoatiara Adjacent to Fazendinha and Arari potash deposits owned by Petrobras where more than 1.0 billion tonnes of potash resources have been defined (a) Brazil Potash has invested over US$100 million, having completed ~50,000 meters of drilling in 54 holes and a PEA, since exploration began in 2009 Itapiranga Itacoatiara Manaus Nova Remanso Itacoatiara Port Autazes Deposit *Petrobras Deposits 1.1 bn tonnes 0 50 100 Km Note: (a) Based on Petrobras non-NI 43-101 compliant identified resources of 1.1 billion tonnes of potash in Arari and Fazendinha deposits. Such historical estimates were made between 1979-1987. A qualified person has not done sufficient work to classify such estimate as current mineral resources or mineral reserves and the Company is not treating the historical estimate as current mineral resources or mineral reserves and should not be relied upon. 5 Autazes Area Overview Brazil Potash’s potash discovery in the Autazes area is the shallowest in the basin Project located in low intensity farmland Autazes is Brazil Potash’s highest priority target due to the following: Autazes deposit Shallower depths (as shallow as 685 meters) Attractive average KCl grade in excess of 31% Close proximity to Manaus (the capital of the Amazon state with 2 million people) only 120 km southeast, and the major economic hub in the region Year round access Prominent waterways AM-254 The Autazes area is developed as low intensity farm land The area is accessible year round by either paved road from Manaus or boat along the Amazonas and Madeira rivers Amazonas and Madeira rivers 123 km of paved road access from Manaus World’s largest navigable inland waterway 6 Large Potash Resource Defined at Autazes Autazes Drilling Map Autazes mineral resource estimate includes 425 MT @ 32.0% KCl measured & indicated plus 301MT @ 30.6% KCl inferred(a) Based on 39,540 m of drilling in 34 holes and cutoffs of 10% KCl and 1m thickness Autazes Deposit Thickness up to 4.0m, averaging 2.3m Petrobras Arari Deposit 675 Mt @ 33% KCl Sylvinite horizon ranges in depth from 685m to 863m gently dipping southeast at 1-2° Petrobras Fazendinha Deposit 487 Mt @ 27% KCl . Deposits open to the north and south and resource is expected to expand ! Drill Hole Resource Area with KCl Petrobras Potash Deposit Claim Permit Only 44% of Autazes area explored Autazes area is only <10% of the Company’s land package 0 5 10 Km Permit Application Total/average AUTAZES DEPOSIT Resources Category Measured Indicated Inferred Tons 127,855,000 297,530,000 300,561,000 Grade KCl tons 32.5% 31.8% 30.6% 41,561,000 94,577,000 91,958,000 Note: (a) Ercosplan Ingenieurgesellschaft Geotechnik und Bergbau (“Ercosplan”) is a world recognized leader in potash exploration techniques and potash mining and prepared the NI 43-101 compliant technical report titled Mineral Resource Estimate for the Autazes Area, Amazonas State, Brazil dated August 20.2014 (the “NI 43-101 Report”). The qualified persons who authored the NI 43-101 Report were Dr. Henry Rauche and 7 Andreas Jockel of Ercosplan. Mineral resources that are not mineral reserves do not have demonstrated economic viability. Brazil is a Very Important Potash Market Latin America accounts for 21% of the world’s potash demand and Brazil represents nearly 80% of this demand KCl Demand (2012) AMERICAS WORLD Americas 38% Rest of World 62% Brazil is currently heavily reliant on imported potash from Canada, Russia, Belarus and Jordan (>90%) 47,671 ('000 t KCl) North America 43% 18,340 ('000 t KCl) Strong government support to reduce Brazil’s dependence of imported potash Latin America & Caribbean 57% KCl Consumption by Country (‘000 t) (2012) 8,056 7,336 Secondary KCl Market 1Mtpa+ st 5th 2nd Primary KCl Market 8Mtpa+ Source: IFA, Agroconsult (Brazil). 