Transcript Document

INDEPENDENCE GROUP NL
Sydney Mining Club Presentation
April 2005
The Past, The Present, & The Future
THE PAST
 Approximately 300,000 years ago mankind
commenced exploration for rocks with specific
characteristics to make tools.
 Mining was the 1st embryonic
science?
 Evolution of this science has
continued throughout history
and still continues.
MINING HISTORY
 Gold mining commenced approx. 8,000 years ago.
 Copper was smelted at least
6,200 years ago.
 Early exploration involved
finding alluvial deposits or
outcropping ore bodies in
stream head waters.
MINING HISTORY
 In Roman times mineral deposits were mined to
depths of up to 200m using slaves, fire and
dewatering techniques.
 Gold at this time was
valued at ~US$2,000/oz.
 The decline of the Roman
Empire coincided with the
diminishing mining
reserves and the ability to
pay the Legionnaires.
Roman dewatering wheel
Rio Tinto Mine, Spain
EXPLORATION HISTORY
 The exploration techniques developed by the
ancients were the mainstay of exploration up to the
industrial era.
 Significant advances in
exploration & exploration
technology has occurred
over the last 5 decades.
 Technological advances
still continue.
WORLD GOLD SECTOR –
PAST CONSOLIDATION .. WHAT NEXT?
WORLD BASE METAL SECTOR –
FUTURE CONSOLIDATION?
ASX 300 GOLD & BASE METAL
MINING COMPANIES – SHARE PRICE
EXECUTIVE SUMMARY
 Low cost nickel producer - Dec Qtr A$2.65/lb payable Ni.
 Expanded production profile to 9,000t Ni pa.
 Strong cash reserves and cash generation potential – Dec 2004
$23.8M cash + receivables net creditors.
 Paying fully franked dividends - 5c Dec 04, 3c Apr 05.
 Exploring for gold, nickel and copper in Australia.
 Strategy to increase shareholder returns by becoming a highly
profitable diversified mining house.
 P/E 5.1
INDEPENDENCE CORPORATE GOALS
To increase shareholder wealth by becoming a
highly profitable, mid-cap, multi commodity Australian
mining company
 Focus on share price and dividend increases.
(as opposed to market capitalisation).
 Growth through exploration and acquisition.
 Under promise, over deliver.
 Maintain a conservative balance sheet.
SHARE STRUCTURE
ASX Code - Shares
IGO
A$1.32 (01.04.05)
IGO average turnover (last 6 months) = 485,000 shares/day
Ordinary shares
Contributing shares
Unlisted options
TOTAL
107.0M
3.1M
7.4M
117.5M
Undiluted market capitalisation = $142M
ASX 300 Company
TOP TEN SHAREHOLDERS
Ordinary Shares as at 11.03.05
Equity Trustees
ANZ Nominees
Forbar Custodians
Virtual Genius
National Nominees
Queensland Investments
Westpac Custodian Nominees
Yarandi Investments
JP Morgan Nominees
RBC Global Services
6.5M
4.1M
3.5M
3.4M
3.1M
2.9M
2.6M
2.3M
2.1M
1.8M
32.3M
6.1%
3.9%
3.3%
3.2%
2.9%
2.8%
2.4%
2.1%
2.0%
1.7%
30.4%
5 British institutions on IGO register
IGO PROFITABILITY
2003/4
2004/5
1st half
Mine Revenue
A$66.7M
A$44.9M
Mine cash flow (pre tax)*
A$29.4M
A$22.2M
Group profit (after tax)
A$17.3M
A$12.5M
Earnings per share
(undiluted)
A24c
A15 c
Earnings per share
(diluted)
A18c
A12 c
Dividends (fully franked)
A5c
A3c
*
Excludes capital, depreciation, amortisation and exploration
IGO CASH
31 Dec 04
Cash:
A$12.4M
Receivables:
A$19.7M
Creditors:
(A$8.3M)
Total:
A$23.8M
Debt:
A$8.9M
LONG NICKEL MINE (100% IGO)
TARGET:
 New nickel discovery to raise production from
9,000t Ni pa to 15,000t Ni pa in bottom 3rd of nickel
production cash costs
LONG NICKEL MINE
GEOLOGICAL SETTING
WMC Production 1979-1999:
5.43M t
3.7% Ni
203,184 Ni t
IGO Production 2002-Dec04:
370,167 t
3.9 % Ni
14,557 Ni t
2004/2005 Reserves:
1.185M t
4.1 % Ni
48,300 Ni t
LONG PRODUCTION HISTORY
 Long purchase price A$15M.
