Turning Rocks Into Money Global Resources Investing, Switzerland. November 2011 www.explorationinsights.com FORWARD LOOKING STATEMENT
Key Factors to Understanding and Profiting in the Junior Exploration Sector Today 1. Current State of the Mining and Metals Market (Production vs. Discovery) 2. Exploration and Discovery, Risk and Reward 3. Geology and Junior Explorers 4. The Discovery Curve and Due Diligence List Metal Supply, as a Function of Time, can no Longer keep up with Metal Demand, as a Function of Time! Physical, Energy and Financial limitations 0.9% projected copper production growth rate 4% projected demand growth: 8,000 tonnes/yr Rio Tinto 2010 production off 16% Planned Development vs. Capacity
One a Year Bingham Copper Mine- 18 mil tonnes Development capex >$5 billion Production to mining timeline 10 years plus Permitting and social hurdles insurmountable 16 Aging Copper Mines Account for 41% of Production Most of these deposits are over 20 years old We Need to Duplicate these 16 over next decade How? Capex over $100 billion
One a Year Carlin Trend, ~83 million ounces A dozen major gold deposits discovered over 35 years Timeline discovery to production Capex ~$30 billion Gold Quarry Global Gold Production Trend Points out Problems Global gold production declined from 2000 to 2009. ~83mil oz 2010 Important trends: 1) Declining 1 st world 2) Slowing rest of world Recent increase due to mining 20% lower grade Next slide
Gold Production vs Discoveries vs Expenditure Over $5 billion annual expenditure Discoveries falling, production rising = Gold Gap Legitimate discoveries extremely valuable That is the prize! Expenditure Current Production= One Carlin! The Gap Discoveries Very Low Odds of Discovery Success Why? ~10,000 Properties being explored today 1:1,000 Probablility of finding economic gold deposit 1:10,000 Probability of finding gold deposit >4 million ounces 70% of deposits < 1 mil oz
Good Rocks Ore Bad Rocks Waste Geology 101 (There are only 2 rocks you need to know about!) Every Geologic System Leaves a Record Why is it so tough? Time and Evolution Alteration is Ubiquitous Elevated Geochem the Norm High Sulfidation Model Poas Costa Rica
Exploration is an Inexact Science Mother Nature likes Geologists Billions of Anomalies How do you Differentiate Good from Bad? How do you Value an Anomaly? Low Sulfidation Model * Drill here, we re all Rich MAG Almaden s Ixtaca, Mexico Low Sulfidation Discovery Top of Epithermal Gold System 302m @ 1.7 g/t Gold Eq, ~60 holes to date 1,000 by 400 meter main zone 7km by 4 km system
It s Tougher on the Ground than in the Office These are complex mineral systems Subduction Zone You have to know where you are and aren t The Junior Exploration Business-- No Barrier to Entry TSX Venture Exchange All you need is a story and a Geo ~2,000 Canadian mining equities 2,110 financings in 2010, 1,428 Q3 118 IPO s in 2011 $5.3B in 2010, $5.1B Q3 25 international brokerage firms 80 Canadian brokerage firms Who is your exit strategy? President and CEO; Consolidated Moose Pasture Ltd.
Relative Value Know Where You Are on this Graph 95% of stocks that start up this slope end up with nothing of importance 12 10 8 6 4 2 0 Interpreting News Releases Speculation BUY EXPLORATION ~4 to 5 years High Risk High Potential Value SELL 1 2 years Sold to Miner 2 3 years Speculators Leave Orphan Period MINING 2 years 1 year Full Value Institutional Investment Concept Pre discovery Discovery Feasibility Development Startup Deplete Time Do Your Own Due Diligence! 1. Start Market Cap vs. Cash vs. Spend 2. Management History Are they focused? Are they financially committed? Are they right for the job? 3. Deposit Type What is the deposit type they are looking for or developing? What are its tonnes, grade, metallurgical and cost characteristics? 4. Is the target prize worth the risk?
Do Your Own Due Diligence! 5. Exploration/development Strategy Is the plan reasonable? 6. Financing and Dilution Do they have a clear idea of costs vs. goals? Will you be diluted out of a success? 7. Who Cares? Get it right from the start Turning Rocks into Money Comp two 1.7 mil oz gold deposits at $1,500 gold Gross Metal Value You choose 0.9g/t Au or 30 g/t Au? 60Mt @ 0.9g/t Au 1.8Mt @ 30 g/t Au units $/tonne $/tonne 0.9g/t $43.50 30g/t $1,445 Recovery 80% $34.80 95% $1,370 Dilution/Strip.1 $31.40.5 $685 Mine cost $1.40 $30 $100 $585 Process cost $5.00 $25 $30 $555 Mine margin $25 $555 Capex $200mil $3.30 $300 $165 Mine profit $21.70 $390 NAV 60Mt $1.3bil 1.8Mt $702mil
Take Aways 1. Good rocks vs Bad Rocks 1. Easy Entry, Easy Money, Hard Rocks 1. The Life Cycle of a Discovery, Know the Potential Value www.explorationinsights.com Reports and Video at ExplorationInsights.com Turning Rocks Into Money