Latest Company Presentation - Prophecy Development Corp

Silver Zinc Lead
District Project
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Investor Presentation – April 6, 2016
Forward Looking Statements
This presentation may include certain “forward-looking statements” within the meaning of applicable Canadian securities legislation. All statements,
other than statements of historical fact, included herein, including, without limitation, statements regarding future plans and objectives of the
Company, projected capital and operating expenses, permitting approvals, timetable to permitting and production and the prospective
mineralization of the properties, are forward-looking statements that involve various risks, assumptions, estimates and uncertainties. Generally,
forward looking information can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is
expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such
words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". There
can be no assurance that such statements will prove to be accurate, and actual results and future events could differ materially from those
anticipated in such statements. Forward-looking information is subject to known and unknown risks, including but not limited to: general business,
economic, competitive, geopolitical and social uncertainties; the actual results of current exploration activities; acquisition risks; and other risks of
the mining industry. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those
contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. These
statements reflect the current internal projections, expectations or beliefs of Prophecy Development Corp. (“the Company” or “Prophecy”) and are
based on information currently available to the Company. The Company does not undertake to update any forward-looking information, except in
accordance with applicable securities laws.
The technical content of the Company’s presentation was reviewed and approved by Christopher M. Kravits CPG, LPG., who is a Qualified Person
within the meaning of National Instrument 43-101. Mr. Kravits is a consultant to the Company and serves as its qualified person and general mining
manager. Mr. Kravits has reviewed and approved the scientific and technical aspects of this presentation.
Cautionary Note to U.S. Investors Concerning Estimates of Measured, Indicated or Inferred Resources – The information presented uses the terms
“measured”, “indicated” and “inferred” mineral resources. United States investors are advised that while such terms are recognized and required by
Canadian regulations, the United States Securities and Exchange Commission does not recognize these terms. “Inferred mineral resources” have a
great amount of uncertainty as to their existence, and as to their economic and legal feasibility. It cannot be assumed that all or any part of an
inferred mineral resource will ever be upgraded to a higher category. Under Canadian rules, estimates of inferred mineral resources may not form the
basis of feasibility or other economic studies. United States investors are cautioned not to assume that all or any part of measured or indicated
mineral resources will ever be converted into mineral reserves. United States investors are also cautioned not to assume that all or any part of an
inferred mineral resource exists, or is economically or legally mineable.
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6 Year PCY Chart (365.6 million shares O/S)
43-101
resource
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Potosi : World’s Premier Silver Address
Potosi Department, Bolivia, 30 million oz Ag produced in 2014
Cerro Rico (200km NE Pulacayo)
Founded 1545, 1.8 billion oz Ag produced
2014 Coeur produced 6 mm oz Ag
San Cristobal (100km SW Pulacayo)
Third largest silver mine by reserve (500+ mm oz)
2014 Sumitomo produced 20+ mm oz Ag
San Vicente (150km SE Pulacayo)
2014 Pan American Silver produced 4 mm oz Ag
Pulacayo
Founded 1545, Rediscovered 1833
670+ mm oz Ag, 200,000t Pb, 200,000t Zn produced
100% acquired by Prophecy from Apogee Silver Ltd in January 2015
Prophecy to announce construction decision in 2016
source: wikipedia, company websites, SERGEOTECMIN bulletin no. 30, 2002
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Why Pulacayo? $30 mm, 8 yr work in progress
Exploration Potential
Resource with Permitted Operation
• Pulacayo Underground Resource
@ 500 AgEq Cutoff
• Paca Resource
@ 300 AgEq Cutoff
• Mining and Milling Construction Permitted
•
•
•
•
•
Infrastructure in place
•
•
•
•
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90,000+ meters drilled for Pulacayo & Paca
Open pit, Underground, Tailings
Several exploration areas yet to be drilled
District Style Silver – Zinc – Lead play
Rare Antimony Surface Discoveries
Strong Local Community Relations
Power and water onsite
20km paved road to rail
Rail connects to Chilean Port
Trial Toll Mill Concentrate sold to Trafigura
•
•
•
•
200 years mining tradition
Generational miners
Supportive of Prophecy’s operation
Pulacayo town within 1km from mine
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Pulacayo Underground Resource Estimate
Pulacayo Mineral Resource Statement – Effective June 16th, 2015
Ag Eq. Cut-Off
(g/t)
400
500*
600
Category
Tonnes**
Indicated
Inferred
Indicated
Inferred
Indicated
Inferred
2,080,000
480,000
1,270,000
350,000
750,000
170,000
Ag (g/t) Zn (%)
455
406
530
419
608
394
3.19
3.93
3.63
4.58
4.02
6.75
Pb (%)
Ag Eq.
