real alpha investing in the resources sector - gic mines & money presentation (march 2015)

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Real Alpha Inves-ng In The Resources Sector Brad Ridge CEO/Principal Partner Grid Investment Capital [email protected] GRID INVESTMENT CAPITAL March 2015

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Live presentation delivered at this years Mines & Money Conference providing examples of investments Grid Investment Capital has sourced, executed, and hold as business interests in the resource/commodity related sectors. These delineated opportunities encompass highly compelling business models, quantified risk, distinct global comparative advantages, simplicity, robust margins and high cash generative capabilities, and minimal 3-5x capital return profiles over 2-3 year duration periods.

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Page 1: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

       

Real  Alpha  Inves-ng  In  The  Resources  Sector  

   

Brad  Ridge  CEO/Principal  Partner  Grid  Investment  Capital                  

[email protected]      

    GRID  INVESTMENT  CAPITAL  

March  2015  

Page 2: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

 

 Disclaimer:  The  contents  herein  are  of  a  general  nature  only  and  neither  represents,  nor  is  intended  to  represent,  any  specific  advice  on  any  par:cular  ma;er,  individual  or  corporate  objec:ves,  financial  situa:ons,  or  needs.  Grid  Investment  Capital  Pte  Ltd  does  not  provide  legal,  accoun:ng,  financial,  investment  or  taxa:on  advice.  Any  persons  receiving  the  contents  herein  should  therefore  seek  advice  based  on  their  par:cular  circumstances  from  independent  legal,  accoun:ng,  investment,  and  tax  advisors.  Grid  Investment  Capital  Pte  Ltd  makes  no  representa:ons  or  warran:es  of  any  kind,  express  or  implied  as  to  the  accuracy  of  the  informa:on,  content,  materials  or  products  enclosed.  Neither  Grid  Investment  Capital  Pte  Ltd,  nor  its  affiliates,  directors,  officers,  employees,  agents,  contractors,  successors  or  assigns  will  be  liable  for  any  damages  whatsoever  arising  out  of,  or  in  any  way  related  to,  the  use  of  this  content.  This  limita:on  applies  to  direct,  indirect,  consequen:al,  special,  puni:ve,  or  other  damages  any  third  party  may  suffer,  as  well  as  damages  for  loss  of  profits,  business  interrup:on  or  the  loss  of  data  or  informa:on.  The  contents  enclosed  is  provided  on  a    "as  is"  basis,  and  may  contain  errors,  faults,  and  inaccuracies  and  may  not  be  complete  and/or  current.  You  may  u:lise  the  contents  and  electronically  copy  and  print  hard  copies  of  parts  of  the  enclosed  solely  for  personal,  non-­‐commercial  use.  Any  other  use,  including  the  reproduc:on,  modifica:on,  distribu:on,  transmission,  republica:on,  display  or  performance,  of  the  contents  is  strictly  prohibited.  Grid  Investment  Capital  Pte  Ltd  is  registered  in  Singapore  (Company  #201110078C)  at  133  Cecil  Street,  #18-­‐02  Singapore  069535.  

GRID  INVESTMENT  CAPITAL  

Page 3: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

  Singapore  based  Principal  investor  

  Global  co-­‐investor  partners      

  Investment  Profile  

  Private  Equity,  Listed  Markets    Minimum  3-­‐5x  capital  return,  2-­‐3  yr.  dura:ons    Tangible  compara:ve  advantages    Quan:fiable  risk/return  profile    Liquid  capital  exit  strategy  

 Sectors  

  Commodi:es,  Infrastructure/Logis:cs    Financial  Market  Services    IT/Digital  e-­‐Commerce  

 

 Opportuni:es  

  Mul:ple  Sources    Direct  approaches,  brokers,  funds,  associates  

GRID  INVESTMENT  CAPITAL  

 Conducive  Time  Zone  

Favorable  Business  Environment  

 

Principal  Capital  Investment  Aggressive  Return  Targets  Short-­‐Med  Term  Dura-ons  Pragma-c  Risk  Approach  

Demonstrated  Track  Record  

Elevated  Deal  Flow  High  Watermarks  

Few  Executed  Investments  

 

Diversified  Knowledge    Leading  Global  Experience  

Dis-nct  Compara-ve  Advantage  

Page 4: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

 

What Do We Think

About When Investing?

Page 5: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

 

Despite GFC Reforms, The World

Is Still A Scary Place!

GRID  INVESTMENT  CAPITAL  

Page 6: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

40%  in  7  Years!  

