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COMPANY PRESENTATION November 2012
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Disclaimer
Forward-Looking Information This document may contain forward-looking statements. These forward-looking statements are made as of the date of this document and Sierra Rutile Limited (the “Company”) does not intend, and does not assume any obligation, to update these forward-looking statements, except as required under applicable securities legislation. Forward-looking statements relate to future events or future performance and reflect Company management’s expectations or beliefs regarding future events and include, but are not limited to, statements with respect to the estimation of mineral reserves and resources, the realization of mineral reserve estimates, the timing and amount of estimated future production, costs of production, capital expenditures, success of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims and limitations on insurance coverage. In certain cases, forward-looking statements can be identified by the use of words such as “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” or the negative of these terms or comparable terminology. By their very nature forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward looking statements. Such factors include, among others, risks related to actual results of current exploration activities; changes in project parameters as plans continue to be refined; future prices of mineral resources; possible variations in ore reserves, grade or recovery rates; accidents, labour disputes and other risks of the mining industry; delays in obtaining governmental approvals or financing or in the completion of development or construction activities; as well as those factors detailed from time to time in the Company's interim and annual reports. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. 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. Accordingly, readers should not place undue reliance on forward- looking statements.
Working for a better Sierra Leone 2
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Investment Highlights
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Investment Highlights
> One of the largest primary rutile mines in the world
– JORC Resource in excess of 600 million tonnes at 1.3% rutile
– High-grade, high-value premium natural rutile product
– Fully licensed and permitted with significant opportunity to expand resource and production
> Sustained improvement in existing operations, resulting in significant cash flow generation
– Improvements to Lanti Dredge have resulted in a ~50% increase in rutile production since mid-2011
> Lanti Dry Mining project in commissioning
– Lanti Dry Mining project to be delivered on schedule and under budget, with production anticipated in 2012
– Experience gained from Lanti Dry Mining construction allows for cost and timing improvements in future dry mining operations
> Gangama Dry Mining project, reducing expansion risk and increasing near-term production growth
– Gangama Dry Mining project has been selected in favour of a new large dredge due to its superior economics, reduced construction risk and improved development timeline
– Pre-tax IRR of 228% and NPV10 of US$507 million
> Positioned to deliver on production growth from c.90,000 tonnes per annum 2012F to 200,000 tonnes per annum
– Lanti Dry Mining project currently in commissioning with work already underway for the Gangama Dry Mining project
– Optionality to grow production to in excess of 200,000 tonnes per annum with the Sembehun Dredge and Mogbwemo Tailing projects
– Expansions to be funded from internally generated cash flows
Working for a better Sierra Leone 2
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Established Operation, Exceptional Growth
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Gunson Resources 0.74mt
White Mountain Titanium 3.46mt
Sierra Rutile 7.8mt
Kenmare Resource 5.16mt
Mineral Deposits 0.44mt
Base Resources Ltd 0.95mt
Iluka Resources 9.14mt
World Titanium Resources 1.35mt
Astron Limited 3.6mt
0
5
10
15
20
25
30
35
0 20 40 60 80 100 120 140 160 180
Rutile Production Growth through 2015 (kt)
Bubble Size: In-Situ Rutile Resources
A Unique World-Class Deposit
Working for a better Sierra Leone 4
> The largest primary rutile asset in the world
– JORC Mineral Resource in excess of 600 million tonnes rutile at 1.3% rutile
> Exceptional, high value assemblage
– 76% of payable heavy mineral1 is rutile
– 22% of payable heavy mineral1 is zircon