 2002 – Dec 04 pre-tax free cash = $60.2M
LONG MINE PERSONNEL
 Owner operator with
108 salaried employees.
 Very experienced team.
 Turnover extremely low.
 Gain share bonus.
 Skilled personnel
waiting list.
 Only 2 LTI’s since
commencement.
2003/4 & 2004/5 PRODUCTION
2003/2004
2005 1st half
Tonnes
% Ni
Ni t
IGO Ni t
Share
168,991
114,012
4.1
6,843
4,063
4.1
4,705
2,798
Nickel mined outside or in excess of reserves:
 Dec 04 Qtr = 27% Ni t.
 Project to date = 32% Ni t.
DEC O4 Qtr PRODUCTION STATS
Long
Tonnes
% Ni
Ni t
33,923
2.6
895
Gibb South
Victor South
4,674
6.6
307
23,156
5.6
1,285
TOTAL
61,753
4.6
2,487
A$/lb Payable Ni
Payable sales revenue (incl. hedging):
6.96
Cash mining / development costs:
1.59
Milling & other cash costs:
1.06
TOTAL
2.65
Deprec. / amort. / rehab:
0.74
2004/2005 PRODUCTION BUDGET
Budget: 222,000 t @ 4.0% Ni (8,900t Ni)
2004/5 Cash costs to date A$3.10/lb
(payable nickel metal)
LONG - 5 YR MINING SCHEDULE
LONG EXPLORATION TARGETS
IGO AUSTRALIAN REGIONAL
EXPLORATION
STRATEGY: Targeting new, high profit mines by  Exploring under cover and in lightly or unexplored
terrains.
 Using empirical, conceptual targeting & new innovative
exploration technology.
 Turning ground over quickly and efficiently.
REGIONAL BUDGET: 2004/2005 - A $4M
SIGNIFICANT PROJECTS: 7 Nickel
9 Gold
1 Copper
1 Mineral Sands
INNOVATIONS – GEOPHYSICAL
SEEING DEEPER IN SALINE CONDITIONS
LOW TEMP
SQUID TEM SENSOR
MAG TEM SENSOR
Anglo American JV
INNOVATIONS - GEOCHEMISTRY
USING CHROMITES TO FIND NiS
 Chromites are a common mineral in many rock types.
 Diamond explorers collect and analyse chromites to
identify those sourced from diamond bearing intrusives.
 Independence can use this data to recognise chromites
that occur in massive nickel sulphide.
Nickel sulphide face
Chromite grains
NICKEL GEOCHEM & TEM ANOMALY
TARGET: Low cost nickel mining camp
Nickel geochemical image
Anomalous values and TEM conductor
over magnetics
NICKEL GEOCHEM & TEM ANOMALY
TARGET: Low cost nickel mining camp
Nickel geochemical image
Aeromagnetic image &
TEM anomaly
NICKEL SULPHIDE GOSSAN
Nickel sulphide gossan
Primary nickel sulphide
TROPICANA GOLD JV
TARGET: new gold camps
TROPICANA CROSS-SECTION 14320mN
FRANCIS FURNESS OPTION
TARGET: +1,000oz PVM @ +15g/t Au (UG)
MERTONDALE OPTION
TARGET: +250,000oz @ +4g/t Au (OC)
DALWALLINU PROJECT (100% IGO)
TARGET: New gold camp
Gold
Geochemistry Image
Arsenic
Geochemistry Image
Bismuth
Geochemistry Image
MT ISDELL Cu-Zn-Au (100% IGO)
TARGET: New Cu-Zn mining camp
MT ISDELL Cu-Zn-Au (100% IGO)
Zinc Geochemistry Image
Lead Geochemistry Image
Copper Geochemistry Image
Gold Geochemistry Image
MINERAL SANDS PROJECT (100% IGO)
TARGET: High-grade zircon mineral sands
MINERAL SANDS PROJECT (100% IGO)
IGO INVESTMENT CRITERIA
Acquisition / Merger Investment Tenets:
 Production cash costs in the lowest 3rd of worldwide costs.
