ASX RELEASE

10 February 2009

 

INDABA CAPE TOWN 2009  

PRESENTATION  

 The  following  presentation  is  to  be  given  at  Indaba  Capetown  2009  by  the  Company’s Managing 

Director, Mr Brad Sampson. 

 

 

Further information on the Company is available on its website  

www.discoverymetals.com.au 

 

 

 

 

 

 

 

 

 

 

 

 

For further information on this release and Discovery Metals Limited generally, please contact:

Brad Sampson MANAGING DIRECTOR Ph: +61 7 3218 0200 or Mob: +61 4 38 771 037 brad@discoverymetals.com.au

AIM Nominated Advisor – Fairfax, Contact Ewan Leggatt/Laura Littley Ph: +44 20 7460 4389 or 7460 4387

AIM Broker – Fairfax, Contact Marc Elliott Ph: +44 20 7460 4393

UK PR – Conduit PR, Contact Jos Simpson Ph +44 7899 870 450

ASX & BSE: DML AIM: DME SHARE PRICE: A$0.15 SHARES: 150.1M Market Cap: A$22.5M

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Indaba Cape TownIndaba Cape TownFebruary 2009

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The information contained in this document (“Presentation”) has been prepared by Discovery Metals Limited (“Company”).

This Presentation does not constitute an offer or invitation to any person to subscribe for or apply for any securities in the Company.

While the information contained in this Presentation has been prepared in good faith, neither the Company nor any of its shareholders, directors, officers, agents, employees or advisers give any representations or warranties (express or implied) as to the accuracy, reliability or completeness of the information in this Presentation, or of any other written or oral information made or to be made available to any interested party or its advisers (all such information being referred to as "Information") and liability therefore is expressly disclaimed. Accordingly, to the full extent permitted by law, neither the Company nor any of its shareholders directors officers agents employees or advisers take any responsibility for or will accept anyneither the Company nor any of its shareholders, directors, officers, agents, employees or advisers take any responsibility for, or will accept any liability whether direct or indirect, express or implied, contractual, tortious, statutory or otherwise, in respect of, the accuracy or completeness of the Information or for any of the opinions contained in this Presentation or for any errors, omissions or misstatements or for any loss, howsoever arising, from the use of this Presentation.

Neither the issue of this Presentation nor any part of its contents is to be taken as any form of commitment on the part of the Company to proceed with any inaccuracies in, or omissions from, this Presentation which may become apparent. transaction and the right is reserved to terminate any di i ti ti ith I i t ill th C b ibl f t l i d idiscussions or negotiations with any person. In no circumstances will the Company be responsible for any costs, losses or expenses incurred in connection with any appraisal or investigation of the Company. In furnishing this Presentation, the Company does not undertake or agree to any obligation to provide the recipient with access to any additional information or to update this Presentation or to correct any

This Presentation should not be considered as the giving of investment advice by the Company or any of its shareholders, directors, officers, agents, employees or advisers. Each party to whom this Presentation is made available must make its own independent assessment of the Company after making such investigations and taking such advice as may be deemed necessary. In particular, any estimates or projections or opinions contained in thi P t ti il i l i ifi t l t f bj ti j d t l i d ti d h i i t h ld ti f it lf ithis Presentation necessarily involve significant elements of subjective judgment, analysis and assumptions and each recipient should satisfy itself in relation to such matters.

This Presentation may include certain statements that may be deemed “forward-looking statements”. All statements in this discussion, other than statements of historical facts, that address future activities and events or developments that the Company expects, are forward-looking statements. Although the Company believes the expectations expressed in such forward-looking statements are based on reasonable assumptions, such statements are not guarantees of future performance and actual results or developments may differ materially from those in the forward-looking

Th C i h h ld di ffi l d i d lstatements. The Company, its shareholders, directors, officers, agents, employees or advisers, do not represent, warrant or guarantee, expressly or impliedly, that the information in this Presentation is complete or accurate. To the maximum extent permitted by law, the Company disclaims any responsibility to inform any recipient of this Presentation of any matter that subsequently comes to its notice which may affect any of the information contained in this Presentation. Factors that could cause actual results to differ materially from those in forward-looking statements include market prices, continued availability of capital and financing, and general economic, market or business conditions.