Source: Company announcements, IBMA, Credit Suisse, Sierra Rutile estimates 1. Pricing assumptions based on TZMI LT prices: Zircon 1,715 US$/t, Ilmenite: 145 US$/t, Rutile 1,000 US$/t, Leucoxene 850 US$/t
Construction stage Existing Producer
Well positioned to take advantage of the positive market fundamentals for rutile
Ass
em
bla
ge V
alu
e1
(US$
/t)
Planning stage
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Established Infrastructure and Skilled Workforce
Working for a better Sierra Leone 5
Welding Crew
Power Plant
> Significant infrastructure already in place
– Mineral separation plant expandable to >200,000 tonnes of rutile per annum
– Established port and shipping fleet with capacity to ship >200,000 tonnes per annum of rutile
– A modern MFO (Marine Fuel Oil) power plant capable of producing 23MW of power (current utilisation under 9MW)
– Over 80km of established haulage roads
– Modern engineering and camp facilities in place
> Skilled and experienced workforce
– Experienced management team
– +30 years of experience operating experience at Sierra Rutile
– >95% Sierra Leonean nationals
– Highly educated employees
– Significant recruitment from premier universities of Sierra Leone, Fourah and Njala
Nitti Port
Dredge Management Meeting
Substantial infrastructure and experienced workforce provide a strong foundation for growth
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Existing Operations: Performance Enhanced
Working for a better Sierra Leone 6
> Lanti Dredge and process plants upgraded
– Following a capital investment project initiated in October 2010 the operation has increased the rutile production rate from around 60,000 tonnes per year to over 90,000 tonnes per year
– Record quarterly production of 26,381 tonnes of rutile in Q3 2012
– Upgrade included:
– Upgrade of drives
– Refurbishment of bucket band
– Replacement of process spirals and cyclones
– Installation of new magnets
– In addition, the company has improved operational management procedures and risk mitigation planning
Significant Improvement in Existing Operations
Lanti Dredge
Source: Sierra Rutile
40,000
50,000
60,000
70,000
80,000
90,000
100,000
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12
Trai
ling
12
mo
nth
s p
rod
uct
ion
(r
uti
le t
on
ne
s)
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Lanti Dry Mining: A Step Change in Production
Working for a better Sierra Leone 7
The Lanti Dry Mining project has been delivered on budget and ahead of time
Project Commissioning
Scrubbing and screening module assembled
> The Project
– Targeting high-grade pockets of resource, inaccessible to dredge mining
– 28.1 million tonnes at 1.5% recoverable rutile
– Adds production of 30,000 to 35,000 tonnes per annum of rutile and associated ilmenite and zircon by-products
> Project Update
– Ore processing plant is currently being commissioned, on budget and ahead of time
– Production from Lanti Dry Mining to be realised before year end 2012
– Supervisors and operators are onsite and fully trained
– Majority of earth moving equipment onsite, in-line with plan
– The building of the of 400,000 tonne ore stockpile is complete
Spirals being installed
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Gangama Dry Mining: Adds Unparalleled Value
Working for a better Sierra Leone 8
Dry mining Gangama provides access to a high-grade resource in a shorter development time and reduced capital cost, enhancing Sierra Rutile’s leverage to
strong prices
> The Project
– The high-grade Gangama deposit will add significant free cash flow by reducing project construction time and substantially decreasing capital cost compared to D3 dredge project
– The project, consisting of two 500 tonnes per hour units, provide additional optionality and operational flexibility
– Mining inventory increased by 22% to 39 million tonnes, as dry mining will provide access to previously inaccessible mineralisation
– 12-month project construction period
– Power, water and road access are already in place
– Matched equipment fleets will provide operational and maintenance synergies with existing operations
– Detailed construction costs are known and extensive economies of learning exist from the Lanti Dry Mining project
– Plant and infrastructure is semi-mobile and can be re-located to other deposits when mining at the Gangama deposit has been completed
Gangama Dry Mining PFS: Key Project Highlights
Average annual production rate (ore
mined) 7.0 million tpa
Average annual production rate (rutile
produced) 83,400 tpa
Up-front capital expenditure $103 million
