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The right moves: strategy for value-add Petrus Cilliers, Managing Director African Mining Investor Dinner Cape Town Wednesday, 6 February 2013

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Page 1: The right moves: strategy for value-add - Chrometco · The right moves: strategy for value-add Petrus Cilliers, ... 41 950 096 8 671 629 39.00 15 090 833 3 371 342 ... Ptn 3 Ptn 7

The right moves:

strategy for value-add

Petrus Cilliers, Managing Director

African Mining Investor Dinner

Cape Town

Wednesday, 6 February 2013

Page 2: The right moves: strategy for value-add - Chrometco · The right moves: strategy for value-add Petrus Cilliers, ... 41 950 096 8 671 629 39.00 15 090 833 3 371 342 ... Ptn 3 Ptn 7

Disclaimer

Opinions expressed herein are, by nature, subjective to known and unknown risks and uncertainties. Changing

information or circumstances may cause the actual results, plans and objectives of Chrometco Limited (the

“Company”) to differ materially from those expressed or implied in the forward-looking statements. Financial

forecasts and data given herein are estimates based on the reports prepared by experts who, in turn, relied on

management estimates. Undue reliance should not be placed on such opinions, forecasts or data. No representation

is made as to the completeness or correctness of the opinions, forecasts or data contained herein. Neither the

Company, nor any of its affiliates, advisors or representatives accepts any responsibility for any loss arising from the

use of any opinion expressed or forecast or data herein. Forward-looking statements apply only as of the date on

which they are made and the Company does not undertake any obligation to publicly update or revise any of its

opinions or forward-looking statements whether to reflect new data or future events or circumstances.

6 February 2013 African Mining Investor Dinner | 2

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Company profile

• Minerals exploration and mining company

• have chrome, acquiring PGMs

• Focus on delivering value to shareholders

• Unique in SA as an exploration company

• JSE AltX listed

• strategy to combine chrome and PGMs

• Experienced management

• Primary asset – Rooderand Mine

• resource statement of 60Mt chrome ore

• existing chrome stockpile of ±70 000t

6 February 2013 African Mining Investor Dinner | 3

Page 4: The right moves: strategy for value-add - Chrometco · The right moves: strategy for value-add Petrus Cilliers, ... 41 950 096 8 671 629 39.00 15 090 833 3 371 342 ... Ptn 3 Ptn 7

Chromex Canada

Korpo Trust

(Pty) Ltd

Chrometco Mining

Services (Pty) Ltd

Structure

6 February 2013 African Mining Investor Dinner | 4

4

19% 76%

14%

PILANESBERG MINING COMPANY

(PTY) LTD

New Order Mining Rights

100%

ROODERAND CHROME

(PTY) LTD

Section 11 transfer

5%

Moepi Mining SPV

(Pty) Ltd

Page 5: The right moves: strategy for value-add - Chrometco · The right moves: strategy for value-add Petrus Cilliers, ... 41 950 096 8 671 629 39.00 15 090 833 3 371 342 ... Ptn 3 Ptn 7

Board and management

Jonathan Scott (58)

Independent non-executive chairman

BSc (Hons), MBA

Many years of experience in mining, mining finance, banking and corporate finance, and

has served on the Boards of a number of JSE-listed companies over the years.

Petrus Cilliers (47)

Managing director

PrEng, BEng (ChemEng), MBA

Chemical engineer with more than 20 years’ experience in the mining and metallurgical industry as a

consultant and in managerial capacity.

Christopher Seabrooke (59)

Independent non-executive director

BCom, BAcc, MBA, FCMA

Joined the Board in February 2012. Christopher has been a director of over 20 JSE-listed companies over the

years. He is currently CEO of Sabvest and a non-executive director

of Brait, Datatec, Massmart, Metrofile and Net1.

Edward Bramley (44)

Non-executive director

Experienced mining and exploration professional with international experience in business exploration and

management. Edward is a co-founder of the Chrometco group of companies

and has had a long-standing association with the Chrometco group.

Richard Rossiter (56)

Independent non-executive director

Richard is an experienced mining professional and geologist, currently based in Australia as the executive

chairman of Realm Resources (ASX Listed). Richard was the former chairman of Sylvania Platinum (LSE

Listed).

Ivan Collair (58)

Independent non-executive director

BCom (Hons), BSc

Joined the Board in February 2012. Ivan has over 30 years of business experience and is currently the

Government Relations Manager for Shell South Africa.

Trevor Scott (34)

Financial director

BCom (Hons), BAcc, CA(SA)

Specialist in providing IFRS, tax, corporate governance, and other services to local and offshore listed

companies. He has many years of experience in the disciplines of corporate finance and management.

