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LUBLIN COAL PROJECT April / May 2014 - ASX: PDZ

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LUBLIN COAL PROJECT April / May 2014 - ASX: PDZ ABN 23 008 677 852 LUBLIN COAL PROJECT April / May 2014 - ASX: PDZ SCOPING STUDY PRESENTATION Large Scale Project with Potential High Margin Semi-Soft Coking and Premium Thermal Coal within the Heartland of Industrial Europe Lublin Coal Project Prairie Downs Metals Limited (ASX:PDZ) is an ASX listed company developing the Lublin Coal Project in Poland’s world class Lublin Coal basin… Large scale, high quality resource of semi-soft coking and premium thermal coal – JORC Coal Resource Estimate of 1.6 billion tonnes Scoping Study confirms robust fundamentals (steady state EBITDA of US$332m pa) and the lowest cash cost position (US$37/t FOR) on the global cost curve for coal delivered into Europe Existing regional rail and port infrastructure providing access to domestic, European and other export markets Potential for long term supply of 6mtpa of high quality coal into Europe, reducing regional dependence on Russian energy supplies Adjacent to the world-class Bogdanka (WSE:LWB) longwall coal mine with an EV of US$1.6B Executive team with strong coal expertise and experience in Poland Cautionary Statement This presentation includes information extracted from Prairie Downs Metals Limited’s (“Prairie”) ASX announcements dated 28 April 2014 entitled ‘Scoping Study Confirms Potential for World Class High Margin Met and Thermal Coal Project’. The Company advises that the information relating to the Scoping Study referred to in this presentation is based on lower-level technical and preliminary economic assessments, and is insufficient to support estimation of Ore Reserves or to provide assurance of an economic development case at this stage, or to provide certainty that the conclusions of the Scoping Study will be realised. Page 2 Poland: A favorable investment jurisdiction Poland is a safe, low risk mining jurisdiction with an excellent fiscal regime… . One of the most attractive fiscal regimes globally for coal 19% Corporate Tax Rate . Poland is a first world country having gone through significant reform since the end of communism in 1989 No requirement for Government Participation . Over 120 billion in foreign direct investment has been channelled into Poland since 2004 4PLN/t Royalty (~US$1.2/t) . Poland is the largest hard coal producer in Europe and is a key supplier of coal to its domestic market and neighbours Belchatow Power Station (4,440MW), Poland . Poland is a pro-coal nation with one of the highest rates of coal fired generation globally (90+%) . Poland has a highly skilled coal mining workforce, with 110,000 people directly employed in the industry . Availability of low cost skilled labour make Poland an attractive jurisdiction to develop coal projects Source: Eurostat and Polish Ministry of Treasury Page 3 The Emergence of the Lublin Coal Basin . Initial drilling in the . Bogdanka Lists on the . Bogdanka Mine basin in search of Warsaw Stock Exchange in commissioned in 1982 gas reserves 2009 . Bogdanka has been the . Leads to discovery of . Modernisation of the sole operator in the a massive coal mine exemplifies the high basin ever since resource productivity/low cost potential of the basin 1950 1960 1970 1980 1990 2000 2010 Communist Era Democratic/Free Market Era . Large scale government . Bogdanka mine . Prairie is the first foreign exploration commences development commences entrant to the basin in 2012 in the 1960’s . Government considers . 184km2 footprint with over . Culminates in hundreds development of a coal of boreholes drilled mining complex in Lublin 200,000 metres of drilling through to the 1980’s data Page 4 Polish Coal: A tale of two different coal basins With the Upper Silesian Basin in decline, the Lublin Coal Basin is set to become the pre-eminent coal basin in Europe given favourable geology and mining conditions… Silesian Basin Lublin Basin Size1 5,400km2 Size 9,100km2 Years in Production 250 Years in Production 30 Production 82 mtpa Production 8.5 mtpa No. Operating Mines 29 No. Operating Mines 1 Typical Longwall 150 metre face Typical Longwall 300 metre face Panel 1.2 km length Panel Up to 5 km length Coal Geology Coal Geology Seam Dip Variability Faulting Methane Rockburst Seam Dip Variability Faulting Methane Rockburst 0o - 45o High High High High 0o - 2o Low Low Low Low 1: 5,400km total of which 4,500 within Poland. Source PWN encyklopedia Page 5 Lublin Basin: First Quartile Operating Costs Low cash costs and high productivities in the basin are primarily a function of favourable geology… Q2 2013 Unit Mining Cash Costs Longwall Plow (Source: Company Filings, 3.15 PLN/USD, 0.74 EUR/USD) . Geology and mining conditions are ideal for modern, high productivity longwall mining . Caterpillar/Bucyrus longwall plows have been employed since 2010 at Bogdanka with remarkable success . World record production rates of 12,850 tonnes per day have been achieved which is equivalent to over 4mtpa from a single longwall face Page 6 Key Scoping Study