Operating cost (LOM) $307/t
Construction period 12 months
Gangama resource mined 39 million tonnes
Project life 6 years
Pre-tax NPV10 $507 million
Post-tax NPV10 $330 million
Pre-tax IRR 228%
Post-tax IRR 157%
Project payback 8 months
Source: Sierra Rutile
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Gangama Dry Mining: Near-Term Milestones
Working for a better Sierra Leone 9
Detailed engineering and site preparation work is already underway
Gangama deposit with resource outline > Project Update
– Internal pre-feasibility study has been completed incorporating known costs and significant project learning’s from the Lanti Dry Mining project
– The project will be expedited through the next levels of study
– Detailed engineering work has commenced
– Long lead-time pre-construction activities, including dam construction for process water storage, will commence in November
Mining Pond
Dams
Existing roads
Deposit outline
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Sembehun Dredge: Long-Term Value Creation
Working for a better Sierra Leone 10
> The Project
– The Sembehun group of deposits are located approximately 45km from the current operating area
– 274 million tonnes at 1.34% rutile in Sembehun provides the opportunity to develop a new project that delivers long-term returns
– A pre-feasibility study has been completed by Snowden Mining Industry Consultants on the construction of a independent operation at Sembehun, which includes:
– A 1,875tph large dredge and wet plant concentrator
– New mineral processing plant
– New 18.6 MW power facility
– All site infrastructure required to support an independent operation
> Project Update
– An exploration programme was commenced in October 2012 to support detailed mine planning and confirm geometallurgy for the feasibility study. This programme is expected to be concluded in Q2 2013
Sembehun Dredge study: Key Project Highlights
Average production rate (ore
mined) 13 million tpa
Average rutile production rate
first 5 years / LOM 135,000 tpa / 113,000 tpa
Up-front capital expenditure $305 million
Operating cost $322/t HM produced
Construction period 24 months
Project start year 2016
Total resource mined 274 million tonnes
Project life 22 years
Pre-tax NPV10 $347 million
Post-tax NPV10 $215 million
Pre-tax IRR 34%
Post-tax IRR 26%
Deposit Mining Pond Mining Lease Boundary Proposed Dam Final Product Haul Road Existing Road HMC Hauling Road
Source: Snowden Mining Industry Consultants study
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Strong Production Growth
Working for a better Sierra Leone 11
The new development plan substantially reduces capex requirements while maintaining production growth optionality
> Increased production flexibility
– The utilisation of dry mining will provide significant production flexibility and increased synergies between mining operations
> Reduced capital cost
– Capex requirements over the same period have been reduced by $66 million
> Significant growth optionality beyond 200,000 tonnes
– Substantial growth optionality remains
– Sembehun Dredge project
– Mogbwemo Tailings project
– Additional dry mining targets
Source: Sierra Rutile
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250
2011 2012F 2013F 2014F 2015F
Ru
tile
Pro
du
ctio
n (
'00
0 t
on
ne
s)
Lanti Dredge Lanti DM Gangama DM
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Partnership with Sierra Leone
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Sierra Leone – An Investment Friendly Destination
Working for a better Sierra Leone 13
“We know that countries are more likely to prosper when they encourage entrepreneurship; when they invest in their infrastructure; and when they expand trade and welcome investment. So we will partner with countries like Sierra Leone to create business environments that attract investment, not scare it away.” US President Barack Obama, Speech to the United Nations General Assembly, September 2010
Over 40 years, Sierra Rutile has forged strong relationships with the people and Government of Sierra Leone
> Investment friendly jurisdiction
– Sierra Leone is a stable and investor friendly country
– Sierra Leone has a pro-mining investment climate with the current development of multiple mining projects including African Minerals’ and London Mining’s iron ore projects
– Sierra Leone is a key part of Tony Blair’s African Governance Initiative which is working to develop the capacity of the Government to set and deliver on its priorities
> Strong relationship with Sierra Leone