(g/t)
Ag
(MOz)
Zn
(Mlbs)
Pb
(Mlbs)
2.18
2.08
2.51
2.47
2.91
3.49
594
572
688
620
785
710
30.4
6.3
21.7
4.7
14.7
2.2
146.3
41.6
101.6
35.3
66.5
25.3
100
22
70.3
19.1
48.1
13.1
Prepared in accordance with the CIM Definition Standards for Mineral Resources and Mineral Reserves referenced
in National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”). The effective date of the
estimate is June 16th, 2015. The mineral resource estimate was prepared by Mercator Geological Services Limited
(“Mercator”) under supervision of Michael Cullen, P.Geo., who is an independent Qualified Person under NI 43-101.
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Notes:
Mineral resources are estimated in conformance the CIM Standards referenced in NI 43-101.
Raw silver assays were capped at 1,700 g/t, raw lead assays were capped at 15% and raw zinc assays were capped
at 15%.
Silver equivalent Ag Eq. (g/t) = Ag (g/t)*89.2% + (Pb% *(US$0.94/ lb. Pb /14.583 Troy oz./lb./US$16.50 per Troy oz.
Ag)*10,000*91.9%) + (Zn% *(US$1.00/lb. Zn/14.583 Troy oz./lb./US$16.50 per Troy oz. Ag)*10,000*82.9%).
Metal prices used in the silver equivalent calculation are US$16.50/Troy oz. Ag, US$0.94/lb Pb and US$1.00/lb. Zn.
Metal recoveries of 89.2% Ag 91.9% Pb 82.9% Zn used in the silver equivalent reflect historic metallurgical results
disclosed by Apogee Silver Ltd.
Metal grades were interpolated within wireframed, three dimensional silver domain solids using Geovia-Surpac Ver.
6.6.1 software and inverse distance squared interpolation methods. Block size is 10m(X) by 10m(Z) by 2m(Y).
Historic mine void space was removed from the model prior to reporting of resources.
Block density factors reflect three dimensional modeling of drill core density determinations.
Mineral resources are considered to have reasonable expectation for economic development using underground
mining methods based on the deposit history, resource amount and metal grades, current metal pricing and
comparison to broadly comparable deposits elsewhere.
Rounding of figures may result in apparent differences between tonnes, grade and contained ounces.
*Mineral resource statement cut-off value; resource statement values are presented in bolded form.
**Tonnes are rounded to nearest 10,000.
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Pulacayo 70,000 meter close-spaced drilling
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Pulacayo Drilling Highlights*
hole Nº from - to (m) int (m)
PUD005
PUD007
PUD057
PUD069
PUD109
PUD118
PUD134
PUD150
PUD159
PUD170
96.2 – 108.0
70.0 – 96.8
374.0 – 378.0
281.0 – 294.0
293.6 – 298.4
174.0 – 184.0
128.2 – 151.5
290.0 – 302.0
343.0 – 354.0
237.0 – 239.0
11.9
26.8
4.0
13.0
4.8
10.0
23.3
11.2
11.0
2.0
Ag
(g/t)
689
517
1,184
624
3,607
1,248
514
882
790
3,163
Pb
(%)
1.9
2.3
0.8
2.1
3.8
1.7
1.3
0.4
0.6
0.1
Zn %
1.4
4.2
2.3
4.2
4.1
2.6
1.9
0.6
0.6
0.9
Dist from
adit (m)
-67.5
-44.5
-137.5
-46.0
-30.4
-93.9
-55.7
-75.2
-116.6
-32.5
PUD 109:
4.8 meters @ 3,607g/t Ag
3.8% Pb, 4.1% Zn
~200m from surface
*Total 137 holes:
29 holes (21%) Ag 1,000 to 10,000 g/t
67 holes (49%) Pb or Zn >5%
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Pulacayo Underground Resource
4 to 8 meter thickness
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Paca Resource Estimate
Paca Mineral Resource Statement – Effective September 9, 2015
Ag Eq. Cut-Off
(g/t)
Category
Tonnes**
Pb (%)
Ag Eq.
