Celsius Resources Limited — Investor Presentation 2013

Apr 10, 2013

Celsius Coal Limited (ASX:CLA)

Date of Lodgement: 11/4/13

Title: “Company Insight – Unique 250mt+ Coking Coal Project”

Highlights

• Maiden inferred 250mt+ coking coal resource in Uzgen Basin in Kyrgyz Respublic located near rapidly expanding steel production markets across the border in Xinjiang Province, China.

• Very large deposit, with excellent indications of coking coal quality including low contaminants, good existing infrastucture links, and low cost-to-market.

• Unique feature is Company inheriting large quantities of detailed Soviet-era data of a high standard – Celsius is effetively ‘re-drilling’ an already-delineated resource. Hence, unusually rapid maiden JORC resource definition. Excellent corellations with historic data to date underpin expectations of rapid next stages of project development.

• Exposed areas of deposit appear amenable to surface mining, with a potential 1-2 mtpa raw coal production by 2015 with truck-based export to Xinjiang markets. This simple, low-cost and low-CAPEX start-up can significantly de-risk the project and provide early cashflow to assist with funding an expanded 5 – 8 Mtpa operation.

• Fully-funded program for 2013 to complete resource upgrade drilling, the feasibility program (to convert main Kargasha deposit to a mining license) and firm-up markets and customers.

• Longer-term development strategy also discussed.

Record of interview:

MAIDEN COKING COAL RESOURCE

companyinsight.net.au

Celsius Coal’s maiden coking coal JORC Resource in the Uzgen Basin in the Kyrgyz Republic was announced 16 March 2013. What are the details of the resource in terms of quantity and status?

Executive Chairman, Alexander Molyneux

In terms of quantity, the maiden inferred resource is 255 million tonnes of coking coal, comprising the adjacent Kargasha and Kokkia licenses. This is a very large single point contiguous coking coal resource – larger than the contiguous single point sources held by other peers looking to land-export coking coal to China such as Xanadu, Aspire Mining or Guildford.

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It’s still early stages and hence significant resource upside exists. In terms of status, this is a maiden resource in the ‘inferred’ category.

Our project has a critical differentiating feature. Since we have inherited considerable Sovietbased exploration data - essentially we are ‘re-drilling’ a historically delineated resource. This data is a key reason why we could achieve a maiden resource so quickly. Further, since the data has been verified satisfactorily through our own drilling, we’re confident the resource will increase quite substantially in size. That data shows a reasonable coal resource target on our existing licenses approaching 400 million tonnes - a large and meaningful deposit very close to China.

Our inherited data has not only ‘kick-started’ the project but will accelerate the next steps of resource expansion and upgrading. Basically, we know where to drill and why.

companyinsight.net.au

What are the details of the main resource at the Uzgen Basin Coking Coal Project, and the geological work the Company has conducted?

Alexander Molyneux

After we acquired the licenses during mid-2012 the Company drilled 7 core holes involving 3,800 metres of cumulative drilling. The core samples were sent to an independent laboratory over the northern hemisphere winter for assessment. They were then provided to Australian independent technical experts, and thus we were able to prepare the maiden JORC Resource.

This work has been guided by the data inherited from the work on our license areas completed during the Soviet era. We received more than 1,000 pages of historical data covering 60 holes – almost 29,000 metres of linear drilling that we can use. There’s also a lot of adit and trenching work on the Kargasha and Kokkia licenses that has proved valuable.

The first thing we did was to correlate the drill holes with previous drill holes in the same location. Generally, we found excellent correlation. That means two things – first – we can use well-correlated Soviet data for resource definition – and secondly - having separately confirmed specific coal seams with modern drilling – the Soviet data can guide cost-effective and efficient confirmation of the extent of those seams.