Investors are cautioned that any forward-looking statements are not guarantees of future performance and that actual results or developments may d ff ll f h d f d ldiffer materially from those projected in forward-looing statements.

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Southern African and Australian focused base and precious metal project development company ◦ ASX (DML), BSE (DML) & AIM (DME) listedCurrent Mineral Resources◦ Boseto Copper Project – 45.6 Mt @ 1.5% Cu and 18.7 g/t Ag◦ Dikoloti Nickel - 4.1Mt @ 0.7% Ni, 0.5% Cu & 1.2 g/t PGEKey focus is the development of the Boseto Copper Project◦ Bankable Feasibility Study underway

Focus, Excellent Resources, Great Locations

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M k t C d E t i V lMarket Cap and Enterprise Value

Issued Shares at 4-Feb-09 150.1mShare Price at 4 Feb 09 AUD$ 0 15Share Price at 4-Feb-09 AUD$ 0.15Market Cap AUD$22.5mNet Cash at 4-Feb-09 AUD$ 5.2m

Significant ShareholdersMacquarie Bank 11 7%

Shareholder Base DissectionMacquarie Bank 11.7%Investec (Botswana) 10.4%Taurus Fund 9.5%BIFM 7 2%

Australia 63%

Botswana 30%BIFM 7.2%Trafigura 5.9%Resource Capital Fund 5.6%

United Kingdom 7%

4

Top Twenty Shareholders = 58% February 2009

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Quality Resource• Boseto Copper Project 45.6 Mt@1.5% Cu and 18.7 g/t Ag

Project in DevelopmentB k bl F ibilit 40% l t• Bankable Feasibility 40% complete

Supportive and capable shareholder provide funding• Cash at Bank - AUD$5.2 M$

Copper• Demand growth to continue after 2009/10,Supply growth at risk = price upside

Low Political Risk• Botswana

Growth PotentialGrowth Potential• First Mover in highly prospective Kalahari Copper Belt

Experienced Board and Executivep

5February  2009 Delivering the Boseto Project

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ZAMBIAANGOLA

BOTSWANA ZIMBABWEBoseto Copper Project

Maun

SowaNata

F i t

BOTSWANA ZIMBABWE

OrapaGhanzi

Gobabis

WINDHOEK

Selebi-Phikwe

FrancistownNAMIBIA

B O T S W A N AWINDHOEK

Walvis Bay

SOUTHAFRICA

Dikoloti Nickel Project

Jwaneng

PRETORIA

JOHANNESBURG

GABORONE

0 200 km

AFRICA

JOHANNESBURG

February 20096

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ANGOLA

ZambianCopper Belt

ANGOLA

ZAMBIAANGOLACRATON

ZIMBABWE

ZAMBIA

MOZAMBIQUEZIMBABWE

CRATONNAMIBIA

BOTSWANABoseto Copper ProjectBoseto Copper Project • Ghanzi-Chobe Fold Belt - a 140km

wide zone of deformation

KAAPVAALCRATON

• Within late Proterozoic Pan AfricanMobile Belt

• Associated with the well known SOUTHAFRICA

Central African Copper Belt

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Poorly explored extension of Zambian Copper Belt Poorly explored extension of Zambian Copper Belt February 2009

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Plutus Inferred Resource15.9 Mt @ 1.6% Cu & 16.4 g/t AgPlutus Inferred Resource15.9 Mt @ 1.6% Cu & 16.4 g/t Ag