 Long-term mine-life.
 Appropriate capital cost and cash generation
timing.
 Significant exploration upside.
MATRIX METALS LIMITED
 Independence Group is
now the largest
shareholder (18.9%).
 Potential low-cost SX/EW
Australian copper metal
producer (99.99% Cu).
 Copper oxide resources:
21Mt @ 1.1% Cu
(230,000t Cu).
 Resource - predominantly
low acid consumer.
Copper oxides
MATRIX METALS LIMITED
- A SNAPSHOT
Listed on the Australian Stock Exchange ASX code – MRX.
 Ordinary shares
Unlisted Options
575.4M
12.0M
 MRX cash as at 31.12.04
A$16.8M
 Tax losses
A$24.0M
 Market Cap as at 01.04.05
(quoted at 8.8c)
A$50.6M (undiluted)
 Matrix Enterprise value
A$28.4M (undiluted)
MT CUTHBERT SX/EW PLANT
 Proven dump leach SX/EW in-house expertise.
MATRIX METALS PROJECT
LOCATIONS & RESOURCES
 Stage 1
White Range Project
15,000 t Cu over +6 yrs.
 Stage 2
Mt Watson Project
15,000 t Cu over +6 yrs.
COPPER OXIDE
EXPLORATION UPSIDE
 Numerous untested CuO
prospects within
economic trucking
distance to White Range
and Mt Watson.
 Numerous other CuO
prospects.
 Exploration focused on
testing old workings.
 Regional exploration in its
infancy.
PRIMARY COPPER SULPHIDE
POTENTIAL
Copper sulphides
 Potential for economic primary copper
sulphide ore bodies beneath surface oxide
deposits eg.
Mt Watson:
MWRCD 130: 38m @ 2.18% Cu
(including 20m @ 3.03% Cu)
Mt McCabe:
MRXRD 001: 28m @ 2.93% Cu
(including 4m @ 7.4% Cu)
IGO CURRENT STATUS
LONG MINE
A$40M pa
EXPLORATION
A$4M budget
Exploring
for new
high-grade
Ni deposits
A$2M expl.
A$4M decline
Targeting
Ni
Au
Cu
Zn
Mn
M.S.
MATRIX ?
A$20M pa ?
Under
due diligence
LONG-TERM GROWTH STRATEGY
Targeting +A$100M profit per annum
EXPLORATION
LONG MINE
9,000t Ni pa
ACQUISITON 1
EXPLORATION
MINE 1
LONG MINE
NEW
DISCOVERY
15,000t Ni pa
ACQUISITON 2
EXPLORATION
MINE 2
MATRIX ?
ACQUISITON 3
ASX 300 GOLD & BASE METAL
MINING COMPANIES – MKT CAP
ASX 300 GOLD & BASE METAL
MINING COMPANIES – PE
ASX 300 GOLD & BASE METAL MINING
COMPANIES – EARNINGS/SHARE
ASX 300 GOLD & BASE METAL MINING
COMPANIES – SHARE PRICE/EPS
SUMMARY
 +5 year mine life with low cash costs.
 Strong cash position.
 Significant cash flow available for growth and fully
franked dividends.
 Exposure to exploration upside at Long and on regional
nickel and gold plays.
 A$6M exploration budget plus Long South decline.
 Acquisitions must be value accretive.