All this information shows the Kargasha deposit is relatively flat. It generally dips in singledigit dips, and the coal-bearing thickness is generally between 4 and 15 metres thick. There is a lot of coal at surface, and coal down to around 600 metres beneath surface (beyond which we have excluded the coal from our maiden resource). This relatively flat blanket of coal sits beneath rolling hills above - and importantly – the valleys between the hills cut through the coal seams leaving the coal outcropping and exposed in these areas.

companyinsight.net.au

What analysis has been done of the quality of the coking coal?

Alexander Molyneux

We’ve done quite a lot of testing from core samples, with results showing good coking properties relatively free of deleterious contaminants affecting marketability – low in ash, sulphur and phosphorous. Every hole we’ve drilled has been through testing. Core samples from the 7 holes drilled on the Kargasha license, totalling 3,800 metres, have been assessed at

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an independent international laboratory and separately assessed by third-party coal quality experts, to three separate standards - Russian, Chinese and Australian. That means we can understand coal quality from an investor viewpoint (i.e. how it compares with good quality coal deposits elsewhere) and the quality criteria our Chinese customers understand. Early discussions with potential customers give us confidence of strong interest in our product. Finally, we assess according to Russian standards because we have an ongoing interest in how our modern work correlates with the older Soviet data.

Bulk sampling is next, and we’ll keep up the same ‘depth work’ on coal quality through this stage, and in relation to testing this year’s drilling.

PROJECT LOCATION AND LOGISTICS

companyinsight.net.au

Where are the Company’s projects located relative to its target markets for coking coal, and why is your location important?

Alexander Molyneux

Our main projects are located in the Uzgen Basin in Kyrgyz Republic, a direct neighbour of China. Our most developed license is Kargasha – with two lesser developed licenses at Kokkia and Min Teke.

This location is important because the key market for us is the Xinjiang Province in north-west China, with a population in excess of 20 million and some unique economic drivers.

There is a huge Chinese central government-sponsored investment program specifically for this province – to improve its infrastructure and general standard of living – with two bases.

The first key impetus is that Xinjiang is one of the most strategic provinces in China because it is a big source of the country’s domestic energy – where China mines its own uranium, where most uranium imports enter China from Kazakhstan, where nuclear energy materials are stored, and where pipeline oil and gas enters China from Central Asia.

Xinjiang is the key import gateway for Chinese energy requirements arriving by land. The strategic need - to have stability, good infrastructure and a good and growing standard of living - will not go away.

The second key impetus is that China has deliberately targeted stimulation of trade with Central Asia. Xinjiang Province has now designated two new special economic zones – much as the Shenzhen powerhouse was promoted in the early days of China’s industrialisation. This has important ramifications for us as a future coking coal producer – and we’ve already begun engaging with customers.

Demand for coking coal for steel production in Xinjiang is expanding very rapidly – producing around 12mtpa of steel in 2012 and growing to 35mtpa by 2015. These are not just industry analyst forecasts – these are actual steel mills that are either in the process of commissioning or are under construction.

The nearest potential customers are roughly 500 kilometres away from our Uzgen coking coal deposit based on existing transport routes, which are paved road options going to Kashgar - a

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major city, the nearest steel centre with 3 new steel mills, and one of the new special economic zones. The distance of 500 kilometres – which is a distance to final market – compares favourably with Queensland and NSW first-stage distances from mine-to-port averaging around 300 kilometres – and that’s just the first-stage to reach the vessel.

I should add that the Trans-Asia project to extend the rail system from Kashgar through Kyrgyz to Uzbekistan – which is being financed and promoted by China – provides important upside. The rail route is very close to our deposit, and rail would provide an excellent opportunity to ramp-up our operations to the targeted 5-8mtpa with very low transport costs.

It should also be noted that Xinjiang is a very large coal producer in its own right, but only 2% of Xinjiang’s coal has adequate coking properties. The special economic incentives (low loans, tax incentives, free land) and good availability of the other resources needed for steelmaking have encouraged steel makers to develop – but the question mark is over coking coal.

All these circumstances add up to our projects having a very real advantage in supplying coking coal to this market.

companyinsight.net.au

How do China and the Kyrgyz Republic get on?

