Rapidly Expanding Western Australia s Iron Ore Industry. Hyundai Steel Investment & Trade Opportunities May 2010

Transcription

1 Rapidly Expanding Western Australia s Iron Ore Industry Hyundai Steel Investment & Trade Opportunities May 2010

2 Western Australia one of the world richest mineral provinces

3 World Leader in Mineral & Petroleum Production Oil & Gas Salt Nickel Pilbara Iron Ore Oil & Gas Ta Kimberley Manganese Gold Pb/Zn Bauxite Diamond Iron Ore Nickel Chromite Geraldton Ti Minerals Oil & Gas Yilgarn Gold Iron Ore Cu/Zn Perth Nickel Nickel Gold Eastern Goldfields Kalgoorlie Bauxite Ti Minerals Coal Ta Esperance

4 Selected WA Commodities relative to World Production 2009 Alumina Diam Garnet Gold Ilmenite Iron ore LNG Nickel Rutile Salt Tantal Zircon 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Western Australia Rest of Australia Rest of World

5 Mineral Export Domination Centre for Investment Growth

6 Mineral and Petroleum Shipments iron ore, the dominant sector Total value A$61 billion, almost half of national production Source: Department of Mines and Petroleu

7 Australian Mining Investment - dominance of Western Australia, especially dedicated to iron ore & LNG Source : Australian Bureau of Statistics

8 Iron Ore the world s number 1 seaborne trader & - massive growth potential

9 Million tonnes WA Iron Ore Production & Growth - inextricably linked to China s steel growth 450 Mt 2009 Shipments BHPB Rio Tinto (Hamersley Iron / Hope Downs) Robe River 54.4 FMG 34.0 Atlas 1.1 Mt Gibson Iron (hematite) Midwest Corp Murchison Metals Stage Operations suspended 1.6 Portman 8.5 Mt Gibson (Aztec) 3.4 Total 382.6Mt

10 >95% of all exports to North Asian Region Other Asia 5Mt 11Mt India? CHINA China 252Mt 558Mt TAIWAN 10Mt 12Mt SOUTH KOREA 44Mt 45Mt JAPAN 65Mt 74Mt Europe / USA 12Mt 17Mt WESTERN AUSTRALIA AUSTRALIA

11 percentage of total imports Market Penetration the Key for WA Japan China South Korea Taiwan

12 Competitive Advantage Stability for Overseas Investors: Interest in New Iron Ore Developments Mt Karara (Gindalbie) 50% Ansteel JV (+36.3% in company) Koolanooka / Weld Range (Midwest Corp) 50% Sinosteel JV; 98% Sinosteel (in company) Mt Gibson Magnetite (Asia Iron) 40% Sinom; 60% Chonqing I&S (in company) Jack Hills (Crosslands) 50% Mitsubishi; 50% Murchison Metals (19.7% Harbinger Capital,12.26% POSCO & 5.85% Sinosteel (all in MML)) Balmoral Central (Sino Iron) 80% CITIC Pacific; 20% MCC Balmoral South (Australasian Resources 6.33% Shougang Concord; 4.74% APAC, 3.5% Australian /International Minerals Minerals (Hong Kong) in company Cape Lambert (MCC) 100% MCC West Pilbara (Aquila) 50% AMCI; 8.3% AMCI and 15% Baosteel (in Aquila company) Southdown (Grange) 30% Sojitz + 70% Grange (47.2% Jiangsu Shagang, 13.8% RGL Holdings, 8.3% Pacific Minerals, 7.7% Stemcor (UK) in co.) Balla Balla (Aurox) 11.5% RockCheck Steel Robertson Range (FerrAus) 10% Western Mining Co Ltd;8.9% Penfolds; 12%CRM(all in co.) Glacier Valley (FMG) 50% Baosteel; 50% FMG (10% Leucadia; 15.7% Harbert; 5.4% Magnitogorsk; 2.5% Fengli Gp; 17.3% Hunan Valin) Mt Mason, etc (Jupiter) 5.1% Haoning Group (LSG Coal) in company Lake Giles (Macarthur Minerals) 80% Macarthur Minerals; 20% LPD Coal (plan to buy back by Macarthur) Wiluna West (Golden West Resources) 18.5% Cliffs International; 10.95% Hunan Valin Steel; 1.22%; Yijian Investment Yalgoo South (Venus) 50% Shandong BG&MR Nullagine (BC Iron) 50%BC Iron(22% G Bogolyubov(through Cons.Mins.); 16% Regent Pacific); 50% FMG ((10% Leucadia; 15.7% Harbert; 5.4% MMK; 2.5% Fengli Gp; 17.3% Hunan Valin) Mindy Mindy (Cons. Minerals) 100% G Bogolyubov