NexusprospectNexusprospect

Petra Inferred Resource4.5 Mt @ 1.1% CuPetra Inferred Resource4.5 Mt @ 1.1% Cu

NE Zeta NE Zeta

Zeta Inf & Ind Resource -Zeta Inf & Ind Resource -Total Mineral ResourceTotal Mineral ResourceTotal Mineral ResourceTotal Mineral Resource

prospectprospect

Zeta Inf.& Ind. Resource -25.2 Mt @ 1.5% Cu & 20.1 g/t Ag (Indicated Mineral Resource of 3.9Mt @ 1.7%Cu, 26.1 g/t Ag and Inferred Mineral Resource of 21.3 Mt @ 1.4% Cu, 19.1 g/t Ag)

Zeta Inf.& Ind. Resource -25.2 Mt @ 1.5% Cu & 20.1 g/t Ag (Indicated Mineral Resource of 3.9Mt @ 1.7%Cu, 26.1 g/t Ag and Inferred Mineral Resource of 21.3 Mt @ 1.4% Cu, 19.1 g/t Ag)

Total Mineral ResourceTotal Mineral Resource45.6 Mt @ 1.5% Cu & 18.7 g/t Ag45.6 Mt @ 1.5% Cu & 18.7 g/t Ag

Total Mineral ResourceTotal Mineral Resource45.6 Mt @ 1.5% Cu & 18.7 g/t Ag45.6 Mt @ 1.5% Cu & 18.7 g/t Ag

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5km5kmQuirinus prospectQuirinus prospectFebruary 2009

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Grade Increasing as Resource GrowsFebruary 20099

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metres holes

750+ holes have been drilled in the areawith 600+ holes in the Boseto Resources

Intensive drilling in late 2008February 200910

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Year 2006 2007 2008 2009 2010 2011

Quarter 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4Drilling for Feasibility Study

Pre-Feasibility Study

Environmental Studies

Bankable Feasibility Study

Project Finance

Construction

Commissioning

Copper & Silver Production

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Project Details2Mtpa Concentrator- conventional flotation (considering 3 Mtpa option)Open Pit Mining23,200 t Cu and 725,000 oz Ag per annum (in concentrate)

Pre Feasibility StudyPFS completed June 08 - Capex US$185M and Net Cash Cost US$1.43/lbXPFS update January 09 XPFS update January 09 –– CapexCapex US$131M and Net Cash Cost US$1.06/lb US$131M and Net Cash Cost US$1.06/lb

Bankable Feasibility Study Formally commenced August 0840% complete40% completeInvestigating options on timing and value addAnnounced completion scheduled for Q1 2010Announced completion scheduled for Q1 2010

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US$/lb2 502.50

2 002.00

1.50 PFS1.50

1.00

PFS

0.50XPFSXPFS

Source: CRU,Morgan StanleyMorgan StanleyJan 09

1st Quartile 2nd Quartile 3rd Quartile 4th Quartile

Cash Costs are at 50% - middle of cost curveFebruary 2009

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Item Status Comment

P PFS planned to self generate power for first 6 months Power PFS planned to self generate power for first 6 months until Botswana grid power is available (expected 2012).

Water ExplorationExplorationcompletecomplete

Water exploration targeting known aquifers. Building on PFS water exploration success to define water

t d b A il 2009resource – expected by April 2009.

Concentrate off-take progressingprogressing Advanced discussions with multiple potential off-take partners continue. PFS assumed all concentrate shipped to overseas smelters.

Environmental (EIA) Detailed environmental studies will be completed by Jun 2009. BFS will be equator principles compliant.

Workforce progressingprogressing Workforce of less than 250 people envisaged. Skills registration and assessment study completed in local g y pvillages.

Tenements Successful reapplication for North West Botswana tenements and granting of new tenements.

T High lit bit d ti g j t t Transport High quality bitumen road connecting project area to manufacturing centres in South Africa and Ports in South Africa, Namibia and Mozambique.

