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Ami corporate update march 2016 - final
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- 2. Forward‐Looking Statements 2 Cautionary Statement This presentation containscertain information that constitutes “forward‐looking information” and “forward‐looking statements” as defined under Canadian and U.S. securities laws. All statements in this presentation, other than statements of historical fact, are forward‐looking statements. The words “expect”, “believe”, “anticipate”, “contemplate”, “may”, “could”, “will”, “intend”, “estimate”, “forecast”, “target”, “budget”, “schedule” and similar expressions identify forward‐looking statements. Forward‐looking statements in this presentation include, without limitation, information as to our strategy, projected gold production from the Young‐Davidson, Hemlo – Williams, Eagle River, Fosterville and Stawell mines, which are not owned by the Company, project timelines, the planned 2% net smelter return royalty on future production from the Kemess Underground mine, projected exploration results, resource and reserve estimates, projected production and costs of the Kemess Underground mine, other statements that express our expectations or estimates of future performance, value growth, value creation and shareholder returns, the success of exploration activities, mineral inventory including the Company’s ability to delineate additional resources and reserves as a result of such programs, mineral reserves and mineral resources and anticipated grades, exploration expenditures, costs and timing of any future development, costs and timing of future exploration and the presence of and continuity of metals at Kemess East at modeled grades. Forward‐looking statements are necessarily based upon a number of factors and assumptions that, while considered reasonable by management at the time of making such statements, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Known and unknown factors could cause actual results to differ materially from those projected in the forward‐looking statements. Such factors and assumptions underlying the forward‐looking statements in this presentation include, but are not limited to: changes to current estimates of mineral reserves and resources; fluctuations in the price of gold and copper; changes in foreign exchange rates (particularly the Canadian dollar and U.S. dollar); performance of the Young‐Davidson, Hemlo – Williams, Eagle River, Fosterville and Stawell mines, which may impact the future cash flows associated with the Company’s royalty holdings; the impact of inflation; employee relations; litigation; uncertainty with the Company’s ability to secure capital to execute its business plans; the speculative nature of mineral exploration and development, including the risks of obtaining necessary licenses, permits, authorizations and/or approvals from the appropriate regulatory authorities for the Kemess Underground project; contests over title to properties; changes in national and local government legislation in Canada and other jurisdictions in which the Company does or may carry on business in the future; risk of loss due to sabotage and civil disturbances; the impact of global liquidity and credit availability and the values of assets and liabilities based on projected future cash flows; as well as business opportunities that may be pursued by the Company. Actual results and developments are likely to differ, and may differ materially, from those expressed or implied by the forward‐looking statements contained in this presentation. Such statements are based on a number of assumptions, including those noted elsewhere in this document, which may prove to be incorrect. Readers are cautioned that forward‐looking statements are not guarantees of future performance. All of the forward‐looking statements made in this presentation are qualified by these cautionary statements. There can be no assurance that forward‐looking statements or information will prove to be accurate, accordingly, investors should not place undue reliance on the forward‐looking statements or information contained herein. The Company disclaims any intention or obligation to update or revise any forward‐looking statements whether as a result of new information, future events or otherwise, except as required by applicable law. Cautionary Note to U.S. Investors Concerning Measured, Indicated and Inferred Resources This presentation uses the terms "measured", "indicated" and "inferred” resources. We advise investors that while those terms are recognized and required by Canadian regulations, the United States Securities and Exchange Commission does not recognize them. “Inferred 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 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. Qualified Person as Defined by National Instrument 43‐101 John Fitzgerald, Chief Operating Officer for AuRico Metals Inc. has reviewed and approved the scientific and technical information contained within this presentation. Mr. Fitzgerald is a “Qualified Person” as defined by National Instrument 43‐101.
