dacha corporate presentation – august, 2011
DESCRIPTION
Dacha Corporate Presentation – August, 2011TRANSCRIPT
Corporate PresentationTSX-V:DSM OTCQX:DHCAF
A Forbes & Manhattan Group Company
August 2011
Forward Looking Statements
Caution regarding forward-looking information:
This presentation contains "forward looking information" within the meaning of applicable Canadian securities legislation. Forward looking information includes without limitation, statements regarding the proposed use of the proceeds of the financing, the receipt of all necessary approvals, the issue of permits, progress in development of mineral properties, future production and sales volumes, capital and mine production costs, demand and market outlook for rare earth metals, future metal prices and treatment and refining charges, the financial results of the Company, the future financial or operating performance of the Company, and terms and the availability and likelihood of future acquisitions. Generally, forward looking information can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information, including but not limited to: general business, economic, competitive, geopolitical and social uncertainties; market risks; risks related to leverage; acquisition risks; and other risks of the mining and trading industries. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws. This presentation does not constitute an offer to sell or a solicitation of an offer to sell any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.
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Capital Structure
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Capital Structure
Stock symbol:Shares issued:Fully diluted:Price (08/09/11):Market Cap:52-week High/Low:
DSM – TSX:V76.7 M100 M$0.82$62 M$1.20 -$0.32
Key Institutional Shareholders
AGF Management ~ 6%
RAB Capital ~ 4%
Management & Insiders ~ 4%
HARD ASSET VALUE
$1.96 PER SHARE
Discount to Net Assets
60%
Metals ` $143.8 millionCash $3.7 millionLiquid Securities $3.7 million
Total: $150.0 million
Rare Earth Metal Value
Investment Objectives
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Provide investment exposure to a physical inventory of Heavy Rare Earth Elements
Multi Metal strategy reduces single element exposure risk
Generate profits from trading to downstream customers
Mitigate Risk with inventory located in multiple LME approved warehouses located off-shore near end-users
Maximize inventory and trade gains through a tax effective off-shore corporate structure
Dacha’s Effective Tax rate is 2.5%
BUSINESS MODELFiscal Achievements
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193,000 kilograms of Heavy Rare Earth Oxides in Inventory at March 31
Raised $22 million of Equity at $.45 per share in April 2010 to initiate business model
Raised Net Assets from $0.38 per share to $0.64 per share at year end March 31 for 68% gain in Net Assets per share
18 trades executed in 2011 for $5.2 million in gross profit in Q3 2011
300,000 kilograms of Heavy Rare Earth Oxides Acquired in F2011 in 12 trades totaling $33.84 million
Attractive Value PropositionInventory Value at April 21, 2011
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Participate in the expected price appreciation of rare earths and strategic industrial metalsMetals Inventory Grades* Quantity Spot Price/kg Market Value Market Value
4/21/2011 (Kg) (US$) (US$millions) (C$millions) US$1.00=C$0.9537
Busan, South Korea Dysprosium Oxide 4N 15,000 $699 $10.5 $10.0
Dysprosium Fe Santoku 12,000 $653 $7.8 $7.5 Gadolinium Oxide 4N5+ 10,000 $185 $1.9 $1.8
Lutetium Oxide 4N+ 3,000 $800 $2.4 $2.3 Neodymium Oxide 4N+ 18,000 $221 $4.0 $3.8
Terbium Oxide 4N+ 14,000 $1,195 $16.7 $16.0 Yttrium Oxide 5N 10,000 $160 $1.6 $1.5
Shanghai, China
Yttrium Oxide 4N5+ 120,000 $29 $3.5 $3.3
Total: 202,000 $48.5 $46.2 *Grades: 4N = 99.99% 4N+ = 99.99+% 5N = 99.999% 4N5+ = 99.99%/99.999+%
No Exploration or Mining Risk
Attractive Value PropositionInventory Value at May 27, 2011
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Participate in the expected price appreciation of rare earths and strategic industrial metals
Metals Inventory Grades* Quantity Spot Price/kg Market Value Market Value
5/27/2011 (Kg) (US$) (US$millions) (C$millions)
US$1.00=C$0.9
773 Busan, South Korea