McKinsey  

Page 7: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

McKinsey  

Page 8: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

       

    GRID  INVESTMENT  CAPITAL  

McKinsey  

EU   Failed  fiscal    management,  failed  banking  

system    

Page 9: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

                         

    GRID  INVESTMENT  CAPITAL  

JAPAN   Govt  sQmulus  failure,  fiscal  blowout,    

insurmountable  debt,  exported  deflaQon    

McKinsey  

Page 10: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

Macro  Economic  ObservaQons    

   Global  debt  levels  higher  than  any  point  in  history     Unprecedented  levels  of  global  Govt  debt     Contrac:ng  private  debt  -­‐  less  investment     Low  interest  rate  environment  is  here  to  stay  

   Unless  the  debt  bubble  bursts!     China  –  Rising  non  transparent  leverage     EU  –  Deteriora:ng  growth,  failed  banking  system       Japan  –  Expor:ng  a  debt/defla:on  vortex     Falling  global  GDP  epidemic        =  Lower  commodity  prices  

GRID  INVESTMENT  CAPITAL  

Page 11: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

Staples  From  Experience    

   Humans  have  short  memories     No  one  knows  where  prices  are  going     Search  for  yield  will  drive  increased  risk    

 

GIC  Investment  Focus    

   Macro  risk  exposure  minimiza:on     Search  for  compelling  product/sector  opportuni:es     Demand,  cost,  margin,  NPAT  focus     Unique,  sustainable  stories  

GRID  INVESTMENT  CAPITAL  

Page 12: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

Page 13: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

Rising  Demand  Falling  Supply  

Cheapest  to  Deliver  High  Margin  

Clear  Route  to  Market  No  Like-­‐for-­‐Like  Global  CompeQtor    

Page 14: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

   

   GIC  ini:al  private  equity  investment  -­‐  Feb  2012     Publically  listed  -­‐  Mid  2012  (ATU:ASX)     181m  shares  fully  diluted,  50%  management     Market  capitaliza:on  circa  A$260m  ($1.45)    

 

GRID  INVESTMENT  CAPITAL  

Seed  +1700%  IPO  +625%    

 

Background    

Page 15: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

Flagship  ‘Groundhog’  Project  

B.C.  Canada  

 

The  Worlds  largest  UHG  anthracite  coal  development  project  

 

Page 16: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

Flagship  ‘Groundhog’  Project  

B.C.  Canada  

 

MulQple  Shallow  Seams  

 

Page 17: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

MulQple  leases  MulQple  mines  

800km2  

Page 18: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

220km  Road  

MulQple  routes    to  market  

Page 19: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

 

Port  Stewart    

Stewart  Bulk  Terminals    3Mtpa  port  capacity  secured  non  ‘take-­‐or-­‐

pay’  contract    

Stewart  World  Port    5Mtpa  port  capacity  under  MOU  

commencing  2016  

Page 20: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

     

   Largest  undeveloped  HG-­‐UHG  anthracite  deposit     Groundhog  1.6Bt  defined  JORC  resources     >600Mt  at  Groundhog  North  (‘GHN’)  alone     Independent  GHN  supplementary  PFS  Oct  2014  

  38  Year  mine  life    Shallow  depth,  mul:ple  thick  seams    Amiable  to  open  cut/underground  

       opera:ons    5.4Mtpa  ROM  produc:on    3.2Mtpa  sales    US$171M  max  capital  drawdown    Total  opex  costs  $86t  FOB  incl.  royal:es    Fast  tracked,  staged,  clear  route  to  market  

 

 

GRID  INVESTMENT  CAPITAL    

Scale    

Page 21: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

   

   Not  any  ‘ordinary’  coal  asset     HG  anthracite  <1%  of  known  global  coal  reserves     High  carbon  steel  feed,  graphite  subs:tute,  specialty  uses:  

GRID  INVESTMENT  CAPITAL  

  lump  coke  replacement    sintering  iron  ore  replacement    blast  furnace  injec:on  coal    recarburisers  in  electric  arc  furnaces    charge  carbon    filtra:on  media  and  ac:vated  carbon    carbon  cathodes,  anodes,  electrodes  

  lithium  ion  ba;ery  anodes    electrode  paste    synthe:c  graphite  replacement    carbon  feed  for  :          -­‐  calcium  carbide,  silicon,  phosphorous,  soda,  sodium  sulphide,  plas:cs,  urea  

 

HG  &  UHG  Anthracite  Coal    

Page 22: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

Blast  Furnace  Coke  -­‐  *$215  Foundry  Coke  -­‐  *$420  

 

*Resource  Net  Current  Market  Prices  

Anthracite  uses  in  steel  industry  

Page 23: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

Supply/  

 

GRID  INVESTMENT  CAPITAL  

Resource  Net,  Wood  Mackenzia  

HG-­‐UHG  anthracite  is  not  an  oversupply  story….  it’s  a  DEMAND  story!  

