North West Minerals ProvinceResource Economics

TEL Webinar- 19 August 2020

• Is there long term global demand for the commodities contained in NWMP resources?

• Is there enough economic resource in the NWMP to sustain a long term infrastructure investment?

• Will a change in electricity cost have a significant impact on resource development and mine production?

• Will the change in electricity cost produce economic benefits beyond the reduced costs/ increased margins of mining companies?

Key Questions

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Resource Assessment Approach

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• Process managed by Soren Consulting

• Izmin carried out resource assessment

• Neuchatel and JKTech technical input

• WoodMac global commodities outlook

• Search for NWMP all resource data –multisource, case studies, etc

• Priority for projects with resources and reserves reported (JORC compliant)

• Independent review not driven by current project ownership or LOM plan.

Data gatheringExisting NWMP Projects

Project Assessment

Undefined projects

Production & Power Demand

Data for reports and profiles

ACIL Allen NEM & Economic

Impact

Specialist Input

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Resource Assessment Approach

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• 112 Projects with resources with 39 Reserves reported

• 60 assessed too early in resource definition to include at this stage

• 62 operating or assessed as potential to host operations

• Given 30 year review period 6 projects not yet defined included – 5/10 year cycle-average size of historical discoveries

• Production profile, LOM, power demand developed for each project with BAU and then NEM price

Data gatheringExisting NWMP Projects

Project Assessment

60112

Not included

Undefined projects

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Production & Power Demand

Data for reports and profiles

ACIL Allen NEM & Economic

Impact

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Specialist Input

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$A680 Billion NWMP mineral resources (in-situ value)

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Copper, $119,318, 17%

Gold, $28,040, 4%

Cobalt, $15,408, 2%

Zinc, $214,909, 31%Lead, $103,744, 15%

Silver, $68,530, 10%

Molybdenum, $10,355, 2%

Rhenium, $15,059, 2%

Iron, $17,941, 3%

P2O5, $41,951, 6%

U3O8, $12,695, 2%

Graphite, $5,171, 1%

REE, $6,042, 1%

V2O5, $29,907, 4%

Remaining In Situ Value by Commodity (A$M)

• Total combined historic in-ground mineral

inventory exceeding A$890 Billion (US $580

Billion) (Mined + remaining resource)

• Despite over 100 years of mining, the remaining

Mineral Resources still have an in situ value of

A$680 Billion (US $455 Billion)

• The remaining resource base hosts substantial

resources of "New Economy” minerals, including

cobalt, copper, gold, graphite, molybdenum,

REE’s, rhenium, silver, vanadium and zinc.

• "New Economy” Resources have an estimated

current in situ value of A$511 Billion

Connecting NWMP to the NEM

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CopperString combined with existing NWPS infrastructure opens much of the NWQMP’s highly mineralised and prospective regions for connection to the

NEM

Power costs make up a very large portion of operating costs for mineral projects in the NWMP

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NEM ConnectionBusiness as Usual

Power Cost BAU vs NEM supply

BAU Electricity Cost Estimates

Cost Component Cost Estimate $/MWh

NEM Contract 50 - 60

Cost at CopperString Nodes <100

NEM Electricity Cost Estimates

• Outlook for gas price steady increase –tightening of supply from 2023

• Contracting – complex, multiple contracts, low flexibility, high fixed cost components

• Access to large competitive market with strong competition

• Flexibility in contracting –volume, time, duration –better match operations/projects

• Access to large scale renewable supply

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-40%

Cost Component Cost Estimate $/MWh

Site - Diesel GenSets 300 - 320

Site - Gas Fuelled Gensets 180 - 200

NWPS (Mt Isa Generation) 150 - 180

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Development and Production Outcomes

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BAU Case vs NEM Case

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Annual Production (Revenue) by CommodityBAU v NEM-Access

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NEM-Access

BAU (local gas or diesel)

$0

$2,000

$4,000

$6,000

$8,000

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S $

M)

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Copper Gold Cobalt Zinc Lead Silver Molybdenum Rhenium P2O5 Graphite REE V2O5

COPPER

COPPER

GOLD

GOLD COBALT

COBALT

ZINC

ZINC

LEAD

LEAD

SILVER

SILVER

MOLYBDENUM

MOLYBDENUM

RHENIUM

PHOSPHATE

RHENIUM

VANADIUM

VANADIUM

*based on commodity prices as at 22/02/2020

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Forecast Base Case Gross Production Value* BAU Gas Generation vs NEM Supply

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$0

$1,000

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alu

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f P

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(U

S $

M)

* gross production value is defined as the quantity of ore to be mined (before processing) multiplied by LME commodity prices as at 22/02/2020

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154Bn Mineral Production Value (Increase)

