Mining On Top: Stockholm 2013 26-27 Nov 2013 Challenges of investing in junior mining companies and Sotkamo Silver – Professor Timo Lindborg, Sotkamo Silver; CEO

1. Challenges of
Investing in Junior
Mining Companies
and
Sotkamo Silver

2. Life Cycle of Junior Explorer
Full value
Relative Value
High Risk High Potential
Possible takeover
Speculation
Lowered
risk
Institutional
Investment
Discovery
Failure
10-15 years
Exploration and Discovery
Feasibility
Construction
Start
Up
Prod.
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3. REQUIRE PROPER INFORMATION
ETHICS – HONESTY
- The level of the ethics of the Company comes from the entrepreneurs,
owners, management and board.
COMPANY'S GOVERNANCE
- The stock exchange rules and legislation obliges.
- Mining Industry Association’s recommendations
INFORMATION AND COMMINUCATION
- Adequate transparency + credibility
- NI 43 101; JORC; FINNMIN; SVEMIN; CIM; NI 43 101
World bank; EQUDOR PRINCPLES; etc…..
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4. RULES REDUCE RISKS
• Ni 43 101
• JORC CODE
• SVEMIN
• FINNMIN
• CESR
JORC or NI43101 CODE
MINERAL
RESOURCES
ORE
RESERVES
(IN SITU)
(MINEABLE)
Increasing level
of geological
knowledge and
confidence
Consideration of economic,
mining, metallurgical,
marketing, and governmental
factors
PROVEN
Committee of
European
Securities Regulators
MEASURED
PROBABLE
INDICATED
INFERRED
Timo
Lindborg
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5. Effective implementation of the mining project
The resource model is critical to exploration and mining decisions,
since the resource estimate controls financial expectations at each
stage.
• Conceptual study
• Pre-feasibility study stage
• Feasibility study stage
• Back to basics – There are no guarantees with new technology.
• Planning for the unforeseeable – do you have plan B or C
• Mining is cyclical - Volatility is the new stability.
• The licence to operate demands better technology and
sustainability.
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6. Sotkamo Silver´s Sustainable Development Policy
• Our aim is to undertake our activities responsible, with due
consideration to the environment, the communities and the
social license in which we operate
• We undertake our exploration and mining-activities in a manner
which takes into consideration environmental aspects,
landowners and other interested and affected parties.
• As a one tool among others in order to implement this, we have
formed a Committee to Monitor Environmental and Social
Issues within our activities at Silver Mine. The members come
from both the municipality and the local village associations and
Sotkamo Nature Organization.
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7. OVERVIEW OF SOTKAMO SILVER
■ Headquarter is in Stockholm, Sweden. The
Company also has an operations office in Oulu
and a field office in Sotkamo, Finland
■ The primary listing is on the NGM Equity stock
exchange in Stockholm with secondary listing on
the Nasdaq OMX Helsinki
■ Current market capitalization is about € 20 million
■ The Company had € 1.1 million of net cash at the
end of Q3 2013
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8. ORE RESERVES AND ESTIMATED MINE ECONOMICS
KEY PROJECT SUMMARY
Ore reserves
Ore
tonnage
Ag Grade
Ag
Proven
1.19 Mt
90.18 g/t
3 442 141 oz
Probable
1.78 Mt
83.40 g/t
4 786 353 oz
Proven and probable ore reserves
2.97 Mt
86.11 g/t
8 228 494 oz
MINE ECONOMICS
Production of payable silver
0.8 million oz Ag per annum and 7.4
million oz Ag over LOM
Operations commencement date
Q4 2014
Average operating cash costs
€ 10.5 / oz Ag over LOM (US$ 13.7)
Required capital expenditure (including
infrastructure)
€ 30.7 million
Required net financing (including contingency,
working capital and guarantees)
€ 40 million
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9. BENEFTS TO INVEST IN SOTKAMO SILVER
• EXPERIENCED AND PROVEN MANAGEMENT - WE DELIVER
• LOW TECHNICAL AND GEOLOGICAL RISK
• FORECASTED OPERATING CASH FLOWS ARE STRONG
• JORC RESERVES AND RESOURCES
• ADITIONAL EXPLORATION POTENTIAL (JORC)
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10. PRESS RELEASE 130828
• THE VOLUME OF THE EXPLORATION TARGET IS
MORE THAN 20 M TON MINERAL RESOURCES
• TOTAL 33 M TON (resources + potential)
• THIS INCREASE THE TARGET SUBSTANTIALLY
“The result of this study shows clearly the great potential, which Silver Mine deposit
has towards depth and strike. This increases the potential of the Silver Mine projektet
and our expectations of the deposit quality. I am certain that the Silver Mine will have
much longer life time than the actual reserves shows today.”