13 New Iron Ore Developments & Growth Plans / Potential 9 existing producers with expansion plans other projects at various stages of feasibility & engineering 60+ other prospects Shipments 383Mt (2009) Market Potential Mt/a? Development Aspirations (capacities) ? Mt/a?

14 The Iron Ore Sector & Overseas Investor Setting

15 Pilbara the Hub of the Major Growth Midwest / Yilgarn the Future Potential Factors in Future Growth Port & Rail Infrastructure the key issue Third party access / carriage Competition for markets Players (Pilbara) BHP Billiton & Rio Tinto FMG CITIC Pacific The Juniors 10 + many other aspiring developers (largely dependent on infrastructure access) Players (Midwest / Central Yilgarn) Mainly Chinese owned and backed developments POSCO position in Crosslands

16 $ million Spectacular Growth in Iron Ore Exploration $ millions Others BM +Ni Gold Iron Ore /801982/831985/861988/891991/921994/951997/982000/012003/042006/ Q2 04 Q3 04 Q4 04 Q1 05 Q2 05 Q3 05 Q4 05 Q1 06 Q2 06 Q3 06 Q4 06 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09

17 WA Natural Endowment: Ever Growing Sustainable Iron Ore Resource Base Marketable Quality Current High - Medium Quality Resources 16.9 Bt 14.9 Bt (Mes+Ind) (Inf) Subeconomic Resources 3.7 Bt 8.8 Bt Total >44 Bt Resource Magnetite 10.3 Bt 10.0 Bt (Mes+Ind) (Inf) 2 nd largest resource base in world

18 Potential WA Magnetite Projects: 20.3 billion tonnes & rising CITIC Pacific Balmoral Central Australasian Resources Balmoral South MCC Cape Lambert (Anketell) Fox Resources Mt Oscar Apollo Apollo Mt Oscar Gindalbie Anshan JV Karara Midwest Sinosteel Koolanooka Asia Iron (Sinom) Mt Gibson / Koolanooka S. Grange Resources (Shagang) Southdown Aurox (Tianjin Rockcheck) Balla Balla Atlas Iron Ridley Ferrowest Yalgoo (Yogi) FMG Baosteel Glacier Valley MacArthur Minerals Lake Giles Cashmere Iron Cashmere Downs Polaris Metals Mayfield Crosslands (Murchison Metals) Jack Hills Accent Magnetite Ridge

19 Investment Options On-market acquisition of company shareholding Acquisition of tenure for exploration Project Joint Venture Project acquisition through purchase Tenement farm-in, through progressive expenditure for increasing % holding Pseudo - Joint Venture through resource / deposit ownership Financing of project investment, with securities such as company shareholding

20 Stable Partnerships Government, Developers, Customers State ownership of minerals Condition setting, operating environment & policies (overall State s interest) Fostering trade & investment (State s benefit) NOT commercial or product marketing right & responsibility of private enterprise in return for royalty return to State

21 Investment Opportunities: Overseas Investor Policies WA Government welcomes overseas investment All players treated equitably domestic and overseas companies, except for Commonwealth Government s FIRB approval No explicit special inducements Local industry development encouraged through competitive tendering, contracting services & equipment supply (Australian Industry Participation - AIP) Added value processing encouraged, where economically viable Privately developed multi-user infrastructure preferred; 3 rd party access commitments Social / community benefits / expectations part of project development

22 Foreign investment in Australian companies Foreign Investment Review Board (FIRB) The FIRB examines proposals by foreign interests to undertake direct investment in Australia and makes recommendations to the Government under its foreign investment policy. Investment in existing Australian companies need to be notified where a substantial interest is greater than 15% or A$231 million (indexed) or more is being acquired. The rule from $100M to $219M (from September 2009) to $231M (indexed from January 2010) Larger investments are usually approved unless contrary to the National interest. Reflecting community concerns, specific restrictions on foreign investment are in force in more sensitive sectors such as residential real estate, banking, telecommunications, shipping, civil aviation, airports and the media. Special screening arrangements for media and government-owned sector investments. (NOT part of FIRB approval) 19.9% ownership limit in a company before seeking takeover.

