EFTA00730641.pdf

GLENCOKE Pig Iron Customer Footprin i i Ba Mg Al SI P Ga EC TI 1/ Cr Nn F. co pdi Cu Ln ba G* lat. Sr WINGS ENTERPRISES, INC • ThoPtiodcTableof the Ergret He .frwyec 3orcorcLiyforircrincratnehor Payamackx - - le [M•loY.< Naua dm 'na ,. t il 0 Na Ms V Yr NI, Mo Te Ru ah Pil Ag Cd In U.1 Sa ShrIlha Ti Ca ' lai Hl Ta W Po Oy te N Au Hg TI Ph Oi Po AI Ro H 'Ia Rf Dh So Bh Ha M. .1•••• s.h..“1,••• 1.19", Pm In. Eu Gd Tb Dy Ho Er Tim Vb A c VI Pa LI HpPu Am Ca. Ok Cl EaPo.Mallo Specialtv/Chemical Oxides Proposed Pig Iron Plant EFTA00730641 GLENCOU Geography Crystal City (Wings) 600 miles Gulf of Mexico • 3.000 Miles to Brazil • 3 BOr is wst«, A Ir tAr via Warn . 2 CAT via Rail -5,000 miles to Sweden -6,000+ miles to Eastern Europe EFTA00730642 Wings Layout Beneficiation Facility Tailings Lake Facility Phase I Initial capital raise (miscellaneous uses) $40.0 Pevelopmeni costs • II Mine development costs $180.0 II Iron ore beneficiation facility $150.0 II Tailings lake facility $150.0 Total (Gross) $520.0 Tailings monetization (@> 25% disc. rate) ($215.4) Total (Net) $304.6 Represents Wings Operations Represents KinderMorgan Operations Represents Kobe Steel Operations 45 mile pipeline Capex Needs $mm FXCIlldfli Kobe Steel development (1) Pig Iron Facility = $400mm4)700mm Fxrludes Kindermrvgart tioveloomeit; (2) Port= $600mm Tailings • 4 MT Fe203 • 1 MT Fe304 • 1MT Phos / Apatite • 600KT Pyrite • 75KT REO I I Mine • 150 MT Iron Ore Resource • 57% Iron Ore Grade • 4MTPA Annual Prod'n • 30 Year Mine Life Pig Iron Facility Initial Capital Rake Breakout Payoff existing liabilities Complete feasability studies Misc working capital Total $20.0 $7.0 $13.0 $40.0 GLENCOU -a O CO CO CO -0 CD -0 EFTA00730643 Overview of Process 6mm tonnes iron ore mined (-57% Fe) Beneficiation 1 4mm tonnes of concentrate (-70% Fe) 1mm tonnes of OXIDES - Specialty oxides (70%-71% Fe) - Chemical oxides (71.6% Fe) 3mm tonnes of IRON ORE - -70% Fe I GLENCO1K All sold to Pig Iron Partner for pig iron production 2mm tonnes of final PIG IRON product - -97% Fe, 3% carbon (Pig Iron/Wings) owns (20%/80%) of pig iron process EFTA00730644 Product Margins and Free Cash Flow Yield Calculations Products Oxide Margins Iron Ore Margins Pig iron Margins Price ($ftonne) Volume (tonnes) $250 donne 0.600 Price ($0.86:dmtu) Volume (tonnes) $60 ;tonne 3.400 Price ($lonne) volume (tonnes) $400 ;tonne 2.244 Revenue Cash cost Transportation $60 /tonne $10 donne $150 $36 $6 Revenue Cash cost Transportation $47 /tonne $2 /tonne $204 $160 $7 Revenue Cash cost Transportation $300 /tonne $10 /tonne $898 $673 $22 Total cost $70 /tonne $42 Total cost $49 /tonne $167 Total cost $310 /tonne $696 SITDA E180 /tonne $108 EBITDA $11 /tonne $37 SITDA $90 /tonne $202 r 6347 % margin 72% % margin 18% % margin 23% Wings ownership (100%) $108 Wings ownership (100%) S37 Wings ownership (80%) $162 $307 Free Cash Flow Yields Unlevered FCF Yield % Financial Partner Levered FCF Yield % Msc start-up costs $50 Financial Partner hvestment $150 Tailings facility $150 Mne development costs $180 Levered FCF (steady state) $171 Benet ication tacily $150 Ownership % 70% Roane $70 Financial Partner FCF $119 Total (Gross) $600 Tailings monetization ($175) yield % 80% Total (Net) $425 Unlevered FCF (LOM average) $176 yield % 41% 5 EFTA00730645 Overview #1: Oxides GLENCOU • -1mm tonne market in the U.S. • There are only two mines globally which contain sufficient Fe content to produce specialty and chemical oxides • Historically, the Pea Ridge Mine was the sole supplier of oxides to the U.S. market • When Pea Ridge closed in 2001, oxide purchasers were required to switch to the Kiruna Mine in Sweden -The distance from most U.S. oxide purchasers to the Kiruna Mine is over 5,000 miles • Jim Kennedy can hire Gene Koebbe, the former Quality Control and Customer Representative for Pea Ridge, now working for Reiss Viking / Koch as well as someone from Prince and Akers 5450 $400 $350 $100 $250 $200 $150 $100 $50 • Type End Market Customers Price/ton Volume Revenue Specialty wade Water treatment Kemira. General Chemical $130-$170 100.000 tons $15.0. . ___ Heavy media Akers. Massey _ . $180-$220 _ . 