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Rare Earth Elements“Physical Ownership in Strategic Metals”
Corporate PresentationJanuary 5th, 2011
TSX-V:DSM OTCQX:DHCAF
A Forbes & Manhattan Group Company
Forward Looking Statements
Caution regarding forward-looking information:
This presentation contains "forward looking information" within the meaning of applicable Canadian securities legislation. Forward looking information includes without limitation, statements regarding the proposed use of the proceeds of the financing, the receipt of all necessary approvals, the issue of permits, progress in development of mineral properties, future production and sales volumes, capital and mine production costs, demand and market outlook for rare earth metals, future metal prices and treatment and refining charges, the financial results of the Company, the future financial or operating performance of the Company, and terms and the availability and likelihood of future acquisitions. Generally, forward looking information can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases or state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information, including but not limited to: general business, economic, competitive, geopolitical and social uncertainties; market risks; risks related to leverage; acquisition risks; and other risks of the mining and trading industries. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws. This presentation does not constitute an offer to sell or a solicitation of an offer to sell any of the securities in the United States. The securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any state securities laws and may not be offered or sold within the United States or to U.S. Persons unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.
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• Produces +95% of Global Supply• Export Tariffs of 25% imposed to drive manufacturing to China• Export Quotas reduced every year for last 5 years• China reduces Quotas for second half 2010 by 70%
CHINA REDUCES QUOTAS FOR H1-2011 BY 35%
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China- Guarding the Supply
“Chinese adamant on rare-earth metal cuts”- Aug 30-2010
BUSINESS MODEL
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Provide Investment exposure to a Physical Stockpile of Strategic metals including Rare Earths without any mining risk
Source and Export REE from China utilizing long established relationships
Store metals in Secure LME warehouse locations outside of China
Trade individual Rare Earth Elements to downstream customers to generate profit
Capital Structure
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Capital Structure
Stock symbol:Shares issued:Fully diluted:Price (01/0311):Market Cap:52-week High/Low:
DSM – TSX:V73.1 M99.5 M$0.50$36 M$1.05-$0.32
Latest Financing(Mar 2010)
Amount Raised:Shares issued:Issue Price:
$22.0 M48.9 M $0.45
Key Institutional Shareholders
Goodman & Co ~12%
AGF Management ~ 6%
RAB Capital ~ 4%
Aberdeen International Inc ~ 3%
Management & Insiders ~ 4%
Management
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Scott Moore, MBA, President & Chief Executive Officer Mr. Moore is an experienced capital markets executive with 20 years experience in the resource sector Former CEO of Franc-Or Resources Corp and VP Corporate Development for Aberdeen International. Former Director of
Sulliden Gold and Avion Gold. He has raised in excess of $250 million in resources in the last 3 years. He holds a Bachelor of Arts degree from the University of Toronto and an MBA from the Kellogg School of Management
Alastair Neill, P.Eng., MBA, Executive Vice-President Mr. Neill is the former GM, Rare Earth Division and VP Business Development for Neo-Material Technologies
(TSX:NEM) and brings over 15 years of direct Rare Earth experience. Mr Neill lives full time in Beijing He holds a MBA from York University and a Bachelor of Engineering in Material Science from the University of Western
Ontario
Brad Boland, C.M.A., Chief Financial Officer Mr. Boland was the CFO of Consolidated Thompson Iron Mines Limited until July 2009 From May 2005 to September 2007, he was at Kinross Gold Corp., most recently serving in the position of Vice
President, Corporate Controller Prior to that, from August 1998 to February 2005, Mr. Boland was at Goldcorp Inc., as Corporate Controller and the Vice
President, Finance
Jihong Gan, BA, MA, Manager Contracts and Administration Ms. Gan is an accomplished administrator with a specialization in East Asian languages. Ms. Gan has a Bachelor of Arts
(Major: Japanese) from the Shanghai International Studies University in Shanghai and a Masters of Arts in East Asian Language studies from Osaka University of Foreign Studies. She will be responsible for the administration of the Company’s operating subsidiaries in mainland China, Hong Kong and Barbados. She will also be responsible for all purchase contracts with mainland Chinese suppliers as well as sales contracts with domestic and export customers.