23 Mining Taxation, Royalties & Charges Mining tax Normal company tax rate of 30% on profit (Australian Government) Royalties Royalties on arm s length sales value of mineral production 7.5, 5%, 2.5% ad valorem (WA Government). Royalty payments are a deduction for company income tax purposes. Production Charges A goods and services tax (GST / VAT) of 10% on certain consumables. Employment tax (WA Government) Business Transactions Duty Usually referred to as Stamp Duty (WA Government)

24 WA Iron Ore Resources (billion tonnes) Cockatoo Island Koolan Island Tallering Peak Magnetite BIF Yilgarn Geraldton Region Emerging Magnetite Kalgoorlie BIF PERTH Koolyanobbing South Coast Dem Inf Magnetite BIF Southdown Esperance Argyle Pilbara Dem Inf Marketable Kimberley Low Grade Marketable High Phos Dampier Port Hedland Low Grade Magnetite BIF Pilbara Existing Region Tom Price Newman Mid West Dem Inf Marketable Low Grade / High P min min Dem Inf 0.1 min min Central Yilgarn Dem Inf Marketable 0.1 min Low grade / High Phos 0.1

25 The Pilbara the hub of current growth & - major expansion potential

26 Cape Preston Balmoral Central Balmoral South Mesa A Dixon Is-Anketell Dampier Red Hill Dampier Pannawonica Karratha Bungaroo Creek Cape Lambert Mt Anketell Mt Oscar Solomon Nammuldi 2 Brockman 4 Tom Price Balla Balla Mulga Downs Port Hedland Port Hedland Abydos White Knight Poondano Pardoo. BHPB Newman. Cloud Break Towns Goldsworthy Rio Tinto Hamersley Iron Robe River FMG Hancock API Bonnie Creek Marillana Christmas Creek.Roy Hill Mindy Mindy Paraburdoo Channar Giles Mini Bakers S Hope 4,5,6 Newman OB18 Rail & Port Capacity Government of Western Australia & Department Access of State Development Critical Robertson Ra

27 Pilbara Railway Infrastructure (early Agreements) All are privately developed under agreements with the State. Longstanding State Agreements provide for third party carriage (BHPB & Rio Tinto) Proviso that a third party haulage service would not interfere with or unduly prejudice companies operations Since 2003, a continual rapid growth programme been promoted, resulting in 3 rd party carriage provisions being ineffective. Challenges made under Commonwealth anti competitiveness policies. Various court decisions changed on appeals. Result still not an operative effective carriage regime. Subject to further discussion with BHPB & Rio Tinto with State under the Agreements in respect to operations merger proposals.

28 Pilbara Railway Infrastructure (later Agreements & policies) Continue to be privately developed under agreements with the State. Only development to date is The Pilbara Infrastructure Agreement (FMG). The provisions relate to the Rail Access Act and Code, which provides for 3 rd party ACCESS to the railway. To satisfy National Competition Policy requirements (of developing an effective rail access regime), in 2008 the State developed a draft report outlining plans for a Pilbara Rail Access System. Still to be acted upon. Any development of new rail and port facilities will have committments to multi-user principles that are effective. All detailed commercial negotiations are between the private parties

29 New Developer Pilbara Rail Options Uncertain effective outcomes at present: State discussions with BHPB Rio Tinto under merger plans? Court decisions result in effective regime? Developers negotiate carriage / access regimes with rail owners Joint Ventures negotiated with rail owners e.g. Hope Downs, BC Iron Developers negotiate ex-mine gate sales with existing rail owners e.g. Iron Ore Holdings Mine developers plan independent rail & port developments e.g. API JV

30 Pilbara Development Aspirations & Port Needs 4 port areas of growth? Dampier Rio Tinto Cape Preston Sino Iron Australasian Mineralogy Anketell API MCC FMG Cape Lambert Rio Tinto / Robe IOH Port Hedland BHPB FMG Atlas HPPL Aurox Brockman BC Iron Ferraus MRD Moly Mines