• Gross revenue estimates based on Commodity prices Feb 2020 –well below LT forecast

• Differential escalates due to the declining BAU production profile

• LT commodity price forecast will lift the incremental benefits

• Data input to ACIL Allen economic modelling to determine the net economic benefits including employment etc

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Power Demand ProfileSensitivity @ +/- 25%

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NEM connected Business as usual

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CopperString - Regional Qld’s Biggest Economic Opportunity

Summary of ACIL Allen CopperString Project economic impact analysis (forecast period to 2050):

• Assesses impacts of mineral production, electricity supply NWQ and Qld NEM (for BAU Vs NEM)

• $123.5 billion additional cumulative gross minerals production

• Brings forward 620MW additional renewable generation

• $139.5 billion aggregate (NPV @7% $41 billion) increase in Qld GSP (Real Economic Output)

• $54.3 billion aggregate (NPV @7% $17 billion) increase in Real Income (Economic Welfare) in Qld

• Approx. $6,000 per person equivalent one-off increase in average real income of every Qld

resident

• 3,561 FTE jobs sustained on average per annum out to 2050 in North and North-West Qld.

• BCR is 4.54 (at a 7% discount rate) & total project benefits are $11.9 billion

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Benefit-Cost Ratio (BCR): supports prioritisation of CopperString

• ACIL Allen economic modelling estimates the project BCR to be 4.54* & total project benefits are $11.9 billion overall*

• Sensitivity –exclude increase mine output – BCR =1.55 and total project benefit $3.1billion

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CopperString Western Sydney Airport Cross River Rail Inland Rail

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*Using a 7% discount rate

Key Findings

• Is there ongoing global demand for the commodities contained in NWMP resources? • Yes, WoodMac global outlook very strong• 74% of insitu resources are New Economy Minerals required for renewable generation, EV, new technologies

• Is there enough economic resource in the NWMP to sustain a long term infrastructure investment? • Yes, In-situ known resources A$890Billion has dropped to A$680Billion over past 100 years of mining. (-24%)• Existing and future exploration programs will continue to grow the endowment

• Will a change in electricity cost have a significant impact on resource development and mine production? • Yes, Izmin estimate +$A154Billion cumulative gross resource production over 25 years• Note - BAU forecast is not pessimistic and the NEM forecast is not blue sky and has a number of conservative assumptions

• Will the change in electricity cost produce economic benefits beyond the reduced costs/increased margins of mining companies?

• Yes, ACIL modelling showed economic benefit to Queensland is $139.5 billion increase in Qld GSP• Significant employment benefits – sustaining current levels for decades - +3650 over BAU • Bringing forward 620MW of renewables generation by increasing the load demand of the Qld NEM – closing the gap to Qld Govt

QRET target of 50% by 2030 and decarbonising mineral production from NWMP

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CopperString CorridorConnecting Queensland’s Best Natural Resources

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CopperString CorridorBest Renewable Energy Resources in Australia

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• AEMO REZ Ratings – NQ Clean Energy Hub only“Double A grade” REZ in Australia

• AEMO ISP 2020 assessed potential for 8,000MW solar and 18,600MW wind

• AEMO ISP chopped off NWQ due to lack of infrastructure - removing the best wind and solar resources

• Wind generation Capacity Factor assessed by Windlab at 45% in Hughenden region – best in Australia

• Best solar is in NWQ

• Low Carbon industries of the future will require large quantities of low cost electricity –hydrogen, minerals processing, green ammonia (fertilisers)

• CopperString Corridor Renewables endowment matches the New Economy Minerals endowment

NQ Wind Resources: Source DNV Global

CopperString Connection applications and enquiries for ~3000MW of renewable generation to date

Queensland Industrial Renewable Energy Zone “QLD I-REZ”

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Potential to create a large scale competitive industrial region based off:

• Best renewable energy resources

• Globally significant New Economy Mineral resources

• Large scale irrigated agriculture• Integrated value add processing

of primary products• Logistics connecting to rest of

Qld, Australia, World markets

• Export renewable energy to rest of Qld replacing coal generators as they close

CopperString will become NQ’s “Base Load Power Station”Powering a low carbon industrial future

Summary

• NWMP output is in decline and employment, royalties, and economic benefit will follow the decline

• A catalyst is required to maintain output until the next generation of projects are developed

• Government owns the states resources – should lead the decisions on future development

• NEM connection – can realise the potential of huge mineral and renewable energy endowment - delivering a sustainable source of prosperity for all stakeholders for many decades

• CopperString aligns strongly with government policy/strategy – Strategic Blueprint for NWMP, New Economy minerals, Powering North Qld, QRET, Northern Aust Development

• CopperString is critical infrastructure delivering for multiple stakeholders

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