José Márcio Matta Machado Paixão - South American Ferro Metals Limited -

South American Ferro Metals Limited

Update on

Ponto Verde Iron Ore November 2014

2 - America’s Iron Ore

Overview and progress to date

Commenced production November 2010 with 1.5 Mtpa license

Refurbished beneficiation plant February 2011

Introduced second production shift from May 2011

Introduced third production shift September 2011

Initial JORC resource of 230 Mt announced December 2011

Commenced feasibility study for expansion to 8Mtpa ROM February

2012

Commissioned first concentrator June 2012

Increased JORC Resource to 301 Mt April 2013

3 - America’s Iron Ore

Overview and progress to date

Executed MoU with MRS for rail access April 2013

Commissioned second concentrator June 2013 to produce 65% Fe

concentrate

Secured 2 year $15 million BFS financing from Deutsche Bank July

2013

Acquired additional waste and tailings storage area for expansion

October 2013

Executed MoU for access via and to adjacent property July 2014

Increased JORC Resource to 403Mt September 2014

4 - Americas Iron Ore

8 Mtpa ROM Expansion Feasibility Study

Focused on export market

New 8 Mtpa of ROM Beneficiation Plant

138 kV Power Transmission Line (Demand of 25 MW) – 17 km

Concentrate and water return pipelines – 14 km

Rail load-out terminal and Filtration Plant – 160 wagons

Additional Waste and Tailings Area

Feasibility study by Logicamms and Ausenco

8 Mtpa ROM Expansion Project – Plot Plan


Short term delay to 8Mtpa Expansion

Delay in receipt of the ancillary Logistics and Dumps licenses;

Inability of Junior Mining Companies to raise significant equity capital for mining projects in the current market;

Necessity to generate cash in the short to medium term;

Current low iron ore prices;

Proceed with 8Mtpa expansion once all licenses issued, together with an improvement in the equity markets.


Interim Expansion

SAFM will double its current capacity to 3Mtpa ROM during 2015.

Low capital expenditure of $15 million

This interim expansion of the existing plant does not require logistics licensing or access to additional areas

Despite the international iron ore price reduction, the domestic iron ore market demand remains strong

The 3Mtpa upgrade has a one year pay-back


Merits of 3 Mtpa Interim Upgrade

Only dependent of the installation license which is expected to be granted within 3 months

Very Low Capital investment can be debt funded domestically

Reduces production cost – current cost of $18 /tonne to fall to $13 / tonne

No interruption to current production

Addition of only 16 personnel (14 operational and 2 in admin)

Doubles production


Updated JORC Resource

Resource

Class

Tonnes

(Mt)

Fe

(%)

SiO2

(%)

Al2O3

(%)

Mn

(%)

P

(%)

LOI

(%)

FeO

(%)

Measuared 83.82 40.44 33.28 2.4 1.49 0.074 3.79 1.07

Indicated 157.79 41.01 29.47 3.58 2.03 0.065 4.59 1.27

Demonstrated 241.61 40.81 30.79 3.17 1.84 0.068 4.31 1.20

Inferred 162.10 39.68 29.7 3.92 2.58 0.056 4.85 2.16

Total 403.71 40.36 30.35 3.47 2.14 0.063 4.53 1.58


Preliminary Reserve Estimate

The Preliminary Mineral Reserve has presented different mathematical pit shells:

• Pit 1 – Average grade 50% Fe for ROM for the ore within the

SAFM’s Mineral Rights.

• Pit 2 - Average grade 50% Fe for ROM considering the push-back that will be developed on the adjacent mineral rights.

• Pit 3 – Total SAFM reserve

• Pit 4 - Total SAFM reserve considering the push-back that will be developed on adjacent area

• Pit 5 – Total SAFM & adjacent land owner reserve considering the push-back that will be developed.