Finance progressingprogressing Ongoing development of the project financing strategy. Quality projects still able to attract both equity and Quality projects still able to attract both equity and debt. Project financing will be debt/equity mix.

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Maun

Exploration potentialExploration potential

~3% of prospective strike has delivered 45 Mt Resource

B t j tB t j tBoseto projectBoseto project

Gh iGhanzi

14 Tenements in Total – 1,300 strike km to explore15February 2009

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Copper Copper –– historical demand trend historical demand trend

Long term trend is for continued demand growthLong term trend is for continued demand growthPeriods of demand reduction do not impact long term growth trend

Copper demand will continue to grow

16SOURCE: international copper study group - http://www.icsg.org/Factbook/copper_world/production_consumption.htm

pp g

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Become a Producer Become a Producer ◦ Focus on developing Boseto (open pit mining)

◦ Bankable Feasibility Study underwayBankable Feasibility Study underway

Grow the Boseto Resource Base◦ Boseto Resource Extensions – eg Plutus, Petrag ,

◦ Near Project Exploration – eg Quirinus, Nexus

◦ Underground Potential- eg Zeta, Plutus

Discover another “Boseto” Project◦ Regional Exploration – 1,300 km of prospective strike length

Seek out value adding opportunities◦ The current global context creates opportunities!

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Inferred Mineral Resource of 15.9Mt @1.6% Cu and

16.4 g/t Ag

Zones of + 2% Copper near f d t d thsurface and open at depth

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High Grade = OpportunityFebruary 2009

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Boseto ComminutionBoseto ComminutionROM Ore ReceivingFrom Pit

2 Mtpa ROM

G i l / J C h

Crushed Ore Stockpile

Grizzly / Jaw Crusher(either at plant or at pit head)

Classification Cyclone

To Flotation

SAG Mill

Simple proven crushing circuitFebruary 2009 19

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Boseto FlotationBoseto FlotationFrom SAG Mill

Flotation Surge & Conditioning

Sulphide Rougher Flotation

From SAG Mill

Sulphide Rougher

Oxide Rougher Flotation

Sulphide Cleaner Flotation

gRegrind

Oxide Cleaner Flotationp

SulphideConcentrateThickener

TailingsThickener

OxideConcentrateThickener

Thickener

TailingsDamTailings Disposal

Concentrate Filter Press(Batch Process)

O id C L d OOxide Concentrate Load OutSulphide Concentrate Load Out

Sequential then split processing of Oxide February 2009 20

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QRC166: 4m @ 1.7% Cu and 13 g/t Ag

218 km Anomaly - Cu-Ag Mineralised – Drill TestedFebruary 2009

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In-fill Program in 2008 February 2009

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Plutus Resource is based on 103/289 holesZeta Resource is based on 114/273 holesZeta Resource is based on 114/273 holes

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In-fill Program in 2008 February 2009

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G d G lt (Ch i )• Gordon Galt (Chairman)ex-Managing Director of Newcrest, significant banking and project development experience

• Brad Sampson (Managing Director)Mining Engineer with extensive operational and project development experienceMining Engineer with extensive operational and project development experience

• John Shaw (Non-Exec Director)Chairman of Albidon , previously Chair of Gallery Gold during development of Mupane Gold

Mine, BotswanaMine, Botswana

• Morrice Cordiner (Non-Exec Director)Director Andean Resources, funds management and finance experience

• Jeremy Read (Non-Exec Director)Je e y ead (No ec ecto )Previous MD of Discovery Metals, +20 years exploration experience ex BHP

• Ribson Gabonowe (Non-Exec Director)Director Kukama & African Mining. Previously Director in Botswana Department of Mines

Capable, Experienced, Balanced

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Capable, Experienced, Balanced

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• Brad Sampson (Managing Director)Mining Engineer with more than 20 years Australasian and African operational and project development experience