(g/t)
Ag
(MOz)
Zn
(Mlbs)
Pb
(Mlbs)
200
Inferred
2,540,000
256
1.10
1.03
342
20.9
61.6
57.7
300*
Inferred
1,260,000
363
0.98
1.02
444
14.7
27.2
28.4
400
Inferred
650,000
462
0.90
1.00
538
9.7
12.9
14.3
500
Inferred
330,000
558
0.79
1.04
631
5.9
5.7
7.6
Ag (g/t) Zn (%)
Prepared in accordance with the CIM Definition Standards for Mineral Resources and Mineral Reserves referenced
in National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”). The effective date of the
estimate is September 9, 2015. The mineral resource estimate was prepared by Mercator Geological Services
Limited (“Mercator”) under supervision of Michael Cullen, P.Geo., who is an independent Qualified Person under NI
43-101.
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Notes:
Mineral resources are estimated in conformance the CIM Standards referenced in NI 43-101.
Raw silver assays were capped at 1,050 g/t, raw lead assays were capped at 5% and raw zinc assays were capped at 5%.
Silver equivalent Ag Eq. (g/t) = Ag (g/t) + (Pb% * (US$0.94/lb. Pb/14.583 Troy oz./lb./US$16.50 per Troy oz. Ag)*10,000) +
(Zn% * (US$1.00/lb. Zn/14.583 Troy oz./lb./US$16.50 per Troy oz. Ag)*10,000; 100% metal recoveries are assumed based
on lack of comprehensive metallurgical results.
Metal prices used in the silver equivalent calculation are US$16.50/Troy oz. Ag, US$0.94/lb Pb and US$1.00/lb. Zn and
reflect those used in the June 16, 2015 Pulacayo mineral resource estimate by Mercator.
Metal grades were interpolated within wireframed, three dimensional solids using Geovia-Surpac Ver. 6.7 software and
inverse distance squared interpolation methods. Block size is 5m (X) by 5m (Z) by 2.5m (Y). Historic mine void space was
removed from the model prior to reporting of resources.
The block density factor of 2.26 reflects the average value of 799 density measurements.
The mineral resource is considered to have reasonable expectation for economic development using underground
mining methods based on the deposit history, resource amount and metal grades, current metal pricing and comparison
to broadly comparable deposits elsewhere.
*The resource estimate cut-off value is 300 g/t Ag Eq. and resource estimate values are presented in bold type.
**Tonnes are rounded to nearest 10,000
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Paca Drilling Highlights (18,160 meters drilled)
hole Nº
PND003
PND008
PND029
PND031
PND062
ESM2
from - to (m)
int (m)
11.0 – 28.0
18.0 – 33.5
12.0 – 22.3
0.0 – 37.0
10.0 – 52.0
0.0 – 38.0
17.0
15.5
10.3
37.0
42.0
38.0
Ag
(g/t)
260
314
436
217
406
411
Pb
(%)
0.9
1.0
0.0
0.9
0.8
1.4
Zn %
0.1
0.4
0.0
0.3
0.1
1.2
Dist from
surface (m)
-7.8
-12.7
-8.5
0.0
-7.1
0.0
PND062
PND008
PND029
ESM2
Paca Open Pit Resource
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Paca : Near Surface Mineralization
Ag Eq (g/t)
0-100 g/t
100-200 g/t
200-300 g/t
300-400 g/t
400-500 g/t
500g/t+
Elevation Level
Within 75m of Surface
Within 100m of Surface
Within 125m of Surface
Within 150m of Surface
Within 175m of Surface
% of Total Resource Tonnes
at 300 g/t Ag Eq.
