january 2015 - presentation
TRANSCRIPT
Premium Potash Project Driven by a
Proven Management Team TSX : PRK OTCQX : POTRF January 2015
FORWARD LOOKING STATEMENTS
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Certain statements in this presentation may constitute "forward-looking" statements which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Potash Ridge Corporation (the "Corporation"), or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this presentation, such statements use such words as "may", "would", "could", "will", "intend", "expect", "believe", "plan", "anticipate", "estimate" and other similar terminology. These statements reflect the Corporation's current expectations regarding future events and operating performance and speak only as of the date of this presentation. Forward-looking statements involve significant risks and uncertainties, which include, but are not limited to the factors discussed under “A Cautionary Note Regarding Forward Looking Statements” and "Risk Factors" in the Corporation’s Annual Information Form dated March 27, 2013, and should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. Although the forward-looking statements contained in this presentation are based upon what management of the Corporation believes are reasonable assumptions, the Corporation cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this presentation and are expressly qualified in their entirety by this cautionary statement. Subject to applicable securities laws, the Corporation assumes no obligation to update or revise them to reflect new events or circumstances.
Focused on near term sulphate of potash (“SOP”) production at its Blawn Mountain property in Utah
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SOP 645,000 tons average per annum
40 year Project Life backed by reserves
EXPERIENCED AND PROVEN MANAGEMENT
OVER 80 YEARS COMBINED EXPERIENCE
Guy Bentinck President & CEO Chartered Accountant; 20 years mining/resource experience Sherritt: CFO and SVP Capital Projects
Ross Phillips Chief Operating Officer 10 years experience in large resource and energy sector projects Sherritt, Capital Power
Jeff Hillis Chief Financial Officer Chartered Accountant; 10 years mining sector finance, including CFO of several public mining companies Iberian Minerals, Excellon, Falconbridge
Paul Hampton VP, Project Management Geologist and Metallurgical Engineer; ~30 years experience in design, construction, start-up and management of mineral processing facilities SNC, Washington Group, Outotec
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COMPETITIVE ADVANTAGES
Premium potash product with supply deficit that cannot be met by existing production processes; 163% premium over MOP Current SOP consumption is ~5 million tpa, demand potential is 10-12 million tpa Large surface mineral deposit - low cost and low risk mining, with easy access to ore for test work. Known process – existing production facility in Azerbaijan 645,000 tons of SOP per annum over 40 year mine life proven plus probable reserves Established infrastructure nearby, designated development lands and efficient state permitting; no federal permits for plant site Water rights, large mine operations and groundwater discharge permits all secured. Only major permit remaining (air permit) will be completed in parallel with feasibility study. PFS completed November 2013: $1.0 billion NPV at 10%; 20.5% after tax IRR; excludes potential revenue from alumina rich material Mining friendly jurisdiction with strong state and municipal government support. MOUs under negotiation for $641m of support infrastructure; project financing expression of support received from Export Development Canada; Utah infrastructure financing available
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POTASH OVERVIEW
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No known substitute
Increasing world population
Growing per capita income
Decreasing arable land
Increasing use of biofuels
POTASH WORLD DEMAND +5% EXPECTED ANNUAL DEMAND TO 2016; SOP HIGHER GROWTH POTENTIAL
POTASH: ESSENTIAL TO THE WORLD’S FOOD SUPPLY
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POTASSIUM AND SULPHUR ARE ESSENTIAL NUTRIENTS
SOP: PREMIUM FERTILIZER
Sulphate of Potash (SOP)
Muriate of Potash (MOP)
50% K2O Equivalent 60% K2O Equivalent
17% S 0% S
<1.0% Cl 45% Cl
4.8 million tonnes sold in 20131 50 million tonnes sold in 20131
Improves yield, quality, taste and enhances shelf life1
Crop quality/yield diminish as chloride builds up1
1 CRU 2013 8 Chemical makeup assumes 92.5% K2SO4 and 95% KCl product * Within target markets
Consumption of SOP restricted by limited production capacity, with little expansion potential
SOP share of potash market: Current: 5 Mt Potential: 10-12 Mt*
Trend toward high nutrient fertilizers
Trend towards pricing of SOP based on incremental revenue through yield/quantity improvements vs. premiums over MOP
SOP – A DISTINCT & VALUABLE POTASH PRODUCT
Fruits Vegetables Nuts Horticultural Plants
Tobacco Tea Coffee Dry/Salty soil
Especially valued for chloride sensitive crops, SOP improves yields on high value crops such as:
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SOP MARKET DYNAMICS
1CRU 2013 10
Europe 24%
N. America
7%
C & S America
6%
China 49%
Africa 5% RoW
9%
SOP Consumption by Region
Region Process Method
World Capacity Process Inputs Products Avg Cost /
Ton1 Future Outlook
China/ Europe
Mannheim 2.3Mt 43%
• MOP • Sulfuric Acid • Energy
• SOP • Hydrochloric Acid
$453
High Cost/by-‐product
limits growth
Europe MOP and Kieserite
1.2Mt 22%
• MOP • Kieserite • Energy
• SOP • Magnesium
Chloride
$440 No
addiRonal deposits
China/ USA/ Chile
Salt Lakes 1.9Mt 35%
• Lake Brines • Energy
• SOP • Magnesium
Chloride • Sodium Chloride
$381
No addiRonal suitable lakes
Existing SOP Production by Process
New sources of SOP from these existing processes are unlikely due to lack of primary sources and difficulties surrounding secondary source production.