• Paul Fulton (Chief Financial Officer)I t ti ll i d i d t f i l ith 38 i i d i l Internationally experienced resource industry professional with 38 years mining and mineral processing experience in three countries including more than 10 years in CFO roles

• Charlie Karelse (General Manager Boseto Operation)Mining Engineer with Australian and Botswana experience over 30 yearsMining Engineer with Australian and Botswana experience over 30 years

• Ross Gibbins (Cost Estimation and Business Development)Civil Engineer with + 30 years international resource industry cost estimation and business development experience with major engineering companies

• Fred Nhiwatiwa (Botswana Country Manager)16 years experience as a professional geologist in Southern Africa . Previously exploration manager for IAMGold

Ch i ti H ili (B t F ibilit M )• Christian Heili (Boseto Feasibility Manager)Mining Engineer with 25 years experience in operational and consultancy roles in mining engineering, management and project development experience in Southern Africa

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Track Record of Delivery25

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Inferred Indicated Total

Area Mt % Cu g/t Ag Mt % Cu g/t Ag Mt % Cu g/t Ag

Petra 4.5 1.1 - - - - 4.5 1.1 -

Plutus 15.9 1.6 16.4 - - - 15.9 1.6 16.4

Zeta 21.3 1.4 19.4 3.9 1.7 26.1 25.2 1.5 20.1

Total 41.7 1.4 18.1 3.9 1.7 26.1 45.6 1.5 18.7

- After Zeta upgrade December 2008After Zeta upgrade December 2008- All Mineral Resources reported at cut off grade of 0.6% Cu- Silver grades do not include the Petra Resource where no JORC silver grade has been modelled to date

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Chalcocite Copper Mineralisation From

Pl R

Malachite Copper Mineralisation From

Pl RPlutus Resource Plutus Resource

February 200927

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2Mtpa Concentrator2Mtpa Concentrator18 month final design and construction period Commissioning Q2 2011Commissioning Q2 2011Conventional comminution and floatation flow sheetWet tailings disposalWet tailings disposalFinancial modelling based on 10 years open pit productionPlant operating costs include maintenance and power costsPlant operating costs include maintenance and power costsSelf generate power first 6 months until grid power availableOpen pits mined via mining contractorOpen pits mined via mining contractor Updated Resource Model expected May 2009

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Ten years only 2011 to 2020 Units PFS XPFS*XPFS* XPFS*XPFS*

Average 10 year price US$/lb 2.52 2.002.00 3.003.00

Operating surplus (in 2008 $’s) USDmillion 541 417417 864864Operating surplus (in 2008 $ s) USDmillion 541 417417 864864

NPV10 USDmillion 115 103103 218218

Payback after production commences years 3.25 2.52.5 1.251.25y

Internal Rate of Return % 23% 25%25% 45%45%

Total Capital Expenditure USDmillion 185 131131 131131

Average Net Cash Costs US$/lb 1.43 1.041.04 1.131.13

Annual throughput (flotation) Million tonnes 2 22 22

Copper production Tonnes Cu pa 23 500 23 20023 200 23 20023 200Copper production Tonnes Cu pa 23,500 23,20023,200 23,20023,200

Silver production Oz Ag pa 780,000 725,000725,000 725,000725,000

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Initial 10 Year Life – Open Pit Mining February 2009

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Highlight PFS XPFS*XPFS*Highlight PFS XPFSXPFSThroughput 2 Mtpa 2 2 MtpaMtpaInitial Mine Life 10 years 10 years10 yearsAverage Copper Grade 1.3% 1.5%1.5%Open Pit Ore Mined 20Mt 20Mt20MtAverage Silver Head Grade 15.1 g/t 18.7 g/t18.7 g/tCopper Recovery 90% 82.5%82.5%Silver Recovery 80% 60%60%Silver Recovery 80% 60%60%Concentrate 40% Cu 40% Cu40% CuAnnual Copper Production 23,500 tonnes 23,200 tonnes23,200 tonnesAnnual Silver Production 780,000 ozs 725,000 725,000 ozsozsLong term copper price US$2.38/lb US$2.00/lbUS$2.00/lb