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Comments Timo Lindborg, CEO
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11. PRESS RELEASE 131002
• EXCELLENT RESULTS RECEIVED FROM INFILL
DRILLING-PROGRAM
•
The best intersections were found in holes TS3 with 7.5 meters Ag (silver) 153 g/t; TS4 with 15 meters
Ag 269 g/t , TS5 with 10.5 meters Ag 304 g/t, and TS6 with 7.5 meters Ag 267 g/t , TS9 with 5.5 meters
Ag 834 g/t
•
“The results are excellent and give us an opportunity to revise the mining plan. The
results give additional verifications to our expectations of the deposit´s quality from
the area where we plan to start the mining during the first years productio.”
Comments Timo Lindborg, CEO
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12. INCREASED POTENTIAL DOWN TO - 2 000 M
Open Pit
Mine Decline
Planned Decline
Total Mineral Resource (JORC)
13 Mill.t, Ag 60 g/t
Ore Reserve (JORC) 3 Mill.t, Ag 86 g/t
500 m
Drill Intersections
R-110: 27.25 m, Ag 92 g/t
R-106: 23.40 m, Ag 148 g/t
Exploration Target (JORC)
>20 Mill.t, Ag 60 g/t
2 Km
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13. SENIOR MANAGEMENT HAVE EXTENSIVE MINING
EXPERIENCE IN THE NORDIC REGION
Timo Lindborg – President &
CEO
■ Doctor of Technology, MSc (
Civil Engineering) and BSc
(Geology). Professor at Oulu
University
■ 35 years experience with
mining projects and Nordic
companies
■ Former Chief Executive Officer
of Endomines AB, Endomines
Oy and Kalvinit Oy
■ Extensive experience in silver
and gold mining projects
■ Born 1955
pic
Ilkka Tuokko – Managing
Director Sotkamo Silver Oy
■ MSc in Geology and
mineralogy from Oulu
University
■ More than 30 years
experience in mining projects,
precious metals and
international mining
companies
■ ”Competent Person” status,
according to Australian JORC
and Swedish SveMin
■ Former Group Geology &
Mining Manager of Mondo
Minerals B.V.
■ Born 1950
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14. BOARD OF DIRECTORS HAVE EXTENSIVE MINING
EXPERIENCE IN THE NORDIC REGION
Mauri Visuri – Chairman of the Board (since
2011)
■ MSc in Economics from the University Of
Vaasa
■ Bachelor of Science in Machinery
Engineering from Vaasa Polytechnic
■ Extensive experience in mining and process
industry
■ Mr. Visuri is also Managing Director of
Teknoventure Oy
■ Born 1957
Teuvo Jurvansuu – Board member
(since 2010)
■ 35 years experience in the mining
industry
■ Worked in various mines in Finland
during that period including Vihanti,
Keretti, Enonkoski and Pyhäsalmi
mines
■ In 2001 he entered the position of
Managing Director of Pyhäsalmi Mine
Oy and at the same time, Inmet
Finland Oy (retired in 2009)
■ Born 1948
Joanna Kuntonen-van ‘t Riet – Board
member (since 2012)
■ MSc in Environmental Sciences from the
University of Helsinki
■ Over 13 years experience in
environmental and safety management
in the mining industry
■ Presently Environmental and Safety
Manager at Northland Resources
■ Born 1974
Jarmo Vesanto – Board member
(since March 2013)
■ MSc (Geology and Mineralogy)
■ Member of the Australian Institute of
Mining and Metallurgy
■ More than 30 years experience in
mining and exploration including 10
years in Australia and Canada with
Outokumpu Oyj
■ Currently General Manager - Finland
at Altona Mining Ltd
■ Born 1954
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15. RAMP-UP PHASE WILL BENEFIT SIGNIFICANTLY FROM THE EXISTING WORK
Mining plan
■ The existing mine
decline of 2.6 km
and ramp access
(25 m2) , as well as
the vertical
ventilation shaft
extending 350
meters from the
surface, in place
and ready for
operational use.
