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Opportunities in the Saskatchewan Mining Supply Chain

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2 Opportunities in the Saskatchewan Mining Supply Chain
Northern Opportunities Forum La Ronge, SK November 21, 2013 Monique Lischynski Manager, Supply Chain Development Ministry of the Economy Good morning: ladies and gentlemen: Thanks to ABMEC, the organizer Very excited to be back to England and to tell the opportunities in SK You may wonder why this Chinese guy was sent here, but not a native English-speaking person? No one else in the office have lived in England longer than me although some of them are British. My personal link with the UK: Southampton , 1st return trip since 1996 My roots in mining: Daye County, Hubei Province, my ancestor land, mined iron ore 226 AD (1780 yrs history), with the largest open mine pit in Asia. My ancestor home village is located right above iron ore mine. Minerals are in my blood, and give me passion for my job.

3 Safety Moment

4 Ministry of the Economy
Mission to: “advance economic growth to generate wealth and opportunity in Saskatchewan.” It has three core lines of business: To advance and regulate responsible resource development To develop, attract and retain skilled workers To enhance economic growth and competitiveness in the province. Provide a more integrated approach to the province's economic growth.

5 Economy – Supply Chain Overall:
To increase local goods and services content in resource industries including mining, energy and value added agriculture industry. To assist local companies to understand supply opportunities Team of three: Michele Grella, Shelley Kent, Monique Lischynski

6 Outline Overview of minerals exploration and production
Overview of supply chain opportunities Examples of goods and services required What is important to buyers Strategies for market entry Resources ECON’s roles and services

7 Overview Between , mining companies in SK will have invested over $15 B in projects From 2008 – mining companies in SK will invest over $50 B in new projects >30,500 employed in industry Over $2.5 billion annually on wages, goods, services

8 Overview Industry Drivers: Expanding global population
Growing middle class in developing countries Increase need for food quality, power and industry Increased energy consumption Increased crop production

9 Saskatchewan Rich Endowment of Minerals
REE Saskatchewan Rich Endowment of Minerals Athabasca Basin Uranium Gold & base metals World’s largest potash producer and 2nd largest uranium producer Canada’s 2nd largest oil producer and 3rd largest natural gas producer Oil Sands Precambrian Shield 651,036 km2 Diamonds Oil Western Canada Sedimentary Basin Natural Gas When it comes to mineral endowment Saskatchewan has truly been blessed geologically with a rich and diverse mineral endowment. The northern 1/3 of Saskatchewan, which is underlain by rocks of the ancient Precambrian Shield includes the Athabasca Basin, which contains the largest, highest grade uranium deposits in the world. Also in the Precambrian shield ancient volcanic belts, shown in green, contain base metals and gold (cross hatched pattern). There is also significant rare earth element potential in the Precambrian Shield, particularly to the north of the Athabasca Basin large potash deposits which account for account for about 45% of the world’s potash reserves. southern part of the province as deposits of diamonds, coal, clays and sodium sulphate. The rocks in the southern part of the province also host substantial resources of oil and natural gas. Saskatchewan is second in oil and third in natural gas production in Canada. In terms of mineral potential, assuming the current regulatory environment and current land use restrictions, which is considered the best measure of investment attractiveness, Saskatchewan ranked 5th out of 96 jurisdictions surveyed and first out of Canadian jurisdictions in the Fraser Institute’s survey of mining companies. Potash Oil Clay Coal Ranked 1st in Canada and 5th overall out of 96 jurisdictions in terms of Mineral Potential, assuming current regulations and land use restrictions (ie investment attractiveness ) in 2012/13 Fraser Institute Mining Survey.

10 Saskatchewan Value of Mineral Production
2012 Production: Potash, uranium, coal, gold, silver, salt, sodium sulphate, potassium sulphate, bentonite, silica sand and kaolin; Position in Canada (value of production): In top 3 1 in 2008; 3 in 2012 Value of mineral production: 2012: ~ $7.4 B, largely from potash and uranium down from $ 8.1 in 2011 value better than 2009 and financial crisis near record $9.5B realized in 2008. $ Cdn Billion

11 Mineral Exploration: 1984 – 2013
Saskatchewan Mineral Exploration: 1984 – 2013 Exploration spending: record $474 M in 2008 range of between $275M and $323M. ~$2.8 B spent has been spent between 2004 and 2011. ~$1.2 B on uranium ref in later in the presentation. new discoveries have been made; and several projects are advancing towards production, bodes well for the future of our mining sector. Of the just under $300M in exploration in 2012 about 50% ($150 M) would have been spent in the North. Overall $1.2 B in overall spend in Northern Goods and Services of which 30% is goods and 70% services Of this overall spend of only $150 is Exploration *2013 Expenditures are a preliminary estimate

12 Saskatchewan Uranium: Exploration and Development Activity
2014: Mining of high grade Cigar Lake deposit begins 2013: McClean Lake Mill restarts 3 Projects at Feasibility/Prefeasibility 7+ Advanced Stage Projects Exploration : $1.2 Billion spent 16+ new discoveries from 100’s of projects Production by 2017 could climb to 17,000 t/U short to mid term prospects for uranium look very good a number of projects in development, feasibility/prefeasibility and at the advanced stage of exploration. estimate that by 2017 production could be at 17,000 t/U

13 Saskatchewan Potash Mines
Cory Vanscoy Patience Lake Colonsay Allan Lanigan Esterhazy K1 + K2 Belle Plaine Agrium PotashCorp Mosaic Rocanville This map shows (colour coded by company) 10 producing mines.

