Finders Resources One2One Investor Presentation

Finders Resources Limited
(ASX:FND)
Proactive Investors August 2011

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2

Investment Overview (ASX:FND)
Undervalued investment opportunity with significant potential
• Market Cap >50% discount to Wetar NPV
Strong project economics, low costs, high projected cash flows
• EBITDA @ $7000/tonne copper exceeds current market
cap
High grade copper resource with low strip ratios
Significant upside potential in grade, recoveries, resources
Indonesian-based exec team with local contacts & experience
Funding progressing, banks mandated
Construction to commence Q4, full production 2013
Ojolali: highly prospective gold-silver opportunity
Copper has strong fundamentals, few near- term producers
3

Corporate Overview (ASX:FND)
Market Capitalisation ~$120m
Broker Coverage
Shareholder Register
BlackSwan
FinnCap
Helmsec
Shaw
Austock
Mark Savich
Martin Potts
John Macdonald
Vince Pisani
Anna Kassianos
Resource Capital Fund
10.2%
(11.7% diluted)
Acorn Capital Ltd 10.9%
Straits Resources Ltd 10.8%
Taurus Resources 9.7%
Lujeta Pty Ltd 5.6%
Directors/Staff
8.0%
$0.55
FND Share Price Performance Last 12 Months
$0.45
$0.35
$0.25
Supportive, expert cornerstone investors

Indonesia – Asia’s premier mining location
Active advanced projects and world class mines Au/Cu mines
Martarbe
Mt Muro
G. Pani
Toka Tindung
Lanut
Gosowon
g
Lebong
Donok
Way
Linggo
Pongkor
Awak Mas
Ojolali Gold
Silver Project Tujuh Bukit Batu
Hijau
Romang
Wetar Copper
Project
Grasberg
World class mineral province – New Mining Law 2009
5

Wetar Copper Project .
6

Wetar Copper Project - Background
Resource discovered by CSR Minerals (Russell Fountain)
Sold to Billiton who developed gold mine
• Developed existing port, road and camp infrastructure
• Chris Farmer, exploration geologist
Billiton lease ended in 2004, claimed by Finders
Less than 6km by established haul road from port
Key Finders executives have been involved with Wetar since 1980s
7

Reserves - Bankable Feasibility Study
High grade JORC mining reserves at surface
• Strip ratio 0.95
(0.5% Cu Cut-off) Category Tonnes (m) Grade % Cu
Contained
Copper (kt)
FND 95%
Kali Kuning Pit Proved 4.91 2.5 123 117
Probable 0.85 2.2 19 18
Sub-Total 5.76 2.5 142 135
Lerokis Pit Proved 2.05 2.4 49 47
Probable 0.37 2.3 9 9
Sub-Total 2.42 2.4 58 55
Combined Proved 6.96 2.5 172 163
Probable 1.22 2.2 28 27
Total 8.18 2.5 200 190
JORC Reserves support a 9.2 year mine life
8

Development Plan - recap
Demonstration Plant
Expanded Demo
Plant: 7,000 tpa
Whim Creek Plant:
25,000 tpa
Outcomes
• +2,500 t of LME Grade A
cathode sold at premium
• Leach parameters optimised
resulting in +80% Cu recovery
• All operational aspects verified
from mining to marketing
Key points
• Brownfield expansion of
existing demonstration plant
operations
• Faster route to profitable
copper production
• Takes FND to cash positive
Key Points
• Optimises mine economics
• Construction starts in parallel
• Reduces production risk
• Reduces hedging risk
Construction
Q4 2011*
EDP
Q3 2012*
Whim Ck
Q2 2013*
25,000 tpa
* Note for timing
Assumes conversions complete by Q3 2011 and project finance in place
Staged development path de-risks the transition to full-scale production
9

Wetar Layout – Kali Kuning
Main expansion:
Whim Creek plant
and leach pads
Kali Kuning Test Pit
Leach Pad
Crusher
Gold Pit
Leach Pad
EDP Expansion
Demo SX-EW Plant
Solution Ponds
Environmental Ponds
Stepwise increase in production to 25,000tpa requires waste rock platform
10

Demonstration Plant
Commercial height heaps, no scale-up issues
SX-EW technology is modular, extra capacity is derived from tanks and power
11