400.000 tons _ _ $80.0 Chemical grade 71% Pigments Prince. Penn Mag $230-$350 200.000 tons $58.0 Chemical grade ++71% Brake pads. ceramics Misc 5400-$1.200 150.000 tons $120.0 $321 850,000 tons $273.0 Production and Logistical Cost Comparison Reiss-Viking (Kiruna Mine in Sweden) vs. Wings Enterprises (Pea Ridge Mine in Missouri) 70% Fe Speclolty Gude Iron Oxides 71% Ft un.sizad Cnorr. ca2 Grade "On OakleS 3541t:n a um $314/v. OHM ins cog ice mtg. Mho' Mena Iffeleassid 71.0%Ft Pt t0:1011 nulled and Sind °Iowa, Glade kanaeldes Oxide Margins Price ($11onne) Volume (tonnes) Revenue S250 lonne 0.600 $150 Cash cost $60 /tonne $36 Transportation $10 'tonne $6 Total cost $70 /tonne $42 EBITDA 5180 /tonne $108 % margin 72% 6 EFTA00730646 Overview #2: Iron Ore GLENCOU • The ideal strategy is to lock in 3mm tons of iron ore sales to our pig iron partner -The vast majority of iron ore is concentrated in the Mesabi region of the U.S. and is owned by vertically integrated BOF steel producers - Cleveland Cliffs is the only major merchant iron ore producers in the U.S. - The market is very tight with few imports/exports - Merchant sales of iron is a suboptimal strategy - Wings' cash cost is competitive, but it would be reliant on robust steel production such that BOFs possess insufficient capacity Iron Ore Cost and Margin Comparison Average 65% Fe North American Steel Grade Iron Ore vs. 70% Fe Wings Special Grade Iron Ore Production Cost per Ton Finished Ton Wings Production Cost/Ton S zo Hoisted Cost Per Ton $22.45 x 6mm tpy $33.40 70°A Fe Concentrate $11.50 x 4mm tpy $11.50 Pipeline to River $2.10 x 4mm tpy $2.10 Stan Fully Diluted Worst Case Production Cost° $47.00 S too WingartOretka craft Cleveland Cliffs Cash Operating Expenses $1.499 Oi S18.5/ton Tonnes (mmj 22.7 SW Cash Cost (Mona) $66.04 (22%) toff margin SWUM (18%) gloss romp. Iron Ore Margins Soo Price ($0.66/dirtu) $60 :Yonne SWAM S91 Roo martio Moo Volume (tonnes) 3.400 S'o Market Price 65%Fle MM gaol We $66/ton roma prodtxtion Con 70%f de SOne. Revenue $204 Cash cost 5471tonne $160 wing ere $20 Vitt t Clit rAft Transportation $2 :Yonne $7 Total cost $49 itonne $167 SO EBITDA $11 /tonne $37 Onent Noah Aintica, AVMS.% Wimp Preforms % margin 18% Wings ownership 100% $37 I Includes dewatering cost at River Site 2 Wings 70% magnetite concentrate. If one assuming a $1.32dmtu. then Wings' product would earn $1.32 x 5= -$6.5arton more than Cleveland Cliffs 7 EFTA00730647 GLENCOR Overview #3: Pig Iron • Market Overview: -The U.S. imports 4-10mm tons of pig iron annually from Brazil (70% of imports) and Eastern Europe (20%) • 3 types of pig iron: End Market Ingredients Basic EAF steel production & iron castings <1.5% Silicon. 0.5.1.0% M2. <0.12% Phos Foundry grade Grey iron castings godurar— iron castings Z.55.% alnPhos <1.5%-3.5% Silicon, 0.5-1.0% Mg, <0.12% Phos i▪ t Wings will produce foundry grade (15-20% premium) • Pricing: - Pricing is a function of scrap price and capacity utilization in steel mills (i.e.- it scrap price I or utilization t then pig iron price I) - Kobe Steel estimates the long-term price of pig iron to be $400/ton - Brazilian pig iron cash costs are about $500/ton FOB - When pig iron prices last hit $250/ton, 80% of Brazilian capacity was curtailed •Strategy: - Wings has close geographic proximity to 27 EAFs in the region Pig Iron Margins Price ($itonne) $400 "tonne volume (tonnes) 2.244 Revenue $898 Cash cost $300 /tonne $673 Transportation $10 donne $22 Taal cost $310 donne $696 8 EBITDA S90 Ronne $202 % margin 23% EFTA00730648 Overview #3: Pig Iron Pig Iron Cost Comparison (Wings vs. Brazil) Wings Brazil Consumption Unit Unit Cost/ton CosVton per ton Amount Cost Nuggets Nuggets Iron oxide (I) 1.5 $47 $71 $208 Coal (0 0.5 $325 $163 $163 Natural gas (GJoules) 5.0 $4.00 $20 $33 Other ($) $64 $45 Subtotal $317 $449 Logistics Brazil C $32 Ocean Freight C $20 Logistics USA $10 $13 Total $327 $514 Yield increasetost Decrease 10% 0% Total Cost ($Iron) $294 $514 I 75% greater Foundry grade premium ($50) Total Cost (Snon) • w. foundry prem. $244 $514 110% greater Wings will produce a 4.70% Fe. increasing yields by 10% or more. GLENCOU 9 EFTA00730649 GLENCOR Overview #3: Pig Iron (Cont'd) • Existing project: Mesabi Nugget Project — Steel Dynamics and Kobe Steel • Currently producing 500.000 tons and plans to increase production (all for Steel Dynamics internal consumption) • Start-up capex per unit $200mm-$250mm • Kobe Steel also has a project in Vietnam producing 2mm tons per year with 3 units • Kobe would arrange financing for 70%-80% of the pig iron facility •There are currently no merchant pig iron producers in the United States - Almost all domestic iron ore is controlled by vertically integrated BOFs who do not to supply their EAF competitors with supplies - Pig iron production has historically been a very pollutive and energy intensive endeavor - EAFs historically purchased pig iron from Brazil which lacked environmental regulations and access to cheap charcoal/coke - Coal currently sells for $325/ton - Pig iron production normally requires 0.5-0.6 tons of charcoal/ coke for each ton of iron ore • Wings' pig iron technology - Kobe system is attractive because it requires half the levels of charcoal/coke - Wing's technology reduces emissions by 40% and energy use by 30% -We can use Kobe Steel's ITkm3 technology to produce pig iron with a cost/ton of $300/ton - Jim Kennedy prefers to use Omnisource's technology with a cost/ton of $200-$280/ton 10 EFTA00730650 Historical Pricing BRAZIL MPI PRICE DEVELOPMENT 5100) 5403 PO) 5603 5103 $4,3 5303 5203 5103 So No •I MO, ...in•enfolern/31104111001310•1 -11310.01101,101emilliell 1110 1111111 ~1miiillllllll NIADUANMPIPRKU Current value: 00010n FOB MP MN IMP Mel h•IN Mo, NINI rn le Iron ore prices (5/metric ton based on 64% iron content) GLENCO1< SCRAP-MPI PRICE DEVELOPMENT 5c. Oc INK SIM WO< Ism 550C 51m 'MC slm 5: 1.•••01 Area: 1•• l7 On 0) /N•011 Apt Ot : Current value: -$125/ton CFR ($ price and 96 change) 175 150 125 100 • 7536 SO • 25 0 4 • Lump 10 year average = $71/ton = $1.10dm 0 87% A Source: Otis and vanous industry pu bbCatiOnSfrepOrtS DMTU: $0.47 $0.55 $0.63 $1.25 $1.17 $1.25 $2.20 $1.14 $1.95 EFTA00730651 Pig Iron Data USA Ore Based Metallics Imports - Tonnes 10:0.000 4003000 0:30000 1.10$000 3=000 1500.000 1.0.0.003 1X0$000 100000 Min UMW 131.014 1,161.461 1.401.154 2003 31P1 29:19 IAN 1003 001 I0091101 • SOMA • TAMA! IP Veit nab • Uttar* • Mime • GYM 2008 DRI/HBI Production Mellon Metric Tons 20 18 - 16 - 14 12 - 8 6 4 2 0 I 2008 World DRI/HBI production: 68.5 mt Diamond = HSI countries iDnfor=— it iHi i i i1 8 1 1 1 I $* 1 a 1 Dots scurvy lAldre• Technologies l NOM GLENCOKE $100 $SCO 5400 $100 $200 $103 so MPI - VALUE CHAIN 0,01000 PAN 1Y0k31 value chain tWOUL. $35 ganef !ma WM. US CurcOak $195 MPI COST STRUCTURE Raw Materials Iron ore ("1600 kg / 1000 kg pig iron) Coke or charcoal (500600 kg or 2.5-3.0mt / 1000 kg pig iron] Fluxes, etc. •Production • Smelting • metal treatment + casting +Logistics • Delivery to FOB lbente/rail/terminal, etc.) • Ocean Freight • Delivery to customer Iclischarge/barip/rael/truck/stockyard, etc.) ❖Financing +Trader/distributor margin 12 EFTA00730652 Rare Earth Metals GLENCOU • Pea Ridge possesses the highest value of heavy rare earth elements of any permitted mine globally • The Pea Ridge deposit is classified as a "Strategic and Critical- asset by the USGS • Producing 20,000tpy of rare earth concentrates could possibly be more valuable than the 4mm tonnes of iron ore concentrates • Much of Wings rare earth ore production will be at no cost, as it is a byproduct of the normal beneficiation process for the iron ore • China controls '-97% of total rare earth supply • Global demand expected to grow to190-210kt REO per year by 2014, representing a +10% CAGR over 2008 levels (124kt) • China expected to supply only 160 -170kt per year by 2014 -The numbers above suggest a minimum shortfall of 30kt annually. GMP notes that the shortage could be as high as 50kt annually -Global availability of REOs will depend to a large extent on China's export policies. Further restrictions will increase the planned shortfall. • The lower value REE from the mine could sell for $11/kilo ($11,000/ton) — volume would be -5,000 tpy • The higher value REE from the breccia pipes could sell for $18/kilo ($18,000/ton) - volume would be -10,000 tpy Pea Ridge has the highest value Heavy Rare Earths Distribution of any Permitted mine in the World 100 95 90 aS 10 75 70 6S 60 Relative REO Distribution of Lanthanides Pea Ridge vs. Other Deposits se UGY geftd, Pr. Oy •GSA 1 Mt Pass 0rotou MI Weld Nol•nt Pea 0.46. 