Alexander Molyneux

Very well, and both countries want it that way. The nature and magnitude of the trade opportunity means both China and Kyrgyz treat each other as special economic partners. For a country such as Kyrgyz – that previously had suffered from geographic isolation – this is a magnificent opportunity – and China believes Kyrgyz offers markets for its manufactured goods especially as Kyrgyz resource projects improve living standards. Kyrgyz is also quite different from Mongolia – it is quite a diversified economy - so the relationship between the two countries is quite different – it is much more ‘two-way’. Kyrgyz and China are investing in agriculture and sponsoring a $3 billion hydro-electric program that will export electricity into China, and there is a lot of similar joint investment in infrastructure and long-term Chinese financial assistance.

MINING AND SALES

companyinsight.net.au

What are the indicative costs for supplying the Xinjiang markets across the border from your prospective mine locations?

Alexander Molyneux

It’s very early days on cost, but we are much more advanced than a typical company that has just delivered a maiden resource.

There are two reasons for this.

First, we have the inherited Soviet data to work with - which covers engineering and mining concepts as well as exploration and resource definition.

Secondly, we have a significant advantage over developers of similar-sized deposits elsewhere in the world. That’s because we don’t need to build and finance massive infrastructure to get

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our coal to market. We don’t need to construct the massively expensive upfront port or rail lines before we can start selling coal.

This de-risks our project enormously – because we can be mining and selling coal very quickly and inexpensively.

We estimate mining and processing costs would give us a cash cost of US$40 to 65 per tonne at the mine gate. There’s such a wide range because our mining ultimately will require different methods – but at the lower-end early coal can be mined via open pit, which doesn’t need processing for our end-use market. Other coals though will require processing, and others will require a more expensive form of mining.

The transport cost of trucking the product to market (via paved roads and known routes that work) is roughly US$19 per tonne - cost from mine to Kashgar in Xinjiang - to steel mills and the current link-up with the Chinese rail system.

There is also a further US$5/tonne in taxes and duties - so overall we think we can deliver to market for a total cost of between US$65 and 90/tonne – compared with the product pricing in the marketplace of US$120 – 170/tonne.

In other words, we believe our project can have very robust economic prospects – based on mining and transportation cost – even assuming transport by truck.

As noted earlier, the Trans-Asia project to extend the rail system from Kashgar through Kyrgyz to Uzbekistan – which is being financed and promoted by China – provides important upside. The rail route is very close to our deposit, and rail would reduce the cost of transporting our product by around US$6 per tonne.

companyinsight.net.au

What are the implications for how the main Kargasha deposit could be mined and treated?

Alexander Molyneux

Obviously, some of the coal can be surface mined. For instance, in one area there is a round hill with coal exposable on all sides – so this could be an open-pit, truck-and shovel operation. Other areas look amenable to highwall operations.

We are working on these areas now – especially the areas that lend themselves to open-pit or surface-based techniques, and estimating the quantity in this category, and how mining could be scheduled.

Our working concept is to begin with a 1-2mtpa surface-based operation for some years. This is a low CAPEX way of starting the operation.

We’re also looking closely at underground mining techniques for the rest of the deposit area to support a larger-scale operation of 5 – 8mtpa, and the early indications are promising. First, the Soviet data indicates the coal seams are very low in gas – so degasification costs might possibly be avoided. Secondly, given the nature of the resource, access to coal is likely to be horizontally-based – this means we should be able to start the mine in the coal itself – avoiding a lot of costly shaft development or pre-development CAPEX before we’re able to access revenue-generating coal.

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This year we’ll be doing the work to confirm these assumptions – the gas desorption testing, analysing the geotechnical qualities of the deposit, defining some clear strategies for mining exact quantities of coal, and ascertaining the relevant costs.

UPCOMING CATALYSTS AND FORWARD STRATEGY

companyinsight.net.au

What next steps have you planned to advance Kargasha and the other Company projects?