BUSINESS MODEL2010 Achievements
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199,000 kilograms of Heavy Rare Earth Oxides in Inventory at year end
289,000 kilograms of Heavy Rare Earth Oxides Acquired in 2010
11 acquisition trades executed in 2010 totaling $30.84 million
5 Sales contracts with 4 different customers executed in Q4 2010 totaling $15.65 million in gross sales
Attractive Value Proposition
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Participate in the expected price appreciation of rare earths and strategic industrial metals
No Exploration or Mining Risk
Rare Earth Metal InventoryAs at Dec 31-2010 Quantity
(Kgs)Cost
($millions)Market Value
($millions)Held Busan Korea
Dysprosium Oxide 15,000 $4.5 $4.4Dysprosium Fe 12,000 3.5 3.6Gadolinium Oxide 10,000 0.7 0.7Lutetium Oxide 3,000 0.9 1.2Neodymium Oxide 10,000 0.9 0.9Terbium Oxide 13,000 6.5 8.1Yttrium Oxide 10,000 0.4 0.7
Held within ChinaEuropium Oxide 6,000 2.2 2.7Yttrium Oxide 120,000 0.9 0.9
199,000 $20.4 $22.9
Rare Earths in the Limelight
“China Tightens Grip on Rare Minerals”
“China slashes first batch of rare earth export quotas by 35.17%”- Dec 30-2010
Japan rare earths imports from China plunge in Nov December 27, 2010 -- TOKYO (Source: Reuters)
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“China Cracks Down on Illegal Mining of Rare Earth Metals” – NY Times Dec 2010
“China Cuts Rare Earth Exports”
A Paradigm Shift in the REE Industry
Security of Supply no longer just a commercial Issue
It is now a Political Issue
Rare Earth Supply Technology and Resources Transformation Act [RESTART] introduced to both the U.S House of Representatives and the U.S. Senate in 2010
Japanese industry minister asked Chinese Minister of Industry and Information for reductions to this year's export quota to be reversed. “We are concerned that rare-earth metals will not come to Japan in the future”.
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“” China Defends Rare Earth Quotas as inline with WTO” Bloomberg Dec 30-2010
“What Are Rare Earth Elements”
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Rare Earth Element or REE are Lanthanide series elements and are found at the bottom of the Periodic Table
15 elements plus Yttrium are classified as REE and have specific magnetic, fluorescent and chemical properties
Some are classed as Light, Medium or Heavy REE and have varying applications in laptops, LCD’s , cellular phones and hybrid vehicles.
Heavy REE such as Europium, Terbium and Dysprosium command the highest value
Rare Earth ElementsIndustry Primer
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Product Miniaturization
Lighter Weight
Energy Efficiency / Environmental Compliance
Enhanced Control and Measurement
Enhanced Performance and Functionality
Essential inputs for virtually all electronic products
No substitutes exist that have the same characteristics and provide the same benefits
Rare Earth Applications
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1kg Neodymium 15kg Lanthanum 0.1kg Dysprosium Top-selling car in Japan
Toyota PriusBiggest User of Rare Earths of any Object in the World
100 g of Dysprosium is worth approximately $10Without Dysprosium you don’t have a Prius
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The Largest User of Rare Earths Tomorrow1mt Neodymium needed for every 3 MW of wind power generated
Current State of the Rare Earth Markets
15Source: Rhodia
Supply Side Response
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MolyCorp Inc AMEX-MCP Re-opening the Mountain Pass
mine closed since 1998 with production in 2013
Primarily a Light Rare Earth Deposit with 86% of 2013 production in Cerium, Lanthanum and Neodymium
Expected to produce approximately 18,000 Tonnes per year
No production of Heavy Rare Earth Elements ( DY,Tb,Yt)
Lynas Corporation ASX-LYC Starting Mt Weld mine with
announced production in late 2011 Primarily a Light Rare Earth Deposit
with 96% of 2012 production in Cerium, Lanthanum and Neodymium and Praseodymium
First production is 11,000 tonnes per year.
No production of Heavy Rare Earth Elements ( DY,Tb,Yt)
SUPPLY/Demand Gap Increasing
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IMCOA Rare Earth Oxide Forecast
SUPPLY/Demand Gap Increasing
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Rare Earth Oxide Forecast
Current State of the Rare Earth Markets
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No significant commercial stockpile exists globally
No buffer to volatile pricing or actions from China
No ability to hedge against future price increases
Limited supply-side response
Most advanced Rare Earth mining projects are 2-5 years away from delivering product to market with substantial financial and technical hurdles to overcome
Dacha has the inventory today and the ability to grow its stockpile quickly
An Actively Managed Physical Portfolio
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Dynamic Physical Portfolio
of Rare Earths+
Trading Operations
Fundamental Research
Asset Allocation
First Mover Advantage
Risk Minimization
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Dacha’s LME Warehouse Locations
LME WarehouseSingapore
LME WarehouseKorea
Inventory Insured at Market Value
Why buy DACHA?
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Rising Commodity Prices For Rare Earth forecast in next 3yrs
Only Rare Earth Company that actually owns the finished product
Focused on high value Heavy Rare Earths
Demonstrated Ability to acquire REE in China despite reduction in export quotas
No new supply of Heavy Rare Earth’s till 2015
Diversification into other strategic metals
A Forbes & Manhattan Group Company
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Forbes & ManhattanA Private Merchant Bank
Dacha Strategic Metals Inc.
Management Team
Scott MoorePresident and CEO
Alastair NeillExecutive VP
Brad BolandCFO
Board of Directors
Scott Moore Alastair Neill Jean-Guy Lambert
Claude BlanchetStan Bharti George Faught
Strategic Metal Advisory Board
Alastair NeillDr. Allen Alper Don Bubar
Gen. Ron Hite
G. Scott MoorePresident and CEOTel: 416-861-5903
TSX:DSM OTCQX:DHCAF
China OfficeFloor 5, South Building
Zhonghai MansionJianguomenwai Street
Beijing, China1000020
Toronto Office65 Queen St west, Suite 800
Toronto, OntarioM5h 2M5