Wetar - Economic Overview
BFS June 2011
Ore Reserves 1
8.2 MT
Strip Ratio 0.95
Initial Mine Life
9.2 years
Ave Cu Grade 2.5%
Ave Cu Recovery 75%
Cathode Production Capacity
25,000 tpa
LoM Production
150,000 tonnes
Capital Costs (incl. $17m acc.
prov.)
Operating Cash Cost – LoM 2
US$155.4
US$1.09
Copper Price Sensitivity – Based on BFS
Flat LOM Copper Price ($/t)
Price Case Base 3 $6,000 $7,000 $8,000 $9,000 $10,000
LOM Cash Surplus (US$m) 525 295 408 518 627 737
Project NPV (US$m) 304 143 216 287 359 430
Project IRR 62% 32% 42% 51% 60% 69%
Payback Period (Years) 0.9 1.6 1.3 1.1 0.9 0.8
Notes:
1. Excludes 0.2mt of Inferred Resources within the pit shell.
2. Excludes royalty (4%), head office costs and marketing expenses (nil net of sales premium)
3. Assumes copper pricing based on the Comex forward curve as at 16 June and then reversion to a long term real price of US$2.50 / lb by 2017
Finders trades at a significant discount to NPV
12

EBITDA / Capex US$m
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Cashflow at Various Copper Prices
250
200
150
100
50
0
-50
US$10,000 / tonne
US$9,000 / tonne
US$8,000 / tonne
US$7,000 / tonne
US$6,000 / tonne
Capital Costs
FND Mkt Cap
-100
-150
Full year EBITDA exceeds current market cap at $7,000/tonne Cu
13

Sensitivity Analysis
Grades/recoveries could add $40m+ to NPV
Production +1 Yr
WACC (+/- 2%)
Opex (+/- 10%)
Capex (+/- 10%)
Fuel Price (+/- 10%)
Indonesian Rupiah (+/- 10%)
(40,000) (30,000) (20,000) (10,000) - 10,000 20,000 30,000 40,000 50,000
Upside
Downside
Project is not overly sensitive to movements in costs
14

Financing Status
Standard, Credit Suisse, Barclays mandated in July
• $138m in facilities including $20m cost overrun facility
• Require 20,000 tonnes hedging life of mine
• Targeting credit approval in Sep/Oct
Investigating a range of equity alternatives
• Mezzanine, converts, offtake-linked financing, placement and rights
issue
15

Team in Place
Dr Russell Fountain
(Chairman)
Dr Chris Farmer
(Managing Director)
Rob Thomson
(Director-Development)
James Wentworth
(Finance Director)
Bob Sowter
(Wetar General Manager)
Chris Allwood
(Project Manager)
Darren Holmes
(Projects/Commissioning)
Daniel Tarrant
(Metallurgy/Commissioning)
Greg Brown
(Contracts & Logistics)
The Demo Plant Crew
(Constructions/Operations)
Over 40 years of international experience in all aspects of mineral exploration, project feasibility and
development of mining projects. Previous senior positions include President, Phelps Dodge
Exploration Corporation; Exploration Manager, Nord Pacific Limited and Chief Geologist, CSR Minerals.
20 years of international experience, Phelps Dodge and Senior Geologist Billiton Indonesia BV. Chris
has lived in Jakarta since 1991.
Over 30 years of Australian and international mining experience including 5 Asian development projects
in the last 13 years. CEO Climax Mining Limited and Asian Mineral Resources Limited.
More than 17 years of finance and investment experience with a focus on mining and mining services in
Australia and internationally. Non-Executive Director of Mastermyne (ASX:MYE).
Civil engineer and Chartered Professional Engineer. More than 45 years experience building and
operating mines in Indonesian, Asia and Africa.
More than 30 years of multi-disciplinary projects. Recent experience includes Principal’s
Representative for Straits at Sebuku and Owners Projects Manager at Minara.
Over 10 years copper SX-EW experience, including commissioning the Lady Annie, Browns Oxide and
Leichardt plants.
Daniel has 11 years experience of copper SX-EW in a range of metallurgical and operations positions
at PPM Solutions, Birla, Lady Annie, Mt Gordon, Young Australia.
Materials and Logistics Manager for the Ambatovy Nickel Project, President Director for Linfox Logistics
in Indonesia for 7 years.
Successfully built, commissioned and operated the demonstration plant at Wetar. Highly experienced
Indonesian nationals with previous experience on major construction projects and mining operations
throughout Indonesia. Ably supported by local crew who have shown tremendous progress in the past
two years.
16

Strong Local Community Support
Community relationships with FND management extend back to
previous mining of the original gold pit by Billiton .
Completed compensation and access agreements.
Local employment priority. ~125 people (almost 100% of workable age
engaged).
Yayasan (social charity) for each village. Initial focus: foods supply,
sustainable projects, health and skills training.
17

Mine Site - Resources Upside
Meron
• Potential
0.5-1.5Mt @
1.5-3% Cu
• Gold cap potential
Au eq. 50-100k oz
Karkopang
• Strong EM
conductors under
cover sequence
Meron potential extra 1-2 years production; exploration to recommence
18