6 February 2013 African Mining Investor Dinner | 5

Page 6: The right moves: strategy for value-add - Chrometco · The right moves: strategy for value-add Petrus Cilliers, ... 41 950 096 8 671 629 39.00 15 090 833 3 371 342 ... Ptn 3 Ptn 7

Snapshot (as at 29 February 2012)

• Total assets: R223 million

• Revenue: R618 561

• Gross profit: R304 259

• Cash: R31 million

• HLPS: (9.01 cents)

• Market capitalisation: R48 million

• Shares in issue: 185 million

6 February 2013 African Mining Investor Dinner | 6

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20-month timeline

6 February 2013 African Mining Investor Dinner | 7

June 2011

Presented DCM

deal to shareholders

Shareholders reject deal

December 2011

DCM mining and

management ends

December 2011

CMO takes operational

control of Rooderand

December 2011

CMO sells chrome ore

for own account

February 2012

Resource revalued

June 2012

Nkwe discussions start

August 2012

Nkwe deal agreed

and signed

November 2012

Shareholders meeting

for Nkwe deal

December 2011

NOMR awarded

Jun

2011

Jul

2011

Aug

2011

Sep

2011

Oct

2011

Nov

2011

Dec

2011

Jan

2012

Feb

2012

Mar

2012

Apr

2012

May

2012

Jun

2012

Jul

2012

Aug

2012

Sep

2012

Oct

2012

Nov

2012

Dec

2012

Jan

2013

Feb

2013

Page 8: The right moves: strategy for value-add - Chrometco · The right moves: strategy for value-add Petrus Cilliers, ... 41 950 096 8 671 629 39.00 15 090 833 3 371 342 ... Ptn 3 Ptn 7

Rooderand Mine

• Location: Western Limb of Bushveld

Igneous Complex, North West

Province

• Mining neighbours include:

• Platmin’s Pilanesberg Mine

• Xstrata’s Horizon Mine

• Anglo Platinum’s Tumela Mine

• Average market value of ± R186 million

at current resource statement

• upper value of R257 million

• New order mining rights in place

6 February 2013 African Mining Investor Dinner | 8

S N

Pilanesberg

12° dip

Middle group: MG1, 2, 3, 4

Upper group: UG1, 2

Lower group: LG7, 6, 6A

Merensky: very close to UG2

Page 9: The right moves: strategy for value-add - Chrometco · The right moves: strategy for value-add Petrus Cilliers, ... 41 950 096 8 671 629 39.00 15 090 833 3 371 342 ... Ptn 3 Ptn 7

Rooderand Mine

• Acquired by Chrometco in early 2004

• Provisional sale of shares agreement with DCM Chrome for R62 million in 2007

• DCM Chrome manages and mines Rooderand Mine from 2007 to 2011

• Implementation of conditional disposal agreement not approved by shareholders

in July 2011 at a special general meeting

• Mining and management agreement expired in December 2011

• DCM Chrome paid

• R13 million deposit

• R13 million per year as part of a mining management contract

• DCM Chrome defaults on the final 2011 payment of R10 million

• Chrometco re-acquires Rooderand Mine for accounting purposes

6 February 2013 African Mining Investor Dinner | 9

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Rooderand Mine: location map

6 February 2013 African Mining Investor Dinner | 10

Rooderand Remainder

(Nkwe)

Portion 1

Portion 3

Portion 2

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6 February 2013 African Mining Investor Dinner | 11

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Markets: South African domestic

chrome ore prices

6 February 2013 African Mining Investor Dinner | 12

-

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.00

450.00

500.00

Q12008

Q22008

Q32008

Q42008

Q12009

Q22009

Q32009

Q42009

Q12010

Q22010

Q32010

Q42010

Q12011

Q22011

Q32011

Q42011

Q12012

Q22012

Q32012

CIF PRICE $

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1.1 1.2

5.54.7 5.0

7.58.3

8.1

6.4

9.88.69.5

13.6

11.1

14.8

-

5

10

15

20

2000 2005 2008 2009 2010

SA

ch

rom

e o

re p

rod

uc

tio

n (

Mt

ma

teri

al)

Exported Domestic consumption

Chrome market

South Africa is the largest chrome ore producer and exporter globally…

6 February 2013 African Mining Investor Dinner | 13

South Africa accounts for ~50% of global chrome ore

production in 2010, growing in line with global average

8.6 9.5

13.611.1

14.8

8.0

12.1

15.0

11.5

15.0

16.7

21.6

28.6

22.6

29.8

-

5

10

15

20

25

30

35

2000 2005 2008 2009 2010

Glo

ba

l c

hro

me

ore

pro

du

cti

on

(M

t m

ate

ria

l)

South Africa Rest of world

Source: Heinz Pariser

South Africa exported ~5Mt chrome ore in 2010,

~34% of its production compared to ~12% in 2000

1.1 1.2

5.54.7 5.0

7.58.3

8.1

6.4

9.88.69.5

13.6

11.1

14.8

-

5

10

15

20

2000 2005 2008 2009 2010

SA

ch

rom

e o

re p

rod

uc

tio

n (

Mt

ma

teri

al)

Exported Domestic consumption

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Markets: UG2 exports

6 February 2013 African Mining Investor Dinner | 14

Source: Heinz Pariser

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Markets: Chinese chrome ore imports