CRU predicts SOP consumption of 9,500,000 tonnes per annum by 2019 – where will this production come from?
SOP PREMIUM PRICE TRENDS
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U.S. $/tonne
1 Compass Minerals Q3 2014 Report, 2 Potash Corp Q3 2014 Report
Potash Corp Q3/14 realized price $281/tonne2
Recent quotes from blenders in Uberaba, Brazil $750/tonne
Compass Q3/14 realized price $739/tonne1
-‐
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2012 2013 2014
POT -‐ North America (MOP) CMP -‐ (SOP)
SIGNIFICANT GROWTH POTENTIAL EASY ACCESS TO LOCAL MARKETS
SOP MARKET TARGETS
12 1 CRU 2013
2 From PRK Study August 2013, based on crops that are best suited for SOP
United States
SOP consumption: 385,000 tons1 Potential consumption: 920,000 tons2
Large scale production of chloride intolerant crops such as nuts in California and citrus fruits in Florida drive a large part of US SOP demand. Consumption of these crops continues – e.g. almond crops have grown by 7% per year since the mid 1990s.
Brazil
SOP consumption: 42,000 tons per year2 (0.4% of total potash consumption) Potential consumption: 2.1 million tons2 Brazil is the world’s largest grower of coffee, citrus fruits and fourth largest grower of tobacco, all SOP crops. Low consumption is entirely due to lack of SOP availability.
China
SOP consumption 2.5 million tons per year1 Potential consumption: 5.5 million tons per year2 China produces close to half of the world’s fruits and vegetables, and nearly one-third of the world’s tobacco and tea. SOP consumption almost doubled between 2007 and 20121, with large untapped growth potential.
THE BLAWN MOUNTAIN PROJECT
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ANTICIPATED MINE RAMP-UP IN 2017
PROJECT OVERVIEW
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Large alunite deposit, which is expected to be processed into SOP, and possible alumina rich material
Average 645,000 tons of SOP per annum
Historical work expedites project development
Mineral deposit to be surface mined
Proven process backed by extensive metallurgical testing
ORE TEST PIT
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ALMOST 100 YEARS OF POTASH PRODUCTION
UTAH: AN ATTRACTIVE MINING JURISDICTION
1Forbes Magazine, November, 2014 2Fraser Institute, April, 2013
Major resource producer
Existing potash production
Best state for business1
Top quartile mining jurisdiction2
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OUR LAND ADVANTAGE
State-owned land designated for development
Leasehold and royalty agreements negotiated
No known adverse environmental or social issues
Roads, rail, transmission and natural gas nearby
Construction materials, equipment suppliers and skilled labour force
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MUNICIPAL AND STATE SUPPORT OF PROJECT
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ADVANCED PERMITTING STAGE The following table identifies the various permits and approvals that the Corporation has or still needs to obtain prior to start-up of the mine and processing plant:
Major&Required&Permits&
Major&Permits&or&Approvals& Issuing&Agency& Completed&
Exploration+Permit+ Utah+ Division+ of+ Oil,+ Gas+ and+Mining+
October,+2011+
US+ Army+ Corps+ of+ Engineers+Jurisdictional+Waters+Concurrence+
US+Army+Corps+of+Engineers+ March,+2014+
Water+Appropriations+ Utah+Office+of+State+Engineer+ May,+2014+
Groundwater+Permits+ Utah+Division+of+Water+Quality+ July,+2014+
Large+Mine+Operation+Approval& Utah+ Division+ of+ Oil,+ Gas+ and+Mining+
August,+2014
Air+Quality+Permit+ Utah+Division+of+Air+Quality+ +
PREVIOUS WORK ACCELERATES PROJECT DEVELOPMENT
EXTENSIVE DEVELOPMENT COMPLETED IN 1970’s
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• Approximately $25 million spent (~$100 million in today’s dollars).