63.42%
95.61%
99.60%
99.93%
100.00%
Open
Open
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Open
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Tailing Piles - Sampling Results
Tailings
Piles
Pulacayo 2
Pero 1
Pero 2
Pulacayo 3
Ag
g/t
112
302
219
380
Au
In g/t
g/t
1.2 7.1
0.2 3.4
0.2 18.1
1.0 69.4
Pb %
Zn %
0.21
1.00
1.01
1.76
0.23
0.31
0.51
1.30
#
Sample
105
36
4
5
Tailings
Tailings
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Typical Mining and Processing Work Flow
Grinded on site
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High grade concentrate
produced on site
Concentrate moved
from rail to port
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Silver District and Expansion Potential
Paca Resource
Pacamayo Anomaly
El Abra Anomaly
7km
Pulacayo Resource
Pulacayo mine access tunnel
(dotted line)
Nap Pero Anomaly
Anomaly found during Plant
condemnation drilling
Pulacayo
Town
Position of Planned Mill
Resource
Tailings
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Resource drilling only covered approximately 30% of the known Tajo vein
system which is open beyond 3km strike length and 1km depth.
Prior operator had developed much larger resource at lower cut-off.
Drilling along strike and down dip could discover additional resources.
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El Abra 250m x 110m: Surface Outcrops
Sample
EA-049
EA-51
EA-066
EA-065
EA-48
Interval (Chip
Channel Sampling)
2 meter
2 meter
2 meter
2 meter
2 meter
Ag (g/t)
Sb (%)
Pb (%)
5.6
5.6
21.5
38.9
3.2
2.54
0.90
0.59
0.48
0.49
1.56
0.30
0.73
0.66
0.44
Ag Eq
(g/t)
502.7
173.4
149.8
145.2
103.4
Sb Eq
(%)
3.63
1.25
1.08
1.05
0.75
Pacamayo 2m x 26m: Underground Samples
Sample
MPU-77
MPU-69
MPU-70
MPU-74
MPU-75
17
Interval (Chip
Channel Sampling)
1 meter
0.60 meter
0.60 meter
1 meter
1 meter
Ag (g/t)
Sb (%)
Pb (%)
Zn (%)
Cu (%)
7,379.5
3,867.5
2,547.5
1,330.0
135.0
2.49
1.79
0.85
2.25
1.34
17.60
2.29
0.80
0.01
0.01
6.96
2.40
1.15
0.42
0.29
3.10
1.97
1.06
1.60
1.24
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Ag Eq
(g/t)
8,982.6
4,516.6
2,859.4
1,820.4
457.7
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Paca North 400m x 100m: Surface Outcrops
Sample
PC-011
PC-005
PC-016
PC-002
PC-017
Interval (Chip
Channel Sampling)
2 meter
2 meter
2 meter
2 meter
2 meter
Ag (g/t)
Pb (%)
Zn (%)
833.0
377.0
330.0
226.0
219.0
0.03
1.64
0.06
2.16
0.10
0.03
0.05
0.04
0.08
0.03
Ag Eq
(g/t)
835.3
434.8
333.5
303.1
223.6
Pero 400m x 300m: Surface Outcrops
Sample
PR-067
PR-163
PR-121
PR-007
PR-032
18
Interval (Chip
Channel Sampling)
1 meter
1 meter
1 meter
1 meter
1 meter
Ag (g/t)
Sb (%)
Pb (%)
27.0
118.0
62.8
28.6
39.7
0.65
0.22
0.04
0.03
0.52
3.65
2.13
3.39
4.32
1.61
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Ag Eq
(g/t)
251.0
227.7
189.3
187.7
169.6
Sb Eq
(%)
1.79
1.62
1.35
1.34
1.21
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2006
(dirt road Uyuni to Pulacayo, now paved)
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Today: Extensive Infrastructure and Development
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On-site and Nearby Infrastructure
Approved Mill Site
Power on site
Core Storage of Drill Results
Uyuni Rail Station to Port of Antofagasta
Approved Tailing Site
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Pulacayo Community and Cooperatives
Prophecy has great relationship with local Pulacayo community who are proud of its 200 years of mining tradition.
Pulacayo cooperative and Prophecy share the common goal to bring Pulacayo mine to production and restore
Pulacayo town to full employment and prosperity.