13%.• SOW 21%- Nd.. Pr., Dy. 66%- Ce. + La. SEGY = Heaviest and Most Valuable (Samarium. Europium. Gadolinium. Yttrium. and Terbrum) Nd. Pr. Dy = The kiddie REO Values (Neodymium. Praseodymium and Dysprosium) Ce • La • The Light abundant and lowest value (Cerium and Lanthanum) 19,,000 30,,000 ( ) • Inc Inc so.= Rare Earths Suppty IS Demand 2008 2108E 1010E 2011E 2017E 2013E 2314E Ctela Se* oft0INS.pm —Cara Cenrd GOA Derund 13 EFTA00730653 GLENCOR Investment Merits • One of the two highest quality magnetite reserves mines in the world (57% Fe ore and 70% Fe concentrate) - Capable of serving the specialty and chemical oxides markets (+$250/ton price) and foundry grade pig iron (15-20% premium to basic) • Low cost producer at $47/ton - Iron ore: $47/ton fully diluted cost vs. $65-$75/ton for the industry' • $40/ton 'apples to apples- cost comparison with 65% Fe producers and '-$28/ton if byproduct production is included2 - Oxides: Kiruna Mine (Sweden) has 4x higher cost structure excluding transportation cost of -$50/ton - Pig iron: Cost basis (FOB) could be the lowest globally - $300/ton potential + $10/ton transportation = $310/ton • Logistical advantage - Pig iron — Wings can function as the only U.S. merchant pig iron producer servicing a 500 mile circumference primarily by barge • 4-10mm tons demand currently serviced by Brazil (+3,000 miles from Nola) and Eastern Europe (+6,000 miles from Nola) - Oxides— Specialty/chemical oxide producers currently source product from the Kiruna Mine in Sweden (+5,000 miles) • Upside Potential From Other Assets • Byproducts (cob rock, phosphorous, and REM) could generate north of $2,000mm LOM 14 (1) $65-$70/ton operating cost for Cleveland Cliffs and $75tIon-for NA: Australia estimated at $4Mon: China can range from $40,ton-$80ff on (2) $40/ton effective cost = f$47.00 $1.32 x (70%-65%)]; Byproducts could reduce cost/ton by another $10-$14/ton EFTA00730654 GLENCOlk Financial Model 15 EFTA00730655 Liquidation Analysis ASSET LIQUIDATION VALUATION SUMMARY Mcnt; Under Ground Iron Ore Deposit. 150mm tons of proven reserves 105mm tons of finished iron ore Full Feasability Sale Value S $120mm = 3x reserves = $450mm - $330mm startup costs It would cost over $150mm to discover and "prove out" a green field ore body of similar size today (no permits or infrastructure included) Existing Operations: Residual from 38 yrs of running the mill This is finished inventory: Sold as off spec oxides [330kT x (1-31% loss)] x ($120/ton - $18/ton) = $24mm $20mm 330.000 tons at surface of mine Tailings Lake Reserve • (1) Rare Earth: REE willing to pay $25mm for 25% of the $240mm rare earths = $100mm value (2) Hematite - 4MT x $77/ton (price) - $15.1ton (transport) - $18/ton (processing) = $175mm (3) Maanetite - 1MT x 31% loss = 700kT x $200/ton (price) -$151ton (transport)-$18/ton (processing) = $115mm MINUS $150mm cost for tailings lake facility River Property/Port Jefferson County has approved $21mm of Industrial Revenue Bonds for other real estate properties. Wings would own 2.5 miles of therfront properties. Am believes the value is: $50-100mm S10mm Total $390mm Value Not Included (1) Capex funded by Bethlehem Steel from the 1950s-2001 (invested $75mm into the mine in 1950s alone) (2) Two major rail lines (BNSF and Union Pacific) intersecting on the property (3) Two shafts in the mine which go down 2.500 feet (4) 5 miles of underground roads (5) 30MW of electrical service onsite GLENCO1< 16 EFTA00730656 (a) (b) (a) (b) Sources & Uses Debt: pipeline Debt: nine development & f acilities Taillings Monetization Financial Partner - Correnn Equity SOURCES ($mm) Lain $70 $240 $215 $150 la 10% 36% 32% 22% gat 4.0% 8.0% NA NA TOTAL $675 100% Equity Ownership Existinq Post Deal Jim KennedyNna Abboud Glencore Financial Partner 30% 70% - 30% 30% 40% TOTAL 100% 100% Debt: Mine Development and Facilities Asset Amt %Debt Debt Arnt Tailings lacility $150.0 50% Mine development costs $180.0 50% Benelication facility $150.0 50% $75.0 $90.0 $75.0 $480.0 1 $240.0 Tailings Monetization Rthenue EBIMA $850.0 $400.0 NPV 631. 