14 Saskatchewan Potash Production
8 conventional underground mines 2 Solution mines Each of the potash mines have recently increased, or plan to increase their production capacity. Planned expansions of 15.9 Mt KCl by 2020 This represents a 90% increase over 2004 Total estimated cost of expansions: $13.9 B Some work from the Potash Mining Supply Chain Requirement Guide 2 MTPY Conventional about $4B while Solution $3.2 B – prices have elevated from here (recent quote is K+S for 2 MTPY solution mine is $4.1 B) Annual operations and repair: $160 M for conventional $234 for solution.

15 Saskatchewan Gold ~1.63 M oz Au produced since 1986 from 7 gold mines (primary) in LaRonge Gold Belt Current Operations : Seabee Gold Operation (Claude Resources) 2 mines (Seabee, Santoy 8,) produced 1 millionth oz in August 2012 2012: 49,570 oz Au La Ronge Gold Project (Golden Band Resources): production at three mines over past year (Roy Lloyd, EP, Komis) at Jolu Mill 41,932 oz Au produced in 2012 fiscal year (year ended April 30, 2012; After operational restructuring production has recently resumed Komis La Ronge Gold Belt) Jolu Mill Roy Lloyd Seabee Gold Production: Claude Resources Seabee Operation (Seabee and Santoy 8 deposits) 1 M ounce last August Golden Band’s 3 mines over last year Roy Lolyd, EP and Komis The Seabee Gold Operation currently has a Proven & Probable reserve of 311,100 ounces of gold, an Indicated resource of 344,200 ounces and an Inferred resource of 603,400 ounces in National Instrument category. Current exploration programs are focused on near mine targets at Seabee and Santoy.

16 Gold Developer: Brigus Gold Corp. Goldfields Project, Uranium City area Others: Wescan Goldfields Fuhua Mining Brigus: production in SK in 2013 (?)

17 Saskatchewan Coal Mining and Exploration
2012 (2011) Coal Production in Mt, Sherritt International Bienfait: 0.5 (0.6) Boundary: 5.6 (5.8) Poplar River (3.5) Total = 9.7 Mt: 2011 Production = 9.9 Mt Coal Exploration Hudson Bay area Dispositions Mineral Potash Coal (Issued/ Applied For) Hudson Bay area Last year, Saskatchewan lignite coal production was 9.9 Million tonnes from Sherritt International’s 3 mines in the south and southeast part of the province near the American border. Limited exploration for sub-bituminous coal continued in the Hudson Bay area along the east central side of the province. Producing Mines

18 Other Mineral Production
Saskatchewan Other Mineral Production and Exploration Production: sodium sulphate high-value silica sand potassium sulphate limestone salt bentonite and other clay products aggregate. Exploration: base metals diamonds rare earth elements graphite Saskatchewan also had production of a variety of industrial minerals as listed on this slide; in addition there was exploration for diamonds, rare earth elements and graphite. Sask Minerals Chaplin Sodium Sulphate Mine – photo by Lilypon (Google Earth post).

19 Saskatchewan Mineral Sector in Fall 2013
Outlook is fairly positive, however, still uncertainties: direction of global markets pace and scope of uranium recovery Commodity prices are down Many mining companies are in cost control mode Need to appreciate how that impacts current procurement focus companies have existing supply chains will be working with them to reduce costs extra challenge for new suppliers and/or start-up suppliers

20 Supply Chain Opportunities
Exploration Projects (new mines/expansions) Establish Infrastructure Construct Underground Construct Surface Operations

21 Exploration Supply Chain Opportunities
Geology (geologists, technicians, prospectors) Transportation Camp/lodging Drilling Geochem Analysis Field Supplies and Equipment Communication and Freight

22 Projects Supply Chain Opportunities
Opportunities exist in both new mine and mine expansion development Key manufactured goods required: Concrete Steel and fabrication Electrical Pumps and piping Valves and fittings Equipment Miscellaneous

23 Surface Construction Overhead cranes Compressors Agitators Belt scales
Heavy civil construction Mechanical rotating equipment Mill/product storage/flotation buildings Electric, instrumentation, controls Concrete Scaffolding Cyclones Grinding equipment Scrubbers Pumps & piping Dryers Thickeners Tanks and storage bins Conveyors Bucket elevators Boilers Centrifuges Overhead cranes Compressors Agitators Belt scales Transformers Fire protection systems Process control equipment Process chemicals HVAC equipment Feel free to mention just a few – they will get the presentations which will provide them with the detal.

