Transcript Preliminary Results 2009

Amara Mining plc
Finding and Funding Gold
FINEX ’12
01 November 2012
Disclaimer
This document comprises an institutional presentation (the “Presentation”) which has been prepared by and
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Peter Brown is a “Qualified Person” within the definition of National Instrument 43-101 and has reviewed and
approved the information contained within this Presentation. Mr Brown (MIMMM) is the Group Exploration
Manager for the Company.
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Forward-Looking Statements: Information contained in this Presentation may include 'forward-looking
statements'. All statements other than statements of historical facts included herein, including, without
limitation, those regarding the Company's financial position, business strategy, plans and objectives of
management for future operations (including exploration and development plans and acquisition
opportunities) are forward-looking statements. Such forward-looking statements involve known and unknown
risks, uncertainties and other important factors which could cause the actual results, performance or
achievements of the Company or the markets and economies in which the Company operates to be materially
different from future results, performance or achievements expressed or implied by such forward-looking
statements. Factors that could cause actual results or events to differ from current expectations include,
among other things, political, regulatory and economic risks and other risks involved in the mineral exploration
industry. The Company believes that the assumptions inherent in the forward-looking statements are
reasonable; however, forward-looking statements are not guarantees of future performance and accordingly
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Any mineral resource figures referred to in this Presentation are estimates and no assurances can be given that
the indicated levels of minerals will be produced. Such estimates are expressions of judgment based on
knowledge, mining experience, analysis of drilling results and industry practices. Valid estimates made at a
given time may significantly change when new information becomes available. By their nature, mineral
resource estimates are imprecise and depend, to a certain extent, upon statistical inferences which may
ultimately prove unreliable. If such mineral resource estimates are inaccurate or are reduced in the future, this
could have a material adverse impact on the Company. Due to the uncertainty that may be attached to inferred
mineral resources, it cannot be assumed that all or any part of an Inferred mineral resource will be upgraded to
an indicated or measured mineral resource as a result of continued exploration. Mineral resources that are not
mineral reserves do not have demonstrated economic viability.
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Amara: Transitioning Into A Mid-Tier Producer
•
AIM and TSX-listed gold producer focused on West Africa
•
Portfolio of assets with strong growth pipeline
— Kalsaka/Sega, a producing mine in Burkina Faso
— Baomahun, a feasibility stage project in Sierra Leone
— Yaoure, an exploration project in Côte d’Ivoire
— Mamoudouya, an early stage exploration project in Mali
Mamoudouya
Yaoure
Kalsaka/Sega
Mamoudouya
Kalsaka/Sega
Yaoure
•
Robust balance sheet - cash and liquid assets of US$28.8 million as
at 30 June 2012
•
On track to achieve 2012 production guidance of 60-70,000 ounces
•
Focused on expansion, while minimising dilution for shareholders
•
Experienced management team with complimentary skillset
Baomahun
Group Resources*
M&I: 3.3Moz
Indicated: 2.52Moz
Inferred: 1.09Moz
www.amaramining.com
*Resources are shown as inclusive of reserves. A comprehensive breakdown
of mineral resources and mineral reserves by property, including with
respect to tonnage and grade, is included on slide 22
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What Is Gold?
•
“Dense, soft, shiny, malleable and ductile metal”
•
Long term store of value – safe haven for investors in volatile markets
•
Used in industry e.g. electronics
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$2,000
10
$1,800
9
$1,600
8
$1,400
7
$1,200
6
$1,000
5
$800
4
$600
3
$400
2
$200
1
$0
Oct-02
Oct-03
Oct-04
Oct-05
Gold ($/oz)
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Oct-06
Oct-07
Oil (rebased to Gold)
Oct-08
Oct-09
Oct-10
Oct-11
Ratio (Oil:Gold)
Price rebased to Gold ($/oz)
What Drives The Gold Price?