Dysprosium Oxide 4N 15,000 $969 $14.5 $14.2 Dysprosium Fe Santok
u 12,000 $960 $11.5 $11.3 Gadolinium Oxide 4N5+ 10,000 $185 $1.9 $1.8
Lutetium Oxide 4N+ 3,000 $1,000 $3.0 $2.9 Neodymium Oxide 4N+ 18,000 $257 $4.6 $4.5
Terbium Oxide 4N+ 14,000 $1,695 $23.7 $23.2 Yttrium Oxide 5N 10,000 $160 $1.6 $1.6
Shanghai, China
Yttrium Oxide 4N5+ 120,000 $33 $3.9 $3.8
Total: 202,000 $64.8 $63.3 *Grades: 4N = 99.99% 4N+ = 99.99+% 5N = 99.999% 4N5+ = 99.99%/99.999+%
No Exploration or Mining Risk
Attractive Value PropositionInventory Value at June 10, 2011
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Participate in the expected price appreciation of rare earths and strategic industrial metalsMetals Inventory Grades* Quantity Spot Price/kg Market Value Market Value
6/10/2011 (Kg) (US$) (US$millions) (C$millions) US$1.00=C$0.9783
Busan, South Korea Dysprosium Oxide 4N 15,000 $1,469 $22.0 $21.5
Dysprosium Fe Santoku 12,000 $1,565 $18.8 $18.4 Gadolinium Oxide 4N5+ 10,000 $255 $2.6 $2.5
Lutetium Oxide 4N+ 3,000 $1,000 $3.0 $2.9 Neodymium Oxide 4N+ 18,000 $318 $5.7 $5.6
Terbium Oxide 4N+ 14,000 $2,695 $37.7 $36.9 Yttrium Oxide 5N 10,000 $168 $1.7 $1.7
Shanghai, China
Yttrium Oxide 4N5+ 4,000 $44 $0.2 $0.2
Total: 202,000 $91.7 $89.7 *Grades: 4N = 99.99% 4N+ = 99.99+% 5N = 99.999% 4N5+ = 99.99%/99.999+%
No Exploration or Mining Risk
Metals Inventory Grades* Quantity Spot Price/kg Market Value Market Value8/5/2011 (Kg) (US$) (US$millions) (C$millions)
US$1.00=C$0.9781 Busan, South Korea
Dysprosium Oxide 4N 15,000 $2,545 $38.2 $37.4 Dysprosium Fe Santoku 12,000 $2,800 $33.6 $32.9
Gadolinium Oxide 4N5+ 10,000 $255 $2.6 $2.5 Lutetium Oxide 4N+ 3,000 $1,000 $3.0 $2.9
Neodymium Oxide 4N+ 18,000 $338 $6.1 $5.9 Terbium Oxide 4N+ 14,000 $4,353 $60.9 $59.6 Yttrium Oxide 5N 14,000 $190 $2.7 $2.6
Total: 86,000 $147.0 $143.8 *Grades: 4N = 99.99% 4N+ = 99.99+% 5N = 99.999% 4N5+ = 99.99%/99.999+%
Attractive Value PropositionInventory Value at August 5, 2011
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Participate in the expected price appreciation of rare earths and strategic industrial metals
No Exploration or Mining Risk
• Produces +95% of Global Supply• Export Tariffs of 25% imposed to drive manufacturing to China• Export Quotas reduced every year for last 5 years• China reduced Quotas for second half 2010 by 70% CHINA REDUCED QUOTAS FOR H1-2011 BY 35%CHINA INCREASED QUOTAS FOR H2-2011 BY 8.9% • China mandates consolidation of Heavy REE producers July, 2011 • Heavy REE plant closures for consolidation = further supply strain
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China - Guarding the Supply
•Monetary surcharges for Export Quotas only implemented in past year
•Additional US$100 per kg regardless of element – on top of 25% tariff
Rare Earths in the Limelight
“I certainly believe that the FOB China prices for REEs will continue to rise given the Chinese announcement of second-half quotas. There is no reason to believe there will be anything but continuing pressure on REE prices and
supplies outside of China.”
Jon Hykawy – interview in The Gold Report
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“China Cracks Down on Illegal Mining of Rare Earth Metals” – Dec 2010
“China Minmetals calls for rare earth production suspension”August 3, 2011 – Bejing (Reuters)
A Paradigm Shift in the REE Industry
Security of supply no longer just a commercial Issue
It is now a Political Issue
Rare Earth Supply Technology and Resources Transformation Act [RESTART] introduced to both the U.S House of Representatives and the U.S. Senate in 2010
Japanese Industry Minister asked Chinese Minister of Industry and Information for reductions to this year's export quota to be reversed. “We are concerned that rare-earth metals will not come to Japan in the future”.
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“ China Defends Rare Earth Quotas as inline with WTO” Bloomberg Dec 30-2010
“What Are Rare Earth Elements”
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Rare Earth Element or REE are Lanthanide series elements and are found at the bottom of the Periodic Table
15 elements plus Yttrium are classified as REE and have specific magnetic, fluorescent and chemical properties
Some are classed as Light, Medium or Heavy REE and have varying applications in laptops, LCD’s , cellular phones and hybrid vehicles.
