AQUILA RESOURCES
Advancing the gold- and zinc-rich Back Forty Project
Investor Presentation | January 2016
TSX: AQA
TSX: AQA | INVESTOR PRESENTATION
Disclaimer
This presentation contains certain forward-looking statements within the meaning of applicable Canadian securities legislation. In certain cases, forward-looking
statements can be identified by the use of words such as "plans", "expects" or "does not anticipate", or "believes", or variations of such words and phrases or
statements that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved" and similar expressions suggesting
future outcomes or statements regarding an outlook.
Forward-looking statements relate to any matters that are not historical facts and statements of our beliefs, intentions and expectations about developments,
results and events which will or may occur in the future, which out limitation, statement with respect to: (i) the economic analysis contained in the PEA; (ii) the
development plan of the PEA and results thereof; (iii) capital expenditure programs; (iv) the quality or quantity of the mineral resources subject to estimates by
Aquila; and (v) work plans to be conducted by Aquila.
These and other forward-looking statements and information are subject to various known and unknown risks and uncertainties, many of which are beyond the
ability of Aquila to control or predict, that may cause their actual results, performance or achievements to be materially different from those expressed or implied
thereby, and are developed based on assumptions about such risks, uncertainties and other factors set out herein. Aquila expressly disclaims any obligation to
update forward-looking information except as required by applicable law. Such forward-looking information represents Aquila’s best judgment based on
information currently available. No forward-looking statement can be guaranteed and actual future results may vary materially. Accordingly, readers are advised
not to place undue reliance on forward-looking statements or information. Furthermore, mineral resources that are not mineral reserves do not have
demonstrated economic viability.
Thomas O. Quigley, Vice President of Exploration for Aquila Resources, is the Qualified Person for the Company as described in National Instrument 43-101 and is
responsible for the contents of this presentation.
TSX: AQA | INVESTOR PRESENTATION
2
Investment Highlights
•
Focused on high-grade polymetallic
assets in the Great Lakes Region
•
Flagship Back Forty demonstrates
strong economics
•
Strong balance sheet post close of
$20.75M financing by Orion
•
Upside potential to improve
economics and expand deposit
•
Potential to unlock value with nearterm permitting and feasibility study
milestones
TSX: AQA | INVESTOR PRESENTATION
$282.2M
38.8%
Pre-tax NPV
Pre-tax IRR
3 3
Orion Transaction | Highlights
•
Closed multi-level financing agreement
with Orion Mine Finance:
• Acquisition of 75% of Aquila’s life of mine silver
production for US$17.25 million
• $3.5 million equity financing
• Each $0.13 Unit consists of one
common share and one-half of a
warrant
$20.75M
Multi-level financing agreement
• Pay an additional US$4.00 per ounce of silver
delivered under the streaming agreement
•
Repurchased existing royalties at Back
Forty
• Net smelter return (NSR) royalty from Hudbay
for US$1 million in cash and issue $225,000
worth of common shares
Funding drives next phase
of project development
• Distributable net income (DNI) royalty from
Vale Exploration USA for $4 million in cash
TSX: AQA | INVESTOR PRESENTATION
4
Focus on the Great Lakes Region
• Strategic focus on high-grade assets
• Back Forty, Bend Copper-Gold, and Reef Gold
located along the Penokean Volcanic Belt
• Flagship Back Forty is a gold- and zincrich deposit
• Expected to be a low-cost producer located in
Michigan’s Upper Peninsula
Lake Superior
White Pine Mine
Copperwood Project
Eagle Nickel/Copper Mine
Upper Peninsula
BACK FORTY
Flambeau Mine
Crandon Deposit
BEND
REEF
Wisconsin
Michigan
• $70M invested to-date
• Region marked by permitting and
acquisition activity
Lake
Michigan
PENOKEAN
VOLCANIC BELT
OTHER MINING
PROJECTS
Illinois
Indiana
Ohio
MIDCONTINENT
RIFT SYSTEM
Region with World-Class Potential
TSX: AQA | INVESTOR PRESENTATION
5
Back Forty | PEA Economics
NPV @ 6%
IRR
Payback Period
Pre-Tax
After-Tax
$282.2M
$210.8M
38.8%
32.0%
1.4 years 1.8 years
• New PEA includes 2013 resource estimate
• Contemplates mining 16.1Mt over 16 years
• 12.5Mt open-pit
• 3.6Mt underground
• Average OPEX of $29.25/tonne for open-pit &
$66.20/tonne for underground
• Total estimated initial capital cost of $261M
• $177M direct pre-production CAPEX;
• $44M contingency; and,
• $40M of indirect and owner’s costs.