0
Oct-12
Ratio Gold:Oil
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West Africa: The Right Address For Finding Gold
Kalsaka/Sega
Baomahun
Yaoure
www.amaramining.com
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Yaoure Gold Project, Côte d’Ivoire
•
Yaoure example of what to look for in a gold project
•
Significant intercepts demonstrate good mineralisation
• 10m at 7.2g/t
• 20m at 3.6g/t
• 22m at 2.5g/t
•
Prime location to develop a CIL/CIP operation as:
• Good existing infrastructure
• Cheap hydro-electric power from 150 MW power station 5km from
deposit
• Existing mining permit
•
Focused on delineating initial inferred resource by late 2012
•
Yaoure
Lower hurdle rate for development due to infrastructure benefits
Yamoussoukro
Abidjan
www.amaramining.com
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Amara’s Recent Financial History
Historic Cash Position
EBITDA vs Exploration Expenditure
•
Strengthened balance sheet
•
Near term exploration is well funded – exploration is key to growth
•
Focused on minimising dilution to shareholders
www.amaramining.com
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Minimising Development Risk
Mine Development Value Curve
Source: LK Consult
•
Operating cashflow minimises development risk
•
Portfolio approach provides flexibility in terms of funding and the story told to the market
www.amaramining.com
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The Global Financial Backdrop
USA Balance of Trade – January 2000 to
January 2012
USA Fiscal Deficit – January 2000 to January
2012
Source: www.davidmanuel.com
•
Worldwide economic picture driven by imbalances
•
Gold price is likely to continue to increase but so will costs
•
Hedging does not make sense in this environment – erodes margins
www.amaramining.com
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Financing Options
Type of Financing
Pros
Cons
Equity Finance
•
No hedging
•
Dilutes existing shareholders
Project Finance
•
•
Debt can be repaid
No dilution for shareholders
•
•
Hedging erodes margins by fixing sales price
but not input costs
Hedging is therefore unpopular with investors
High Yield Debt
•
•
No dilution for shareholders
Does not require hedging
•
More expensive than project finance
Royalty
•
Does not require hedging
•
•
Long term dilution of equity returns
Often limited size available
Commodity Stream
Finance
•
Does not dilute shareholders in the
same way as equity financing
•
•
Long term embedded hedge that cannot be
eliminated
Long term dilution of equity returns
•
•
More expensive than project finance
Often involves substantial embedded hedge
Pre-Prepayment
Facility
•
www.amaramining.com
No dilution for shareholders
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Samsung Partnership: Innovative Financing
•
MOU signed with Samsung C&T Corporation on 12 September 2012 for long-term strategic partnership
•
Provides a general framework for potential long term funding of Baomahun and other development opportunities
•
Initial US$20m facility with an initial term of 22 months, with coupon satisfied by:
— Interest payments of 2.5% + US LIBOR
— Delivery of 1,929oz of fine gold per month at 2.25% discount to spot gold price
— Total cost of facility: 10% per annum
•
No hedging required
•
Unlocks the ability for larger financing and other strategic opportunities
www.amaramining.com
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Baomahun Gold Project, Sierra Leone
•
Feasibility stage gold project in central Sierra Leone
Resource
category*
Tonnes
(million)
Grade
(g/t Au)
Content
(oz Au)
•
Two outstanding elements to feasibility study:
— Open pit mine scheduling
— Resource update
Indicated
25.6
2.5
2,070,000
Inferred
9.6
2.8
860,000
•
Opportunity for low cost power from HEP within 40km of site to decouple project from long term oil price
•
Fiscal stability agreement
Government continuing
•
Significant upside potential outside of resource area – Pujehun South
and Makong South
•
negotiations
with
Sierra
Leone
Makeni
Freetown
Baomahun
Exploration camp and road upgrade work largely complete –
US$4.4m spent in H1 2012, remaining US$0.7m to be spent in H2
2012
www.amaramining.com
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Conclusion: Well Positioned To Find And Fund Gold
•
Exploration remains high risk
•
Funding the development of gold projects has become more difficult in current economic conditions
•
However…
Funding will be available for the right projects
Financing strategies without
hedging are preferred option
www.amaramining.com
Self-generated cash flow is best
form of exploration funding
Portfolio approach minimises
risk
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Amara Mining plc
Contact Us
Pete Gardner, Finance Director
Katharine Sutton, Head of Investor Relations
+44 (0)20 7398 1420
[email protected]
www.amaramining.com
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