1 1st 604 490 408 799 199 162 128 83 80 8 Potash Essential for Brazil Farmland expansion continues in Brazil increasing Brazil Potash’s competitive advantage to deliver the product faster and at a lower cost Brazil is positioned as the world’s agribusiness powerhouse Agribusiness represents over 20% of Brazil’s GDP Highest availability of arable land worldwide World’s largest availability of arable land 400 Excellent growth potential 303 Hectares (million) Brazil is the highest margin potash market for Brazil Potash 300 269 81 200 224 100 219 87 188 132 170 138 42 119 16 96 103 83 170 79 0 Brazil USA Russia India Land in use China EU 36 24 47 24 AustraliaThailand Available land Source: United Nations (UN) World Population Prospects World’s largest availability of freshwater (bn m3/year) World’s largest availability of freshwater Brazil’s main crops are highly potash dependent in rapid nutrient depleting soils 4,807 2,902 3,061 2,830 2,132 8,233 2,838 Source: Food and Agriculture Organization of the United Nations (“FAO”). 9 Existing Bulk Transport Infrastructure for Brazilian and Regional Sales Brazil Potash is able to ship to regional blenders located in the Cerrado and Matopiba regions of Brazil and countries within the Gulf of Mexico at the lowest delivered cost Project located only 13 kilometres from future port site with water sufficiently deep for Panamax vessel Back-haul of potash on empty barges returning to Cerrado and Matopiba 10 Brazil Potash has a Sustainable Logistics Cost Advantage of ~US$110/T Over Canada & Russia Significant cost advantage relative to global producers delivered to the Cerrado and Matopiba regions of Brazil Brazil Potash has access mainly via lowest cost waterways to blenders and no lengthy rail haulage requirements Cost savings of approximately US$112/t and US$105/t(a) relative to Canadian and Russian producers, respectively Brazil Potash’s Logistics Cost Advantage Freight at origin US$49/t Sea freight US$99/t(b) Freight inland US$61/t Canpotex US$209/t Brazil Potash US$97/t(d) ∆ US$112/t Note: (a) Assumes an all-in cost of US$202/t for the logistics costs related to Russian producers as per Agroconsult freight difference analysis. (b) International freight of US$50/t + handling and port expenses+ demurrage cost + 25% Brazilian freight tax (“AFMM”) according to Agroconsult – KCl, pricing report Sep 2014. (c) Data as of 2012 Brazilian Association for Fertilizer Dissemination (“ANDA”). (d) Composed by Freight cost + port and handling expenses + ICMS (sales taxes). Based on average values of potential market according to Agroconsult – KCl, pricing report Sep 2014. 11 Close Proximity to Brazil’s Primary Markets Strategic location close to the Cerrado and Matopiba(b) regions of Brazil The largest soybean producing areas which are major consumers of potash Represent nearly 50% of total agricultural production in Brazil Belém Santarém Manaus Itacoatiara US$54/t(a) Porto Velho US$51/t(a) Carajás US$62/t(a) II Palmas US$77/t(a) Cachoeira Rasteira US$76/t(a) Peixe I N. Xavantina Matopiba experiencing significant agriculture expansion with large and undeveloped rural properties Potential to achieve agricultural yields similar to the Cerrado São Luiz Eclusa Tucuruí Cuiabá Barra do Garça III US$104/t(a) Brasília IV Ports Fertilizer bulk blender Railways Waterways Roadways Cerrado crop belt Sugarcane producers Matopiba regionb I II III IV Total KCl consumption 2014 2024E 1.7Mt 2.9Mt 0.5Mt 0.7Mt 1.3Mt 1.8Mt 0.5Mt 09Mt 4.0Mt 6.3Mt Note: (a) Freight prices in US$/t according to Agroconsult – KCl pricing report Sep 2014. (b) Matopiba refers to the first two letters of the four states comprising the new frontier for grains in Brazil (southern Maranhão (MA), Tocantins (TO), southern Piauí (PI), and western Bahia (BA)). Source: United States Department of Agriculture (“USDA”), Food and Agriculture Organization (“FAO”), Brazilian Association for Fertilizer Dissemination (“ANDA”) and Brazilian Ministry of Agriculture, Livestock and Food Supply. KCl Forecast consumption by Agroconsult Market MOP report Sep 2014. 