– The Company has a positive and long-standing relationship with the Government
– Mining leases date back to the 1970’s and are valid through 2038 with the option to extend for a further (minimum) 15 years
– In March 2011, a special repayment of US$18.3m was made on the loan to Government of Sierra Leone. The monies repaid on this loan are used to fund local development projects such as roads and infrastructure. US$29.6m (€23.75m) is outstanding on the loan, which will be repaid in accordance with its terms over the next 4 years
– In April 2012, Sierra Rutile purchased the Governments 7.1% effective interest in the local subsidiary and pre-paid 2 years of PAYE tax for US$17m
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Sierra Rutile and the Community
Working for a better Sierra Leone 14
Aquaculture Sustenance Programme
Sierra Rutile is a powerful force for development in the local community
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2008 2009 2010 2011 2012FFi
sh in
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('0
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Ruby Rose Centre
Source: Sierra Rutile
> Considerable contribution to national and local economy
– Sierra Rutile makes up a significant proportion of Sierra Leonean GDP and exports
– The company is one of the largest private sector employers in Sierra Leone
– Where possible, the Company is committed to local procurement, spending over US$30m annually on in-country procurement and wages
– Long standing and positive relations with local Mine Workers Union
> Contributions to the local community
– Over US$1m invested annually in the local community
– The Company’s medical facility treats over 20,000 people a year with free HIV testing, education, and mosquito nets for Malaria prevention
– Local technical college, sponsored by Sierra Rutile, provides education to over 300 students
– Through the Sierra Rutile Foundation the Company funds local projects such as schools, wells, grain stores, latrines, courts, bridges, clinics, a local radio station and more
– Fish farms located in old mining ponds provide local villagers with work and a reliable source of food
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A Responsible Steward
Working for a better Sierra Leone 15
>Ongoing Land Rehabilitation Programme
Tree Planting
> Environmental management
– Sierra Rutile is committed to rectifying the legacy disturbance of historical owners and to the continual rehabilitation of mined-out areas
– In 2011, a full survey of disturbed land was conducted and a plan has been developed and is being implemented to rehabilitate all legacy disturbed areas over the next 6 years
– Strong, positive relationships with the Sierra Leone Environmental Protection Agency and Ministries of Fisheries and Agriculture
– Agricultural project initiated in 2010, aims to provide significant sustainable employment for the local people
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Corporate
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Senior Management
Working for a better Sierra Leone 17
John Bonoh Sisay Chief Executive Officer
> Considerable experience in African mining sector, having worked in 10 African countries
> Formerly De Beers, America Mineral Fields (now First Quantum)
> Previously President of Chamber of Mines, Sierra Leone
> Sierra Leone national
Gerald Boting Chief Operating Officer
> 35 years experience having held senior management positions across Africa with Anglo Base Metals and De Beers
> Previously COO of Vedanta Zinc, responsible for operations in Namibia, Ireland and South Africa
Yves Ilunga1 Chief Financial Officer
> Previously, VP – Transformation for AngloGold Ashanti Ghana
> Has held various financial management roles across Africa for AngloGold Ashanti and DeBeers
Andrew Taylor Head of Operations
> 20 years of mining and processing expertise
> Significant experience of operating in Africa with De Beers and Anglo American
> Managed the construction and commissioning of the Voorspoed Mine in South Africa from 2005 to 2010
Neil Gawthorpe Marketing & Logistics Director
> 17 years experience in international industrial minerals marketing
> Previous technical and marketing positions at Redland PLC, Frank & Schulte GmbH and Minelco Group
Desmond Williams Operation Manager
> Previously with SNC Lavalin and Worley Parsons in Canada
> Worked at Sierra Rutile between 1988 and 1998
> Sierra Leone national
1 Starts 1 January 2013
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Board of Directors
Working for a better Sierra Leone 18
Jan Castro Non-Executive Chairman