24 Underground Construction
Walking/drill rigs and drill bits Ultrasound measurement equipment Hoist rope/wire rope Winch Pumps Electrical equipment Hydraulic motor Conveyor and conveyor components Fans Scoop trams Limit switches Cranes Crushers Screens Rock drill lifts Instrumentations Shovels Load and hauling machinery Raise bore systems Specialized mine vehicles Rock tools Explosives and suppliers Rock drills

25 Operating Mines (Potash)
Chemicals – potash flotation, water conditioning for heating systems Fuels and Lubes Dedust oil for potash Mobile equipment-trucks, dozers, front end loaders, etc. Conveyor belting for underground Bearings, seals and power transmission parts Electrical consumables such as breakers, fuses, switches and fixtures Pipes, valves and related fittings (ie. steel, PVC, copper) List of examples of materials and equipment required in a operating potash mine.

26 Operating Mines (Uranium)
Computing and telecom (hardware, software and services) Nuclear materials and process equipment, mechanical components, tooling, maintenance components Boilers, piping, forged components Electronics and instrumentation Logistics, handling and storage Reagents and environment Production services (waste management and cleaning, decommissioning) General service List of examples of materials and equipment required in a operating uranium.

27 Site Services Water Security on site Waste disposal Medical on site
Catering Camp Accommodation Janitorial Services Pest Control Security on site Medical on site Transportation Internet and phone Storage shelters

28 Understanding the Supply Chain

29 Project Supply Chain EPC Example
Mining Company EPC Tier 1 Tier 2 Tier 3 Customer Project Suppliers (OEM) (Parts or Service Provider) (Raw Material) This is a graph of the supply chain in the case of a new project – the Project folks are the EPC – Engineering Procurement Consulting company (Engineers) In this case the Engineering company may be buying the equipment for the project. In other cases (EPCM ) the engineering company will make a recommendation but the Mining Company actually purchases the equipment. EPC – Consulting company which provides engineering, procurement and construction support to mining company. Used extensively in new projects/expansions.

30 Project Perspective Engineering view: On-time, on-budget, reduced risk
Prequalification systems Supplier experience and know-how critical New Supplier: Not long term Projects in different locations

31 Operations Supply Chain
Mining Company Tier 1 Tier 2 Tier 3 Customer Suppliers (OEM or Established Vendor) (Parts or Service Provider) (Raw Material) This is just an example of a supply chain with the Mining Company as the customer OEM is an Original Equipment Manufacturer for example Prairie Machine who makes boring miners. Suppliers would supply directly to him and so on.

32 Operations Perspective
Mining view: Long term What do you offer that adds value New Supplier View: Consistent location Potential for market growth

33 Strategies for Market Entry
Direct to mining companies Partnering with other suppliers of goods and services Work with existing OEM or suppliers to mining companies – supply to the supplier Saskatchewan Manufacturers Guide Companies often want to sell direct to mining companies and that is certainly possible depending on the project/service you have. It is important to understand the mining companies have well established relationships with suppliers and your will need to demonstrate value added to be considered. Mining companies also prefer to work with local suppliers when possible. That can be one of the advantages of developing a Join Venture or project or a supply agreement with a local company.

34 Preparing for the Market
Do your homework: market research – understand your potential customer Understand what your good at (core competency) Think through the 4 P’s product, place, price, promo

35 Practical Advice Know your customer Know your competition
Know your product

36 Making the Pitch Review procurement policies and procedures
Make an appointment Conduct a “lunch & learn” Provide product literature, catalogs (electronically), web site address Request to be added to the bidders list Complete prequalification process If not added to the bidders list, ask why, constructive feedback and adjust

37 Making the Pitch What buyers like: Become a qualified bidder
Tailor your offering to the business Ask customer what they are interested in Offer how your product is different from your competitors

38 You Get the Order Now What? Supplier evaluations: Product quality
Delivery Price Health, Safety, Environment Experience Spec compliance Turnover packages A

39 Becoming a Preferred Supplier
For the long term: Safety Service Quality Technical competency Relationships

40 Resources used in this presentation
How to Successfully Access the Mining Supply Chain - Source of information for this presentation. Detail on potash and uranium including company background, contracts, existing supply chains, procurement methods, contacts Potash Mining Supply Chain Requirement Guide - goods and services required to support the development/ operation for conventional and solution mine. Mining Supply Chain Forum - Presentations from mining and engineering companies.

41 Other Events 44th Annual Saskatchewan Geological Survey Open House
December 2-4, 2013, Saskatoon PDAC 2014 – Prospectors and Developers Association of Canada (PDAC) March 2-5, 2014 Toronto Canadian Institute of Mining (CIM) May 11-14, 2014, Vancouver

42 How we can help… Information on the mining industry and supply chain opportunities Information on the Saskatchewan business environment and related business costs tailored to individual business case Connections to mining and supply companies

43 Saskatchewan Industrial and Mining Suppliers Association (SIMSA)
Promoting Saskatchewan solutions for the global resource industry Phone: Web site:

44 Go Riders!!!!!!

45 Monique Lischynski, M.Sc.
Questions??? Monique Lischynski, M.Sc. Manager, Productivity and Supply Chain Development Phone: (306) Cell: (306)

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