- 3. AMI: Recent Developments Royalty Portfolio Kemess Gold – Copper Project Young‐Davidson ramp‐up progressing Fosterville reserves 34% Hemlo reserves 12% Eagle River reserves 13% Stawell resources 14% 5.7 to 6.1Koz in 2016 attributable production (per guidance) … and gold is 13% YTD Release of positive feasibility update NPV of C$289M, IRR of 12.6% Release of Kemess East Resource update Delineation of high grade core to deposit EA Application has been submitted to the BC Environmental Assessment Office 3
- 4. Capital Structure TSX Ticker Symbol AMI Share Price (as of Mar. 21, 2016)C$0.71 Shares Outstanding 130M Cash (as of Dec. 31, 2015) C$11M Market Capitalization C$93M Management Team Chris Richter President & CEO Robert Chausse Chief Financial Officer John Fitzgerald Chief Operating Officer Chris Rockingham Vice President, Development Harold Bent Director, Environment Susan Craig Advisor, Government & Community Affairs Board of Directors Richard Colterjohn Scott Perry John McCluskey Anne Day Anthony Garson Janice Stairs Joseph Spiteri Chris Richter Major Shareholders1 Sandstorm Gold 15% Alamos Gold 11% Van Eck Associates 10% Donald Smith & Company 4% AMI Management & Directors 3% 4 Market Overview Analyst Coverage National Bank (Adam Melnyk) Macquarie (Michael Siperco) Scotia Capital (Mark Turner) Mackie Research (Barry Allan)
- 5. Property Locations 5 All properties located in stable, desirable mining jurisdictions Development Property CANADA AUSTRALIA KEMESS (100%) British Columbia, Canada YOUNG‐DAVIDSON (1.5% NSR) Ontario, Canada STAWELL (1% NSR) Victoria, Australia FOSTERVILLE (2% NSR) Victoria, Australia Royalty LEVIATHAN (1% NSR) Victoria, Australia KEMESS UG (Potential Royalty or Stream) British Columbia, Canada HEMLO – WILLIAMS (0.25% NSR) Ontario, Canada HEMLO –DAVID BELL (1.5% NSR) Ontario, Canada EAGLE RIVER (0.5% NSR) Ontario, Canada Actively pursuing accretive opportunities to grow royalty portfolio Producing Royalty
- 6. Risk – Reward Source: S&P Capital IQ Precious Metal Royalty companies include: FNV, OR (since inception), RGLD, SLW, and SSL Gold/Copper Developers include: Augusta, CUU, GUY, Lumina, NCU, NGQ, R, RMC (since inception), RMX, TXG, WRN 6 Goal is to Deliver Superior Shareholder Returns in Any Market “Bull Market”“Bear Market” 53% ‐7% 148% ‐25% ‐40% 0% 40% 80% 120% 160% 2009 ‐ 2011 2011 ‐ 2015 Precious Metal Royalty Companies Gold/Copper Developers Annualized Returns Through Bull and Bear Markets "Bear Markets always turn into Bull Markets and you need to be positioned for when they turn.“ – Ross Beaty
- 7. Royalty Portfolio Overview 7 Royalty Mineral Inventory (years)1 Royalty EBITDA (C$ M) at Various Gold Prices2 Royalty Value Drivers AuRico Royalties Asset Stage Geographic Location Core Asset of Operator High‐Quality Operator Precious Metals Mine Life Cost Profile Scale of Production Exploration Upside US$ 0 4 8 12 16 20 24 $1,000 $1,200 $1,400 $1,600 Kemess UG (dev't stage) Stawell Eagle River Hemlo Fosterville YD 0 5 10 15 20 25 Kemess East(3) Kemess UG(3) Stawell Eagle River Hemlo Fosterville YD Royalty Mineral Inventory (years) P&P M&I Inferred
- 8. Kemess (100% Owned) Overview 8 Past PresentFuture Kemess South (Production: 1998 – 2011) C$1 Billion of Infrastructure on Care and Maintenance Kemess Underground (KUG) & Kemess East (KE) 3Moz of Gold Produced (at 0.6 g/t) 750Mlbs of Copper Produced (at 0.2%) KUG Feasibility Update KE Resource Update Environmental Application Submission 30,000m drill campaign in 2015 included intersection of 772m at 0.465g/t Au and 0.365% Cu (0.72% CuE)1 (4.6Moz AuE1) 3,215 4,028 3,197 KUG + KE: AuE Ounces ('000) P&P Indicated Inferred