Alexander Molyneux

Our program this year focuses on the main area of the resource on the Kargasha license, and conversion to a mining license there. This program involves doing almost all of the work that would be done to complete a feasibility study. Almost all that typical work will be done - and although we do all our work to the JORC standard - the overall result won’t be a JORC study. That’s because we are specifically addressing the licensing standards the Kyrgyz Government uses for conversion to a mining license.

We’ll be doing a very significant drilling and sampling program, probably drilling 3 to 4 times the metreage we drilled in 2012. We’ll also focus on gas desorption testing, hydrology, geotechnics to understand the ground conditions, coal quality assessment of larger samples – something closer to a commercial scale with quality and washability testing – and an engineering study. Our overriding objective is to begin a 1-2mtpa initial mining operation as I’ve described.

We’ll also be engaging more intensively with customers to ensure our coal is well-understood, what blends they’ll require, and understand the basis on which pre-sales might be achieved.

All of this work is funded. We have approximately $10 million in liquidity, from around US$5 million in cash, and then via the US$5 million convertible note facility from our major shareholder, Blumont Group from Singapore. So we don’t expect to have to go back to the market to fund this work.

companyinsight.net.au

What are the Company’s near-term and longer-term strategic objectives, and what are the timelines?

Alexander Molyneux

We see a very neat progression – which is uncharacteristically rapid for a project at this stage.

First, within around 12-months and off the back of this year’s significant drilling programme, we aim to have delivered our next resource upgrade and completed the feasibility program to convert the main part of the Kargasha deposit to a mining license; and we also want to firm-up our markets and customers.

Secondly, we aim to be a producer of 1-2mtpa raw coal in 2015 from surface, easily-mineable deposits, via a truck-based export operation to the proximate markets in Xinjiang. This would be a simple, low-cost and low CAPEX project – that substantially de-risks our project. We can be earning early cashflow, without the prohibitive upfront infrastructure costs and risks that many other coking coal producers face. This is an important differentiator for us.

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Finally, in the medium-to-longer term we see a long-life operation producing 5-8 million tonnes annually. Processed coking coal can be delivered efficiently via the new (proposed) Trans-Asia railway to markets in Xinjiang and beyond. We’ll have a transport cost advantage in delivering to many Chinese markets but we don’t think we’ll need to sell beyond Xinjiang because of the extent of the market requirements in the province.

companyinsight.net.au Thank you, Alex.

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DISCLAIMER: Gryphon Management Australia Pty Ltd trading as Company Insight has taken reasonable care in publishing the information contained in this Company Insight. It is information given in a summary form and does not purport to be complete. This is not advice. The information contained herein should not be used as the basis for making any investment decision. You are solely responsible for any use you choose to make of the information. You should seek independent professional advice before making any investment decisions. To the fullest extent permitted by applicable law, Company Insight is not responsible or liable for any consequences (including, without limitation, consequences caused by negligence) of any use whatsoever you make of the information, including without limitation any loss or damage (including any loss of profits or consequential loss) suffered by you or a third party as a result of the use.

Qualifying Statement

This release may include forward-looking statements. These forward-looking statements are based on Celsius Coal’s expectations and beliefs concerning future events. Forward looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of Celsius Coal, which could cause actual results to differ materially from such statements. Celsius Coal makes no undertaking to subsequently update or revise the forward-looking statements made in this release, to reflect the circumstances or events after the date of that release.

Competent

Persons Statement

The information in this report is based on information compiled by Dr Gavin Springbett, a Member of the Australasian Institute of Mining and Metallurgy. Dr Springbett is acting as a consultant to Celsius Coal Limited and is a full-time employee of G&S Resources, Dr Springbett has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity being undertaken to qualify as a ‘Competent Person’ as defined in the 2012 Edition of the ‘Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves’. Dr Springbett consents to the inclusion in this interview of the matters based on his information in the form and context in which it appears.