24.9% $215.4 Phase I Phase Phase!! Phase II Phase!! Phase II GLENCOU USES Sin m $amt 24 Msc start-up costs $40 6% Iron ore development costs Nine dev. costs (start up) $180 27% Iron ore beneficiation facity $150 22% Taings Lake lack/ $150 22% Pipeful system w . dew ater $70 10% Cash on balance sheet $85 13% Dividend TOTAL $675 100% Year 1 Year 2 Year 3 Year 4 Year 5 Total 170.0 170.0 170.0 170.0 170.0 850.0 80.0 80.0 80.0 80.0 80.0 400.0 17 EFTA00730657 Assumptions Cumuluati% Over 5 yrs Iron ore tailings monetization INCLUDED in the Model Revenue EBIIDA 1) Hematite - 4.8MT x 31% loss = 3,360kt x $120/ton (price) - $15/ton (transport) - $18/ton (process $403.2 $292.3 2) Magnetite - 1MT x 31% loss = 700kT x $200/ton (price) -$15/ton (transport)-$18/ton (processing) 1412-4 11E.2 543.2 409.2 Phosphorous and rare earth tailings EXCLUDED from Model 1) Phosohnrmic - 1MT x $100/ton (price) - $15/ton (transport)-$18/ton (processing) 100.0 67.0 2) REM - 75KT x $10/kilo (price) x 1000 kilos/ton -$15/ton (transport)-$18/ton (processing) 750.0 746.0 $850.0 $813.0 Cumulative ▪ All non-tailings byproducts EXCLUDED from the Model 1) Cob Rock - 1MT/yr x $14/ton (price) = $14mm/yr x 30 years 2) Phosphorous - 300KT/yr (for 5 yrs) and 50kT/yr (for 25 yrs) x $100/ton 3) REM - 144KT x $10/kilo (price) x 1000 kilos/ton ▪ Pricing - Iron ore: $1.10/dmtu (model) vs. $1.95 $/dmtu current value' - Pig imn:$400/ton (model) vs. $500/ton current value - Specialty and chemical oxides: $250/ton (model) vs. $320/ton (guidance) - Low end oxides sell for $140/ton: Heavy: $220/ton: Specialty: +$700/ton - Pricing groat!): 0% Opex - Iron ore: $47/ton (model) vs. $47/ton guidance - Pio Iron: $300/ton (model) vs. $280/ton guidance - Oxides: $60/ton (model) vs. $47/ton guidance .'-Transportation cost - Iron ore: $2/ton - Pig Iron: $10/ton - Oxides: $10/ton '..-Tax rate of 35% vs. 23% guidance I) Implies $0.86 for every 1% of Fe. Wings' iron ore contains -70% Fe which equals a price of $0.86 x 70 = $60.00/ton over 30 yrs EBITDA $420.0 275.0 1.440.0 $2,135.0 GLENCOU 18 EFTA00730658 EBITDA Build GLENCOU EBITDA BUILD UP Year -4 -3 -2 1 2 3 4 5 6 7 8 Specialty/Chemical Oxides 8. Iron Ore 2006 2009 2010 2011 2012 2013 2014 2015 2016 2017 2016 2010 Production (mm tones) Crude Ore c- 6rnm fon capacity 1.752 5.025 5.500 6.000 6.000 6.030 6.030 6.000 Flotation Concentrate Weight Yield @ % 69.0 <-- % of code ore that becomes saleable volume 1.209 3.467 3.795 4.140 4.140 4.140 4.140 4.140 Revenue ore.ktity thanlrol Addax Vottsne (tones) 0.600 <- U.S. market size - !mm tones 0.600 0.603 0.600 0.600 0.600 0.600 0.603 0.600 Pnce (Stone) $250.00 <- Low end: $140: Heavy: $220: Specialty: $700. $250.00 $250.00 $250.00 $250.00 $250.00 $250.00 $250.00 $250.00 Revenue Specialty/Chemical Oxides 150.0 (50.0 150.0 150.0 150.0 150.0 (50.0 150.0 kin fa Volume available alter oxide sales 0.609 2.867 3.195 3.540 3.540 3.540 3.540 3.540 Iron Om Fine;Pig Iron Grade. % Fe Fines Concentrate feed. Um ei Sfdrntu 70.0 <- Avg% Fe grade $0.86' <- Omen, value is $1.95 Price (Stone) $60.00 $60.00 $60.00 $60.00 $60.00 $60.00 $60.00 $60.00 $60.00 $60.00 Revenue (Iron Ore) 36.5 1720 f9f.7 2(2.4 212.4 2124 2124 212.4 Revenue (Existing Operations)' 4.4 4.4 4.4 4.4 3.2 Revenue (Total) 4.4 190.9 326.4 346.1 365.6 362.4 362.4 362.4 362.4 Operating Cots Specialty/Chemical Oxides $60.00 <-- A4a)ontyai $47non. Chemical can be 20-30% high 36.0 36.0 36.0 36.0 36.0 36.0 36.0 36.0 Iron ore (70% Fe) $47.00 Fully °fluted *a.Y in-: embeds $6.lon of mine develops 28.6 134.8 150.2 166.4 166.4 166.4 166.4 166.4 Total Operating Cast 64.6 1'70.8 (86.2 202.4 202.4 202.4 2024 202.4 Transportation Cost (oxides) $10.00 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 Transportation Cost ((otron ore) bits= $2.00 1.2 5.7 6.4 7.1 7.I 7.f 7.f 7.1 Fully loaded operating cost c- Eftecuve 'MC cast $53.45 $49.25 $49.06 $48.88 $48.88 $48.88 $48.88 $48.88 EBITDA 4.4 119.1 I43.9 147.6 150.1 146.9 1469 (46.9 1469 man ,: Concentrate available alter oxide sales 0.609 2.867 3.195 3.540 3.540 3.540 3.540 3.540 Pig iron volume 66.7% <-. f .5mm tons concentrate makes lmm tan pig Ira 0.406 1.912 2.130 2.360 