February 2015
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Bolivia Upgraded as Growth Quickens
FT: On Wednesday (July 15, 2015): the credit rating agency Fitch upped the Andean country's rating by one notch –
to 'BB' from 'BB-', with a stable outlook. The move comes a year after Standard & Poor's upgraded Bolivia's rating,
Since Mr Morales took office nine years ago, a combination of gas exports to neighbouring Argentina and Brazil —
plus mineral shipments to Asia —, coupled with prudent macroeconomic and fiscal policies, and popular welfare
programmes, have tripled the size of Bolivia's economy to about $30bn.
Despite Mr Morales's penchant for nationalisations and his sometimes fierce anti-capitalist rhetoric — and unlike
other leftist allies, such as embattled Venezuela — Bolivia has taken prudent advantage of the now-fading
commodities boom.
Under Morales, GDP growth has averaged 5 per cent a year, poverty rates have almost halved, while a gas boom
fuelled a consumption boom. Fitch forecasts that economic activity could keep pace at an average 4.4% in 20152017, driven by robust public investment in diversification and industrialization projects and eased domestic
liquidity conditions.
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Bolivia Upgraded as Growth Quickens (Cont’d)
Bolivia's financial position has been bolstered by its foreign reserves standing at almost $15bn. But as gas, which is
set in relation to a basket of fuel oils that is sensitive to the international price of crude, accounts for about 46 per
cent of Bolivia's exports. Fitch does not seem to be too worried. As they said in a statement:
Bolivia has improved the sustainability of its hydrocarbons production, the largest source of exports, fiscal revenue
and domestic investment. Bolivia's robust external buffers and ample fiscal policy space render its economy betterplaced to absorb adverse shocks and adopt counter-cyclical policies than other commodity exporters in the 'BB'
category.
The country's finance minister, Luis Arce, recently told Reuters he is pondering issuing up to $1bn billion in
international bonds this year to boost public spending.
After a stream of state takeovers some investors may be cautious. However, for Fitch:
Regulatory uncertainty and nationalisation risks have eased. Government and businesses agreed on reforms to the
investment regime that facilitate private participation in sectors that are not subject to state control and recognize
independent conciliation and arbitration for contractual disputes. The authorities ceased nationalizations in 2013
and have paid USD690 million (2% of GDP) in compensation to multinational companies.
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Next Steps
Target Concentrate off taker, Equipment Supplier, and Equity to finance construction to production in 2016
2015 H2
2015 H2
2016
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•Disclose per NI 43-101 (at 500g/t AgEq cut off) resource estimate at Pulacayo Underground
•Disclose per NI 43-101 (at 300g/t AgEq cut off) resource estimate at Paca Open Pit
• Evaluate concentrate off take agreements and project financing
• Evaluate mill purchase options for 500 tpd operation (annual mining rate > 140,000 tonnes)
• Construction decision, including Foundation, Mill Assembly, Mine Development, Water and Power
• Seek Concentrate off taker, Equipment Supplier, and Equity to finance construction
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Antimony (Sb) Market: Batteries, Flame Proofing
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Management
John Lee, CFA
CEO and Chairman
John Lee is an entrepreneur with degrees in economics and engineering from Rice University.
under John’s leadership, Prophecy raised over $100 million and acquired substantial silver
assets in Bolivia and coal assets in Mongolia.
Damdinjav Davaajav
Mongolia Advisor
Mr. Damdinjav has over 20 years of power distribution and generation experience in
Mongolia. Mr. Damdinjav was Deputy Director of the energy department at Newcom Group.
Chris Kravits, CPG,LPG
Chief Geologist
Irina Plavutska
CGA: Chief Financial Officer
Bekzod Kasimov
Vice-President, Operations
Tony S.K. Wong
B.A., J.D: General Counsel &
Corporate Secretary
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Christopher M. Kravits, P.Geo. Holds a Master of Science in Geology, has been a professional
geologist for over 38 years and is a Qualified Person within the meaning of National
Instrument 43-101.
Ms. Plavutska is a professional accountant with over 20 years of diverse international
experience in financial reporting, auditing, and accounting. She is a member of Certified
General Accountants Association of British Columbia.