Preliminary Reserve Estimate

Mathematical Pit Shell Mt Fe

(%)

SiO2

(%)

Pit for current Plant 19.90 50.15 14.53

Pit for current Plant position

with push-back agreement 27.79 50.02 15.81

Pit SAFM 72.14 44.42 20.46

Pit with Push-back

Agreement- Ore SAFM 104.22 43.29 23.52

Pit with Push-back

Agreement- Ore SAFM and

Adjacent Area owner

120.69 43.48 24.04


12 - 3 DEP

Mathematical Pits

SAFM - Litho Group (Reserves)

13 - 3 DEP

Mathematical Pits

SAFM - Litho Group (Reserves with the Push-Back)

Interim Beneficiation Plant Upgrade requirements

New Primary Plant;

Additional LIMS – 2;

Additional WDRE – 2;

Additional Thickener;

New tailings dewatering screen;

New Loading Silos;

Associated belt conveyors, hydro cyclones and pumps.


Interim Beneficiation Plant Upgrade


Interim Beneficiation Plant Upgrade - Layout


Tailings Management

The north area will be developed in two stages in order to meet the project

environmental licensing strategy.

Additionally, waste and tailings will be disposed into existing erosions

located at south west of the mine pit.

The northern site and the Erosions will have capacity to store the first 4 to 5

years of waste.

Additional waste storage land was acquired in October 2013 for use from

year 6.


Product Logistics - Overview


Products Logistics – Current and potential customers


Project Implementation 2016

Q3 Q4 Q1 Q2 Q3 Q4 Q1

License and Capital Raise

License Granted

Capital Raise

Primary Plant

Design

Equipment & Material Procurement and Delivery

Earthworks & Civils

SMPE&I Installation

Concentrators 1 & 2

Design

Equipment & Material Procurement and Delivery

Earthworks & Civils

SMPE&I Installation

Power Line

Design

Cemig Approval

Electrical Equip. & material Procurement and Delivery

Installation

Water Supply Pipeline

Design

Piping Procurement

Installation

First Stage of IWL North

Design

Contractor Selection and Mobilization

Construction

Commissioning and Start-up

20152014


CapEx

Area Cost (R$) %

Crushing & Screening 9,113,046 25%

Magnetic Separation 5,495,981 15%

Tailings 1,834,130 5%

Process and Raw Water 2,088,978 6%

Infrastructure 2,350,000 7%

IWL 6,926,400 19%

Owner's Cost 1,300,000 4%

Contingency (25% excluding Owner’s Cost) 6,952,134 19%

Total (R$) (US$15 m) 36,060,669 100%


OpEx

Cost Description Unit Cost

(R$/t)

Mining Cost 12.97

Labor Cost 5.54

Power 5.03

Amortization/Depreciation 3.11

Maintenance 2.47

Administrative expenses 1.04

Reagent Cost 0.99

Mine Consulting 0.46

Ministry public agreement 0.39

Vehicle expenses 0.33

Topography 0.09

Laboratory 0.06

Total Geral (1Real = 2.46USD) (US$13) 32.48


Overall Project Expansions Timeline

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

3 & 8 Mtpa Expansion

Mine Preliminary & Installation License

Push-back Preliminary & Installation License

Funding Raising for Stage 1 (Finame/BNDS Automático)

3 Mtpa Domestic Expansion

Full Production (3 Mtpa ROM)

New 8 Mtpa Plant Construction

Commissioning/Start-up

Ramp-up

8 Mtpa Production

IWL North & South Previous License

IWL North Construction

IWL South Construction

2018 2019 2020 20212014 2015 2016 2017


Conclusion

The 8 Mtpa expansion was postponed due to licensing delays and difficulty

raising capital under current market conditions.

The interim expansion will:

• Increase substantially the current operation’s margins

• Provide sufficient time to obtain the remaining licences required for export

of the product

• Provide additional time to expand in a better market environment

The 3 Mtpa Expansion is a very low risk project as it will keep the current

operating, commercial and administrative procedures


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José Márcio Matta Machado Paixão - South American Ferro Metals Limited -