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Yilgarn iron juniors poised for take off

Yilgarn iron juniors poised for take off. The Yilgarn Iron Province Western Australia's next big thing What’s Down the Track Conference Kalgoorlie – October 24, 2013 David Utting YIPA CEO www.yipa.com.au. Iron Ore - Highlights in 2012-13.

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Yilgarn iron juniors poised for take off

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  1. Yilgarn iron juniors poised for take off The Yilgarn Iron Province Western Australia's next big thing What’s Down the Track Conference Kalgoorlie – October 24, 2013 David Utting YIPA CEO www.yipa.com.au

  2. Iron Ore - Highlights in 2012-13 • Iron ore remains the State's most valuable sector of the mining industry • Accounts for $56.4 billion (73 per cent) of the mineral sector’s total sales • Although this result was 7.3 per cent lower than the 2011–12 year, increased output of 13 per cent (58 million tonnes) helped to offset weaker prices and a strong Australian dollar • In total 513 million tonnes were exported in 2012–13

  3. Iron Ore Outlook Positive Financial Review 14/10/2013 • HEALTHY PRICE - $US133 a tonne during the September quarter • WA GROWTH - WA 900 Mtpa export in 2018 (Deloittes) • CHINA DEMAND - iron ore imports up 14.7% in Sept compared with last year • CHINA GROWTH - third quarter growth forecast to be between 7.6% and 7.7%

  4. Iron Price Bounce Back • Reasons for end of September 2012 price slump • Chinese steel demand to peak in ~ 2030 • 2012 volatility been driven by destocking and restocking cycles • Seasonality not as big a factor • 2012 about China influencing price • New China government now firmly in control • China 7+% a must for new government • Today, 7% annual growth on a huge • economy requires much more iron ore • than 15% on a much smaller economy • a few years back • 8. High cost China iron mines closing

  5. Junior miners poised for action • Mindax – Recent, $52m JV with Hong Kong PMHL to take Mt Forrest to mining at 2 Mtpa • Golden West – recent approval for mining at 10 Mtpa from its 59% Fe, 130 Mt Wiluna West mine • Cazaly - completed a DFS, set to mine 4 Mtpa fromParker Range @ 55.9% Fe • Radar - Johnston Range pits up to 1 Mtpa • 1 Mindax Ltd • 2 Golden West Resources Ltd • 3 Cazaly Resources • 4 Radar Iron Ltd

  6. YIPA - A Track Record of Achievement • Fourth year of constructive engagement with government and industry • Recent Engineering Studies a WA first with seven companies sharing data, objectives and costs • Mapping the path from mining to export • Strong links with Government and Agencies inc EPSL • Engaging and giving input to port proponents, third party rail & infrastructure • Engaging with Local Communities and Shires • Engaging with KBCCI, ECCI, GIOA, AMEC and other industry bodies

  7. YIPA Membership • Cliffs Natural Resources Pty Ltd  • Mineral Resources Pty Ltd  • Mindax Ltd • Golden West Resources Ltd • Cazaly Resources • Radar Iron Ltd • Fe Ltd   • Meteoric Resources NL   • Buxton Resources • Key members representing the serious mining players • Members represent all stages through exploration to production (inc 15+ Mtpa production) • Energetic and smart, near term miners eg MDX, GWR, CAZ • Great example of a contemporary trade association

  8. Yilgarn Iron Province (YIP) • Key attributes are: • Abundant iron ore deposits • Proximity to existing infrastructure - rail, gas and road • Ports – Esperance, Kwinana, Albany, Bunbury, Geraldton, Oakajee • Proximity to a mature mining culture/logistics in the Goldfields • Concentration of iron resources geographically • Companies willing to work together through common interest

  9. Substantial Iron Endowment Cliffs export approaching 11.5 Mtpa Mineral Resources 4.4 Mtpa New miner strategy – quick/cheap DSO exploitation funding later magnetite for some CET/JORC increasing with on-going exploration

  10. Why the Yilgarn Iron Province? Infrastructure Advantages • Open access to road, rail and port facilities • Infrastructure Govt owned, Independent operators • Cheap, brownfields incremental infrastructure upgrades • Spare rail & port upgrade capacity – two keen infrastructure proponents bidding for expansion – (Qube, Brookfield), (Asciano, MacDow, Murabeni) • Major issues for juniors in Pilbara & Mid West X X X X

  11. Building the case for mining, transport & exportKey Studies Undertaken YIPA Studies carried out by AECOM: 1 Supply Chain Study (completed October 2012) 2 Esperance Port Financial Modeling Study (completed December 2012) 3 Economic Impact Study (completed January 2013) 4Advanced HL Rail Study (completion later May 2013) 5 KPMG MUIOF State Guarantee Study (underway)