• Programs included:
Drilling, Resource estimate, Feasibility Study, mine plan, Engineering, Permitting and 3-year operation of a pilot plant processing up to 11 tons per day.
• Alumina originally primary product; SOP was by-product
• Project ultimately shelved due to poor economic conditions in early 1980s
• Potash Ridge owns all historical data
SIMPLE PROVEN FLOWSHEET
Alunite
Calcination
Water Leach
Alumina Rich Material
SOP Solution Crystallizing Drying, Compacting & Sizing SOP
SO2 Acid Plant Sulphuric Acid
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• Existing plant in Azerbaijan currently mothballed. (Ganja Refinery) • Flowsheet similar to commercial-scale production processes
historically used in US and Australia.
RECENT EXTENSIVE TEST WORK CONFIRMS FLOWSHEET
• Plant to process 10.4 million tons per annum • Metallurgical testing on-going for Feasibility Study
Crushing & Grinding
PREFEASIBILITY STUDY – SUMMARY
• Proven & Probable mineral reserves of 426 million tons; • Reserves support 40 year mine life, with potential to increase life of operations through
exploration of two additional zones of known mineralization; • Project after tax Net Present Value (“NPV”) of $1.0 billion using a 10% discount rate:
• Total sales of 26 million tons of SOP over life of mine; • Unlevered after tax internal rate of return (“IRR”) of 20.5%; payback period of 5 years
after commencement of operations; • Strong cash flow generation with cash flow from operations of $234 million per annum
excluding the two year ramp up period; • Approximately 28% of direct capital costs are supported by packaged quotes 21
Economic Indicators
NPV (after tax, at 10%)(1) $1.0 billion
IRR (after tax)(1) 20.5% Average annual SOP production 645,000 tons Average annual sulphuric acid production 1,440,000 tons SOP price (average) $649/ton Sulphuric acid price (average) $135/ton Project life 40 years Initial capital cost (including 15% contingency)(2) $1,124 million Operating cost (excluding royalties) $173/ton SOP
The economic evaluation is based on the following assumptions: • Site construction commences mid
2016; • Production ramp-up over 2 years
(2017-2018), reaching full production in 2019;
• SOP pricing from CRU forecast below current North American SOP prices;
• Average tax rate of 35%. 1Inclusive of by-‐product acid revenues and exclusive of royalRes; no credit assumed for potenRal revenue from the sale of alumina rich material. 2Currently evaluaRng phasing of construcRon in order to reduce upfront capex requirements.
OVERVIEW OF POTASH RIDGE’S BLAWN MOUNTAIN PROJECT
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7% Other ($14M)
14% RoyalRes ($33M)
Excludes credit for potenRal alumina rich material revenue. Includes 15% conRngency (excluding non-‐energy and labour costs).
Potash Ridge Salt Lakes MOP/ Sulphate Salts
Mannheim Process
Cash Cost per Ton by Production Method (1)
$381 $440
$453
$173(2)
Potash Ridge
Expected In Production
1 CRU/Company Information 2 Includes acid by-product credit (assumes $135/ton price), excludes potential revenue from alumina rich material
1 1 1
Currently evaluating phasing of construction in order to reduce upfront capex requirements
PREFEASIBILITY STUDY – RESERVES ESTABLISHED
Drilling to date has focused only on two of the four areas within the 15,400 acre land parcel
Supports 40 years of operations
Reserves demonstrate the economic and technical viability of the Project
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Reserve Category
Total Proven
('000 tons) Probable
('000 tons)
Alunite Ore (ROM tons) 136,254 289,540 425,794
Ore (average K2O (%) grade) 3.56 3.49 3.51
Ore (average K2SO4 (%) grade) 6.59 6.46 6.49
SOP (tons) 8,457 17,970 26,427
Sulphuric Acid (tons) @ 98% Purity 18,888 40,136 59,024
Mineral Reserves by Category November 6, 2013
STRONG MARKET FOR SULPHURIC ACID
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US market is world’s largest importer of sulphuric acid, mostly from Canada and through the Gulf Coast (from Europe and Mexico)
Current imports of 3 million tonnes per annum; expected to increase to 5 million tonnes per annum by 2018
• Increase in market demand from mine expansions, new development and increases in industrial use
• Imports from Canada and Mexico expected to decline due to lower production of smelter acid (Canada) and higher domestic consumption (Mexico)
Consumers looking for stable supply for existing operations and to satisfy growth plans
Mountain West US market approximately 5.1 million tonnes per annum and expected to grow to 6.5 million tonnes by 2018.