2.360 2.360 2.360 2.360 Price ($350/tome • $sOttome premium) $400.00' <-- Current value is $500 FOB . $30 transport from 8 $400.00 $400.00 $400.00 $400.00 8400.00 $400.00 $400.00 $400.00 Revenue Pig Ion c-- Earns an extra 15-20% to (pondy grade quality 162.4 764.6 852.0 944.0 944.0 944.0 944.0 944.0 Operating Cots Pig ton Costs $300.00 <-- Brazil - $50Ctilon; Kobe System - $309Ton; own 121.8 573.5 639.0 708.0 708.0 708.0 708.0 708.0 Total Operating Cast 12/.8 573.5 639.0 708.0 708.0 708.0 708.0 708.0 Trans pan anon Cost (peg iron) $10.00 c--Same cost 4. I 19.1 21.3 23.6 23.6 216 216 23.6 Pig Iron EBITDA 36.5 172.0 191.7 2124 2124 212.4 212.4 212.4 Kobe Steel ownership (20%) 7.3 34.4 38.3 42.5 42.5 42.5 42.5 42.5 Wings ownership (80%) 29.2 137.6 153.4 169.9 169.9 169.9 169.9 10'9 Existing operations consists of a minimum of 330.000 tons 010(0 sitting at the surface of the mine: this volume is the result of spillage over the 38 years from when the mine was in production Math on existing operations: $120/ton $30/ton costs x 330.000 tons x (1.30% loss) = $21 inventory EBITDA over 5 years EFTA00730659 Consolidated Financials G L E NCOKE Case #2: Pig Iron & Oxides - Byproducts ( -2 -1 1 2 3 4 5 6 7 8 9 10 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Memo: Revenue 320.8 938.1 1.027.7 1.120.8 1.117.6 1.117.6 1.117.6 1.117.6 1.117.6 1.117.6 Operating Costs 172.5 656.5 726.8 800.7 800.7 800.7 800.7 800.7 800.7 800.7 EBITDA - Mine 0.0 4.4 148.3 281.6 300.9 320.0 316.9 316.9 316.9 316.9 316.9 316.9 . EBITDA - Tailings - - - - - - - - - Depreciation 8 Amortization 0.0 100.0 101.9 107.3 113.3 119.9 126.4 32.9 37.6 38.6 39.1 39.1 EB1T 0.0 (95.6) 48.5 174.2 187.6 200.1 190.5 283.9 279.3 278.2 277.7 277.7 1.0% Interest income 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 0.4 8.0% Interpol Expense - Project Financing 19.2 14.4 4.8 - - - 4.0% Interpol Expense - Pipeline 2.8 2.8 1.4 - - - Profit before tax (117.1) 29.7 168.5 188.0 200.6 190.9 284.4 279.7 278.7 278.2 278.2 NOLs 1171 87.4 - - - - - - Taxable income - 81.1 188.0 200.6 190.9 284.4 279.7 278.7 276.2 278.2 Taxes 35.0% - 28.4 65.8 70.2 66.8 99.5 97.9 97.5 97.4 97.4 Net income (117.1) 29.7 140.1 122.2 130.4 124.1 184.9 181.8 181.2 180.8 180.8 CASH FLOW STATEMENT Net income (117.1) 29.7 140.1 122.2 130.4 124.1 184.9 181.8 181.2 180.8 180.8 Depreciation 8 Amortization 100.0 101.9 107.3 113.3 119.9 126.4 32.9 37.6 38.6 39.1 39.1 A Waking Ca lel Operating Cash Flow (17A) 131.6 247.5 235.6 250.3 250.5 217.8 219.4 219.8 219.9 219.9 lExpandonary Capital Expenditures Cumulative Pig Iron Plant Construction Tailings Lake Facility (150.0) (150.0) Beneficiation Plant (150.0) (150.0) Mine Development Costs (180.0) (180.0) Pipeline (70.0) (70.0) Misr: Start-Up Costs (50.0) (50.0) Expansionary Capin (600.0) (600.0) 3.5% Maintenance Capex (979.8) (11.2) (32.8) (36.0) (39.2) (39.1) (39.1) (39.1) (39.1) (39.1) (39.1) Cash Flow from Inwstirg (1.579.8) (600.0) (11.2) (32.8) (36.0) (39.2) (39.1) (39.1) (39.1) (39.1) (39.1) (39.1) Cash Flow Available or Debt Paydown 120.4 214.6 199.6 211.0 211.4 178.7 180.3 180.6 180.8 180.8 Minmetals debt payoff (14.0) bdustrial revenue bond paydown (120.4) (119.6) Pig Iron debt paydown Pipeline debt paydown (70.0) Cash Flow from Financing (14.0) (120.4) (189.6) Cash Flow Available for Dividends 25.0 199.8 211.0 211.4 178.7 180.3 180.6 180.8 180.8 EFTA00730660 IRR Analysis Qffidefrit Jim KemedyiNine Abboud Glamor° Financial Penner 30.0% 30.0% 40.0% • 1 2 3 4 6 GLENCOKE 8 9 10 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 L5 7.5 10.0 59.9 59.9 79.8 63.3 63.3 84.4 63.4 63.4 84.5 53.6 53.6 71.5 5t.1 54.1 72.1 54.2 54.2 72.3 54.2 54.2 72.3 512 54.2 723 Tots 1t» 0,, 25.0 199.6 211.0 211.4 178.7 180.3 180.6 180.8 180.8 Escrease,(Oecrease) in Cash on B'S (631.1) RETURNS ANALYSIS - FINANCIAL PARTIER Imestmeni (150.0) Dardends from operations - (40% equity stake) 10.0 79.8 84.4 84.5 71.5 72.1 72.3 72.3 72.3 Total (150.0) 10.0 79.8 84.4 84.5 71.5 72.1 72.3 72.3 72.3 IRR (held for LOM) 28.4% MOIC 10.8x Le‘ered FCF - Taal (17.1) 120.4 214.6 199.6 211.0 211.4 176.7 180.3 190.6 180.8 180.8 Leered FCF Financial Penner (40% equdy) 1150.0j (6.9) 48.1 85.9 79.8 81.4 84.5 71.5 72.1 72.3 72.3 72.3 Yield % (4.6%) 321% 57.2% 53.2% 56.3% 58.4% 47.6% 48.1% 48.2% 48.2% 48.2.4 Assume Sale of Asset in 2015 (Year 5): EBITDA in 2016 5317 Mahal.) 