Parameters Off the shelf, proven mining & processing methods with ready market access… Key Scoping Study Parameters 50% Semi Soft Coking Product Mix 50% Premium Thermal ROM Coal Production (Steady State Average) 7.7 mtpa Clean Coal Production (Steady State Average) 6.0 mtpa Initial Mine Life 22 Years Coal Geology Highly Productive Mining Method Longwall Coal Handling & Process Plant Dense Media Access to Market Existing Rail & Port Average Sales Price Received US$93.60 /tonne Page 7 Strong Cash Flows & High Margins Significant cash flow generation potential with EBITDA of up to $391 million per annum on conservative pricing assumptions… 100 93.60 90 10.91 80 13.95 70 6.01 2.35 3.58 Average Cash Margin 60 1.25 55.55 50 40 US$/t Clean Coal Average operating cash cost 30 US$36.80/t FOR 20 10 0 Revenue Labour Costs Materials, Leased Equipment & CHPP, Waste SG&A + Mine Closure Royalties LCP Cash Margin Consumables & Power Contractors Management & Fund Logistics US$ / Clean Coal tonne Steady State Average Cash Flow Margin (Based upon the blended average semi-soft coking and premium thermal coal price and Scoping Study operating cost projections; real terms) Page 8 Lowest Position on the Cost Curve The Lublin Coal Project is positioned at the bottom of the global cost curve on a delivered into Europe basis… Colombia Russia Rest of World Potential Position on the Global Cash Cost Curve for Coal Delivered into Europe (2013 CFR ARA Energy Adjusted) (Sourced from Wood Mackenzie 2013 CFR ARA Total Cash Cost, energy adjusted for internationally traded thermal coals delivered into Europe; for the Lublin Coal Project Total Cash Cost is based on unadusted FOR cost per tonne for targeted premium thermal coal product) Page 9 Metallurgical & Thermal Potential Coal quality and washability results consistent across the target mining area of the 391 seam… Page 10 Superior Coal Quality Initial testing has indicated that the Lublin Coal Project potentially hosts metallurgical and premium thermal coals that compare favourably with internationally traded coals Semi-Soft Coking Coal Comparison Lublin Coal Project1 Rio Tinto (NSW) Glencore (NSW) JSW (Poland) Solid Energy (NZ) Semi Soft Coking Free Swell Index 4.0 – 6.0 5.0 4.0 – 6.0 6.0 3.0 – 5.0 Ash (% AD) 2.0 – 2.7 9.5 9.0 8.0 4.5 Volatile Matter (% AD) 33.2 – 36.7 33.0 36.5 37.0 38.0 Thermal Coal Comparison Lublin Coal Project1 ARA (API2) Colombia Russia Premium Thermal Calorific Value (GAD, kcal/kg) 7,526 – 7,830 6,700 6,830 6,877 Ash (% AD) 2.0 – 2.7 16.0 7.2 11.7 Volatile Matter (% AD) 33.2 – 36.7 24.0 – 37.0 34.4 29.8 1) Range of 391 seam analysis from washed core (Float @1.35) from Kopina 1, Kulik, Borowo and Syczyn 7 coal exploration boreholes Page 11 Simple & Effective Coal Processing Exceptionally high core yields (up to 97%) from the 391 seam and average CHPP yield of 77.3% with the flexibility to produce a range of semi-soft and thermal coal products to suit prevailing market requirements… Page 12 High Quality Transport Infrastructure Rail and port studies confirm ample capacity, accessibility and low cost… Rail Accessibility Underutilised Port Capacity . Numerous high quality rail lines servicing Lublin . Port of Gdansk located 520km from project by rail region . Baltmax and Panamax capable with approximately . 95% of Polish rail track is standard gauge 1,435mm 15 mtpa spare capacity . Rail costs in Poland ~2.2 US cents / tonne / km . Port loading charges ~US$4.00 - 6.50/t FOB vessel . Direct access to local and major European markets . Provides further access to European, including Germany, Austria and Czech Republic Mediterranean and wider seaborne markets Page 13 Strategic European Supply Location Significant Optionality with regards to potential target markets and product mix… Page 14 Significant Scale Potential High quality 1.6 billion tonne global resource base with significant potential to upscale production… . High quality 1.6 billion tonne coal resource within 21 seams over the four LCP concessions . Mine plan based on just two target seams – the 389 and 391 with 157mt JORC Indicated Resource . Targeting substantial increase in Indicated Resources during PFS stage from infill drilling and modelling of further seams . Significant potential to increase production and extend mine life beyond the Scoping Study mine plan Page 15 Low Capital Intensity Low capital intensity when compared to other recent and emerging underground coal projects… Capital Cost Summary (US$ million) Recent Global Underground Longwall Capital Intensities (US$m per 1Mtpa ROM Production) Shaft Costs 227.4 (Sinking & Furniture) Underground Development Drivages 49.8 Underground Infrastructure & Ancillary Equipment 73.8 (Belts, Ventilation, Electrics, Power Centers) Capitalised Pre-Production Expenses 84.0 (Labour, Power etc.) Total Underground Mine Development 435.0 CHPP & Waste Management 74.9 Mine Surface Facilities & Infrastructure 78.2 (Buildings, Roads) Total CHPP and Surface Facilities 153.1 EPCM, Owners’ Costs and Contingency 96.4 Page 16 Polish Executive Team Respected and established Polish team… .
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