> Chief Executive of Pala Investments, an investment company focused on the mining sector, and SRL’s cornerstone shareholder
> Significant strategic advisory, management and investment experience
> Serves on the boards of Alacer Gold, Nevada Copper, and Asian Mineral Resources
John Bonoh Sisay Chief Executive Officer
> Considerable experience in African mining sector, having worked in 10 African countries
> Formerly De Beers, America Mineral Fields (now First Quantum)
> Sierra Leone national
Michael Barton Non-Executive
> Senior Vice President at Pala Investments
> Significant strategy and transaction advisory experience
> Serves on the boards of Peninsula Energy, Elemental Minerals and WDS Ltd
Michael Brown Non-Executive
> Former Chief Operating Officer of De Beers. Led restructuring of De Beers during GFC
> Deep industry expertise in strategy, operations, construction
> Senior Vice President at Pala Investments
> Serves on the board of Asian Mineral Resources
Charles Entrekin Non-Executive
> 35 years of experience in the mining sector
> As former President of Titanium Metals Corporation, brings significant industry specialism
> Turnaround expertise
> Serves on the board of Melior Resources
Alex Kamara Non-Executive
> Head of Engineering at Sierra Rutile from 1982-1995
> Chairman of Standard Chartered, Sierra Leone
> Sierra Leone national
Richard Lister Non-Executive
> 40 years of experience in the industrial minerals and mining sectors
> Significant commodity marketing experience
> Formerly Chief Executive of Zemex Corporation, Vice-Chairman of Dundee Bancorp and Chief Executive of Campbell Resources
> Serves on the board of Labrador Iron Mines Holdings
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Sierra Rutile FTSE AIM All Share FTSE All Share Mining
Other 4%
Investec Asset Management
Limited 5%
Neon Liberty Capital
7%
JPMorgan Asset Management
Limited 9%
M&G 20%
Pala Investments 55%
Corporate Overview
Working for a better Sierra Leone 19
> Sierra Rutile Share Price vs. FTSE All Share Mining
> Major Shareholders
Capital Structure
> Listing: LSE AIM: SRX
> Issued shares: 510.0 m
> Options: 26.9 m
> Current Share Price1: 56p
> Market cap: £286 m (US$460m)
> Cash2: US$16.5 m
> Gross Debt: €23.7m (US$29.6m)
Analyst Coverage
> Goldman Sachs
> Mirabaud Securities
> Royal Bank of Canada
> RFC Ambrian
Source: Bloomberg
Source: Bloomberg, Statutory Filings
1 31 October 2012 2 30 Sept 2012
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Contact Details
John Sisay
Chief Executive Officer
Working for a better Sierra Leone
Email: [email protected]
Sierra Rutile Limited 20 Hill Cot Road Freetown Sierra Leone Website: http://www.sierra-rutile.com/
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Appendix
Market Fundamentals
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TiO2 Overview
> Titanium dioxide (TiO2) pigment is a fine white powder used in paints, plastics and paper products - which imparts whiteness, brightness and opacity on the products
> Titanium dioxide pigments are produced from titanium feedstocks. The principle feedstock products are:
> High-grade:
– Natural rutile (95-96% TiO2)
– Synthetic rutile (90-93% TiO2)
– Titanium slag (75-85% TiO2)
Low-grade:
– Ilmenite (30-63% TiO2)
– Leucoxene ( Titanium pigments are produced using the chloride process (55%) or the sulphate process (45%)
> The chloride process requires higher-grade feedstocks (>90% TiO2) and is is favoured for its more efficient, cleaner and lower-cost process
> The sulphate process can utilise lower grade (usually ilmenite) feedstocks
> 90% of titanium feedstocks are used for the manufacture of TiO2 pigment
Working for a better Sierra Leone 22
90%
4% 6%
Pigments (paint)
Titanium sponge
Other (welding)
Overall TiO2 market: 6.8 million tonnes
Source: Credit Suisse
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1.0
2.0
3.0
4.0
Chloride Process Sulphate Process
TiO
2 u
nit
s (m
)
Rutile
Synthetic Rutile
Titanium Slag
Ilmenite
Titanium Feedstock Consumption in Pigment Process
Overall TiO2 End Markets
Source: Credit Suisse
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Late-Cycle Demand Driven by China and Urbanisation
Working for a better Sierra Leone 23
Demand growth anticipated from economic recovery and changing demographic trends
> TiO2 demand grows exponentially, late in the economic cycle
– Demand growth anticipated to increase significantly as both developed and emerging economies strengthen
> China is anticipated to require significantly more TiO2