12 Preliminary Economic Assessment Completed Underground mine with small surface footprint Mine & Plant Mine/13km Plant Port Conventional Hot Leaching Plant Waste Backfill Mine: Underground 8 Mtpa ROM Plant: Production 2.2 Mtpa Granular Potash Byproduct 1.1MTpa NaCl Port: Barge loading facility with sufficient depth for Panamax 13 Conventional Underground Mine and Hot Leach Process • 8.0MTpa ROM – 5yr ramp up • 1500m room & pillar • 17.9km x 12.5km minable resource • Tailings back filled into underground workings • Labour (1538 employees) to be primarily sourced from city of Autazes 30km from site 14 PEA Financial Highlights – Tremendous Margins High Value, Relatively Low Cost Potash Development Project Potash (KCl) Production: 2.2 Mtpa By-product Sodium Salt (NaCl) Production: Estimated Initial Capital Investment to achieve full production: (Capital intensity) Estimated Pre-Production Capital (years 1 to 3) Estimated Average Operating Expense FOB (lowest quartile): (Freight On Board = includes mining, processing & barge loading) Potash Long-Term FOB Vancouver Benchmark Price Basis: Brazil Potash Estimated Realized Price (FOB): Net Present Value (10% discount): Internal Rate of Return (unlevered): Annual Average Cash Flow in Full Production: (pre-tax unlevered) (after-tax 60% levered) (pre-tax unlevered) (after-tax 60% levered) (pre-tax unlevered) (after-tax 60% levered) 1.1 Mtpa US$1.8 billion US$840/t US$1.1 billion US$76/t KCl $393/t $454/t US$3.2 billion US$1.8 billion 26% 31% US$827 million US$503 million Estimated Mine Life: 34 years Projected Plant Start-Up: Ramp-up Period to Reach Full Production: Q1 2019 5 years Note: Preliminary Economic Assessment (“PEA”) completed by Ercosplan as of October 2014 with independent marketing study by Agroconsult. The PEA is preliminary in nature and includes inferred mineral resource that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the PEA results will be realized. See full disclaimer on page 2. 15 Source: Goldman Sachs June 2013, Uralkali. 1400 BHP Billiton, Jansen 1400 Mosaic, Colonsay US$/tonne of annual capacity Mosaic, Belle Plaine 1143 K+S, Legacy 1000 1111 Mosaic, Esterhazy Acron, Talitsky 857 Turkmenkhimia, Farlyk 541 840 Brazil Potash, Manaus 770 822 Eurochem, VolgaKaliy Eurochem, Usolskiy Uralkali, Ust-Yayvinksy Global Expansion Costs – Greenfield Projects 1500 16 Project Development Timeline Brazil Potash Amazon basin project(a) 2012 2013 2014 2015 Construction Capital Resources investigation Drilling to complete 43-101 resources report Initial 43-101 resources report Updated and upgrade 43-101 resources report 2016 2017 2018 $295M $345M $485M Q1 2013 Q2 2013 Q3 2014 Additional drilling (upgrade resources)(b) Q1 2015 Environmental permitting EIA-RIMA for industrial project(c) Permitting (Env.) – LP, LI and LO Q4 2014 LP-Q2 2015 LI LO Engineering studies Preliminary economic assessment (PEA) Bankable feasibility study (BFS) Q4 2014 Q1 2016 Detailed engineering Project finance/construction/commissioning/start-up Note: (a) Management has prepared the timeline above for purposes of planning work around the Brazilian exploration opportunity. The above timeline is subject to change as project parameters continue to be revised and updated based on additional drilling results and the results of the PEA and BFS. (b) Includes additional drilling campaigns not only in Autazes area but also in other BPC target areas. (c) Environmental impact report (“RIMA”) and environmental impact assessment (“EIA”). 