- 9. Kemess UG – Feasibility Study Update 9 •Meaningful production: 238Koz Gold Equivalent (AuE) annually for first 5 years, 207Koz AuE over life of mine (LOM) (12 years)1 • Low cost: All‐in Sustaining Costs2 per AuE of US$682/oz for first 5 years, US$718/oz LOM • Solid economics: • After‐tax NPV (5%) of C$289M and IRR of 12.6% assuming $1,250/oz Au, $2.50/lb Cu, and a C$/US$ of 0.75 • After‐tax NPV (5%) becomes C$421M and IRR becomes 15.4% at $3/lb Cu • Pre‐commercial production capital3 of C$603M (US$452M) • Capital reduction opportunity exists by leasing all or a portion of the C$86M in underground mobile equipment purchases • Low risk: Project infrastructure is already in place (processing facility, grid power, access road, camp, admin and maintenance facilities, etc.) • Significant upside: Large (246Mt) of M&I resource (including 107Mt of reserves) situated vertical to the extraction level (of the planned KUG panel cave) • Potential further upside from Kemess East (including high grade core) – which remains open in several directions • Location: One of the best mining jurisdictions: British Columbia, Canada • Advanced: Expect to enter 180 day Environmental Assessment review period in early April
- 10. Kemess: Initial Capital 10 Kemess Advantages C$603M (US$452M) in pre‐commercial production capex “Low risk” capex given infrastructure in place; Proven logistics 87% of capital expenditures are C$ denominated Capex is heavily weighted to final 2 years prior to commercial production Opportunity to reduce capex through equipment leasing (C$86M) Project financing opportunity (marketable clean concentrate)
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- 12. Kemess: Production and Costs 12 Low Cost Mining Total LOM cash costs of US$639 and AISC of US$718 perAuE AISC of US$682/oz over first 5 years Caving initiated in the highest value ore Low ‘break‐even’ in early years to allow for debt repayment Payback period of 3.9 years at base case assumptions 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 0 100 200 300 400 500 600 700 800 900 ‐1 1 2 3 4 5 6 7 8 9 10 11 12 13 Annual Gold Equivalent Production vs. USD AISC Gold Equivalent Production AISC(USD)
- 13. Reserves and Resources (all categories) of 10.9Moz AuE Property‐Wide Kemess East –High Grade Discovery 13 ~51Mt in high grade core of Kemess East with Cu grade 69% higher and Au grade 23% higher than KUG Reserves K UG K East K South
- 14. Kemess Alternatives Kemess Advantages Attractive economics “2/3rds built” (~C$1B of infrastructure) Moderate capex (mostly UG dev’t) Proven (‘98 – ’11) Advanced stage ~55/45 Au/Cu split BC government very supportive Fully unencumbered Clean concentrate 14 Smelter (offtake‐linked) Financing Joint Venture / Earn‐in Project Financing Royalty / Stream Private Equity
- 15. Net Asset Value per Share 15 * Consensus royalty NAVs do not yet reflect positive resource updates, production guidance or recent gold price appreciation ** Consensus Kemess value will be updated upon release of Kemess Underground Feasibility Study Update and KemessEast Resource Update (imminent) Share Price 0.74 0.85 0.09 0.43 1.33 ‐ 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00 Royalties* Kemess** Cash Corporate Outflow