Increasing  demand  from  blue  chip  customers,  diminishing  reliable  long  term  supply  

 

Supply  and  Demand    

Page 24: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

   

   Falling  produc:on,  rising  demand    Vietnam  exports:  19Mt  2010,  6.5Mt  2014,  2Mt  est.  2015  (Currently  0)    ‘Strategic  Commodity’  status  ,  export  controls,  surface  reserve  exhaus:on    Ukraine/Russia  –  problema:c  supply  chains    Absence  of  any  long  term,  reliable,  scalable  seaborne  supplier  

 

GRID  INVESTMENT  CAPITAL    

Supply  and  Demand    

Page 25: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

       

 Most  analysts  and  investors  are  ignorant  of  global  UHG  anthracite  supply/demand  dynamics   Fail  to  recognise  the  global  scale  and  geological/geographical  uniqueness  of  Atrum’s  Groundhog  asset   Fail  to  recognise  the  value  customers  place  on  long  term,  high  grade  contract  supply    

   UHG  anthracite  markets  in  EU  trading  at  over          US$200/t,  even  within  the  current  environment     Investors  fail  to  recogise  the  significance  of  Atrum’s  recent  announcements  

 

 

GRID  INVESTMENT  CAPITAL    

Supply  and  Demand    

Page 26: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

     

   Signs  off-­‐take  marke:ng  MOUs  with  3  of  7  major  Japanese  ‘Sogo  shosha’  trading  houses  

  Sogo  shosha  houses  :  Mitsubishi,  Mitsui,  Sumitomo,  Itochu,  Marubeni,  Toyota,  Sojitz    Mul:  product  agreements  leading  to  binding  SSA  and  minority  sell  down  in  GHN  to  fund  first  mine  in  Groundhog  coalfield  

   Signs  off-­‐take  agreement  MOU  with  large  Japanese  Steel  conglomerate    

  ‘Premium  product  pricing  …  minimum  20  year  term’  

   Staged  permixng  approvals  throughout  2015    Migra:on  from  developer  to  producer,  maiden  revenues  in  2015    Small  scale  100kt  May  2015,  escala:ng  to  350kt  over  12  months    Full  ML  approval  mid  2016  

GRID  INVESTMENT  CAPITAL    

Recent  Announcements    

Page 27: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

     

   Groundhog      Mul:-­‐mine  coalfield  development    Demonstrated  customer  demand  

   GHN  Modeling    Ini:al  3Mtpa  sales  GHN    Minority  GHN  project  sell  down,  i.e.  30%    US$600M  Capex,  50%  debt  funded    Total  OPEX  costs  circa  US$85  FOB    Min  *US$50  margins  =  US$150M  profit    

         =  ATU  US$100M  equity  share    7x  mul:ple  =  US$700M  MCap    ATU  Current  MCap  @  $1.45  =  US$200M    Implied  GHN  share  price  >A$5    Discounts  mul:ple  mine  development  

“This  level  of  compe--on  from  major  trading  and  strategic  

par-es  is  rarely  witnessed,  and  reflects  the  demand  for  high  

grade/ultra  high  grade  anthracite  products  …    

Groundhog  North  is  merely  the  -p  of  the  iceberg”  

             

AFR,  March  3,  2015  

 

GIC  ValuaQon    

*  GHN  supplementary  PFS    and  current  independent  end  user  pricing  indicates  US$100  margins  currently  available      

Page 28: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

Page 29: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

       

   Tellus  Holdings  Ltd  –  Public,  unlisted  company     Incorporated  2009  NSW,  Australia     Ini:ally  focused  on  developing  Australian  assets     GIC  introduc:on  February  2013     4  months  DD  

   Including  independent  ‘Big  Brother’  confirma:on         GIC  ini:al  private  equity  investment  -­‐  July  2013     94.5m  shares  on  issue     A$52M  valua:on  

GRID  INVESTMENT  CAPITAL  

 

Background    

Page 30: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

       

   Hole  in  the  ground  with  2  revenue  streams     2nd  revenue  stream  more  lucra:ve  than  the  1st     Not  reinven:ng  the  wheel,  impor:ng  the  model     Globally  proven,  100s  of  similar  facili:es       Operated  for  decades  by  billion  $  companies  

                     Worlds  Best  PracQce  SoluQons    

GRID  INVESTMENT  CAPITAL  

 

Background    

Page 31: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL    

Unique  Business    

Page 32: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL    

OperaQng  Model    

 

Simple    

 

Safe    

 

LucraQve    

 

Proven    

Page 33: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

     

   Stable  geological  environment  –  500m  years     Impermeable  nature  of  geologies  

   Unique  ability  to  isolate  solids/liquids/gas  from  the  biosphere     Safest  place  in  the  world  to  store/dispose  of  waste  emissions       Salt  Creep  –  Self  healing  quali:es,  safety  case     Long  life  assets  –  100s  years  LOM     Tier  1  customer  demand     High  quality  commodity  assets     Reliable  long  term  supply  

 

GRID  INVESTMENT  CAPITAL    

Why  Salt/Kaolin  (Clay)?    