5.08 Enterprise Value 1.584 - Debt 0 Cash 44 &pity Value 1.629 Finacial Penner Ownership (40%) asI IRR (Sale In Year 5) 34.1%J RETURNS ANALYSIS - FULL PROJECT Unlegmed FCF (460.0) 37.9. 120.8 187.8 199.3 210.7 211.1 178.4 180.0 180.4 180.5 180.5 Yield% 32% 26.3% 40.8% 43.3% 4S8% 45.9% 3a" 39.1% 39.2% 39.2% 39.2% IRR 31.1%1 NPV 0% 12,130 NPV 4)10% $715 NPV WO% 3215 NPV WO% 87 21 EFTA00730661 Balance Sheet and Operating Stats GLENCOU -1 1 2 3 4 5 6 7 8 BALANCE SHEET Assets Latestil t/- 125/611Bagi 2011 2012 2013 2014 2015 2018 2017 2018 2019 Current Assets: Cash 0.0 675.4 675.4 44.3 44.3 44.3 44.3 44.3 44.3 44.3 44.3 44.3 .ler __QA 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 Subtotal 1.0 676.4 45.2 45.2 45.2 45.2 45.2 45.2 45.2 45.2 45.2 Gross PP8E 4.4 4.4 604.4 615.6 648.4 684.4 723.6 762.7 801.9 841.0 880.1 Acc. Depr. (0.7) (0.7) (100.71 ( k02. (309.9) (423.31 (643.2) (669.6) (7025) (740.0) (778.6) Net PP&E 3.6 3.6 503.6 413.0 338.5 261.1 180.5 93.2 99.4 100.9 101.5 Total 4.6 675.4 680.0 508.9 458.2 383.7 306.3 225.7 138.4 144.6 106.2 146.7 l iabilities X. Fixity Curren1 Liabilties 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 Debt Existing Debt 14.0 10.0 Debt: pteine - 70.0 70.0 70.0 70.0 Debt: mire developmen1 8 taciities - 210.0 210.0 240.0 119.6 Debt: Pig Iron Facility - - - Subtotal 14.0 321.0 310.0 189.6 Existing Common Stock 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Glencore . Equity - - - - - Financial Penner- Equity - 150.0 150.0 150.0 160.0 160.0 150.0 150.0 150.0 150.0 150.0 160.0 Retained Earnings (10.51 215.4 204.9 87.7 117.4 232.6 155.2 74.6 (12.7) (6.5) 15.01 (4.51 Subtotal (10.4) 355.0 237.8 267.5 382.7 3C6.3 224.7 137.4 1416 145.1 145.6 Total 4.6 675.4 680.0 548.9 468.2 383.7 306.3 226.7 138.4 144.6 146.2 146.7 Check OK OK OK OK OK OK OK OK OK OK OK OK OPERATING & FINANCIAL METRICS 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Raceme (womb % 192.4% 9.5% 9.1% 10.3%) 0.0% 0.0% 0.0% Opex margin 53.8% 70.0% 70.7% 71.4% 71.6% 71.6% 71.6% 71.6% EBITDA margin 46.2% 30.0% 29.3% 28.6% 28.0% 28.4% 28.4% 28.4% EBIF margin 14.6% 18.6% 18.3% 17.9% 17.0% 25.4% 25.0% 24.9% Net income margin 9.3% 14.9% 11.9% 11.6% 11.1% 16.5% 16.3% 16.2% Capex as 14 of sales (3.5%) (3.5%) (3.5%) (3.5%) (3.5%) (3.5%) (3.5%) (3.5%) DebtfEBI1DA 70.3x 1.3x 0.0x 0.0x 0.Ox 0.0x 0.Ox 0.0x 0.Ox EBI1DAiinterest 0.2x 10.3x 58.8x NA NA NA NA NA NA EFTA00730662 Sensitivities Sale in Year 5 - Exit at 5x 2016 EBITDA Sensitivities at: $47 Iron Ore Cost / $300 Pig Iron Cost IRR Sensitized to PIG IRON PRICE and OXIDE PRICE Oxide Price ($/tonne) OC a." ec $300 $350 $400 $450 $500 $550 150 29% 37% 43% 49% $200 $250 $300 $350 $400 21% 25% 22% 25% 28% 31% 34% 32% 34% 37% 39% 41% 39% 41% 43% 45% 47% 45% 47% 49% 50% 52% 50% 52% 53% 55% 56% GLENCOU 23 EFTA00730663 GLENCOU Appendix 24 EFTA00730664 U.S. Steel Supply/Demand (MT) GLENCO1< 132 110 Net imports as a%ef 17% 12% 19% 11% 9% 10% 976 ION 10% 11% 11% 11% consumption 119 709 135 122 108 •Productim • Consume= 110 101 86 nn so suraptIo rt Gt s con s• 4% '09 4- 112 44 89 011 114 104 100 104 117 114 104 2004 2005 2006 2007 2006 2009 20110E 2011E 2012E 2015E 2014E 2015E Source. Metal Strategies 25 EFTA00730665 GLENCOKE Iron Ore Transaction Comps Acquirer Date Premium Paid <KW Porto DS rose Mnattnetment) seåke Acquwee Cipacily Resents —outom Implied Transaction Multiple Production of Full Capacity PAWN. Implied FY acRY PM% Rasmos Ore IMO Average Adjusted Resources *4_""9. AdNsled Implied AV ' Ate. Implied FY 44. Grade I% Fe) wad Xel Regemes6' (MO Ore (MU Resources"' GM * Reserves 1055'1) Resources N981) Australian Precedents Autos Remote,' United Meer.) Cary Femme Lid Untied MerteraM C*19 Waraick Resources At a% Rosette** BMPEI Rio Patters JV Weeiern Khan ~wages Forlesore Hammereley Iron Centric lAeun1G1beon Iron dams (Midst.