Heemskirk Consolidated Limited

Published : February 22nd, 2015

Enhanced Process Recovery Impacts Moberly Project Valuation

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Keywords :   Australia | Debt | Fixed | K Street | Market | Natural Gas | Oil | Recovery |

Enhanced Process Recovery Impacts Moberly Project Valuation

HEEMSKIRK

Announcement

23 February 2015


Enhanced process recovery impacts

Moberly Project

Valuation

For further information, please contact:

Peter Bird

Managing Director

Heemskirk Consolidated Limited

ABN 18 106 720 138

Level 5

303 Collins Street

Melbourne Victoria 3000

Australia

Telephone: +61 3 9614 0666

Facsimile: +61 3 9614 4466

Email: [email protected]

This information is available on our website at www.heemskirk.com

Peter Bird

Managing Director

KEY POINTS

Ongoing test work has refined the Moberly plant process flow sheet

Plant recoveries of frac sand in the prescribed size range has increased from 64% to approximately 75%

The increase in recoveries has impacted the project's Stage 1 valuation positively, moving from C$64m to C$82m


The Company has continued to develop the Moberly Frac Project achieving key milestones:
1 Establishment of process facility footings - Initial construction is underway. This stage of development is costed at fixed price C$2.4m, is
40% complete and running to budget.
2 Project funding - Subsequent to commencement of initial construction, funding has been secured for development completion with a two tranche secured debt funding package from existing shareholder, Taurus Funds Management Pty Ltd. Tranche 1 funding is for US$25m and will ensure completion of Stage 1 which has a nameplate capacity of 300,000tpa.
The Tranche 2 component of US$15m would allow for expansion of the
Project (see announcement of 10 February 2015)

Plant Recovery

During the detailed engineering phase of the Project, refinements were made to the wet portion of the plant and these have improved what were already very favourable economics.
The refinements have resulted in an elevation in product recoveries reporting to the saleable frac sand size fractions.
The project will deliver between a 30 mesh to 140 mesh product, sorted into size ranges as required by customers. As a result, recoveries have increased from
64% to approximately 75%.

1

HEEMSKIRK

Announcement

23 February 2015

This development has a positive impact on all commercial elements of the project, eg: mining cost per ore tonne, haulage, processing cost. This change has a minimal impact on the total process facility layout and footprint, with the exception of minor modifications located within the wet sector of the process facility sitting within the plant building envelop.

Valuation impact

The increased recoveries has a significant impact on the project's Stage 1 Valuation increasing it from C$64m to C$82m using a Real Discount Rate of 7.5% (10.6% Nominal)1.
The Project model was independently audited with no material issues identified in model structure or inputs.

Key assumptions Stage 1 Development

Nameplate production output capacity - 300,000 metric tonnes

Recoveries in frac sand product size of approximately 75%

Capital costs with contingencies - C$28m

Funding in place Stage 1 - US$25m

Funding in place Stage 2 - US$15m

C$/US$ exchange rate - $0.80

Project Free Cash Flow Undiscounted annual average - C$11.2m

Project Internal Rate of Return Stage 1: 43%

Payback Period Stage 1: 2.2 years

Project NPV is C$82m for Stage 1

Estimated time to completion of construction 12 months

Production Letters of Intent from customers dated February 2015 in place

API specification frac sand

Defined in situ JORC Reserve is more than sufficient to satisfy current 20 year mine plan.

1 This discount rate has been recently reviewed with the real WACC calculated at 6.37% and hence the chosen discount rate of 7.5%

is regarded as being conservative


2

HEEMSKIRK

Announcement

23 February 2015

Comment on the Frac Sand market outlook in the WCSB

The negative change in the oil and natural gas prices has had a short term regressive impact on activity levels within the "oil patch" in the Western Canadian Sedimentary Basin; however this change has been more prominent within the Oil Sands sector (not a consumer of Frac Sand) and in the early stage exploration expenditure phase of company budgets. Oil and gas drilling activities continue in the WCSB at a reduced rate, however drilled wells still require stimulation (hydraulic fracturing) even if the well is intended to be shut-in after completion. Shut-in wells are wells that are brought into production quickly when prices recover or when additional production
is required to meet contracted commitments. The current trend in new well completions has been to use more sand than previously. We expect the usage of sand over the next 12 months to be flat or slightly increased due to the change in completion sand volumes.
The Moberly Stage 1 Project is estimated to contribute to slightly less than 10% of regional consumption. As previously announced, the Mount Moberly White Frac Sand meets all API parameters and customer technical approvals within the region.

Other Activities in relation to the Development

In parallel with onsite construction engineering and funding activities, the Company is upgrading finance and production reporting systems to ensure appropriate controls are in place prior to plant
commissioning.

3

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Heemskirk Consolidated Limited

PRODUCER
CODE : HSK.AX
ISIN : AU000000HSK9
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Heemskirk Consolidated is a gold development stage company based in Australia.

Its main asset in production is PAJINGO in Australia and its main exploration property is LOS SANTOS in Spain.

Heemskirk Consolidated is listed in Australia and in Germany. Its market capitalisation is AU$ 41.1 millions as of today (US$ 30.7 millions, € 27.5 millions).

Its stock quote reached its highest recent level on July 09, 2010 at AU$ 0.35, and its lowest recent point on March 18, 2016 at AU$ 0.02.

Heemskirk Consolidated has 562 640 000 shares outstanding.

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Corporate news of Heemskirk Consolidated Limited
1/27/2016Generic
1/19/2016Entitlement Offer Results and Shortfall
1/18/20162016 Notice of Annual General Meeting
1/18/2016Corporate Governance Statement & Appendix 4G
12/23/2015Renounceable Rights Issue - Dispatch of Offer Document and E...
12/15/2015Letter to Shareholders
12/14/2015Debt Funding CPs to be satisfied by equity raising
12/14/2015Annual Statutory Update of Resources and Reserves
12/14/2015Offer Document
8/18/2015Appendix 3B Rights Issue
8/14/2015Entitlement Offer Results & Shortfall
7/30/2015Renounceable Rights Issue - Dispatch of Offer Document and E...
7/27/2015Cleansing Statement - Exercise of Options
7/23/2015Appendix 3B - Placement
7/23/2015Letter to Shareholders
7/21/2015Appendix 3B - Rights Issue
7/21/2015Letter to Optionholders
7/21/2015Offer Document
7/21/2015ASX Announcement - Confirmation of Resource
7/17/2015Clarification Statement - Appendix 3B
7/16/2015Appendix 3B
7/16/2015Renounceable Rights Issue
7/15/2015Moberly Project Funding Package Finalised
7/15/2015Trading Halt Request
7/15/2015Appendix 3B
7/6/2015Appendix 3F
3/29/2015Convertible Debt Securities
3/29/2015Appendix 3B
3/24/2015Securities Trading Policy
3/2/2015Appendix 3Z
3/2/2015Appendix 3B
2/26/2015Heemskirk AGM Presentation 26 February 2015
2/23/2015Withdrawal of Resolution 2 - 2015 Annual General Meeting
2/22/2015Enhanced Process Recovery Impacts Moberly Project Valuation
1/19/20152014 Corporate Governance Statement & Appendix 4G
1/19/20152015 Notice of Annual General Meeting
11/3/2014Moberly Frac Sand Project
10/30/2014Update - Funding for the Moberly Frac Sand Project
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