Page 34: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

     

   Waste  IS  a  commodity     Waste  IS  a  poten:al  resource     Australia  possesses  the  highest  waste  emissions  per  capita  of  any  country  outside  of  the  US     Reported  60m  tons  waste  annually     Reported  6.5m  tons  ‘hazardous’     Regulators  cite  waste  output  is  3-­‐10x  official  reported  figures  

   Some  target  markets  trading  at  A$1000-­‐5000t     Nowhere  in  the  world  is  waste  output  falling  in  terms  of  volume  or  price     Growing  popula:on,  urbaniza:on  

GRID  INVESTMENT  CAPITAL    

Why  Waste?    

Page 35: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

     

   Proven  safety  case  -­‐  global  recogni:on  

GRID  INVESTMENT  CAPITAL  

“Rock  salt  is  globally  recognized  to  be  a  suitable  host  rock  for  permanent  storage”  

GRS  Report  for  UNEP  –  Op-ons  for  Environmentally  Sound  Management  of  Surplus  Mercury,  2011

“Wastes  dumped  and  sealed  in  salt  rock  are  permanently  kept  away  from  the  biosphere,  and  no  subsequent  treatment  is  necessary”  Underound  Disposal  of  Hazardous  Waste  in  Germany,  A.  Ozarslan,  ISBN  

975-­‐395-­‐417-­‐4,  2001

 

The  Perfect  Storm?    

Page 36: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

     

   Increased  domes:c  bans,  fines,  license  removal  

    Interna:onal  best  prac:ce  adop:on    

GRID  INVESTMENT  CAPITAL  

 “…from  September  2010  hazardous  waste  is  banned  from  being  disposed  of  to  landfill  in  metropolitan  Adelaide  and  

all  regional  and  remote  areas  of  South  Australia”    

South  Australian  EPA  www.epa.sa.gov.au/environmental_info/waste/hazardous_waste  

 

                               Controlling  transboundary    

                     movements  of  hazardous  wastes                        and  their  disposal  

 www.basel.int  

 

The  Perfect  Storm?    

Page 37: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

     

   Permanent  removal  of  corporate/Director  liability  (IAS  37)  –  real  compara:ve  advantage  

GRID  INVESTMENT  CAPITAL  

Underwriqen  Liability  Offsets  

Insurance  underwriQng  

Facili:es  insurable  by    AAA  underwriters  

Independent  CerQficaQon  

Australian  legal  and  accoun:ng  sign  off    Permanent  removal  of  con:ngent  liabili:es  from  corporate  balance  sheets  and  directors  

PIC’s     ‘Permanent  Isola:on  Cer:ficates’  to  provide  evidence  and  assurance  to  corporate  auditors  

Permanent  Liability  Removal  

Only  domes:c  facili:es  legally  in  posi:on  to  provide  total  waste  liability  offsets  

 

The  Perfect  Storm?    

Page 38: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

 

WA  Govt  Facility  Built,  operated  by  Tellus  enviro  team  for  >20  years  Only  Class  V  waste  management  team  in  Aust  

 

 

Direct  Experience    

Page 39: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

39  

Experienced  Board  team   Exp.  mining/  regulatory    team  

Experienced  waste  management  team  

Shell,  NSW  Minerals  Council  VIC  Haz  Waste  Consult.  CommiRee  

Ex  BD  Coffey  Environmental,  IBM  

Head-­‐AMP  Capital  Investors,  CEO  Tenix  Infrast,  DUET  &  Lend  Lease  Capital    

Philip  Garling  Non  Execu]ve  Chairman  

Duncan  van  der  Merwe  Group  MD  

Ron  Sison    NED  

Noel  Davis    MD  ClayVault  WA  

Robert  Charter  GM  Sales/Marke]ng  

Dr  Nikki  Williams  NED  

Mining  (Gencor    CSM  Energy),  waste  &  infrastructure  (BOS,  Nobles)  