  12. Economic Impact Study Big benefits to WA (Completed January 2013) 10 Mtpa of iron ore production and logistics (not port) • State Government royalty receipts of $95 m per annum (assume US $120 per tonne) Construction stage - full-time equivalent (FTE) jobs • Direct employment for up to 1,000 workers • Indirect 3,227 workers throughout the economy Operational stage - full-time equivalent (FTE) jobs • Direct employment for up to 360 people during mine operation • 1,170 jobs elsewhere in the economy

  13. Esperance Port - Bird’s Eye View • Footprint • tight but • workable • 11.5 Mtpa • and set • for growth • Capesize • capable

  14. Esperance Port Financial Study(completed December 2012) Upgrade is Commercially Viable Modelled key parameters including: • capital intensity, • return on investment, • period of investment, • tonnage and • tariff structure and rates • Suggests ‘sweet spot’ where tariffs, fees & cost structure are acceptable for miners, proponent & EPSL • Suggests low capital ($150m) and incremental upgrade for the stage one export of ~10 Mtpa DSO • Echoes findings of YIPA’s October Supply Chain Study

  15. MUIOF State Guarantee Study underway by KPMG • THE CHICKEN & EGG PROBLEM • Miners find it difficult to fund ‘take or pay’ without a port • Port upgrade can’t happen without ‘take or pays’ • Possible Non-financial WA Government support – guarantee of well sub $150m • non-contingent liability, balance sheet neutral • Supports balance sheet, not a drag because upgrade pumps almost $1 billion into State coffers in a decade – inc $95m pa in Royalties • Non- financial mechanisms - each can be made conditional in terms of timing, quantum and fees • Guarantee for the take or pay arrangements • Guarantee for a minimum tonnage at the port • Guarantee the underlying debt facilities • Pursue Federal/WA Government funding eg $660m Oakajee money or R for R

  16. ModestEsperance Port Upgrade Enabler for new exports DSO Stage 1 - Additional ~10 – 12 Mtpa • Learning lessons of Oakajee – no gold plating • Latest Cap Cost estimated at $150m • Tariff structure economically viable for miners • No Seabed reclamation eg no 2+ year additional environmental approval process • EPSL says early 2015 completion date Upgrade Stage 1 - Infrastructure • New car dumper (bottom or rotary) • Negative pressure storage (~800,000 tonnes) • New rail and conveyer systems • Possible upgrade ship loader from 4,500 to ~ 5,500 tph (tonne per hour) currently averaging 2.5 tph

  17. Conceptual Upgrade - Stage 1 Estimate additional ~10 Mtpa

  18. Esperance Upgrade Timeline • Two very experienced consortia: • Qube Bulk Pty Ltd and Brookfield • Infrastrucure (Aust)  • Yilgarn Esperance Solution (YES) • comprised of McConnell Dowell  • Constructors (Aust), Asciano (parent company of Pacific National) and Marubeni Corporation Ltd EPSL’s stated timeline •  By Nov 22, proponents submit final bids for assessment • March 20, 2014 successful bidder selected • June 30, 2014 EPSL financial closure with winner • Financial closure with miners ????? • Design and approvals ????? • 18 month construction period • Construction of the upgrade to begin in early 2014 but EPSL expected to revise • Early 2015 completion date but EPSL expected to revise

  19. Supply Chain Study(completed October 2012) • Examined rail and port infrastructure • Concludes modest rail upgrades progressively required as tonnages increase • Modest Port upgrade of about 10 - 12 Mtpa (Stage 1) • Incremental in nature • Rail north/south: Leonora, Kalgoorlie, Esperance • Rail east/west: Koolyanobbing, West Kalgoorlie, Esperance • New signaling in places • Modest number of additional passing loops • Re-sleepering, ballast in places

  20. Portlink– Kalgoorlie Rail Infrastructure • Community consultation open & information day on October 19 • Possible intermodal terminal in Kalgoorlie (3 options) • Freight rail bypass around the town centre (3 options)

  21. Portlink Kalgoorlie Rail Options Option 1 appears cheapest/least congestion?

  22. Menzies – infrastructure surge • New light industrial area south of the town • Co-located multi user iron ore truck to rail load out facility • Truck logistics and maintenance • Depot/workshops • Mine admin facility • Road upgrades • Menzies will require additional temporary resources to cope with an upcoming increase in development activity

  23. Western Australia's next big thing • Yilgarn Iron Province: second only to the Pilbara • Success from a prudent approach: • Close co-operation between miners • Quality stakeholder engagement with local communities, infrastructure providers, port proponents, EPSL and Government • Modest capital investment • Commercial viability • Incremental approach to rail, port • Thank you! • www.yipa.com.au

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