• Potential to develop reduced-CAPEX high-grade initial
phase operation
The PEA is preliminary in nature and includes inferred mineral resources that are considered too
speculative geologically to have the economic considerations applied to them that would enable
them to be categorized as mineral reserves. There is no certainty that the preliminary economic
assessment will be realized.
PEA Metal Prices: Gold: $1,293/oz; Zinc: $0.96/lb; Silver: $20.46/oz; Copper: $3.18/lb; Lead: $0.96/lb
Strong PEA Results Validate Decision to
Acquire 100% Interest in Back Forty
TSX: AQA | INVESTOR PRESENTATION
6
Back Forty | Production Highlights
Payable Metals Mix
Production Parameters
Mine Life
16 years
Throughput
5,350 tpd
Silver | 5 %
Lead | 1%
Copper|
14%
Total Payable Production
Gold
532K oz
Zinc
721M lbs
Gold | 40%
Copper
74M lbs
Silver
4,645K oz
Lead
21M lbs
Zinc|
40%
Diverse Revenue Streams
TSX: AQA | INVESTOR PRESENTATION
7
Back Forty | Recovery Rates
Average Metallurgical Recovery*
Flotation
Only
Leach
Only
The Project will support 4 product streams:
Ore Type
Recovery %
Cu**
82.5%
Pb**
72.9%
Zn**
91.0%
Au
50.5%
Ag
46.6%
Au
90.1%
Ag
45.3%
Gold – Silver doré
Zinc concentrate
Copper concentrate
Lead concentrate
*As calculated from 2014 PEA (Base Case). **Values are weighted averages of ore types where the
specified metal is recovered
Solid Recovery Rates Contribute to Strong Project Economics
TSX: AQA | INVESTOR PRESENTATION
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Back Forty | Sensitivity Analysis
Base Case
-15%
Base Case
Base Case
+ 15%
Gold
$1,099/oz
$1,293/oz
$1,487/oz
Silver
$17.39/oz
$20.46/oz
$23.53/oz
Zinc
$0.82/lb
$0.96/lb
$1.10/lb
Copper
$2.70/lb
$3.18/lb
$3.66/lb
Lead
$0.82/lb
$0.96/lb
$1.10/lb
Pre-Tax
NPV @ 6%
IRR
Payback Period
$122.3M
$282.2M
$440.6M
23.7%
38.8%
52.0%
2.8 years
1.4 years
0.9 years
$95.2M
$210.8M
$324.8M
20.2%
32.0%
42%
3.1 years
1.8 years
1.2 years
After-Tax
NPV @6%
IRR
Payback Period
Economically Viable Against Commodity Price Fluctuations
TSX: AQA | INVESTOR PRESENTATION
9
Back Forty | Mineral Resources*
Category
Tonnes
Au (g/t)
Ag
(g/t)
Cu (%)
Pb (%)
Zn
(%)
Au (oz) Content
Zn (lbs)
Content
Measured
6,700,000
2.16
27.30
0.47
0.18
3.95
465,000
583,000,000
Indicated
8,430,000
1.92
22.24
0.22
0.26
2.36
520,000
439,000,000
M&I
15,130,000
2.03
24.48
0.33
0.22
3.06
985,000
1,022,000,000
Inferred
2,340,000
2.07
26.53
0.36
0.33
2.20
156,000
113,000,000
*Mineral resources are not mineral reserves and do not have demonstrated economic viability. NSR cut-off values for the 2013 resource estimate were based on
metal price assumptions of US$0.96 per pound zinc, US$3.65 per pound copper, US$1.01 per pound lead, US$1456.36 per troy ounce gold and US$27.78 per troy
ounce silver. Metallurgical recoveries were determined and applied for each of the metallurgical domains determined for the deposit. Cut off values were
determined for each of the metallurgical domains contained in the optimized open pit were based on NSR values. Average cut-off value for the open-pit resource
contained within an optimized pit shell was US$27.75. Cut off values were determined for each of the metallurgical domains based on NSR values. Average cut-off
value for the underground resources outside of the optimized pit shell was US$66.45. Refer to the February 4, 2013 press release for full cautionary language and
disclosures.