Mr. Kasimov has served on the board of directors of several Mongolia-focused companies
and holds a Master of Science in Finance from the Stockholm School of Economics. Mr.
Kasimov is fluent in English and Russian.
Mr. Wong is a lawyer who has practiced law throughout Canada for over 12 years. He served
as a senior securities regulator in British Columbia from 2005 to 2010
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Silver market is relatively small, 246 million oz coins and
bars investment demand amount to only $4 billion at
$16/oz, JPM recently started accumulating silver ETF
Silver, Zinc, Lead, Antimony
Think Prophecy
2013 Silver coins and bars demand increased 76% from
2012, robust investment demand at current price levels
(@$15 to $20/oz)
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S/O 365mm, 52week $0.08 to $0.01
[email protected]
+1.604.569.3661
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Appendix
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Pulacayo Historic Resource Estimate*
Ag
Pb
Zn
Ag
Pb
Zn
g/t
%
%
Oz
M.Lbs. M. Lbs.
Combined Open Pit and Underground Resources including Oxide and Sulphide Zones
Open Pit Resources (Base case 42° Average Pit Wall Slope Angle)
Open Pit Indicated
Oxide
1,500,000 95.9
0.96
0.13
4,626,000 NA
NA
Open Pit Inferred
Oxide
248,000 71.2
0.55
0.31
569,000 NA
NA
Open Pit Indicated
Sulphide
9,283,000 44.1
0.66
1.32 13,168,000 135.90
269.54
Open Pit Inferred
Sulphide
2,572,000 33.4
0.92
1.36
2,765,000 51.99
76.88
Waste Rock
71,679,000 NA
NA
NA
Strip Ratio 5.3 : 1
Underground Resources (All blocks below 4,159 m ASL with NSR>$58 USD)
Underground Indicated Sulphide
6,197,000 213.6
0.86
1.74 42,547,000 117.5
237.72
Underground Inferred Sulphide
943,000 193.1
0.43
1.61
5,853,000
8.94
43.47
Total Indicated
Oxide+Sulphide 16,980,000 110.5
0.74
1.49 60,341,000 253.4
507.26
Total Inferred
Oxide+Sulphide 3,763,000 75.9
0.79
1.43
9,187,000 60.93
120.35
The historic Pulacayo mineral resource estimate by Mercator that was prepared for Apogee has an effective date of
September 28, 2012. The same estimate and associated model were subsequently used as the resource base of the
Pulacayo project feasibility study prepared by TWP Sudamerica Ltd., with an effective date of January 17, 2013.
Results of both projects were disclosed previously by Apogee in accordance with NI 43-101 and are now historic in
nature*.
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30
Resource
Type
Tons
Notes
*The historical estimate is not considered reliable because it is three and a half years old. It is presented here to
assist the reader when considering the current Pulacayo deposit resource estimate. Though some of the methods
and assumptions used in the historical estimate are still valid, others are not. The historical estimate assumed a 42°
pit wall slope for the open pit resources. The key parameters included an NSR cut-off of US$13.20 for open pit
sulfide resources and US$23.10 for open pit oxide resources, and US$58.00 for underground resources below 4159
m ASL, metal prices of US$25.00/oz silver, US$0.89/lb lead, and US$1.00/lb zinc where lead and zinc do not
contribute to revenue in the oxide zone, and contributing 1.0 meter assay composites were capped at 1500 g/t Ag,
15% Pb, and 15% Zn. The key methods included use of inverse distance squared algorithm to estimate grade,
variography to assess grade distribution, and use of a proprietary NSR calculator. The historical estimate uses the
same resource categories described in Sections 1.2 and 1.3 of NI 43-101. The historical estimate does not include
any more recent estimates or data available to the issuer. The work needed to upgrade the historical estimate as
current mineral resources is to use current metal prices in the NSR calculation. A qualified person has not done
sufficient work to classify the historical estimate as current mineral resources. The Company is not treating the
historical estimate as current mineral resources.