– Population forecasted to peak at 1.4 billion in 2025 with middle-class growing to 70% by 2020
> Urbanization in Asia, Latin America, and India will further impact TiO2 demand
> US housing recovery presents near-term upside
Pigment Consumption vs. GDP Per Capita
Source: Rio Tinto
Late-Cycle Demand Growth
Satu
rati
on
Lev
el (
%)
Note: Saturation level is the point at which consumption per capita does not increase with income levels Source: Rio Tinto
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
0 10,000 20,000 30,000 40,000 50,000
Pig
me
nt
Ap
par
en
t C
on
sum
pti
on
(kg
)
GDP Per Capita (PPP Basis 2005$)
China (annual) Japan
(Average)
South Korea (Average)
Western Europe (Average)
USA (Average)
Indicative S-Curve
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China Moving to High-grade Feedstocks
Working for a better Sierra Leone 24
China’s Move to Chloride Technology
> China’s 12th Five Year Plan stipulates the move to chloride-based production, which requires significantly increased rutile volumes
> Some Chinese companies have now obtained the technology to produce pigment via the chloride process, increasing demand for high-grade feedstocks including rutile
> The first chloride pigment producer will come online in China in 2013 with substantial growth forecast thereafter; plants are to be commissioned using 100% rutile
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
2013 2014 2015 2016 2017 2018
Pig
me
nt
(kt)
Source: Company Estimates
Forecast Chloride Pigment Production Ramp Up in China
High Grade - China
High Grade - China
High Grade - RoW
High Grade - RoW
Low Grade - China
Low Grade - China
Low Grade - Row
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2000 - 2010 2010 - 2020
CAGR = 3.3% CAGR = 4.1%
TiO2 Feedstock Demand Growth
Source: RioTinto
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Limited Ability for a Supply Response
Working for a better Sierra Leone 25
> Limited supply response
– Greenfield supply response is muted by long project development times and financing requirements
> Limited near-term expansion potential
– Sierra Rutile is one of few producing assets capable of significant, near-term expansion potential
> Significant challenges facing other projects
– Should further prolong strong supply side fundamentals
Natural Rutile Supply/Demand Forecast
Natural Rutile Supply Additions
0
200
400
600
800
1,000
1,200
1999 2004 2009 2014 2019TiO
2 U
nit
s o
f R
uti
le (
'00
0 T
on
ne
s)
Current Supply SRL Base Resources
Other White Mountain Demand
Source: TZMI, Company Estimates
Project Company Country Existing Production ktpa Expansion production
ktpa Potential
Production ktpa Total Production
ktpa Earliest Possible
Production Status
Sierra Rutile Sierra Rutile Sierra Leone 125 80 - 205 - Construction
Kenmare Resources Moma expansion Mozambique 6 10 10 26 2012 Construction
Mineral Deposits Grand Côte Senegal 10 0 10 2013 Construction
Base Resources Ltd* Kwale Kenya 73 0 73 2013 Construction
Gunson Resources Coburn Zircon WA 0 10 10 2013 Feasibility
Trimex* Trimex Group India 8 0 8 2013 Feasibility
Tronox Fairbreeze S.Africa 120 25 0 145 2014 Construction
White Mountain* Cerro Blanco Chile 0 95 95 2014 Feasibility
Astron* Astron Ltd Australia 60 0 60 2015 Feasibility
Diatreme & Image Resources Cyclone Australia 0 6 6 2015 Investigation
Total Potential Production 206 246 201 653
Source: Sierra Rutile, * IBMA, Credit Suisse
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The Result: Strong Long-Term Under-Supply
Working for a better Sierra Leone
TiO2 Supply and Demand Balance
Source: Goldman Sachs
-250
-200
-150
-100
-50
0
50
100
150
2009 2010 2011 2012E 2013E 2014E 2015E
TiO
2 u
nit
s (k
t)
26
> Late-cycle demand growth
– Strong demand growth for TiO2 is anticipated as developed and emerging economies strengthen
> Premium titanium metal and specialist welding sectors poised for expansion
– Rutile demand will see additional upward pressure as high-grade TiO2 feedstock is required for premium titanium metal and welding products
> Trend towards chloride production process
– Improvements in environmental impact and cost efficiency is driving the movement toward chloride production, a process which favors natural rutile use
> Global rutile supply increases are likely to be insignificant
– Long project lead times and material capital requirements restrict near-term supply additions
> Market pricing in transition
– Increased volatility in TiO2 prices is expected as demand increases and legacy long-term contracts expire
Fundamental changes in market dynamics with lead to stronger feedstock pricing