30February 2009*XPFS projected figures based on management’s best estimates

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Cost ‐ US$/lb*1 Basis PFS XPFS*XPFS*$/ XPFSXPFS

Mining  (/t mined) USD2.50 /USD1.97 0.75 0.540.54

Plant  (/t ore) USD9.00 /USD 6.38 0.37 0.260.26

Site Admin (/t ore) USD2.00 /USD 1.00 0.08 0.040.04

Average Total Site Costs 1.20 0.840.84

Smelting & Refining US$50/t & 5c/lbUS$70/t & 7c

0.10 0.140.14

Concentrate transport US$200/tUSD110/t

0.21 0.130.13USD110/t

Royalty 3% Cu & 5% Ag 0.08 0.080.08

Corporate Allocation USD1.00/t ore 0.04 0.040.04

Silver Revenue US$13.40/ozUS$12.30/oz

(0.20) (0.17)(0.17)

Average Net Cash Costs 1.43 1.061.06

31*1Average for the first 10 years of 2011 to 2020 in 2008 dollarsFebruary 2009

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US$/lb

3.50

3.00

2 00

2.50

1.50

2.00

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021PFS XPFS US$2.00/lb US$3.00/lb

32February 2009Conservative pricing – plenty of upside

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Price Case Units PFS XPFS*XPFS* $2.00 flat

$3.00 flat

$4.00 flat

L T Copper Price US$/lb 2 38 2 002 00 3 00 3 00 4 00L.T Copper Price US$/lb 2.38 2.002.00 3.00 3.00 4.00

Operating Surplus US$ 541m 608m608m 989m 864m 1,312mSurplus

NPV US$ 115m 165m165m 103m 218m 325m

Payback Years 3.25 1.251.25 2.5 1.25 1

IRR % 23% 40%40% 25% 45% 61%

Modelling represents 10 years only (2011 to 2020)

33February 2009

Modelling represents 10 years only (2011 to 2020)

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USD millions

2010 11

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Grade impact modeled – plenty of upside

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Possible Opportunities CommentExpand Boseto concentrator throughput Design with expansion in mindIncrease open pit life at Zeta, Plutus, Petra Plutus prospect still growingResource additions within 15 km Quirinus NE Zeta Nexus targetsResource additions within 15 km Quirinus, NE Zeta, Nexus targetsUnderground potential at Zeta and Plutus Higher grade zones at depth Potential to replicate along strike 1,300 strike km of exploration p g , p

targets

Unique opportunity to replicate NPV

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The information in this report as it relates to the Zeta, Plutus and Petra Mineral Resources for the Boseto Copper Project was compiled by Mr Jason Hosken and reviewed by David Arnott,both Members of The Australasian Institute of Mining and Metallurgy. Mr Hosken and Mr Arnott are full time employees of Snowden Mining Industry Consultants. Mr Arnott has sufficientexperience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualify as a Competent Person as definedin the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. The information in this report as it relates to the Dikoloti MineralResource was compiled by Mr Stefan Mujdrica and reviewed by David Arnott. Mr Mujdrica was employed by Snowden Mining Industry Consultants at the time the mineral resource wasreported. Mr Arnott has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he is undertaking to qualifyas a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. The information in this reportthat relates to Exploration Results is based on information compiled by Mr Fred Nhiwatiwa who is a Member of the Australasian Institute of Mining and Metallurgy. Mr Nhiwatiwa is a full‐time employee of Discovery. Mr Nhiwatiwa has sufficient experience which is relevant to the style of mineralisation and type of deposit under consideration and to the activity which he isundertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. MrArnott and Mr Nhiwatiwa consent to the inclusion in the report of the matters based on information provided by them and in the form and context in which it appears.

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