- 16. Kemess – Embedded Royalty Value 16 ILLUSTRATIVENSR (2%) Assumptions Gold Price $1,250 per ounce Copper Price $2.50 per pound Silver Price $16 per ounce Foreign Exchange 0.75 USD per CAD Up to $9M in Annual Cash Flow (KUG Only1) Up to $9M in Annual Cash Flow (KUG Only1) $45M NAV (KUG Reserves Only1) $45M NAV (KUG Reserves Only1) Kemess is 100% owned and 100% unencumbered (no royalties or streams) Presents material “organic” royalty‐growth opportunity $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 In‐Situ Metal Value (2%) (C$ ‘000) Reserves M&I Inferred KE KUG
- 17. Undervalued… 17 EV/EBITDA (2016E) Source: Peers per CIBC (Mar. 21, 2016) – Analyst consensus; AMI NAV per Consensus, *AMI EBITDA shown only for royalty business P/NAV vs. Royalty Co’s 28.4 x 29.0 x 19.0 x 16.2 x14.2 x 10.3 x 19.5 x 10.2 x 0.0 x 10.0 x 20.0 x 30.0 x Osisko Royalties Franco‐Nevada Altius Minerals Silver Wheaton Royal Gold Sandstorm Gold Average AuRico Metals* EV/EBITDA (2016E) 2.0 x 1.2 x 1.4 x 1.2 x 1.3 x 1.0 x 1.3 x 0.8 x 0.6 x 0.0 x 1.0 x 2.0 x Franco‐Nevada Osisko Royalties Silver Wheaton Sandstorm Gold Royal Gold Altius Minerals Average AMI (Royalties Only) AMI (Consensus) P/NAV
- 18. … With Excellent Leverage to Gold 18Source: NBF Estimates (February 19, 2016); NAVPS Leverage shown for a 10% change in Au price P/NAVPS NAVPS Leverage to Au Undervalued… with excellent leverage to gold
- 19. Undervalued vs. Development Co’s 19Source: Peers per CIBC (Mar. 21, 2016) – Analyst consensus P/NAV vs. Development Companies 0.4 x 0.6 x 0.4 x 0.3 x 0.2 x 0.6 x 0.8 x 0.8 x 0.7 x 0.6 x 0.4 x 0.4 x 0.3 x 0.0 x 0.1 x 0.2 x 0.3 x 0.4 x 0.5 x 0.6 x 0.7 x 0.8 x 0.9 x 1.0 x Copper Developers Exeter PolymetNevada Copper NGEx Gold Developers Lundin Gold Sabina Kaminak Dalradian Victoria Lydian Continental P/NAV * Current AMI market capitalization justified by royalty portfolio alone
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- 21. 21 Young‐Davidson Royalty Ramping‐Up to be One of the Largest Gold Mines in Canada Overview Royalty 1.5% NSR LocationOntario, Canada Operator Alamos Gold Asset Overview Underground mine 2016E Production 170‐180 Koz Mine Life 17+ years Resource P&P: 3,823Koz M&I: 1,499Koz Inferred: 321Koz 20 17 14 13 13 10 9 7 5 5 Detour Young‐ Davidson Macassa Phoenix Canadian Malartic Casa Berardi New Afton Holt‐ Hollaway Seabee Timmins‐Bell Complex Canadian Gold Mines ‐ Reserve Life (years)1
- 22. Fosterville Royalty Overview Royalty 2%NSR Location Victoria, Australia Operator Newmarket Gold Asset Overview Underground mine 2016E Production 110‐120Koz Reserves & Resources P&P: 388Koz M&I: 1,878Koz Inferred: 665Koz 22 15,000 20,000 25,000 30,000 35,000 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Newmarket Gold’s Flagship Mine 2015 was 3rd consecutive year of record production Significant exploration success in 2015 (e.g. Eagle Fault) Significant increase in 2015 reserves and reserve grade Record Annual Gold Production up 17% in 2015 to 123,095 ozs Gold Ounces Produced (‘12 – ’15)
- 23. Hemlo – Williams Royalty Overview Royalty0.25% NSR Location Ontario, Canada Operator Barrick Gold Asset Overview Underground and Open Pit mine 2016E Production1 200 – 220Koz Reserves & Resources P&P: 917Koz M&I: 1,451Koz Inferred: 306Koz 23 Q4/15 production of 74Koz at Hemlo Hemlo in operation since 1985 and has produced over 24Moz Strong history of reserve replacement Exploration ongoing (promising results outlined in 2015) Recent Production History 0 50,000 100,000 150,000 200,000 250,000 300,000 2010 2011 2012 2013 2014 2015
- 24. Eagle River Royalty Overview Royalty 0.5% NSR LocationOntario, Canada Operator Wesdome Gold Mines Asset Overview Underground 2016E Production 43 – 47Koz Reserves & Resources P&P: 300Koz Inferred: 170Koz 24 2015 production of 41Koz (at 7.8g/t) Continuous production since 1995 (over 1Moz produced) Long history of reserve replacement Significant upside from continued exploration of identified ore zones including 300 zone Recent Production History 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