Heavy REE such as Europium, Terbium and Dysprosium command the highest value
Rare Earth ElementsIndustry Primer
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Product Miniaturization
Lighter Weight
Energy Efficiency / Environmental Compliance
Enhanced Control and Measurement
Enhanced Performance and Functionality
Essential inputs for virtually all electronic products
No substitutes exist that have the same characteristics and provide the same benefits
Rare Earth Applications
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1kg Neodymium 15kg Lanthanum 0.1kg Dysprosium Top-selling car in Japan
Toyota PriusBiggest User of Rare Earths of any Object in the World
100 g of Dysprosium is worth approximately $160Without Dysprosium you don’t have a Prius
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The Largest User of Rare Earths Tomorrow1mt Neodymium needed for every 3 MW of wind power generated
Current State of the Rare Earth Markets
17Source: Rhodia
Supply Side Response
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MolyCorp Inc AMEX-MCP Re-opening the Mountain Pass
mine closed since 1998 with production in 2013
Primarily a Light Rare Earth Deposit with 86% of 2013 production in Cerium, Lanthanum and Neodymium
Expected to produce approximately 40,000 Tonnes per year
No production of Heavy Rare Earth Elements ( DY,Tb,Yt)
Lynas Corporation ASX-LYC Starting Mt Weld mine with
announced production in late 2011
Primarily a Light Rare Earth Deposit with 96% of 2012 production in Cerium, Lanthanum and Neodymium and Praseodymium
First production is 11,000 tonnes per year.
No production of Heavy Rare Earth Elements ( DY,Tb,Yt)
SUPPLY/Demand Gap Increasing
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IMCOA Rare Earth Oxide Forecast
SUPPLY/Demand Gap Increasing
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Rare Earth Oxide Forecast
Current State of the Rare Earth Markets
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No significant commercial stockpile exists globally
No buffer to volatile pricing or actions from China
No ability to hedge against future price increases
Limited supply-side response
Most advanced Rare Earth mining projects are 2-5 years away from delivering product to market with substantial financial and technical hurdles to overcome
Dacha has the inventory today!
Risk Minimization
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Pacorini Metals Shanghai Warehouse
Pacorini Metals LME WarehouseKorea x 2
Inventory Insured at Market Value not cost
* Pacorini Metals is owned by Glencore
Why buy DACHA?
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Rising Commodity Prices For Rare Earth’s forecasted in next 3-5 years
Only Rare Earth Company that actually owns the finished product
Focused on high value Heavy Rare Earths
Demonstrated Ability to acquire REE in China despite reduction in export quotas
No new supply of Heavy Rare Earths till 2015 at the earliest
Demonstrated Ability to trade with downstream customers
97.5% after tax exposure to gains in inventory or trading profits
Management
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Scott Moore, MBA, President & Chief Executive Officer Mr. Moore is an experienced capital markets executive with 20 years experience in the resource sector. Former CEO of Franc-Or Resources Corp and VP Corporate Development for Aberdeen International.
Former Director of Sulliden Gold and Avion Gold. He has raised in excess of $250 million in resource companies in the last 3 years.
He holds a Bachelor of Arts degree from the University of Toronto and an MBA from the Kellogg School of Management
Alastair Neill, P.Eng., MBA, Executive Vice-President Mr. Neill is the former GM, Rare Earth Division and VP Business Development for Neo-Material
Technologies (TSX:NEM) and brings over 15 years of direct Rare Earth experience. Mr Neill lives full time in Beijing.
He holds a MBA from York University and a Bachelor of Engineering in Material Science from the University of Western Ontario
Ryan Ptolemy, CFA, CGA., Chief Financial OfficerMr. Ptolemy is a certified general accountant and CFA charter holder. Mr. Ptolemy currently
serves as CFO to a number of public companies in the mining sector. From August, 2005, to September, 2009, Mr. Ptolemy was at an independent investment dealer in Toronto, most recently serving as CFO, where he was responsible for financial reporting, auditing, budgeting and internal controls.
Jihong Gan, BA, MA, Manager Contracts and Administration Ms. Gan is an accomplished administrator with a specialization in East Asian languages. Ms. Gan has a Bachelor of Arts (Major: Japanese) from the Shanghai International Studies University in
Shanghai and a Masters of Arts in East Asian Language studies from Osaka University of Foreign Studies.
A Forbes & Manhattan Group Company
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Forbes & ManhattanA Private Merchant Bank
Dacha Strategic Metals Inc.
Management Team
Scott MoorePresident and CEO
Alastair NeillExecutive VP
Ryan PtolemyCFO
Board of Directors
Scott Moore Alastair Neill
Jean-Guy Lambert
Claude Blanchet
Stan Bharti George Faught
Gen. Ron Hite
G. Scott MoorePresident and CEOTel: 416-861-5903
TSX:DSM OTCQX:DHCAF
China Office11th Floor, Kerry Centre
North Tower1 Guanghua RdBeijing, China
1000020
Toronto Office65 Queen St west, Suite 800
Toronto, OntarioM5h 2M5