BUILDING A MIDBUILDING A MID--TIER RESOURCES GROUPTIER RESOURCES GROUP
Annual General Meeting Annual General Meeting 23 May 200723 May 2007
2.
HILLGROVEStructure
3.
HILLGROVEIn South Australia
4.
KANMANTOOWhy South Australia?
One of the most prospective terrains in the world – home of the Big One – Olympic Dam
Ideal for application of latest exploration techniques
Neglected historically
Gawler is vastly under explored → major mines
New greenstone domains akin to the Eastern Goldfields of WA
Supportive State Government
Sixth most desirable region in the world to explore (Fraser Institute)
Projects located close to infrastructure
Result → SA will host Australia’s major mineral discoveries
5.
KANMANTOOProject Location
Low operating cost setting
Existing infrastructure
6.
KANMANTOOKanmantoo Copper Gold Mine 2007
7.
KANMANTOOResource Zones
8.
KANMANTOODrilling Results Highlights
Main Zone: 81m @ 1.35% cu
North East: 16m @ 4.34% cu and 0.65 g/t au
O’Neil Zone: 11m @ 2.05% cu and 6.47 g/t au
South East Zone: 22m @ 1.51% cu and 0.78 g/t au
East Zone: 20m @ 1.13% cu and 0.1 g/t au
9.
KANMANTOOMay 2007 Resource
Type Tonnes Cu Au Ag Tonnes Cu Au Ag Tonnes Cu Au Ag Cu Metal Au Cut Ag
T % g/t g/t T % g/t g/t T % g/t g/t Tonnes Ounces Ounces
Oxide 950,200 0.8 0.2 3.3 195,200 0.6 0.2 1.4 1,145,400 0.8 0.2 2.9 8,800 7,100 108,500
Transitional 1,093,000 0.8 0.2 3.1 523,000 0.7 0.2 1.7 1,616,000 0.8 0.2 2.7 12,300 9,800 138,000
Fresh 20,920,000 0.9 0.2 3.1 9,759,000 0.8 0.2 2.3 30,679,000 0.9 0.2 2.8 268,900 200,100 2,802,400
Total 22,963,000 0.9 0.2 3.1 10,477,000 0.8 0.2 2.3 33,440,000 0.9 0.2 2.8 290,000 216,900 3,048,800
Indicated Inferred Total
Kanmantoo Deposit Resource Estimate - April 2007(0.25%Cu Cutoff)
10.
KANMANTOOPotential Open Pit Development
11.
0
10
20
30
40
50
OriginalResource
12/04 Upgrade 10/06 Upgrade 4/07 Upgrade Target
28Mt at .94% cu & 0.2 g/t gold
Reso
urce
Mill
ion
Tonn
es
Inferred Tonnes Indicated Tonnes
33.44Mt at .9% cu & 0.2g/t gold
18.4Mt at 1.1% cu & 0.2 g/t gold
8.5Mt at 1.2% cu & 0.2 g/t gold
KANMANTOOResource Growth
12.
KANMANTOOPre-Feasibility Study Highlights
Mineral resources: - Copper/Gold: 28MT at 0.94% Copper and 0.20g/t Gold Contained metal: - 262,600T Copper and 177,200oz Gold Initial planning inventory: - 12,727,554MT optimized at USD$1.80 per lb copper priceBase case assumptions: - Copper price US$2.65 → US$1.63
- Exchange rate (A$/US$) A$0.70 flatOpen pit: - 1.2km long X 600m wide X 270m deep
- Ore mined 2MT PA with potential to expand to 2.5MT PA- Initial minimum mine life 6.5 years
Processing: - Conventional crushing, grinding and flotation- Mill throughput 2MT PA with potential to expand to 2.5MT PA
Average head grade: - 0.95% Copper, 0.23g/t Gold, 3.55g/t Silver Average recovery: - Copper 80% - 96% depending on ore type
- Gold 15% - 53% depending on ore type Concentrate: - 61,000 - 82,000 dry TPA
- High quality, medium copper content, low impurities Concentrate grade: - >25% Copper, 2.0 - 3.7g/t Gold, 39.3 – 61.4g/t Silver Average metal in cons: - 19,000T PA Copper
- 6,000oz PA Gold - 113,000oz PA Silver
Initial Capex: - A$98.3 Million
13.
KANMANTOOProcess Flow
14.
KANMANTOOProposed Site Layout
15.
KANMANTOOCommunities and Stakeholders
We act with integrity, transparency and honesty.We recognise, respect and support the right of Kanmantoo’s local communities to be consulted:– Committee/Focus group meetings– Community meetings– Site tours, newsletters and community webpage.
We aim to consult with major local stakeholders– Business/ community/ landowners– Adelaide Hills Regional Development Board– Mount Barker Council.
We aim to meet or exceed the highest environmental standards.We aim to engage and contribute to the life of the Kanmantoo communities– Sport– Education– Employment.
Result to build community’s understanding, mutual respect and support for Hillgrove’s work.
16.
KANMANTOOKey DFS Consultants
17.
KANMANTOOConceptual Flow Chart
2006 2007 2008 2009
Pre-feasibility
Metallurgy
Permitting
Drilling
Definitive Feasibility Study
Construction & Development
Mining
18.
KANMANTOONear-mine Exploration
Exploration and resource definition drilling is ongoing and will be particularly concentrated during the Definitive Feasibility Study (DFS) which commenced in December 2006
Recent drilling intersected high-grade zones of copper mineralisationand highlighted new zones not incorporated in the latest resource or the PFS economic model
The programme confirmed the prospectivity of the area and potential for a mineralised system of considerable size
Both the resource tonnage and the confidence level have increased
Given the substantial gaps and possible strike extensions targeted for drilling, there is excellent potential for further significant copper resource growth in and around the old open cut
19.
KANMANTOOMine CorridorIP with Drillingand Ore Blocks
20.
KANMANTOORegional Magnetics
Regional exploration has recommenced, reconnaissance of all new magnetic targets underway
12 major magnetic targets outside Mine Corridor
21.
KANMANTOOWheal Ellen Area – Magnetics
Angas Deposit on same stratigraphic contact about 10km to the south and is a discrete magnetic high
Series of magnetic targets have been identified along these targets
These targets are largely unexplored with a number of targets with historic workings
Rock chips up to 24g/t gold, 147g/t silver, 18% lead and 21% zinc
22.
ALFORD PROJECTSummary – Similarities to Tennant Creek and Rum Jungle
Past drilling has identified significant widths of copper mineralisation associated with haematite alteration including 76m at 0.95% Copper including 12m at 2.18% Copper in ALDDH001
Key similarities to Iron-Oxide-Copper-Gold (IOCG) deposits such as Olympic Dam, Prominent Hill and Carrapateena – similar granites/age, copper/uranium mineralisation present, on same linement/rim fault system, presence of basement highs
Copper mineralisation associated with a number of discrete gravity features, a key association for IOCG deposits
Uranium potential with past drilling returning excellent first pass with assay results up to 290ppm Uranium
Past exploration has defined a series of copper anomalies along the Alford Shear Zone for over 7km in strike
2007 exploration program underway which will include calcrete sampling, aircore drilling, diamond drilling and assaying of past work for uranium
23.
ALFORD PROJECTInterpreted Geology
Highlights
75m @ 0.95% copper and4m @ 290ppm uranium
ALFORD PROJECTMay Drilling
Pyrite with lesser
Chalcopyrite
Pyrite with lesser
Chalcopyrite
Brecciated and haematite altered siltstones with common pyrite and lesser chalcopyrite ALDDH008 138.6 – 143m
Strongly brecciatedand haematite altered siltstones ALDDH008 27.9 –32.5m
25.
INTERMET RESOURCESInvestment Summary
Issued capital – 40m shares and 31m @ 20c (10m expiry 30/11/07, 21m expiry 24/5/10)
Cash 31 December 2006 of $3 million
Tightly held structure – major shareholders Hillgrove 31% and Sempra Metals & Concentrates 8%
Specialist Gawler Craton explorer with over 8,500km² under title
World class team of exploration professionals – Managing Director, Gary Ferris, and Director, Dr Neville Alley
Very active 2007 programme targeting company makers
26.
Detailed understanding of the tectonic history and mineral systems on the Gawler Craton
Technical expertise – Exploration team has extensive experience on the Gawler Craton and gold systems
Uranium expertise – strategic JV’s with proven uranium explorers – UEQ, Mega Uranium
Association with Hillgrove Resources – keeps costs down and provides access to drill rigs
Concurrent multiple exploration programmes – constant stream of results due in 2007
JV’s and cash leverage ITT’s probability of success
INTERMET RESOURCESCompetitive Advantage
27.
INTERMET RESOURCESITT Project Matrix
Project Tenement No. Participants JV Commitment ($) Exploration Model
EL3466 ITT 100% • IOCG • Base metals related to Hiltaba Suite magmatic event • Orogenic gold
EL3467 ITT and Hindmarsh Resources
$600,00 over 4 years to get 80% interest in Unconformity-related uranium only
• Unconformity-related uranium • Epithermal gold and base metals
Lake Gilles
ELA 537/06 ITT 100% • Base metals related to Hiltaba Suite magmatic even • Orogenic gold
EL3314, ELA 230/06 ITT and WCP Uranium
$1.5M over 4 years to get 80% interest in uranium • Palaeochannel hosted uranium
EL3314 ITT 100% • Archaean greenstone hosted base metals, nickel and gold mineralisation
Coulta
ELA 230/06 ITT 100% • Proterozoic “Broken Hill” style base metals EL3462, EL3463 ITT and Uranium
Equities Ltd $2M over 5 years to earn 80% interest in Palaeochannel and unconformity related uranium
• Palaeochannel hosted and unconformity related uranium
EL3462, EL3463 ITT and Silver Swan Group
$500,000 over 4 years to get 80% interest in all minerals excluding palaeochannel hosted and unconformity related uranium
• IOCG • Orogenic gold • Archaean greenstone hosted base metals and gold
Cocata
ELA 690/06 ITT 100% • Unconformity related uranium • Archaean greenstone hosted base metals and gold
EL3313, EL3323, ELA 379/06
ITT and Uranium Equities Ltd
$1M over 5 years to earn 80% interest in uranium • Palaeochannel hosted uranium Watson
EL3313, EL3323 ITT and Silver Swan Group
$500,000 over 4 years to get 80% interest in all minerals excluding uranium
• Archaean hosted gold and base metals • Proterozoic intrusive hosted nickel
Southern Gawler Ranges
EL3461, EL3598, EL3612
ITT 100% • IOCG • Orogenic gold
Garford North ELA 683/06 ITT 100% • Archaean gold (similar to Challenger Gold Mine) • Archaean nickel and base metals • ?IOCG
28.
INTERMET RESOURCESLake Gilles Project – IOCG Ingredients
Important “ingredients for IOCG style deposits”
Temporal association of Cu-Au mineralisation with magmatism of the Hiltaba Suite and Gawler Range Volcanics – Lake Gilles, Southern GRV, Cocata Projects
Importance of breccias in localising mineralisation – Lake Gilles
A high crustal level of Fe-oxide and Cu-Au-U formation – Lake Gilles, S GRV Projects
A strong brittle structural control on the location of breccias and ore –LG, Cocata, SGRV
Importance of hematite accompanying higher grade Cu-Au-U mineralisation – LG, SGRV
The roles of two fluids of contrasting physico-chemical properties, one of which is meteroic in origin – LG, S GRV
29.
EASTERN STAR GAS LTDCompany Overview
Principal Activities
Eastern Star Gas Ltd (ESG) is focused on gas exploration and production from both coal seam gas (CSG) and conventional natural reservoirs in eastern Australia. ESG also owns and operates a gas fired power station.
The Company holds interests in several licences in Victoria and New South Wales and will utilise farm-outs to conduct exploration drilling.
Share price:
Market cap:
Shares on issue:
Major Shareholders:
$0.31-47
$240 million
416m ordinary shares118m restricted shares
Hillgrove Resources 19.9%Directors 18%Ingalls and Snyder 8%
Financial Snapshot
PEL 238 CSG (65%):
PEL 238 Conventional (100%):
Wilga Power Station:
Exploration Upside:
Victoria:
Key Assets
17 TCF gas resource
1.4 TCF unrisked gas in place
11 MW expandable to 40MW
PELs 6, 8, 422, 424 (Oil & Gas)
Coal Seam Gas (Brown Coal)
Key Milestone Summary
An integrated natural gas and electricity company with very large gas resource potentialAn integrated natural gas and electricity company with very large gas resource potential
Q1 - 2007:
Q3 - 2007:
Q4 - 2007:
2009:
MacGen MOU to supply 500PJ
50-100 PJ of 2P reserves certification
Expand to 200 PJ of 2P gas reserves
Expand to 600 PJ of 2Pgas reserves
30.
EASTERN STAR GAS LTDKey Assets
ESG Permit Locations – NSW and VictoriaESG Permit Locations – NSW and Victoria
NSW is a net importer of gasESG has a large resource of both coal seam (CSG) and conventionally reservoired gas in Eastern AustraliaGrowing demand for gas-fired electricity due to greenhouse concernsVery well positioned to capture a significant portion of this new gas market opportunity
Key AssetsKey Assets
PEL 238 CSG (65%) 17 TCF gas resource
PEL 238 Conventional (100%)
1.4 TCF* unrisked gas in place
Wilga Power Station 11 MW expandable to 40MW
Exploration Upside PELs 6, 8, 422, 424 (Oil & Conventional Gas)
Victoria (brown coal) Coal Seam Gas* Internal Estimate.
31.
EASTERN STAR GAS LTDMarket OpportunitiesA phased approach has provided ESG with the enviable position of being able to match field development
with market growth, and market development initiatives are in parallel with reserves certification
Immediate Opportunity Short – Medium Term
Electricity Generation
Regional Opportunities
Ultimate Objective
Existing infrastructure facilitates progressive market development with the ultimate aim of gas to Newcastle and Sydney
Ability to supply 11MW WilgaPark Power Station
BayswaterPower Station
MOU signed with MacGenfor 500PJ to BayswaterPower StationLocal base and peak period electricity generation
Regional power generation at Gunnedah, Tamworth, Dubbo etc.Narrabri, Gunnedah, Tamworth & Dubbo industrial sales and gas distribution
125km connect to existing pipelines250km to connect to MacGen
Gas requirement is 2.75 Tj/dExpansion of Wilga Park power station to 40 MWProduction test gas used to avoid flaring100+ MW peak load potential
32.
EASTERN STAR GAS LTDMacquarie Generation MOU
Macquarie Generation is Australia’s largest electricity generator producing the equivalent of 40% of NSW’selectricity requirementsMOU agreement provides ESG with a potential supply deal for:
500PJ gas for Bayswater Power Station (2,640MW capacity)Potential for an additional supply to Liddell Power Station (2,000MW capacity)
Initial gas sales target 2009/2010250km high pressure gas transmission pipeline linking Narrabri to the Bayswater power stationNSW’s first major indigenous supply of natural gas providing a 25% increase in NSW’s gas consumption120km from Newcastle providing opportunity for further gas sales (Newcastle/Sydney/Wollongong)Environmental benefits will also be significant
MOU implies significant confidence in ESG achieving 2P reserves certificationMOU implies significant confidence in ESG achieving 2P reserves certification
33.
EASTERN STAR GAS LTDGas Reserves Program
Focus on PEL 238 CSG drilling program to achieve commercial gas flow rates and reserves certification targets:
– Q3 2007: 50-100PJ– Q4 2007: 200PJ– 2009: 600PJ
Gas pipeline from Bohena project to the Wilga Park power stationFarm out exploration drilling in conventional oil and gas licenses
Bohena Seam – Gas Reserves Certification ProgramBohena Seam – Gas Reserves Certification Program Work Program in PlanWork Program in Plan
Achievement of initial 2P gas reserve certification will de-risk the PEL 238 project
Achievement of initial 2P gas reserve certification will de-risk the PEL 238 project
BibblewindiProduction Pilot
• 9 well pilot• Well interference - strong• Gas flow rates increasing• Continue dewatering• 3rd Quarter, 2007 2P gas
reserve certification target
Bohena Production Pilot• 3 wells in production• Aggregate gas flow rate –
237 mcfd and increasing• Continued dewatering
Bohena Project area covers 265kms2 within PEL 238 (9,100kms2) and contains up to 3,700PJ GIP
Core Hole Drilling Program4 core holes drilled to increase 2P gas reserve to 200 PJ by confirming:
• Coal thickness• Coal permeability• Gas content• Gas composition
34.
EASTERN STAR GAS LTDGrowth Potential Aligned to Development Strategy
2006 2007 2008 2009 2010PEL 238 Coal Seam Gas ProgramPEL 238 Coal Seam Gas Program
Confined production pilot
Confined production pilot
Unconfined production pilot
Unconfined production pilot
Gas for power stations in Tamworth, Dubbo and
Gunnedah
Gas for power stations in Tamworth, Dubbo and
Gunnedah
Sales to Newcastle /
Sydney / Wollongong
Core hole drilling program
Core hole drilling program
Dril
ling
Dril
ling
Cer
tific
atio
nC
ertif
icat
ion
Infr
astr
uctu
reIn
fras
truc
ture
Mar
ketin
gM
arke
ting
Reserves Certification (2P)Reserves Certification (2P)
100PJ 200PJ 600PJ 1200PJ
Gas pipeline to Wilga Park power station Gas pipeline to Wilga Park power station
Gas supply to Narrabri RegionGas supply to
Narrabri RegionMOU with MacGen for potential Gas Supply
MOU with MacGen for potential Gas Supply
Regional Opportunities for further gas sales
Regional Opportunities for further gas sales
250km gas pipeline to MacGen power station 250km gas pipeline to MacGen power station
Pipeline to Newcastle /
Sydney / Wollongong
Production Pilots & Core HolesProduction Pilots & Core Holes
Commence Gas sales to MacGen
Commence Gas sales to MacGen
Gas pipeline to MacGen
Gas pipeline to MacGen
Expand Wilga Park power station to 40MW capacity
Expand Wilga Park power station to 40MW capacity
35.
HGO holds a 25% fully diluted strategic stake in ESG
ESG poised to be the key player in NSW gas production
Context of lowered green house gas emissions from gas generated electricity sets scene for use in electricity generation
Improving gas prices with demise of PNG gas pipeline
Majors seeking to secure Australian onshore gas resources
ESG has 65% of Gunnedah Gas Project and unassailable operatorship
Clear value adding route: gas production → reserves → contracts →cashflows
Value to Hillgrove of ESG shares/ notes/ options– @ 45cps = $68 million– @ 50cps = $76 million– @ 70cps = $108 million
EASTERN STAR GAS LTDSummary
36.
DirectorsDean Brown, Chairman
– Former Premier of South AustraliaDavid Archer, Managing Director
– Founded Savage Resources and PowerTel LtdJohn Quirke, Non-executive Director
– Former Senator, SA Member of ParliamentRon Belz, Non-executive Director
– Certified practicing Accountant
Senior StaffIan Kirkham, Company Secretary and CFO
– Previously CFO of a number of Australian mining companiesDale Ferguson, General Manager – Exploration & Operations
– Involved in discovery of a number of Australian depositsMarty Adams, Project Manager – Kanmantoo
– Mining Engineer with 20 years’ experience including Newmont (Woodcutters) and as General Manager at Tennant Creek for Normandy
Richard Bradey, Mine Geologist – Kanmantoo– 20 years base metal mine experience – Mt. Isa, Mt. Gordon, Benambra and Woodcutters
HILLGROVE Key People
37.
ASX : HGO
Ordinary Shares HGO 242.1 million
Options – 30 cents 2009 Unlisted 12.5 million
Options – other expiry - ESOP Unlisted 7.9 million
Options – other expiry - Sempra Unlisted 18.0 million
Market Cap (@ 38 cents per share) $91.0 million
Cash (March 2007) plus Sempra cash ~$10.0 million
NPAT year ended 31 January 2007 $10.8 million
Liquidity $3.7 million per month
HILLGROVE Investment Metrics
38.
SHAREHOLDERSTop 35%
SegaInterSettle 8.5% Swiss Nominee
Archer Group 7.6% Managing Director
Sempra Metals 7.0% Fortune 500, American energy & Concentrates and metals trading group
Anglo Pacific 3.5% London based investment fund
Colonial Global 3.5% Large Australian pensions institution
Macquarie Bank 3.1% Australia’s largest investment bank
Merrill Lynch 2.2% London based investment fund
DISCLAIMERThis presentation may contain forward looking statements that are subject to risk factors associated with copper, gold and gas businesses. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a variety of variables and changes in underlying assumptions which could cause actual results or trends to differ materially, including but not limited to: price fluctuations, actual demand, currency fluctuations, drilling and production results, reserve estimates, loss of market, industry competition, environmental risks, physical risks, legislative, fiscal and regulatory developments, economic and financial market conditions in various countries and regions, political risks, project delay or advancement, approvals and cost estimates. Investors should undertake their own analysis and obtain independent advice before investing in HGO shares.All references to dollars, cents or $ in this presentation refer to Australian currency, unless otherwise stated.
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