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Trials and Tribulations of Metallurgical Development Simon Purkiss, Managing Director September 2008. Disclaimer.

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  1. Trials and Tribulations of Metallurgical DevelopmentSimon Purkiss, Managing DirectorSeptember 2008

  2. Disclaimer Certain statements in this document relate to the future, including forward looking statements relating to financial position and strategy. These forward looking statements involve known and unknown risks, uncertainties, assumptions and other important factors that could cause the actual results, performance or achievements could be materially different from future results, performance or achievements expressed or implied by such statements. Such risks, uncertainties, assumptions and other important factors include, among other things, general economic conditions, exchange rates, interest rates, the regulatory environment, structural changes in the industries in which the Company operates, competitive pressures, selling price and market demand. The forward looking statements in this document reflect views held only as of the date of this document.

  3. Overview of European Nickel • Emerging mid-tier nickel laterite producer focused on growth • Production potential of over 50,000tpa Ni within 5 years • Developers of innovative, simple, low cost heap leach process • Technology partner with BHP Billiton • Geographic diversification: Turkey, the Philippines and Albania • Attributable nickel resource base of ≈2.1 million tonnes (JORC 1Mt) • Highly experienced and strong management team • Listed on London’s AIM with good liquidity. Ticker: ENK • Ambition: To be mid-tier, low cost global Ni laterite producer 3

  4. Nickel Laterite Processing • Laterites are the future of nickel – majority of resources in the ground • Unlike sulphides, no upgrade steps • Two main processing routes • Ferronickel smelting • Reduce total orebody in kilns with coal/oil • Smelt total orebody to molten state • Production of 20-40% ferronickel product • High Pressure Acid Leach (HPAL) • Subject total orebody to high temperatures & pressure in sulphuric acid • Refiner liquor • Production of 99.99% nickel metal 4

  5. Drawbacks • Limited use of orebody • Narrow constraints of “other” ore components • Ferronickel smelting, low iron saprolites • HPAL, low magnesium limonites • Rest of ore body waste • High capital costs • $2-4bn for 40-60ktpa nickel production • Operating costs • Energy dependant 5

  6. Alternatives • Caron process • Ammonia leach, one operation • Chinese processing • Pig nickel • Blast furnaces • High coking coal, inefficient, 4-8% ferronickel, impure, polluting, high operating costs, very low capital • Ferronickel smelters • High energy consumption, 8-12% ferronickel, impure, polluting, high operating costs, low capital costs • Heap leaching 6

  7. Heap Leaching • Common in copper, gold industry • 25 years experience to very large scale • Low capital costs, plastic and pumps • Low operating costs, no moving parts • Environmentally benign • Wider range of orebody can be treated Ideal for nickel laterite treatment? 7

  8. Metallurgical Development • Metallurgical development can be expensive • Akin to geological exploration, maybe not as black and white • Can be time consuming and difficult to stage develop • Laboratory work • Large scale tests • Pilot scales tests • Full scale development • Short-cuts could be expensive • Aim is to have the Financing Bank’s engineers sign off on the process 8

  9. Development of the Çaldağ Project, Turkey • Initial laboratory tests positive • Decision to fast track into pilot scale to reduce time & development costs • New intermediary product, Mixed Hydroxide product (MHP) to further reduce full scale capital costs • Higher risk but risk assessment identified: • Major risk in scale up to full height heap • New product MHP required market development so sufficient material required • Demonstration of process to local stakeholders identified as critical 9

  10. Heap Leach pilot plant Simplified Flow Sheet 35% Ni 25% Ni 10

  11. More photos

  12. More photos

  13. Nickel extraction >75% Cobalt extraction >75% Leach rate continuing Flux dependant Leach results Black Sea Turkey Mediterranean Sea

  14. The Financing Route • Private equity funded for first 2 years • Convertible note from Standard Bank $2.5m November 2003 • IPO on AIM £15m March 2004 • Options exercised by BHP Billiton $10m 2004/2005 as milestones achieved • Bankable feasibility study completed March 2006 • Equity raising $155m May 2006 • Development started 17

  15. Technology development • From start of project to bankable equity raising was approx. 30 months • Heap leaching demonstrated to independent engineers satisfaction • Product circulated to various refineries & smelters and price structure developed • Local stakeholders satisfied with environmental aspects of the technology • Government EIA granted 18

  16. Not All Risks Can Be Factored In….. • EIA approved by Turkish Govt. in January 2006 • Equator Principles compliant ESIA in April 2006 • Forestry application in June 2006 • Furore over 1 million trees felled by developer outside Istanbul in Sept 2006 • Freeze on grant of forestry permits • Turkish Govt. election period from July – Sept 2007 • Visit by Minister Eroğlu to the site in Dec 2007 • ENK planted over 11,000 trees during 2007 • ENK’s 1st Sustainability Review published in March 2008 • Implementing ICMM Principles for Sustainable Development & Voluntary Principles on Security and Human Rights • Forestry permit application submitted May 2008 19

  17. Overview of the Çaldağ Project • 100% ownership • JORC proven reserve of 375,000t contained Ni • Production target 20,000tpa Ni, 1,200tpa Co • Life of Mine 15 years • Total nickel production 258,000t Ni • Open pit, low cost operation • LOM off-take agreement with BHP Billiton • Located close to deep water port Izmir • Awaiting forestry permit 20

  18. Establishing a Mid-Tier Nickel Producer • European Nickel is leveraging off its simple, low cost technology to become a mid-tier nickel producer • Heap leach technology applicable on equatorial laterites • Permeability & recovery in a high rainfall region • Product enhancements • Technology has enabled European Nickel to acquire strategic stakes in juniors with large resources but no metallurgical ‘know how’ • JV with Rusina Mining on Acoje deposit in Philippines • 19.3% stake in Toledo Mining • Combined, these 3 projects have potential of 90,000tpa 21

  19. Conclusion • Metallurgical development • Not for the faint hearted • Will cost more than you budgeted • Assistance from Major (BHPB) invaluable • Clear target required • Short-cuts traded off against risk and expenditure • Financing development • Continued evaluation on economics, meeting the investment grade 22

  20. The New Industry Paradigm • Costs through the roof – construction, materials, diesel, raw materials • Skills shortage – all key disciplines across all continents • Rise of NGOs in 24/7 news media world • Credit crunch 23

  21. European Nickel Investment Case • Exposure to nickel - strong fundamentals • Low cost entry into laterites – the future of nickel • Simple heap leach process offers competitive edge over other expensive laterite technologies • Geographic diversification • Large resource base and growing • Project pipeline potential of +100,000tpa Ni Focused on a Clear Vision To become a mid-tier global nickel producer, targeting 50,000tpa in five years, by leveraging off the competitive edge offered from proprietary, low cost process 24

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