Ex  FD  Newalta,  Canada’s  largest  salt  cavern  waste  storage  operator  

Ex  WA  Environmental  Regulator,  Managed  only  Class  V  waste  facility  

Employee  of  EPMS,  Project  manager  at  WA  Kaolin  

Mark  Shepherd    Tellus  RockVault  NED  

John  Cook  Tellus  RockVault  Chair  Mike  Ingram  

Kaolin  –  Sandy  Ridge  PM  Ex  NSW  Chief  Mining  Engineer,  Ex  MD  Waste  Service  NSW  

Ex  MD  Coffey  WA,  managed  Australia’s  only  Class  V  waste  facility  

ü  ü   ü  

Infrastructure  development  Salt  and  kaolin  mining/sales  Heavily  regulated  waste  mgmt  

Wiltshire  Geological,  Schlumberger,  TerraSearch  

Jaime  Livesey  Project  Administrator  /Snr  Geologist  

Steve  Reece  Chandler  Technical  Advisor    

Employee  of  Golders  -­‐  managed  UK  salt  /  backfill  mine  for  15  years  

Joanna  Stewart  Priestley    Senior  HSEC  Manager  

Employee  of  MoR  MacDonald,  Hyder,  Parsons  Brinkerhoff,  PPK,  

Natasha  Alford  HSEC  Manager  and  Policy  

Employee  of  MoR  MacDonald,  Hyder,  Parsons  Brinkerhoff,  PPK,  

    GRID  INVESTMENT  CAPITAL    

Management    

ü  ü  ü  

Page 40: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

Chandler    Project  

LocaQon  120km  south  Alice  Springs,  NT  (Remote)  Amadeus  Basin  –  5B  ton  inland  sea  forma:on  Adjacent  to  exis:ng  rail,  connected  na:onally  

Geology  Rocksalt  forma:on  -­‐  Deep,  vast,  simple  750-­‐1000m  underground,  250m  thick  500  million  year  stability  

Grade   98%  pure  halite  –  high  grade  

Resource  309Mt  defined  JORC  ,  DFS  (FEL  3)  500  year  mine  life  No  fatal  flaws  

Pit  to  Port  LogisQcs  

Qube  Bulk  logis:cs  partnership  Road  to  Rail  Exis:ng  Rail  to  Darwin  Port    Warehouse/transfer  sta:ons  Direct  port  loading  

Commodity  Sales  

Only  reliable  high  grade  salt  supplier  domes:cally  Formal  wri;en  EOIs  for  mul:ples  of  annual  produc:on  (Japan  traders,  other  major  Asian  end  users)  

Approvals  Status  

Awarded  ‘Major  Project  Status’  recogniQon  –  NT  Govt  MLA  lodged  Imminent  EIS  lodgment  Extensive  community  engagement  

Project  LocaQon  

Page 41: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

 

Chandler  Project    

Page 42: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

     

GRID  INVESTMENT  CAPITAL  

 

Chandler  Economics    

Costs  Fixed  and  Floa:ng  OPEX/CAPEX/DEBT   (174.0)  

EBITDA                    (EBITDA/Rev  Margin  49%)   173.9  Deprecia:on  and  Maintenance     (21.5)  

EBIT                             152.3  Net  Interest  Expense   (0.6)  

EBT   151.8  Tax   (46.7)  

NPAT                              (NPAT/Rev  Margin  30%)   105.1  

Chandler  Financials  ($A)   Ave  Annual  

Salt  &  Minerals  (87.7%  Ex  9.8%  Do  2.5%  Mi)  

Tonnage       508k  tpa  Ave  $/ton  (Yr1  $56.1/t  =  Ex$25/t,  D  $296/t,  M  $150/t)   $109.2/t  Total  Revenue   $55.5  M  

Storage  &  Isola:on  (98%  isola:on,  2%  storage)  Tonnage     233.5k  tpa  Ave  $/ton     $1,278.1/t  Total  Revenue  (p.a.)   $298.4  M  

                         Total  Revenue   $353.9  M  

Project  Returns   Mgt  Case  

IRR  (Equity,  post  tax,  nominal)   24.8%  

NPV  (Equity,  10%  discount,  post  tax)   $410.9M  

                 DSCR   Ave  1.76X  

Project  Sources  and  Uses  of  Funds   A$M   %  

Sources  Pre-­‐development  Equity     12.5   2.7%  Development  Equity     124.1   26.8%  Storage  pre-­‐sales     95.3   20.6%  Senior  Debt   231.9   50.0%  

Sources  Total   463.8   100%  

Uses  Pre-­‐Development  CAPEX  (FEL3  DFS)   10.0   2.2%  Working  capital   0.2   0.1%  Direct  CAPEX   270.2   28.3%  Indirect  CAPEX   146.1   31.5%    DSRA/c  ini:al  funding   3.7   0.8%  Construc:on  term  interest   25.7   5.5%  Financing  fees   7.7   1.7%  