31 Broome Port Hedland Ridley Pardoo Cape Preston Mesa A Balmoral / Sino Iron West Pilbara / API Mesa J Rio Tinto + JVs BHPB +JVs FMG Atlas + Aurox API JV Mineralogy +JVs Brockman Resources Hancock Prosp. Iron Ore Holdings Ferraus MCC Mineral Deposits Moly Mines Dampier Balmoral S Anketell Bungaroo Ck Nammuldi Brockman 2 Cape Lambert Solomon Brockman 4 W Turner Syncline Cape Lambert / MCC Tom Price Paraburdoo Eastern Ra Balla Balla North West Coastal Hwy investigator Channar Wodgina Mulga Downs Marandoo Poondano W Angelas Overview Plan BHP Yandi MAC Abydos Mt Webber Rhodes Ridge Roy Hill Yarrie Bonnie Creek Cloud Break Christmas Creek Marillana Phils Creek / IOH HI Yandi Hope Downs Newman Callawa Spinifex Ridge Railways + Private Access Roads port Rio Tinto BHPB FMG Hancock API Main Roads Private roads proposed) Slurry Pipeline proposed Ports (& proposed) OB17/18 Wheelarra Davidson Ck / Robertson Ra Meekatharra

32 New Pilbara Projects Company Project Products Commitments Australasian Resources Balmoral South Magnetite conc./pellets Actively seeking partners API (Aquila) West Pilbara Robe pisolite (CID) Baosteel +offtake MOUs with 31 mills Atlas Iron Wodgina + Abydos Hematite (Goldsworthy) Market trade Aurox (Atlas?) Balla Balla Ti magnetite conc. Finance? Offtake Rockcheck + Chengde Hancock Prospecting Roy Hill Marra Mamba (Hematite) Posco FerrAus Robertson Range Davidson Creek Marra Mamba (Hematite) Investment? Market trade BC Iron / FMG Bonnie Creek Pisolite (CID) Market trade Iron Ore Holdings Prices Creek / Iron Valley Yandi-type pisolite (CID) Initial mine gate sales to Rio Subsequent market trade? Brockman Resources Marillana Pisolite (CID) + Detritals Offtake Sinosteel Investment? MCC Cape Lambert Magnetite conc. Offtake? Atlas Ridley Magnetite conc. Sale of project FMG Solomon Pisolite (CID) Sale of project? Finance? Offtake

33 Port Company Planned Capacity (2015) Aspirations (2020) Cape Preston Citic Pacific / Australasian / Mineralogy (+48) Anketell API (Aquila) Cape Lambert Iron Ore (MCC) FMG (Solomon) 35+? Dampier / Cape Lambert ( Mt) Port Hedland ( Mt) Rio Tinto Iron Ore (Hamersley Iron) Robe River (managed by Rio) 62 * (in Rio figures) Hope Downs (integrated into Rio) 30 * (in Rio figures) BHPB FMG Atlas Iron 12? 24 Aurox 6 10 Hancock Prospecting BC Iron 5? Ferraus 3 3 Brockman Resources 17? 17 UMC (part of BHPB) 5? 5 Others (Moly Mines, PMI, et al) 1? 3? Total approx.775mt/a Mt/a

34 Pilbara Development Aspirations & Port Demand Infrastructure a key element for growth Dampier Anketell Cape Lambert Port Hedland ? Cape Preston (+48?) Pilbara Total

35 Port Hedland Planning - a jigsaw Anderson Point S.Nelson Point (Burgess Point) Nelson Point SW Creek Harriet Point Utah Point Finucane Is Inner Harbour Channel Cap Mt/a? Outer Harbour

36 Anketell Industrial Area Port Development Concept Layout Players WA Government Strategic Industrial Area Iron Ore Australian Premium Iron JV MCC FMG ( for Solomon et al)

37 Cape Preston Planned Complex Cape Preston Port Austeel (Mineralogy) Sino Iron (Stage 1 & 2) Mineralogy Potential Development Planned 40Mt/a Potential.70Mt/a Aspirations 120Mt/a? Australasian Resources Source: Courtesy Mineralogy PER (Strategem)