31
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Paca Historic Resource Estimate
Resource Class
Open Pit Inferred
Tonnes*
18,416,100
Ag
g/t
43.04
Pb
%
0.68
Zn
%
1.16
Ag
Pb
oz
Million lb
25,484,000 276.08
Zn
Million lb
470.96
*Rounded; strip ratio 3.1t to 1t for constraining pit shell. The historic Paca deposit mineral resource estimate by
Micon was prepared for Apogee and has an effective date of January 16, 2007. The estimate was disclosed
previously by Apogee in accordance with NI 43-101 and is now historic in nature. It is presented here to assist the
reader in considering the current Paca deposit resource estimate. The historical estimate is not considered relevant
or reliable because it is over nine years old. Though some methods and assumptions used are still valid others are
not. The historical estimate assumed the up-dip and down-dip limits of the mineralization domains to be the lesser
of half of the distance to the next barren drill hole or 25 metres, not to cap grade values, and a 45° pit wall slope for
the open pit resources. The key parameters included a gross metal value cut-off of US$ 20 for mineralized areas and
metal prices of US$10.43/oz silver, US$0.55/lb lead, and US$1.30/lb zinc. The key methods included use of length
weighted composite calculation, inverse distance squared algorithm to estimate grade, variography to assess grade
distribution, and a proprietary NSR calculator. The historical estimate uses the same resource categories described
in Sections 1.2 and 1.3 of NI 43-101. The historical estimate does not include any more recent estimates or data
available to the issuer. The work needed to upgrade the historical estimate as current mineral resources is to use
current metal prices. A qualified person has not done sufficient work to classify the historical estimate as current
mineral resources. The issuer is not treating the historical estimate as current mineral resources.
32
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Ulan Ovoo Project Summary
Mongolia, Russia & China (via Manzhouli)
Ulaan Ovoo Coal Seam
Ulan Ovoo Deposit Cross Section
Source: Prophecy Development Corp.
33
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Ulaan Ovoo Project Summary
• Over 200 Mt M&I resource*, Single coal seam 40meter+, open pit mining, low strip ratio;
• 5,000 kcal/kg, low ash 10% & low sulfur 1%;
• Customers – Mongolia, Russia, China (via Manzhouli);
• Strategically located just 17 km from the Russian border;
• Invested over US$60M in the mine development, infrastructure and mine fleet;
• Low risk project, fully permitted, low mining cost, and great leverage to thermal coal price
* - Wardrop Engineering (Tetra Tech) affirmed 174 Mt of measured and 34 Mt of indicated coal resources in 2010.
34
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Russian Market for Ulaan Ovoo
Blending Plant
Demand: 2mt pa
Gusinoozersk Power Plant
Demand: 3 mt pa
120 km from Mongolian – Russian border
Ulan- Ude Power Plant 1 & 2
Ulan-Ude city (boilers, residential)
Demand: 2 mt pa
220 km from Mongolian – Russian
border
Tugnuiskiy Mine
Zeltura Border
Kharanor Power Plant
Demand: 0.5mt pa
~300kms
Ulaan Uvoo
Source: Prophecy Development Corp.
35
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Chandgana Project Summary
Chandgana
Power Plant
Source: Turquoise Hill Resources, Prophecy Development Corp.
36
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Chandgana Project Summary
•
•
•
•
Advanced Greenfield Mine Mouth Power Project in Mongolia
Phase 1 – 300MW, phase 2 – 300 MW
Mongolia: Fast growing country in need of energy
Mine mouth plant next to coal deposit (633mt Measured and 539mt Indicated)
• Central location near existing Mongolian power grid
• Coal mining and power plant construction licenses obtained
• EIA and Land Use Rights obtained
• Concession Agreement, PPA and Tariff application submitted
• EPC contracts finalized
Target Next Steps:
• Award of the EPC contract: 2015
• Signing of the Concession Agreement and Power Purchase Agreement: 2016
• Project Financing (Debt + Equity): 2017
*2010 Technical Report by Kravits Geological Services disclosed
• Construction and COD: 2018 - 2021
according to NI 43-101
2007 Technical Report by Behre Dolbear disclosed according to NI
43-101
37
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Chandgana Power Project Location
Chandgana aerial
view, 100 sq km land
> 1 bt coal, featuring
40m thick coal seam
outcrop
38
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Chandgana Power Project Benefits to Mongolia
• Contribute to pollution reduction - Various studies have linked Ulaanbaatar air pollution to
respiratory death and women miscarriages. Chandgana power plant will eliminate the need
of additional power plants in Ulaanbaatar and reduce dependence on Power Plant #3 and
#4, which emit heavy nitrogen and sulphur oxides and harmful particulates due to their age.