Uses  Total   463.8   100%  

Page 43: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

Project  LocaQon  Sandy  Ridge  Project  

LocaQon  

140km  south-­‐west  of  Kalgoorlie,  WA  (Remote)  Adjacent  to  WA  Govt.  Mt  Walton  IWDF  20+  years  opera:onal  experience  in  adjacent  facility  

Geology  

Kaolin  forma:on  –  Shallow  at  surface,  simple  Con:nua:on  of  well  known  Mt  Walten  geology  forma:on  30-­‐40m  thick,  overburden  2-­‐5m  

Grade  High  grade  suitable  for  ceramics,  paints,  specialty  uses  

Resource  41.3Mt  defined  JORC  ,  DFS  (FEL  3)  1475  year  mine  life  No  fatal  flaws  

Pit  to  Port  LogisQcs  

Qube  Bulk  logis:cs  partnership  Road  to  Rail  Exis:ng  Rail  to  Perth  Port    Warehouse/transfer  sta:ons  Direct  port  loading  

Commodity  Sales  

High  grade  Kaolin  in  demand  regionally  Formal  wri;en  EOIs  for  full  annual  produc:on  

Approvals  Status  

MLA  lodged  Imminent  EIS  lodgment  Extensive  community  engagement  Imminent  Major  Project  Status  expected  based  on  government  discussions  and  support  and  exis:ng  experience  next  door  

Page 44: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

 

Sandy  Ridge  Project    

Page 45: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

 

Sandy  Ridge  Economics    

                       Costs  

Fixed  and  Floa:ng  OPEX/CAPEX/DEBT   (21.3)  EBITDA                  (EBITDA/Rev  Margin  56%)   27.6  

Deprecia:on  and  Maintenance     (3.4)  EBIT   24.2  

Net  Interest  Expense   (0.2)  EBT   24.1  

Tax   (7.6)  NPAT                      (NPAT/Rev  Margin  34%)   16.4  

Uses  Pre-­‐Development  CAPEX  (FEL2  PFS)   5.1   8.2%  Working  Capital   0.2   0.4%  Direct  CAPEX   35.5   57.1%  Indirect  CAPEX   19.6   31.5%  DSRA/c  Ini:al  Funding   0.5   0.8%  Construc:on  term  interest   0.6   1.0%  Financing   0.6   1.0%  

Uses  Total   62.2   100%  

Returns   Mgt  Case  

IRR  (Equity,  post  tax,  nominal)   48.1%  

NPV  (Equity,  10%  discount,  post  tax)   $99.6  M  

                 DSCR   Ave  2.54X  

Sandy  Ridge  Financials  ($A)   Ave  (25  yrs)  

Kaolin  (2  products  50%  ceramic,  50%  paint)  

Tonnage   27.6k  tpa  Ave  $/ton    Yr  1  $293/t  =  50%  $270/t  tableware  and  50%  $315/t  paint  

$530/t  

Total  Revenue  (p.a.)    $14.6  M    Storage  &  Disposal      (80%  bulk  low  value,  20%  CH  overflow)      

Tonnage   65.7kt  pa  Ave  Price/ton  5  Yr  1  $303/t  (80%  $250/t  bulk,  20%  $515/t  CH  overflow)    

$521.9/t  

Total  Revenue  (p.a.)    $34.3  M                              Total  Revenue    $48.9  M    

Project  Sources  and  Uses  of  Funds   A$M   %  

Sources  Pre-­‐development  Equity   5.1   8.2%  Development  Equity     13.0   20.9%  Storage  pre-­‐sales     13.1   21.1%  Senior  Debt   31.0   49.8%  

Sources  Total   62.2   100%  

Page 46: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

Community  consulta:on  

Suppor:ng  jobs  (WA  TO’s)  

Suppor:ng  jobs  (NT  TO’s)  

Customers  (NT  Gov.  briefing)  Community  sponsorship  

NT  Gov.  &  Regulator  (site  visits)   TO  mee:ngs  &  site  visits  

Suppor:ng  local  business  (20+)  

 

Community  Engagement    

Page 47: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

Waste  Acceptance  Criteria   CH   SR  

Liquids  -­‐  in  barrels,  line  &  bunded  

Dry  -­‐  mul:ple  lined  and  bagged  

Nuclear  waste  (Defence,  Energy)    

Uranium  mining  waste  

Infec:ous  (Medical)  Waste  

Uncer:fied  waste  

Industry  Waste  Sources  

Oil  &  Gas    

Mining  

Heavy  Industry  /  Power  Genera:on  

Manufacturing  

Agricultural  

Government/SES  

Best  PracQce  Systems  

Cer:fied  Management  System  

Strict  acceptance  criteria  

Packaging  and  transport    criteria  

Safety  case  –  man  made  engineering    

Safety  case  –  natural  engineering  (geology)  