38 Iron ore Prospects in the Pilbara JV / Farm-in Potential Palmary / FMG Mindy Mindy Evaluation CID (pisolite) Brumby Resources Pardoo E / Mt Goldsworthy Exploration Lump & fines Ausquest Rocklea, Tom Price Exploration CID - Pisolite Mineral Resources Ltd (Polaris) N.Pilbara, Poondano Exploration Lump & fines; CID Pisolite FMG / Baosteel Glacier Valley Exploration Concentrate Jupiter Mines Brockman, Shay Gap Exploration Lump & fines Strike Resources Paulsen s East Exploration Lump & fines Iron Mountain Wyloo Exploration Lump & fines Talisman Wonmunna Exploration Lump & fines Hannans Reward Jigalong Exploration Lump & fines Atlas / Warwick Res. Jimblebar / Caramulla S Exploration Lump & fines Murchison Metals Rocklea Exploration Lump & fines Giralia Resources Western Creek Exploration CID Pisolite Flinders Mines Hamersley Exploration Lump & fines Fox Resources Mt Oscar Exploration Pellets / Concentrate Apollo Resources Apollo Mt Oscar Exploration Pellets / Concentrate Hemisphere Res Yandi S / Hamersley Exploration CID - Pisolite Dynasty Metals Warramboo, Prairie Downs Exploration CID + Lump & fines Amex Resources Mt Maguire Exploration Lump & fines

39 The Mid West & Yilgarn an emerging growth potential - rail / port, key to unlocking the potential

40 More Significant Proposed Developers in Mid West region Oakajee Port Site (promoted) Jack Hills Initial 22Mt/a Geraldton+ Oakajee (advanced stage planning) Aspirations: Mt? Mt Tallering Peak Weld Ra 35 40Mt/a Oakajee focus (earlier stage evaluation) Wiluna West Oakajee Geraldton Geraldton Port (capped?) Koolanooka Blue Hills Mungada Mt Karara Mt Gibson Cashmere Downs

41 Geraldton Port 12Mt/a Up to 65,000DWT vessels New berth developments Dedicated iron ore shiploader Major storage sheds Magnetite dewatering Berth 5 Possible Berth 6 possible Berth 7 Berth 4

42 Geraldton Port Berth 5:Dedicated iron ore shiploader Possible Berth 6 possible Berth 7 Berth 5 Berth 4

43 Mid West Ports Oakajee: looking to the future Oakajee Site

44 Yilgarn Iron Ore an emerging iron ore province Large Chinese holdings Other potential opportunities

45 Mid West, Yilgarn, South West Projects Company Project Products Commitments Mount Gibson Iron Extension Hill Lump & fines DSO Shougang Asia Iron Extension Hill Magnetite conc. Chongqing I&S Gindalbie Mt Karara Magnetite conc. Ansteel Grange Southdown Magnetite conc. Jiangsu Shagang, Sojitz Trade? Sinosteel Midwest Weld Range Lump & fines DSO Sinosteel Trade? Sinosteel Koolanooka Magnetite conc. Sinosteel trade? Murchison Metals Jack Hills Magnetite + hematite conc. POSCO offtake Mitsubishi trade? Other opportunities? Ferrowest Yalgoo Iron, magnetite conc.? Seeking partners MRL Carina Lump & fines DSO Partners / offtake? Cashmere Iron Cashmere Downs Magnetite conc. Investment opportunity Macarthur Mins. Lake Giles Magnetite conc. Investment opportunity

46 Other Potential Developments in Mid West mostly JV or Farm-in potential Iron Mountain Bona Well Exploration Magnetite? Red River Resources Feral, Wongan Hills Exploration Lump & fines IC2 Global Victory Bore Exploration Lump & fines; magn? Accent Mt Gibson Ext. Exploration Lump & fines? Royal Resources Pinyalling Hills / Plateau Exploration Lump & fines; CID? Batavia Mining Gullewa Exploration Lump & fines Giralia Beebyn (Weld Range) Exploration Lump & fines Atlas Mount Gould / Wilgie Mia Exploration Lump & fines Aurora Minerals Ryansville, Camel Hills Exploration Lump & fines Alchemy Resources Robinson Range Exploration Lump & fines PepinNini Minerals Robinson Range Exploration Lump & fines Emergent Resources Beyondie Exploration Lump & fines

47 Summary WA supply aspirations can satisfy market demand (based on moderate increased penetration rates) Reliance of overseas / consumer financing of major project capital for new players Access to infrastructure is an important consideration in assessing development potential Welcoming environment from WA Government for overseas investment Some potential for investment and or offtake from more advanced projects Significant JV or farm-in potential in exploration stage projects