~90% of Resources are in M&I Category
TSX: AQA | INVESTOR PRESENTATION
10
Project Potential
Low-CAPEX , High-grade Initial Phase
Operation
•
Focus on mining near-surface, high-grade
zones
•
Benefits include:
• Attractive economic returns
• Mitigation against start-up risks
• Significant optionality over the longterm
•
Feasibility study will better define economics
$129.4M
Pre-tax NPV
38.6%
Pre-tax IRR
$100.8M
Initial Capital Cost
Maximize Capital Return in Early Years of Production
TSX: AQA | INVESTOR PRESENTATION
11
Project Potential | Exploration
•
Potential to expand underground resource
•
Ore body open at depth in two directions
•
VMS deposits occur in clusters
•
Focus is on identified gossans
•
Q4 2015 - 1,000 metre near-mine drill program
produced encouraging assay results
Potential to Extend Mine Life and Improve Project Economics
TSX: AQA | INVESTOR PRESENTATION
12
Back Forty | Near-Surface Mineralization
Pit Shell #32 (brown) and
Underground Mining Shapes
(blue) from 2014 PEA
2014 PEA Open Pit
Resource (diluted)
12,256,000 tonnes M+I
244,000 tonnes inferred
Approx. 200 meters
2014 PEA Underground
Resource (diluted and
extracted)
2,734,002 tonnes (M +I)
911,334 tonnes
(Inferred)
Deposit Open at Depth Creates Upside Potential
TSX: AQA | INVESTOR PRESENTATION
13
Upcoming Catalysts
Longer-term
Short-term*
Milestone
Timing
Status
Mine development
Orion financing agreement
Q1 2015
Completed
Submission of permit application
Q4 2015
Completed
Exploration/development of Aquila’s second
generation assets
Start of feasibility study
Q4 2015
Ongoing
Near-mine exploration program
Q4 2015
Ongoing
Metallurgical test work
H1 2016
In progress
Completion of feasibility study
H2 2016
In progress
Generating value from REBgold’s
assets
*Activities are dependent on financing and macro-economic conditions
Unlocking Shareholder Value
TSX: AQA | INVESTOR PRESENTATION
1414
Expanded Management Team
Management
Directors
Barry Hildred, CEO - Current Chairman of Aldridge Minerals. Founder and Former
President of TMX Equicom + 20 years of capital markets experience.
Edward Munden, Interim Chairman - Currently a Director and Co-Founder of private
investment company and a Director of Mustang Minerals. Co-founded a NASDAQ-traded
energy company and held senior positions until it was sold in 2001, +35 years of experience in
energy, mining and technology industry.
Andrew Boushy, Vice President , P.Eng - 25+ years of experience in project delivery,
engineering design, strategic planning, contract management, construction and
operational improvement. Previously with Ausenco Canada, Mining and Minerals,
Xstrata Nickel, Kinross Gold, Hatch Africa and the Nuclear Waste Management
Organization.
Barry Hildred (refer to Management column)
Stephanie Malec, CFO – 15+ years of experience combining accounting, financial
reporting, public markets and mining sector work. Previously with Malbex Resources,
Starfield Resources, Dundee Precious Metals, Falconbridge and
PriceWaterhouseCoopers
Peter M.D. Bradshaw - Currently a Director with First Point Minerals, 45 years of international
mineral exploration experience in over 30 countries with Barringer Research, Placer Dome and
Orvana Minerals.
Tom Quigley, VP Exploration P. Geo - Former President and CEO of Aquila Resources
Inc. & current President of Minerals Processing Corporation. Qualified Person for
Aquila Resources.
Kevin Drover – President & CEO of Aurcana Corporation since 2014. 40+ years of experience
in management, operations and project development with mining companies with assets
around the world, including Kinross Gold, Benz Mining, Oracle Mining and Glencairn Gold.
Stephen Fabian – Currently a Principal and Director of Genus Capital Fund, listed on the LSE as
the Baker Steel Resource Trust. Founder of South American Ferro Metals and formerly held
positions with County NatWest and Rock Capital Partners. +25 years of experience in the
mining and finance industry.
Andrew W. Dunn – Currently Managing Partner of Canadian Shield Capital and Senior Advisor
of Atlas Partners. Previously spent 27 years at Deloitte, and served as Vice Chair of Deloitte
Canada and Chair of its Client Cabinet
Committed to un-locking Back Forty’s Potential
TSX: AQA | INVESTOR PRESENTATION
15
Capital Structure
CURRENT CAPITAL STRUCTURE
TSX
AQA
Share Price (As of Jan. 8 2016)
$ 0.17
Avg. 3-mth volume
59,543
52-week range
$0.10 - $0.24
Market Cap.