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- 26. 26 2016 Outlook Royalty revenue: US$6.6M – US$7.1M After‐tax: US$5.7M – US$6.1M Assumes gold price of US$1,150/oz; Every $50/oz change in gold price has US$0.3M impact on revenue G&A: ~ US$2.5M Kemess Care and Maintenance: ~US$4.5M Targeting a reduction of annualized C&M to US$3M or below by year‐end Kemess project expenditures: US$1.5M – US$2.5M KUG FS update, KE resource update, EA, permitting, and First Nations activities Kemess East exploration: US$1.7M Expect to be FCF positive in 2017 following completion of this year’s investments and with cost cutting measures being pursued at Kemess
- 27. 27 Mineral Reserve Estimates ‐ Gold Category Tonnes(000's) Grade (g/t) Ounces (000's) Kemess Underground Proven ‐ ‐ ‐ Probable 107,381 0.54 1,868 Total Kemess Underground P&P 107,381 0.54 1,868 Mineral Resource Estimates ‐ Gold Category Tonnes (000's) Grade (g/t) Ounces (000's) Kemess Underground Measured ‐ ‐ ‐ Indicated 139,019 0.33 1,460 Total Kemess Underground M&I 139,019 0.33 1,460 Inferred 21,600 0.40 277 Kemess East Measured ‐ ‐ ‐ Indicated 39,200 0.50 627 Total Kemess East M&I 39,200 0.50 627 Inferred 109,600 0.38 1,331 Mineral Reserve and Resource Estimates – Copper and Silver Grade Contained Metal Category Tonnes (000’s) Ag (g/t) Cu (%) Ag (000’s) oz Cu (000’s) lbs Kemess Underground Probable Reserves 107,381 2.0 0.27 6,878 629,595 Indicated Resources 139,019 1.6 0.18 6,988 565,705 Inferred Resources 21,600 1.7 0.22 1,179 104,700 Kemess East Indicated Resources 39,200 2.0 0.40 2,512 344,000 Inferred Resources 109,600 2.0 0.37 6,994 888,000 Kemess Reserves & Resources
- 28. Endnotes 28 Slide 4 ‐ Market Overview 1) Per Scotia, Sedi, and company filings Slide 7 ‐ Royalty Portfolio Overview: 1)Reserves and resources per most recent resource updates from asset owners; Assumes annual production levels for YD, Fosterville, Hemlo, Eagle River, Kemess UG and East, and Stawell of 200Koz, 115Koz, 200Koz, 50Koz, 140Koz, and 30Koz respectively and recoveries of 90%, 88%, 95%, 95%, 90%, and 90% respectively 2) Annual production assumptions per mid‐point of guidance; For Kemess UG, the copper price is being adjusted up/down by the same percentage, i.e. the parallel copper price assumptions for the gold price range of $1,100 ‐ $1,600/oz is $2.54, $2.77, $3.00, $3.23, $3.46, $3.69 Slide 8 ‐ Kemess Overview: AuE ounces calculated on the basis of $1,250/oz Au and $2.50/lb Cu Slide 9 – Kemess Feasibility Study Update 1) All figures sourced from press release dated March 23, 2016 entitled “AuRico Metals Announces Positive Feasibility Study Update for the Kemess Underground Gold – Copper Project” 2) All‐in sustaining costs (“AISC”) is a non‐GAAP measures that does not have a standardized meaning 3) Pre‐commercial production capital represents total capital expenditures required to achieve commercial production including capitalized pre‐commercial operating costs less revenue from pre‐commercial production (at pricing used in Feasibility Study)(See note 1) Slide 13 (Kemess East): 1) AuE calculation assumes Au price of $1,250/oz and Cu price of $2.50/oz Slide 16 – Kemess Embedded Royalty Value 1) Per 2015 Feasibility Study update Slide 22 ‐ YD Royalty: 1) Scotia analysis Slide 24 ‐ Hemlo ‐ Williams Royalty 1) Total 2015 production for Hemlo Complex per Barrick disclosure; not 100% attributable to Williams mine