MOU with a third party marketer in place for potential offtake and marketing arrangement for 100% of the sulphuric acid production from the project.
• Leaching process leaves alumina rich material which, with beneficiation, may be used as a substitute to bauxite as a feedstock into a Bayer alumina production facility.
• Metallurgical testing confirmed the alumina in this material is soluble in high temperature caustic solutions
• May also be acceptable as a raw material feed for low temperature refineries
• Further testing is underway to determine whether the alumina rich material could meet specifications for feed material in the production of ceramic proppants in North America.
• PFS economics do not include potential revenue from the sale of approximately 1.2 million tonnes of this alumina rich material
• Landed cost of bauxite in China is approximately $85 per tonne
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UPSIDE POTENTIAL FROM LEACH RESIDUE
SOURCES OF SMELTER FEED TO CHINA
Blawn Mountain,
Utah Boke,
Guinea Trombetas,
Brazil Kingston, Jamaica
Distance to Shandong Province, China (nm) 5,556 11,128 10,815 9,051
Port Vancouver Conakry Aratu Jamaica
MILESTONES
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Preliminary Economic Assessment issued November, 2012
Metallurgical test program initiated January, 2012
Pilot Plant Test work initiated & SOP from test work produced May, 2013
Prefeasibility Study supporting 40-year mine life issued December, 2013
Large Mining Permit Application submitted December, 2013
Water Rights Granted May, 2014
Ground Water Permit approved July, 2014
Large Mining Permit approved August, 2014
Strategic Partnership with Tetra Tech announced August, 2014
Air Quality Permit 1H 2016
Issue Feasibility Study 2H 2015
Complete metallurgical test program 2H 2015
Receive final permits 1H 2016
Mine construction start up Mid 2016
Ramp up of mining Mid 2017
Note: Timelines are based on obtaining sufficient financing to advance Feasibility Study
Expected Achieved
CAPITAL STRUCTURE
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Millions
Common Shares 81.7
Non-voting Common Shares 5.1
Total Shares Outstanding 86.8
Stock options(1) 6.5
Total Fully Diluted Shares 93.3
As at December 31, 2014 1. Stock options have exercise prices varying between $0.14 and $1.00. Expiry dates occur between 2021 and 2024
INSIDERS HOLD 5%, 10% FULLY DILUTED
COMPETITIVE ADVANTAGES
Premium potash product with supply deficit that cannot be met by existing production processes; 163% premium over MOP Current SOP consumption is ~5 million tpa, demand potential is 10-12 million tpa Large surface mineral deposit - low cost and low risk mining, with easy access to ore for test work. Known process – existing production facility in Azerbaijan 645,000 tons of SOP per annum over 40 year mine life proven plus probable reserves Established infrastructure nearby, designated development lands and efficient state permitting; no federal permits for plant site Water rights, large mine operations and groundwater discharge permits all secured. Only major permit remaining (air permit) will be completed in parallel with feasibility study. PFS completed November 2013: $1.0 billion NPV at 10%; 20.5% after tax IRR; excludes potential revenue from alumina rich material Mining friendly jurisdiction with strong state and municipal government support. MOUs under negotiation for $641m of support infrastructure; project financing expression of support received from Export Development Canada; Utah infrastructure financing available
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CONTACT US
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Toronto office: 3 Church Street, Suite 600 Toronto, Ontario M5E 1M2 Phone: 416-362-8640 ext 101
Salt Lake City office: 170 S. Main Street, Suite 500 Salt Lake City, UT 84101 Phone: 801-433-6027
www.potashridge.com [email protected]