• Save water, coal transportation and operational cost - Chandgana power plant will be built
next to the Chandgana coal mine, 300 km east of Ulaanbaatar. This will avoid transporting 2
to 4 millions tonnes of coal to congested city (more than 100 wagons per day). Water will be
extracted from the mine and avoids sharing precious water resource (up to 6 million tonnes
per year, 16,000 tonnes per day) within city of Ulaanbaatar. Water scarcity problem will
emerge in 2015 in Ulaanbaatar, and intensify from 2020 onwards. Assuming each UB
resident is consuming 20 liters of water a day, a new power plant will take water away from
about 800,000 residents annually.
39
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Chandgana Power Project Benefits to Mongolia
• Energy independence - Chandgana power plant project will reduce expensive power import
from Russia and China, and achieve Mongolia energy independence. Mongolia is projected to
import over 450 MW from Russia and China before 2018. Prophecy proposed electricity tariff
will be lower than import with exemption from income tax, VAT, customs duty. The power
plant is planned to start supplying power to Mongolian system by 2021.
• Relief on power supply shortage - Chandgana power plant is planned to supply power to
Mongolian system from 2021. Mongolia GDP roughly doubles every 5 years from mining
production. Currently installed capacity is 800MW and demand expects to double by 2020
• Stabilization of transmission grid - Prophecy will finance transmission line from Baganuur to
Chandgana in phase 1, and Chandgana to Choir in phase 2. The new lines will increase the
network stability and security of electricity supply in the Mongolian power grid.
40
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Chandgana Power Project Benefits to Mongolia
• Good location - Chandgana is 300 km away from Ulaanbaatar, 150 km from Choir (further to
South Gobi) and 120 km from Choibalsan. Therefore, it can potentially provide power to
Ulaanbaatar, South and East.
• Project readiness – Chandgana power plant project is 3 years under development and is
ready for construction with construction license, environmental impact assessment, land use
rights, and mining license. Over 10 EPC contractors expressed interest since 2012 and several
binding EPC proposals have been received with competitive price and short construction
time frame (36 months). Construction can start right after Concession Agreement, PPA, Tariff
Agreement and Financial Close.
• Extension to Coal to Gas and Coal to Liquid project – Chandgana is next to highway, has
plenty of land and estimated 3.5 billion tonnes of coal resource in the nearby basin. Once
power project is operational, it is natural progression to develop coal to gas and coal to liquid
projects.
41
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Chandgana Power Plant - Milestones
License / Approval
Power Plant Detailed Environmental Impact Assessment
Chandgana Coal Mining License
Power Transmission Line EIA Approval
600 MW Chandgana Power Plant Construction License
Chandgana Coal EIA Approval
Power Purchase Agreement
Firm EPC Bids
Chandgana Coal Preliminary Economic Assessment
Project Finance Debt Term Sheet
Geotechnical Study
Chandgana Power Plant Land Right Approval
Water & Power Supplies to Site During Construction Permits
Preliminary Mobilization Work
Electricity Tariff Proposal from the Working Group
Coal Supply Agreement
Application for Concession
Project Qualified under Concession Law
Invitation from Ministry of Economic Development to Negotiate on Concession Agreement #7/2055
Ministry of Industry established working group aiming to expedite Chandgana Concession Agreement
600 MW Chandgana Power Plant EPC Agreement
42
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Date
Nov 2010
Jan 2011
Aug 2011
Nov 2011
Nov 2011
Sep 2012
Sep 2012
Nov 2012
Jan 2013
Feb 2013
Mar 2013
Mar 2013
Apr 2013
May 2013
Jun 2013
Aug 2013
Feb 2014
Oct 2014
Jan 2015
Dec 2015
Status
√ Received
√ Received
√ Received
√ Received
√ Received
Submitted
√ Received
√ Received
√ Received
√ Received
√ Received
√ Received
Started
√ Received
√ Signed
Submitted
√ Approved
√ Received
√ Approved
√ Signed
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