Insurance  bonds,  PICs  

Tellus’  cerQficaQons  and  values  

X  

X  

X  

X  

ü  ü  

ü  ü  

X  ü  X  

X  

ü  ü  ü  ü

ü  

ü

ü

üü

üü

ü

 

Strict  Acceptance/Monitoring    

Page 48: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

     

   Advanced  project  JORC  resource  DFS-­‐BFS  status     NT  Govt  ‘Major  Project  Status’  awarded  to  CH     An:cipate  WA  Govt  Major  Project  Status  for  SR     Wri;en  EOIs  for  mul:ples  of  annual  salt/kaolin  produc:on  from  large  Asian  trading  houses     Wri;en  EOIs  for  uptake  of  total  annual  waste  capacity  from  mul:na:onals/ASX100-­‐200  firms     Advanced  discussions  with  Federal/State  Govt  divisions  re  waste  capacity  

 

GRID  INVESTMENT  CAPITAL  

 

Progress    

Page 49: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

     

   Pre  development  capital  raise  opportunity     CH/SR  pilot  program  comple:on  -­‐  April  2015         Binding  take/pay  agreements  with  off-­‐takers     Binding  give/pay  agreements  with  waste  emi;ers     ML  and  IES  comple:on     ECP  &  O&M  consor:um  appointment       Investment  grade  construc:on  financing     Proceed  to  full  construc:on  phase     No  show  stoppers  

GRID  INVESTMENT  CAPITAL  

 

Next  Steps    

Page 50: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

                           Tellus    Holdings    

                           Limited  

Tellus  Chandler  Project  

Tellus    Sandy  Ridge  Project   Tellus  RockVault   Tellus    

InternaQonal  

100%   100%   100%  

50%  

IncorporaQon   Shares  1   Management  Ownership  

Shareholders   Historic  O&G  Spend  2  

Investment  by  Tellus  

Debt  

Public,  unlisted,    NSW  (2009)   86  Million   33%   128   >$18.5M   $7.7M   Zero  

 Investors  

100%  

36.4M  Shares  

AU$20M  

30%  

 (IWDF)  

AU$   Equity   %   Price   Pre  $   Post  $  

$20M   36.4M  shares   30%   $0.55c   $47M   $67M  

The  Offer    –  Tellus  Holdings  Ltd  

$10M   $7M  

AU$20M  funding  uses  1  Ordinary  Equity  fully  diluted  for  ESP  2  Includes  es:mated  value  of  all  open  file  data  from  historic  oil  and  gas  sector  spend  in  the  general  project  area  –  includes  19  holes  (41,500m)  and  15  lines  seismic  (145km)  3  Currency  in  Australian  dollars  

$3M  

 

Predevelopment  Opportunity    

 

Circa  $9m  in  Commitments  March  15  

 

Page 51: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

 

Corporate  Funding  Plans    

Pre-­‐Development  Capital  

Development    Capital   Total    Capital  

                   Sources     A$M   %   A$M   %   A$M   %    Equity   20.0   100%   137.6   27%   157.6   30%  

 Debt           262.9   52%   262.9   50%  

 Cash  flow           108.4   21%   108.4   20%  

                   Total   20.0   100%   508.9   100%   528.9   100%  

Uses   A$M   %   A$M   %   A$M   %    Chandler  pre-­‐development     (10.0)   50%            (10.0)   2%  

 Chandler  development           (416.6)   82%   (417)   79%  

 Chandler  financing,  interest  &  fees             (37.2)   7%   (37.2)   7%                      Total                   (463.8)   88%    Sandy  Ridge  pre-­‐development      (5.0)   26%       0%   (5)   1%  

 Sandy  Ridge  development      (2.0)   10%   (53.4)   10%   (55.4)   10%  

 Sandy  Ridge  financing,  interest  &  fees           (1.7)   0%   (1.7)   0%  

                 Total                   (62.2)   12%  

 Corporate  (Tellus  overheads)     (2.9)   14%                          -­‐             (2.9)   1%                    Total      (20.0)   100%            (508.9)   100%   (528.9)   100%  

Fully  Funded  

 

Page 52: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

       

   Proven  global  duel  revenue  business  model     1st  commercial  mover  regionally  

  Leveraging  million  of  dollars  of  O&G  explora:on     World  class  assets    

   Geologically/logis:cally  unique,  vast,  stable     Structurally  simple,  easy  extrac:on/processing  opera:ons     High  grade,  long  life  resources,  100s  years  LOM  