$ 37.6M
Shares O/S
220.9M
Year End
December 31
CURRENT OWNERSHIP STRUCTURE
Retail 40%
Insiders &
Institutional
60%
MAJOR INSTITUTIONAL SHAREHOLDERS
Hudbay Minerals
16%
Ruffer
14%
Orion
14%
Baker Steel
8%
Strong Shareholder Support & Investor Backing
TSX: AQA | INVESTOR PRESENTATION
16
Investment Highlights
•
Focused on high-grade polymetallic
assets in the Great Lakes Region
•
Flagship Back Forty demonstrates
strong economics
•
Strong balance sheet post close of
$20.75M financing by Orion
•
Upside potential to improve
economics and expand deposit
•
Potential to unlock value with nearterm permitting and feasibility study
milestones
TSX: AQA | INVESTOR PRESENTATION
$282.2M
38.8%
Pre-tax NPV
Pre-tax IRR
1717
Contact Information
Barry Hildred, CEO
Aquila Resources
416. 477. 6985
www.aquilaresources.com
Joe Racanelli
Investor Relations | NATIONAL Equicom
416. 586. 1943
[email protected]
TSX: AQA | INVESTOR PRESENTATION
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Appendix
TSX: AQA | INVESTOR PRESENTATION
1919
Back Forty | Permitting Status
• Mine Permit application submitted to Michigan Department of Environmental Quality
• Application supported by Foth Infrastructure & Environment LLC and previous
work completed by Hudbay
• Application requests permits for
• Nonferrous Metallic Minerals Mining
• National Pollutant Discharge
• Elimination System
• Wetlands Protection
•
Application Aquila’s underscores commitment to mining responsibly and complying
with Michigan’s regulations
Permit Precedents in Place
TSX: AQA | INVESTOR PRESENTATION
20
Back Forty | Infrastructure
Power Supply
• 4.5km power transmission line will be built from an existing 138kV transmission line northeast
of the property
• New power substation planned at the southeast corner of the project will provide power for the
plant facility and mine site with 13.8kV distribution voltage
Roads/Access
• Improvements to existing near and on-site roads, construction of new haulage roads
• Rail line is situated ~13km east of the project site
• Ports for ocean going vessels in Escanaba and Menominee, within 50 miles of project
Labour
• Skilled local workforce readily available
Well-Developed Infrastructure
TSX: AQA | INVESTOR PRESENTATION
21
Second Generation Assets
Bend Copper-Gold Project
•
•
100%-owned VMS occurrence located in the Penokean Volcanic Belt
>14,000 meters of historical drilling delineating a non-43-101 compliant resource*
•
2.7 M tonnes grading 2.4% copper, 1.4 g/t gold and 13.7 g/t silver in copper zone
•
•
1.12 M tonnes grading 4.7 g/t gold and .31% copper in gold zone
Aquila drilling in 2012 indicates major expansion
Reef Gold Project
•
•
•
100%-owned, high- grade gold mineralization potentially amenable to low-cost, open-pit mining
Historic drilling delineated a non-43-101 compliant resource* of 140,564 contained gold ounces (412,410 tonnes
@ 10.6 g/t)
•
Phase III drill program to expand and define resource
Aquila drilling shows broad zones of gently-dipping mineralization open in all directions
*The Company is not treating the historical estimates as current mineral resources or mineral reserves and the historical estimates should not be relied upon or understood to indicate the existence of reserves or resources.
Attractive Pipeline of Future Projects
TSX: AQA | INVESTOR PRESENTATION
22
Zinc | Declining Supply to Create Global Deficit
•
Demand continues to grow 3% - 5%
annually
• Increasing in line with global
economic growth
• Almost 50% is used in galvanizing
steel
10% - 14% of global production is set to
come offline within next 2-3 years
•
No significant new deposits discovered
since 1990s
•
New zinc start-ups will be delayed due to
current capital constraints
Supply vs. Demand*
17500
146kt
Global zinc
deficit in 2018
(kt)
•
16037
15891
15000
2018
Total Refined Supply
Total Consumption
*Source: BMO Capital Markets
TSX: AQA | INVESTOR PRESENTATION
23
Other Assets from Merger with REBgold
•
Potential to earn 50% - 80% interest on properties in Finland from Joint Venture with
Belvedere Resources:
• Kiimala
• Seven drilled gold occurrences occurring from surface, further exploration targets have been
identified
• Rantasalmi
• Multi-million ounce target potential
• Three gold deposits identified that have high-grade and bulk tonnage potential
• Mineralization open at depth and strike
•
REBgold’s proprietary bioleaching technology
• Utilizes bacteria in the extraction of precious and base metals from complex refractory ores
and concentrates
Portfolio of Assets Generate Further Shareholder Value
TSX: AQA | INVESTOR PRESENTATION
24
Milestone Payments to Hudbay Minerals
Amount
Timeline
$3 Million
• Payable upon completion of financing tied to start of construction
at Back Forty
• Up to 50% payable in Aquila shares
$2 Million
• Payable 90 days after start of commercial production
$2 Million
• Payable 270 days after start of commercial production
$2 Million
• Payable 450 days after start of commercial production
• First milestone payment due January 2024
• 1% NSR was repurchased from Hudbay in April 2015 concurrent
with Orion transaction
Based on purchase of Hudbay’s 51% interest in Back Forty
TSX: AQA | INVESTOR PRESENTATION
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