* Metals) Me alien Bulk Minerals Golden Weil Resources Strike Resources dengue Lid Midwest Cap* lambert Centres PUStfOilltåig. Mineralogy Mean Median Other Precedents Slmandou (BSG Resources Guinea) Asia iron Moldings Lid consonance Thompson Corumbo Perlman Ltd JMendes Minas4bo 1.94% Project Amapa Mine MMX Protect Mean Median Toed 1~ %Mal Median Source: Citi Investment Banking Mee Ilen BHP Men ChIneReelellylArlerlare ChIneReelellylArlerlare Ada hen/Hannay Baaalad 81P13Ø 10810-10 123 16-0d4.19 185 09-33-09 11 035.49 23 osseper3 36 28.Aug.29 246 054n06 5.600 vrtSCO 04.51524)9 13 Huron Valk 243~9 822 Cheek* 1236:09 5.150 «CO 1500,08 148 AMC 034:/o4.08 sisetteare Amigo iron &Steel CO-Nes-08 109 Grange Retsawces 25-Ses-08 667 Hs« WM 12.Aug-09 29 Geier« 26-MM 46 Weetwn King 8544008 IS Sheskel Madera 1.107 Chew Metellursied 25h006 374 Cleeteu 25-8m-07 3S Sheuglre 214.0.47 121 MCPeale 314~03 415 Vale 50 67 30.4pr.10 25:0 173.0% 450% 1.9% 22.4% 18.3% 108%) 200% Ni 192% Ni 11.1% MA% MS% »ex o.Ses 12.0% 34.1% 27% 51.7% Ni Ni (13.0%) Ni 42.9% 26.2% Ni 100% ICO% 12% 11% 78% 15% 5% 50% 16% IC% 40% 11% 14% 24% IGO% 11% 10% 103% 100% 50% 50% 100% 6.0 We We We Na 250 4250 We 550 1700 Ne 10/3 20.5 nl We We Na 46.9 272.3 Na 90.8 202.0 We 46.7 67 sax 35 100 e2% 66 238 45% 106 456 45% 206 O We Ne 158 58% 92 Na We Ne 87 59% 39 Na We Ne 158 SS% 92 rda Na n% 26 56% 15 O Ws nY 649 57% 126 4.774 61% 2.916 24.923 60% 15.070 M nå ne 589 35% 202 1.66 50% 957 1.799 59% 1364 1525 6114 991 5.910 61% 3515 Ne tel Ne 685 55% 483 51% Ne 2.4 Ne Ne Ne 7.5 Ne Ne 114 27.6 We We 230.3 We We We 147.4 nl We 21.1 15.0 114.3 68.8 il“lialoilWilR 3614 6 1.69 33% 0.489 a 231 52% tn Ne 119 59% tel Ne 172 62% tel Ne 94 59% 58% 5 568 41% tn Ne 979 31% Ne Ne 250 36% We Ne 1.100 31% We Ne LOW 32% Ne vel tel Ne CharesirqChoowarg lea viumn Vale CloglaneCalls Inc UemOse leg% American Mroes-09 260 3044.05 240 30Jna 750 11 Sep.08 432 01-Feb* 1.900 174,003 5.500 16.8% NA 21.5% FU FU 20.1% 20.1% 60% 20% KO% 15% 160% 51% 70% 5.0 BA 2.0 8.4 292 218 6.5 66.7 150.8 375.0 347.1 6.1 3036 119 119 Uls1-1181131g1X 5.000 58% 2300 1.2 We Ne Ne Na Na 382 We 5.2 36.6 We 132 13.2 4.0 10.4 We We We Col 20 23 22 32 8.9 7.7 13 4.7 9.7 COS 7.1 7.1 13 6.6 29 4.5 75 4.0 1.2 17 17 Col 3.7 29 Ne lit sul lit 15.8 11.0 Wit 1.7 192 37es n­ vel 209 67% 140 95 62% 586 1.460 47% 802 ng ng Ma ng ng Ma 71.0 1.780 37% WA 1.133 2/95 330 197 67 IMO 454 29 298 4E% 141 62% 2.350 47% 1.485 33% 74 40% 6.1 Na 5,4 49.5 2.8 nh 16.0 $7 rwe 5.7 6x multiple on 150MT of reserves = $900mm 26 07 3.7 3.8 313 1.4 206 106 37 as 2.9 EFTA00730666 GLENCOKE Management and Advisors Management James Kennedy President - Designed and constructed the iron ore beneficiation facility at Pea Ridge - Former portfolio manager for Kennedy Capital Management with AUM of $100M - 13 years as a securities research analyst and marketing representative funding over $300M in early 1990s. Laurence M. Nuelle Chief Geologist - Transitioning to become the company's full time geologist - Completed extensive work at Pea Ridge under the USGS, specifically relating to the rare earth deposit - Will coordinate the laboratory and processing for the production of rare earth concentrates from the Apatite and the heavy rare earths from the breccia pipes Martin Schaper Interim CFO jay Norwood Interim COO Advisors During Feasibility Study Terry Gooding Former Senior Mining Manager for Pea Ridge Larry Tucker Former Chief Underground Mine Manager and Acting Geologist for Pea Ridge David James Former Senior Mine Engineer for Pea Ridge Tom Gallagher Former Senior Personnel and Safety Officer for Pea Ridge 27 EFTA00730667 GLENCOR Pig Iron Data MPI STRUCTURE: BRAZIL at KULA ctzLIL a MUNI LIMrn a MEMO C'S =SO ibrak ea 4And••••INel &VAS ICA rfl. S' WIM IMMS L'Z..111=.1.rn Total Braiilian nameplate capacity is now about 15 million tonnes per year with 80.90 companies and 163 charcoal-fired blast furnaces. 20 16 H. 14 11 10 14 — 11.1 CROSS BORDER PA E RCHANT PIG IRON TRADE million tonnes - I iporn D , IIA-- •••••••- 17 4ul 12.412.4 WILI 4 I I I I III 11.71— L4 II 200) 2001 /0112 1004 10%4 20,5 7006 1001 T 14 207.9 3/1 16 MPI EXPORTS - mt 2.1 G0 62 • ern•e. • heu • ;Anew Ina I-1 60 12 to 10)1 100) Total MPI trade International trade = 17-18 mtpy Domestic trade [Russia, Brazil, India, Japan, South Africa, EU, etc.] = ± 9 mtpy China domestic trade = 30 mtpy ??? +Total excl. China = ± 27 mtpy Total incl. China = ± 57 mtpy ??? 28 EFTA00730668