6 February 2013 African Mining Investor Dinner | 15

Source: Heinz Pariser

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Nkwe acquisition – update

• Shareholders approved the transaction on 2 Nov 2012

• Phase one of the acquisition complete

• Consideration

• 20 million Chrometco shares issued

• Acquired historical drill core and geological data

• Incorporated new data into the resource model

• Benefits :

• increased geological definition of the

existing chrome resource

• Increased valuation

• Ability to mine better

6 February 2013 African Mining Investor Dinner | 16

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Reserves and resources (Feb 2012)

6 February 2013 African Mining Investor Dinner | 17

Existing Rooderand indicated mineral resources (Cr2O3)

Source Unit 2013 Tonnes Grade Cr2O3 (%) 2013 Cr2O3 content

(tonnes)

Indicated

LG5, LG6,

LG7, MG2,

MG3, MG4

41 950 096 8 671 629 39.00 15 090 833 3 371 342

Inferred

LG5, LG6,

LG7, MG2,

MG3, MG4

25 650 242 nil 39.00 9 222 751 nil

Exploration

target

LG6, LG7,

MG2, MG3,

MG4, MG4A

18 957 226 51 131 623 Estimated 8 616 920 23 270 000

Total 86 557 564 59 803 252 39.00 32 930 504 26 241 342

4 PGE mineral resources (as declared by Nkwe Platinum Limited in 2011)

Source Unit Tonnes (mil) * 4E grade (g/t) 4E content (Moz)

Indicated UG2 and MR 11.90 3.80 1.50

Inferred UG2 and MR 24.80 3.80 3.00

Total 36.70 3.80 4.50

*Geological losses of 30% applied

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Value-add: the Nkwe acquisition

Chrome resource statement pre- and post- new data from Nkwe, DCM data

and limited geological work

6 February 2013 African Mining Investor Dinner | 18

8.6 8.6

41.95

51

38

19.98 13

25.65

0

10

20

30

40

50

60

70

80

90

100

Current Cr resource (Mt) Forecast data Crresource (Mt)

Current data Crresource (Mt)

Indicated (Cr) Exploration target (Cr) Inferred (Cr)

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Value-add: the Nkwe acquisition

Resource valuation pre- and post- new data from Nkwe, DCM and limited geological work

6 February 2013 African Mining Investor Dinner | 19

174 174

849

70

138

12

9

5

117

117

0

200

400

600

800

1 000

1 200

Existing valuation:R186m

Oldest value with Nkwedata: R370m

Newest value with alldata: R1 109m

Indicated (Cr) Inferred (Cr) Exploration target (Cr) PGM

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Rooderand Map - future open cast pits

Board presentation | 20

Ptn 3

Ptn 7

Ptn 5

Ptn 6

Ptn 2

Ptn 1

Ptn 4

ROODERAND 46 JQ

N

PGM pits

chrome

pit

chrome

pits

Also see Google map

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Strategy

• Enhance resource portfolio

• acquisitions of complimentary assets (like Nkwe)

• may look at other commodities

• Exploration

• cost-effective to acquire drill data from others

(like Nkwe)

• infill drilling as required

• Mining/trading opportunities

• looking for cash generators

• stockpiles at Rooderand as prime target

• JV, tolling options possible

• align with the market

• Disposal

• for the right price

6 February 2013 African Mining Investor Dinner | 21

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Value-add: the Nkwe acquisition

• Rest of transaction in progress – mineral rights

• Benefits include:

• increased resource through the addition

of PGM and other minerals

• increased resource valuation

• operational and mining benefits:

• minerals to be mined simultaneously

• increased cost efficiency

• Consideration

• 70 million Chrometco shares to be issued

6 February 2013 African Mining Investor Dinner | 22

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Looking ahead

• New acquisition – Phase 2

• Section 102 to be completed

• PGM resource to be incorporated

• infill drilling as required

• Watching brief:

• market conditions-dependent

• look out for cash-generating projects

• evaluate niche products from

Rooderand stockpiles

• secure offtake agreement for

Rooderand production

• adjust Rooderand production accordingly

• look for potential buyers, JV partners

• look for distressed assets

6 February 2013 African Mining Investor Dinner | 23

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Investment case

• Excellent core asset (Rooderand Mine)

• in prime chrome/PGM neighbourhood

• various value-add options

• buy, sell, merge, JV

• various cash-generation options

• 70kt stockpile

• Value-add acquisition (Nkwe)

• Well placed to weather/take advantage of current

market conditions

• comfortable cash position

• low costs

• no debt

• ‘first-mover’ advantage for distressed assets

• Experienced, multi-disciplinary team

• Low cost of entry for investors

6 February 2013 African Mining Investor Dinner | 24

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Contact details

6 February 2013 African Mining Investor Dinner | 25

Contact details

Tel: +27 (11) 258 8660

Fax: +27 (86) 562 2889

Email: [email protected]

Registered office

Building 2

Country Club Estate

Woodlands Drive

Woodmead

Shareholder data

(Incorporated in the Republic of South Africa)

Registration number: 2002/026265/06

JSE share code: CMO

ISIN: AE000070249