Exploration upside
South coast tenements remain under explored
Kali Kuning &
Lerokis
Meron
Potential size
0.5-1.5mt @ 1-3%
Pantai Merah
Au-barite resource
One hole in copper
Batu Duri
9 drill holes, incl.
10m @ 4.5% Cu
Ilwaki
8 drill holes in gold
cap only
25 km
Similar systems explored for gold cap by Billiton
19

Permitting
Mining Permits issued 9 June 2011
Forestry rezoning almost complete
• Will occur no later than December
Forestry permit application also lodged
Subsidiary permits also in progress
Local government see the Wetar Project as a key for regional development
20

Key Milestones *
Final Permits/Conversion
2011
: Q3
Bank Mandate : Q3 2011
Construction : Q4 2011
Expanded demo plant (7,000tpa) : Q3 2012
Main plant (25,000tpa total) : Q2 2013
• Incorporates the Whim Creek plant
* All timelines subject to permitting and financing
21

Ojolali Project – FND 72% with option
13km 2 mineral district
Sumatran Gold Belt
• Matarbe, Lebong Donok, Lebong Tandai,
Pongkor, Cibalung, Way Linggo
Jambi oxide gold – 175koz
Tambang
• High grade Au/Ag intercepts open at depth
Numerous targets
• Bulk low grade disseminated Au (Jambi N&S,
Belida,)
• Bonanza grade Au, Ag (Way Neki, Batu
Kuning, Kencur)
• High grade supergene Ag (Tambang, Jambi)
• Feeder structures at depth (Tambang, Talang
Harno)
1m oz + Au potential in established gold district
22

Jambi
175k oz Au at surface with depth potential
Leach test results encouraging
Potential seed project to underwrite further exploration
23

Beyond Wetar
FND will evaluate follow-on projects with growth potential
• Ojolali
• Pyrite roasting on Wetar – gold/silver/copper/acid
FND will seek to lever its expertise
• Massive sulphide leaching know-how
• Asian experience and presence
Management team has history of discovery and project development
24

Investment Overview (ASX:FND)
Undervalued investment opportunity with significant potential
• Market Cap>50% discount to Wetar NPV
Strong project economics, low costs, high projected cash
flows
• EBITDA @ $7000/tonne copper exceeds current market
cap
High grade copper resource with low strip ratios
Significant upside potential in grade, recoveries, resources
Indonesian-based exec team with local contacts &
experience
Funding progressing, banks mandated
Construction to commence Q4, full production 2013
Ojolali: highly prospective gold-silver opportunity
Copper has strong fundamentals, few near- term producers
25

Statements
The information in this report that relates to exploration potential, mineral resource and ore reserve estimation is the responsibility of Dr Russell
Fountain. Dr Fountain is a Director of Finders and a Fellow of the Australian Institute of Geoscientists. Dr Fountain has sufficient experience that is
relevant to the styles of mineralisation and types of deposits under consideration and to the activity that he is undertaking to qualify as Competent
Person in the 2004 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’ (JORC Code) and as a
Qualified Person as defined in the AIM Rules. He consents to the inclusion in this report of the matters based on his information in the form and context
in which they appear. All assaying of drill core samples was undertaken by the ITS laboratory in Jakarta. ITS is one of the world’s largest product and
commodity testing, inspection and certification organizations. The Jakarta laboratory is ISO 17025 accredited and employs a Laboratory Information
Management System (LIMS) for sample tracking, quality control and reporting.
26

SX-EW Process
SX-EW technology is used to produce ~22% of the world’s copper production
27

Project Layout for Full Scale Production
Future Airstrip
Camp & Port
Limestone
Quarry
Main Plant &
Operations
Expanded Demo
Plant Operations
Kali Kuning
Meron
Lerokis
1 km
28

US$ / lb Cu
Copper projects in the future
Operating costs (C3*) for new copper projects globally
4.00
3.00
2.00
BFS Wetar Project
1.00
Source: Brook Hunt
*C3 costs include royalty, depreciation, corporate overheads, funding costs (assuming 70% debt)
The Wetar project is well positioned against new production
29

Grade & Recovery Upside
Predicted 10-30% grade uplift in Breccia unit (25% KK resource)
Recoveries better in Heap 3: 80% copper recovery
Potentially an extra years production (25,000t)
A 17% increase above DFS base case LOM production
30

FORESTRY STATUS
Old Mining Area
Kali Kuning - Meron
Old Mining Area
Lerokis
Conversion Production Forest
Open Ground
Production Forest
Production Forest

Re-zoning implications
Kali Kuning and Meron deposits in open ground
Part of Lerokis requires forestry permit
• Available
‣ ~890,000t @ 3.4%Cu
• Requiring permit
Open
ground
‣ 4 hectares
‣ Not mined until 2015
‣ ~18.5kt cathode
Production forest area
Re-zoning expected in 2011, final stages of verification
32