   ‘Major  Project  Status’  recogni:on     Long  term  fundamental  market  growth  trends       Scalable  export/imports  -­‐  No  volume  caps  

GRID  INVESTMENT  CAPITAL  

 

ComparaQve  Advantage    

Page 53: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

       

   Model  recognized  by  regulators  globally  as                                              ‘Worlds  Best  PracQce’       20+yrs  Govt  kudos  –  Only  Class  V  waste  operator     Socially  responsible  and  sustainable  investment     Carbon  capture,  storage,  abatement     Solar  power  development       Strong  community  support,  social  license     No  like-­‐for-­‐like  compe:tor  regionally  

GRID  INVESTMENT  CAPITAL  

 

ComparaQve  Advantage    

Page 54: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

       

   Regulatory  environment  driving  strong  uptake     Price  making  ‘game  changer’  in  waste  market     Permanent  removal  of  liabili:es  via  PIC  offsets     High  mul:na:onal,  blue  chip,  Govt  demand     Cash  flows  before  mine  project  comple:on     Sandy  Ridge  -­‐  already  fully  self  funded     Wri;en  EOIs  from  large  Infrastructure  funds,  banks,  asset  managers  to  fund  construc:on  

GRID  INVESTMENT  CAPITAL  

 

ComparaQve  Advantage    

Page 55: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

       

   This  is  an  infrastructure  asset  a;rac:ng  long  term  annuity  style  investors  i.e.  Pension  funds     Monopolis:c  status     Growing  market     High  man-­‐made/natural  barriers  to  entry     Independent  financial  modeling  demonstrates  high  EBITDA  and  NPAT  margins       Conserva:ve  Revenue,  Capex,  Opex  outlook     Significant  rera:ng  expected  in  2015  

GRID  INVESTMENT  CAPITAL  

 

ComparaQve  Advantage    

Page 56: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

   

       

   Construc:on  finance  modeling  targe:ng  A$1.50  equity  round  è  170%  upli~  from  A$0.55  pre  development  round       Significantly  undervalued  when  measured  against  listed  peers     Mul:ple  exit  op:ons  within  2  year  :me  frame    -­‐  IPO    -­‐  Trade  sale    -­‐  Strategic  sale  

GRID  INVESTMENT  CAPITAL  

 

ValuaQon    

Page 57: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

    GRID  INVESTMENT  CAPITAL  

March  2015  •  Toxfree  share  price    at  March  end  2015              •  1  Toxfree    -­‐  www.toxfree.com.au/upload_documents/presenta:ons/First%20Half%20FY15%20-­‐%20Results%20Presenta:on.pdf    •  2  Tellus  -­‐  Based  on  25  year  LOM  independent  financial  assessment  conducted  by  Corality    

(TOX.ASX)  

Listed  peer  group  comparison  –  Toxfree  

(TOX.ASX)  

Page 58: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

0%  

10%  

20%  

30%  

40%  

50%  

60%  

EBITDA  Margin   EBIT  Margin   NPAT  Margin   Dividend  Yield  

Margins  

    GRID  INVESTMENT  CAPITAL  

Page 59: Real Alpha Investing in the Resources Sector - GIC Mines & Money Presentation (March 2015)

0  

100  

200  

300  

400  

500  

600  

700  

800  

900  

1000  

0.00  

1.00  

2.00  

3.00  

4.00  

5.00  

6.00  

7.00  

8.00  

9.00  

10.00  

2009   2010   2011   2012   2013   2014   2015   2016   2017   2018   2019   2020   2021   2022   2023   2024   2025  

Market  CapitalisaQon  (AU

D  million)  

Share  Price  

MCap   Share  Price  

March  2015  

$9.41  :  TOX    equivalent  P/E  Ra:o  

(1700%  TR)  

$4.23  :  TOX  equivalent  

EBITDA  margin  (770%  TR)  

Secured  assets,  studies  update,  

approvals  progress  

NT  –  MPS,  Studies  update,  approvals  

progress  

CH  build  complete,  full  year  sales  start  

    GRID  INVESTMENT  CAPITAL  

FID,  approvals,  finance,  start  of  SR  build  

SR  build  complete,  full  year  sales  start  

We  Are  Here  

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Thank  you      

Brad  Ridge  CEO/Principal  Partner  Grid  Investment  Capital                  

[email protected]      

    GRID  INVESTMENT  CAPITAL  

March  2015  

Wood  Mackenzie,  Resource  Net,  Tellus  Holdings  Ltd,  Atrum  Coal  Ltd,  ASX,  McKinsey,  Basel  Conven:on,  UNEP,  State  EPAs,  Corality,  Toxfree  Ltd,  GRS,  IBSN  

   

*References: