Growth and Income Through Royalties Q4 2008 TSX:IRC AMEX:ROY
All dollar amounts in U.S. dollars unless otherwise noted.
North Americaʼs Fastest Growing Diversified Mineral Royalty Company Forward-Looking Statements
Some of the statements contained in this presentation are forward-looking statements, such as statements that describe IRC's goals and expectations and IRCʼs estimated revenues from its royalties, production levels and mine life.
Since forward-looking statements are not statements of historical fact and address future events, conditions and expectations, they inherently involve unknown risks, uncertainties, assumptions and other factors well beyond IRCʼs ability to control or predict. Actual results and developments may differ materially from those contemplated by such forward-looking statements. Material factors that could cause actual revenues to differ materially from any such forward looking statements include metal price fluctuations; interpretation of royalty contract terms; operatorsʼ production changes; mine developers abilities to develop, build and operate the mines; the effects of weather, operating hazards, adverse geological conditions, global warming, work slowdowns or stoppages, availability of labour, materials and equipment, changes in governmental laws, regulations, economic conditions or political instability; currency exchange rates; uncertainties involved in interpreting drilling results and other tests; possible variations in ore grade and recovery rates; risks of delays, accidents, equipment breakdowns; the possibility of unanticipated costs or expenses related to mining, processing, mine closures; and IRC's ability to acquire additional royalty interests.
Forward-looking statements are based on the beliefs, estimates and opinions of management at the date the statements are made. IRC does not undertake to update forward-looking statements if managementʼs beliefs, estimates or opinions or other circumstances should change.
2 Important Notices
Resource Estimates - All “reserve” and “resource” estimates included in this presentation were prepared in accordance with the Canadian Institute of Mining and Metallurgy classification system or the Joint Ore Reserve Committee as outlined in National Instrument (NI) 43-101 of the Canadian Securities Administrators and the Canadian Institute of Mining and Metallurgy Classification System. These standards differ significantly from the requirements of the U.S. Securities and Exchange Commission (SEC). In particular, “resources” are not the equivalent of “reserves” and the SEC does not normally permit the use of the term “resources” or of resource estimates in documents filed with the SEC. Accordingly, information included in the presentation may not be comparable to information disclosed by United States mining companies.
IRC does not operate or explore but relies on others. Because it is not the operator, it must rely on decisions made by others, decisions on which it has little or no influence. It must also assume that public disclosure by its operators is accurate and true. Information contained herein is based on information made available by these operators.
This presentation has been reviewed by a qualified person employed by SRK Consulting (U.S.) Inc, for the purposes of NI 43-101.
See Company disclosure documents filed on SEDAR (www.SEDAR.com), including the Annual Information Form dated March 28, 2008, and the Companyʼs Annual Report on Form 40-F filed with the SEC (available at www.sec.gov
Trailing 12 monthsʼ (TTM) EBITDA, TTM adjusted EBITDA, TTM free cash flow per share, TTM EBITDA per share, EBITDA margins and EBITDA are non-GAAP financial measures. Such non-GAAP financial measures do not have any standardized meaning prescribed by Canadian GAAP and therefore may not be comparable to similar measures presented by other issuers. Management uses these measures internally. 3 Passive Foreign Investment Company PFIC
NOTICE OF U. S. TAX INFORMATION FOR U. S. PERSONS
This statement is provided for shareholders who are United States persons for purposes of the U.S. Internal Revenue Code. It is not relevant to other shareholders.
NOTICE PURSUANT TO IRS CIRCULAR 230: ANYTHING CONTAINED IN THIS NOTICE CONCERNING ANY U.S. FEDERAL TAX ISSUE IS NOT INTENDED OR WRITTEN TO BE USED, AND IT CANNOT BE USED BY A U.S. HOLDER, FOR THE PURPOSE OF AVOIDING FEDERAL TAX PENALTIES UNDER THE INTERNAL REVENUE CODE. THIS NOTICE WAS WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF IRC SHARES. EACH SHAREHOLDER SHOULD SEEK U.S. FEDERAL TAX ADVICE, BASED ON SUCH U.S. SHAREHOLDER'S PARTICULAR CIRCUMSTANCES, FROM AN INDEPENDENT TAX ADVISOR.
International Royalty Corporation ("IRC") believes that it is currently a Passive Foreign Investment Company ("PFIC") as defined in Section 1297 of the Internal Revenue Code. Certain U. S. income tax consequences flow from this designation and these tax consequences may be mitigated by electing to treat IRC as a Qualified Electing Fund ("QEF"). The PFIC Annual Information Statement for IRC provided herewith is given to allow shareholders who make the QEF election with respect to IRC stock, should they so desire. Shareholders are urged to consult their tax advisors for more information regarding QEF elections.
For more information, please visit http://library.corporate-ir.net/library/18/188/188772/items/284231/ PFICWebsiteNotice2007.pdf
4 Company Overview
TSX: IRC, AMEX: ROY ~85 diversified mineral royalties Trailing 12 month Net Revenue: $36.8 million1 Trailing 12 month EBITDA: $26.3 million Annual Dividend: US$0.04 per share Liquidity: Cash = $16 million2 and LOC = $40 million
North Americaʼs fastest growing Diversified Mineral Royalty Company
1. Net of $8.6 million Labrador mineral royalty tax 2. As of 6/30/08; note that IRC acquired a royalty portfolio from Atna Resources Ltd. for $20 5 million as of September 4, 2008 Third Quarter Highlights
Atna Royalty Portfolio acquisition Skyline Coal royalty acquisition First concentrate shipped from Avebury Mill commissioned at Gwalia Deeps Multiple new diamond discoveries Increased Reserves and Resources at Schaft Creek Measured and Indicated Resources: 1.393 billion tonnes with 0.25% Cu, 0.18g/t Au, 0.019% Mo, 1.55g/t Ag at a copper equivalent of 0.20% cutoff
Reserves: 812.2 million tonnes of 0.301% Cu, 0.212g/t Au, 0.020% Mo, and 1.76g/t Ag1
North Americaʼs fastest growing Diversified Mineral Royalty Company
1. Copper Fox Metals Inc. News Release, 9/15/07 6 IRC Investment Highlights
1. Proven low-risk mineral royalty structure 2. Industry leading revenue growth 3. Strong, fully-funded growth pipeline 4. High quality, long-lived, diversified royalty assets 5. Experienced and highly aligned management team delivering profitable growth
Attractive Risk Adjusted Returns Throughout the Commodity Cycle 7 IRC Selected Investment Results
Estimated Initial IRC Total Payments Current or Full-Year Forward Return Royalty Remaining Mine Investment Thru 12/31/07 Royalty Payment on Investment1 Life (Yrs) (US$MM) (US$MM) (US$MM)2
Voisey’s Bay 27 $149.4 $53.4 $22.4 23%
Western Australia 8 $10.2 $2.6 $6.1 80%
Belahouro 7 $0.8 $0 $2.7 151%
Pascua-Lama 20 $56.5 $0 $16.9 18%
Pinson 10 $4.1 $0 $4.2 63%
Horizon Coal 30 $1.5 $0 $0.94 30%
BC Coal 21 $1.0 $0 $0.4 56%
Williams 4 $2.2 $1.7 $0.32 52%
Fedorova 18 $0.03 $0 $6.15 96%
Outstanding Investment Returns
See appendix for references and assumptions. 8 Ideal Mineral Investment Structure
Royalty stream driven by operatorʼs revenue; not dependent on their profits Minimal exposure to CAPEX and OPEX price escalation Direct exposure to commodity prices, discovery and expansion upside Balanced asset portfolio of producing, development and exploration projects Strong leverage to other peopleʼs money
“The best business is a royalty on the growth of others – requiring little capital itself” Warren Buffett
9 Why A Royalty Company?
Maximum Exposure to Upside
10 ~85 High Quality Mineral Royalties
Australia North America / Latin America Europe / Africa ~13 Royalties ~65 Royalties ~7 Royalties
93% in Secure Investment-Grade Countries
11 IRC Revenue Growth
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See appendix for references and assumptions. 12 High-Margin, Scalable Business Model
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Revenue Growth Magnifies Profit Margins 13 Comparative Revenue Growth
IRC 422%
Silver Wheaton 101%
Royal Gold 31%
Franco-Nevada 18%
0% 100% 200% 300% 400% 500% Compound Annual Growth Rate 2004-07
Strong Annual Growth Rate 14 Long Life Projects
Project Commodity Mine Life 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Voisey’s Bay Ni, Cu, Co 27
Legacy Industrial Sand 20
Las Cruces Cu 15
BC Coal Coal 21
Avebury Ni 8-10
Gwalia Deeps Au 9
Bell Creek Ni 15
Horizon Coal 30
Wolverine Ag, Au 9
Pascua Au 23
Fedorova Pt, Pd 18
High Lake Zn, Pb, Ag, Au, Cu 12
Pinson Au 10 Commissioning date not yet announced
Westmoreland U 11 Commissioning date not yet announced
Berg Cu, Mo, Ag 17 Commissioning date not yet announced
Schaft Creek Cu, Mo, Au, Ag 30+ Commissioning date not yet announced
Solid Foundation Underpins Long-Term Growth
See appendix for references. 15 Diversifying Revenue Sources
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Increasing Gold and Copper Balance
Revenue totals shown are net of Labradorʼs mineral royalty tax on the Voiseyʼs Bay royalty. For purposes of illustration. See appendix for references and assumptions. See Forward Looking Statements on p. 2-3. 16 Nickel Market Perspectives
Supply No new world-class sulphide ore bodies in development Most laterite depositsʼ economics devastated by diesel costs Supply challenges: Ravensthorpe economics are not attractive at $8.25/lb Ni1 Falcondo shut down again2 Text Pig iron nickel 50,000 tonnes in 1.5 million tonne market – reported Chinese production cost range from $10-13/lb Ni; recent Phillippine exports of nickel ore to China have dropped 96% from earlier levels3 Demand Urbanization and middle-class growth in BRIC countries will continue to drive stainless steel demand Hybrid vehicle batteries and aerospace growth spurring Ni demand in batteries and superalloys
1. Brisbanetimes.com.au, Ravensthorpe moves towards break-even time for BHP Billiton, 9/26/08 2. Mining Weekly online, Xtrada temporarily shuts Falcondo mine as costs bite, prices sink, 8/19/08 3. Bloomberg.com, Philippine Nickel Ore Shipments to China Plunge 96% in July, 8/19/08 17 Precious Metal Revenue
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For purposes of illustration, assumes US$850/oz gold and US$11.25/oz silver for 2008 forward. See appendix for references and further assumptions. 18 Key Development and Feasibility Projects
Gwalia Deeps
$370 Million Average Annual Operator Spending 2005-2007
See appendix for references. 19 Key Feasibility and Exploration Projects
Royalty Operator Location Commodities Comments
Barrick United Barrick must spend US$30 million Pinson Gold States Au by April 2008
Laramide Very high-grade uranium intercepts Westmoreland Resources Australia U obtained in recent drilling
Stornoway Announced estimated 24-40 Aviat Diamonds Canada Diamonds million carats of diamonds in recent conceptual study Amarillo Mara Rosa Gold Brazil Au Scoping study underway
Terrane M&I Resources of 372 MM t @ Berg Minerals Canada Cu, Mo, Ag 0.31% Cu, 0.04% Mo. 2.1 g/t Ag Multiple high-grade gold prospects Commander have been discovered in Qimmiq Resources Canada Au BIF environment
36 Additional Early Stage Projects
See appendix for references. 20 Commodity Price Sensitivities
Change in Change in Commodity Price EBITDA
Nickel 10% $3,135,000
Copper 10% $725,000
Gold 10% $479,000
Cobalt 10% $205,000
Direct Commodity Price Exposure with No Hedging
21 An Expanding Project Pipeline
Operator Commodity Pre-Feasibility Feasibility Development
Legacy Genoa Holding Company, LLC Industrial Sand Avebury OZ Minerals Ltd. Ni Las Cruces Inmet Mining Corp. Cu Belahouro Wega Mining ASA Au Gwalia Deeps St Barbara Ltd. Au Wolverine Jinduicheng Molybdenum Ltd. Ag, Au Pascua Barrick Gold Corp. Au Gold Hill Round Mountain Gold Corp. Au Pinson Barrick Gold Corp. Au Bell Creek Metallica Minerals Ltd. Ni High Lake OZ Minerals Ltd. Zn, Pb, Ag, Au, Cu Westmoreland Laramide Resources Ltd. U Fedorova Barrick Gold Corp. Pt, Pd South Laverton Saracen Minerals Holding Ltd. Au Horizon Coal Western Canadian Coal Corp. Coal Schaft Creek Copper Fox Metals Inc. Cu, Mo, Au, Ag Ambrosia Lake Rio Algom Mining Corp. U
Strong Growth Pipeline Funded by Others 22 Experienced Management Team
Industry Experience Douglas Silver- Chairman and CEO 27 years BA and MS in Economic Geology Certified General Appraiser (Minerals) Paul Zink- President 18 years 20+ years with J.P. Morgan and Koch Industries 10+ years mining related valuation and acquisition experience Ray Jenner- CFO and Secretary 20 years BS Physics and Math, B Comm, Honors, Chartered Accountant Former VP and Treasurer, Echo Bay Mines, former CFO, Nord Resources Corp. James Lydic- VP, Business Development 30 years BA Geology, MBA Former head of Economic Valuation, Anaconda Copper Co. Dave Hammond- VP, Strategic Planning 35 years BS and MS in Geological Engineering, MBA and PhD in Mineral Economics $10 billion in transaction experience as mining service consultant for PricewaterhouseCoopers
Management and Board Committed with ~18% Ownership
23 Near-Term Catalysts
Multiple projects starting up in 2008 Diversifying revenue base Recent discoveries on IRC royalty lands Growing field of acquisition Aging population of royalty holders Credit crisis creating royalty financing opportunities Limited number of competitors Rotation from mining investments that are exposed to CAPEX and OPEX overruns
Royalties: A Better Way To Invest In The Super Cycle
24 International Royalty Corporation TSX:IRC AMEX:ROY
For additional information contact: Douglas B. Silver, Chairman and CEO Paul H. Zink, President Telephone: (303) 799-9020 [email protected] [email protected] www.internationalroyalty.com
25 Appendix
26 IRC Share Structure
BASIC SHARES OUTSTANDING: 78,480,356 Stock Options
Number Average Number Exercise Price Outstanding Remaining Exercisable (Weighted Average) Contractual Life 5,695,500 2.3 Years 3,966,500 CA$4.48
FULLY-DILUTED SHARES OUTSTANDING: 79,501,356
As of 10/17/08 Fully diluted shares outstanding includes basic shares outstanding and in the money options. 27 Voisey’s Bay 2.7% NSR
One of the worldʼs largest mineral royalties Operator: Vale Inco $149 MM acquisition cost (Feb. 2005) Acquired based on long-term Ni, Cu and Co prices of $4.00, $1.00, and $15.00/lb Anticipated revenues to IRC1 $29.0 MM/yr @ $10/lb Ni $21.7 MM/yr @ $8/lb Ni $16.3 MM/yr @ $6/lb Ni Financial springboard for IRC
1.IRCʼs NI 43-101 report on the Voiseyʼs Bay project contains the last publicly reported production schedule for the project. Anticipated revenues are derived from information in this report, internal company calculations and actual production numbers for 2006 and 2007. 2 Pre-income tax basis 28 Western Australia 1.5% NSR
13 projects, four operators, dozens of gold deposits Includes approximately ~11.1 million ounces of gold (Measured & Indicated)1 $10.2 MM acquisition cost (June 2006) Two producing mines (Southern Cross, Meekatharra) Two new gold discoveries (Tower Hill, Bronco East) Large land bank of 3 million acres Only 30% of land effectively explored Anticipated revenues to IRC2 $1.8 million paid in 2007 $4.5 million/yr @ $850/oz gold3
1. St Barbara Ltd Proven and Probable Reserves Statement as of June 30, 2008, Saracen Mineral Holdings Ltd Annual Report 2007, p. 10, Saracen Mineral Holdings Ltd, Decision to Commence Gold Production Operations, Sept 29, 2008, www.mercatorgold.com, Oct 3, 2008 2. See appendix for assumptions 3. Estimates and projections are based on publicly available information of operator, 2007-2010 average revenue per year. 29 Pascua, Chile
0.473% to 3.15% Sliding-Scale Royalty Operator: Barrick Gold Corporation Anticipated revenues to IRC1 $15.3 MM/yr @ $850 /oz gold $56.5 MM acquisition cost (August 2007) Open pit mine Projected 23 year mine life2 Anticipated Production: 750,000-775,000 oz Au/yr3 Total Cash Cost: $40-$50/oz Au3
1. Anticipated revenues based on publicly available information of operator. 2. Projected mine life based on operator’s public disclosure. 3. Average of the first 5 years of production. 30 Gwalia Deeps 1.5% NSR
1.5% NSR Operator: St Barbara Ltd Mill commissioned: September 20081 Acquired as development stage project (June 2006) Part of Western Australia NSR Anticipated revenues to IRC1 $ 2.6 MM/yr @ $850/oz gold
1. St Barbara Ltd Company Update, 9/17/08 2 Pre-income tax basis 31 Las Cruces, Spain
1.5% NSR Operator: Inmet Mining Corporation Projected annual average production rate of 159 MM pounds of copper Proven and Probable Reserves of 17.6 MM tonnes grading 6.2% copper Possibility of deeper primary sulphide resources Announced Q4 2008 start-up may be de delayed by water handling/treatment issue $42.2 million acquisition cost (December 2007) Anticipated revenues to IRC: US$6.7 MM/yr @ $3.00/lb copper www.inmetmining.com 32 Belahouro, Burkina Faso
2.5% Net Smelter Return Operator: Wega Mining ASA (recently acquired Goldbelt Resources Ltd) Development-stage project Open pit, 128,000 oz p.a., 7 year life Cash operating costs $336/oz Production expected Q4 2008 $817,000 acquisition costs (Feb. 2005)1 Anticipated revenues to IRC $3.0 MM/yr @ $850/oz gold Resources increased 2.2 X since acquisition
2007-2008 based upon the operator’s published estimates of gold produced and the applied royalty rate. Goldbelt Resources press releases dated 2/5/07,11/27/06 and 11/1/06. Wega Mining presentation 11/02/07. 33 Avebury, Australia
2.0% NSR Operator: OZ Minerals Ltd. Expected production of 18.7 MM lbs Ni annually1 First shipment of concentrate: August 20082 Underground mine / concentrator Resources (JORC compliant) Measured of 0.46 MM tonnes grading 1.15% Ni Indicated of 5.6 MM tonnes grading 1.16% Ni Inferred of 5.8 MM tonnes grading 1.05% Ni at a 0.7% nickel cutoff grade3
Anticipated revenues to IRC $2.1 MM/yr @ $8.00/lb nickel
1. www.miningnews.net, “More investment needed for Avebury”, 1/7/08 2. OZ Minerals News Release, August 25, 2008. 3. Allegiance Mining Limited news release, April 13, 2007. 34 Assumptions and References
All prices in US dollars unless otherwise noted Metal price assumptions, for purposes of illustration Au: $850/oz Ni: $8.00/lb Co: $16.00/lb Pb: $0.90/lb Ag: $11.25/oz Cu: $2.75/lb Zn: $0.80/lb Coal: $80.00/tonne IRC Selected Investment Results Forward return on investment (ROI) nets IRC investment and payments to date as an outflow at time 0, then calculates future payments over the remaining mine life, assuming a 2009 start-up for B.C. Coal, 2010 for Pinson and Horizon, 2012 for Pascua and 2017 for Fedorova. Voisey's Bay payment is estimated 2008 payment net of 20% Labrador royalty tax; Pascua payment is est'd average of 1st 15 years; forward ROI is calculated on total estimated payment stream; Williams is est'd average remaining annual payment IRC Revenue Growth Avebury: Allegiance Mining NL press release 2/6/08, www.allegiance-mining.com.au Las Cruces: http://www.inmetmining.com/Theme/Inmet/files/pdf/2008_Q1_Las%20Cruces%20Section.pdf Pascua: Based on 80% of stated production levels, 2011 assumes 1/2 year Southern Cross, Williams: Estimated based on current and past production levels Goldbelt Resources Ltd. Press release 10/4/07 Gwalia Deeps: St Barbara Ltd. Press release 2/7/07 Mercator Gold PLC news release 8/9/07 Long Life Projects Voiseyʼs Bay: www.vbnc.com, February 2005 Legacy: Personal communication, January 30, 2008 Las Cruces: Inmet Mining Corporation, quarter report for the three months ending March 31, 2008, p.22. www.inmetmning.com/ouroperations/development/LasCruces/ Avebury: Allegiance Mining Quarterly report for the three month period ending March 31, 2008, p.2. www.allegiance-mining.com.au
35 Assumptions and References
Long Life Projects (continued) Bell Creek: www.metallicminerals.com.au Pascua: www.barrick.com/GlobalOperations/SouthAmerica/PascuaLamaProject/ Fedorova: PGE Fedorova project – Russia, Kolar peninsular, Lovozero area, November 2007 High Lake: www.ozminerals.com/Operations/Mining-Operations/High-Lake.html Pinson: Assumes 100,000 Oz Au production per year. B.C. Coal: assumes the litigation is favorably resolved. Diversifying Revenue Sources, Commodity Price Sensitivities Voiseyʼs Bay: Company calculations based on Incoʼs 2004 NI 43-101 report Avebury: Allegiance Mining NL press release, February 6, 2008; www.allegiance-mining.com.au Las Cruces:www.inmetmining.com/theme/files/pdf2008 01-LasCrucesSection.pdf Energy: Based on internal Company calculations Gold – Pascua: Based on 80% of stated production levels, 2011 assumes 1/2 year; Southern Cross, Williams: Estimates based on current and past production levels; Belahouro: Goldbelt Resources Ltd, press release October 4, 2007, Gwalia Deeps: St Barbara Ltd press release, February 7, 2007; Meekatharra: Mercator Gold plc press release, August 8, 2007 Precious Metal Revenue Pascua: Based on 80% of stated production levels, 2011 assumes 1/2 year; Southern Cross, Williams: Estimates based on current and past production levels; Belahouro: Goldbelt Resources Ltd, press release October 4, 2007, Gwalia Deeps: St Barbara Ltd press release, February 7, 2007; Meekatharra: Mercator Gold plc press release, August 8, 2007
36 Assumptions and References
Key Development and Feasibility Projects Inmet Mining Corporation AIF, March 10, 2008 "A New Nickel Province for China" presentation by Allegiance Minning, November 2007 Confidential information, 12/2007 Wega Mining Presentation, May 9, 2008 St Barbara Mines Ltd Presentation, BMO Capital Markets, 2/27/08 www.barrick.com/globaloperations/southamerica/pascualamaproject/default.aspx
Key Feasibility and Exploration Projects Atna Resources Ltd Press Release, 4/23/08 Laramide Resources Ltd Press Release, 6/25/08 www.stornowaydiamonds.com/advanced/aviat
37 38