■ The projected mine
life is 9 to 10 years
based on current
estimated mineable
ore reserves of
approximately 3.0Mt
Open pit
Existing ventilation shaft
Existing Mine Decline (brown)
Backfill with waste rock
Year Colour
2014 Green, Brown
2015 Red
2016 Yellow
2017 Blue
2018 Black
2019 – 2021 Grey
Planned extension of the decline (green)
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16. REPUTABLE KEY SHAREHOLDERS WITH EXTENSIVE
EXPERIENCE IN MINING SECTOR INVESTMENTS
%
ownership
Market value
(EUR’m)
Teknoventure Oy
14.2
3.5
Finnish Industry Investments Ltd
14.2
3.5
Timo Lindborg (through a company)
10.2
2.5
Jouko Jylänki
8.9
2.2
Ilmarinen Mutual Pension Insurance
Company
8.5
2.1
Total top five shareholders
56.0
13.9
Other shareholders
44.0
10.9
Total
100%
24.8
Top five shareholders
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17. FURTHER EXPLORATION POTENTIAL
■ Exploration projects ongoing in
the surrounding Silver Mine
region, with claims made on
plots covering over 3,000
hectares in the Tipasjärvi
greenstone belt
■ The map illustrates locations of
the applied claims (previous
Mining Act) and ore exploration
permit applications
■ Additional prospects include
Hopeavuori (Vammala Migmatite
Zone) in Southern Finland.
Management believe there is significant
potential in these zones
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18. KEY INVESTMENT HIGHLIGHTS
■Operations are expected to commence in Q1 2015 and
Short
negotiations with potential off-takers are in advanced stages
timeframe to
■All necessary mining licenses and environmental permits
production
received
Completed
Bankable
Feasibility
Study (BFS)
■Extensive exploration and technical mine planning completed,
including a BFS prepared by Wardell Armstrong in May 2012
■Review of the final mining plan completed by Outotec in May
2012
Production
■Average silver production of 0.8 million oz Ag per annum.
■Silver : 7,386,148 oz; Gold : 23,166 oz (LOM)
■Zinc : 17,468 t; Lead : 7,564 t (LOM)
Low capital
expenditure
■Capital expenditure of approximately € 30.7m required, which
includes construction of a processing plant and infrastructure
■Contract negotiations are near complete with all suppliers
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19. LOW RISK AND SIGNIFICANT GROWTH POTENTIAL
Low risk
mining and
processing
■Deposit mineralogy is simple, well understood and easy to
process, with standard grinding and flotation with recovery above
86%.
Significant
growth
potential
■Geophysical surveys suggest substantial extension to potential
mine life and resource mineralization.
■Exploration mineral resource estimate in the inferred category (NI
43-101 compliant) is 13 Mt of ore for 26 Moz silver at 65g/t (cutoff grade 30 g/t Ag) + the Exploration target is 20 Mt at 60g/t.
■Substantial pipeline of promising exploration projects in the
surrounding Silver Mine region.
Management ■The management team has wide experience of running mines in
team with
Finland. Both CEO Timo Lindborg and Managing Director Ilkka
proven track
Tuokko are experienced mining professionals with a proven track
records
record of exploration and production.
Environment
■Equator Principles Assessment received with no significant
issues noted.
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20. SILVER MINE AREA
THE NECESSARY MINING LICENSE
AND
ENVIRONMENTAL PERMIT RECEIVED
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