17 Highly Experienced and Seasoned Management Team Board of Directors Executive Directors Stan Bharti, P.Eng., Executive Co-Chairman Matt Simpson, P.Eng, MBA, Chief Executive Officer International financier with 30 years experience in mergers and acquisitions of resource companies. Has raised over US$1 billion in investment capital in past two years David Argyle, MBA, Executive Co-Chairman Experienced in fertilizer production and marketing. Over 20 years experience in establishing successful operations in Australia, East Asia, China and South America Andrew Pullar, Independent Director Investment Manager with The Sentient Group. Experienced investor in mining as Portfolio Manager and Analyst. Previously held engineering and production roles with DeBeers and Gold Fields in South Africa. William Clarke, Independent Director Former Canadian Ambassador to Brazil and Sweden Hon. Pierre Pettigrew, Independent Director Former Senior Cabinet Minister of the Government of Canada, served as Minister of Foreign Affairs, Minister of Health and Minister of International Trade • Former General Manager of Rio Tinto’s Iron Ore Company of Canada responsible for ~US$300 Mpa budget to move 70MTpa material. Worked for Hatch designing and constructing metallurgical refineries globally. Helio Diniz, Managing Director Brazil Operations Over 30 years experience with advanced projects and mine development, including major discovery in the Amazonas region for Falconbridge David Gower, P.Geo., President, Director Former Global Head of Nickel Exploration for Falconbridge. Numerous discoveries were made under his leadership with a particular focus on Brazil. Involved in deep mine development to depths of over 1,500m Parviz Farsangi, BEng, MEng, MBA, PhD, Chief Operating Officer Former Executive Vice President and Chief Operating Officer of Vale Inco, the wholly owned nickel operations of Vale with a global workforce of 8000 and revenue exceeding $11 Billion annually. Carmel Daniele, B.Ec, LLM, Independent Director Founder of CD Capital. Over 20 years of mining investment experience 18 Strong Shareholder Base Comprising Industry Specialist Funds and Local Entrepreneurs Shareholder Commentary Global natural resources and mining fund Proven track record of identifying and investing in world-class natural resources projects Strong focus in large scale mining and Oil & Gas projects in Latin America Currently holds an equity stake of 34% and rights to two Board seats in Brazil Potash Independent private equity investment firm specializing in the global resources industry Manages multi-billion fund for the development of metal, mineral and energy assets globally Since its foundation, has invested in over 20 companies Currently holds an equity stake of 23% and rights to two Board seats in Brazil Potash Leading merchant bank with a global focus in resources including 165 person Brazil office Successful track record of identifying high quality assets and advancing them to production Since its foundation, has invested more than US$3.0 billion in over 40 projects Currently holds an equity stake of 14% and three Board seats in Brazil Potash One of the largest family conglomerates of Brazil’s north region Operates in the vehicle commercialization segment, carbonic gas production and soft drinks, the latter through Brasil Norte Bebidas, one of the largest Coca-Cola bottlers in Brazil Currently holds an equity stake of 3% in Brazil Potash Benchimol Family One of the largest conglomerates in Brazil’s north region The group operates in the retail segment through Bemol department stores and in the liquefied petroleum gas (LPG) business through Fogás, a leading cooking gas retailer in Amazonas Currently holds an equity stake of 3% in Brazil Potash Source: Company information. 19 Opportunity Summary 1 Resource potentially rivals world’s largest deposits 2 First quartile operating costs of $76/T results in 31% post tax levered IRR 3 4 5 Sustainable logistics cost advantage of ~$110/T over existing producers Unraveled access to high margin Brazilian regional markets High quality management team with extensive Brazil experience backed by highly supportive shareholders 20