1 THE ELEMENTS OF VALUE CREATION June 21, 2011 www.royalnickel.com Disclaimer Cautionary Statements Concerning Forward‐Looking Statements This document contains “forward‐looking information” of Royal Nickel Corporation (“RNC”) which may include, but is not limited to, statements with respect to the future financial or operating performance of the company and its projects, the future price of metals, the estimation of mineral resources and grades, project life, stripping ratio, production, net present value, internal rate of return, the conversion of mineral resource estimates to mineral reserve estimates, the realization of mineral resources estimates, the timing and amount of estimated future production, costs of production, capital, operating and exploration expenditures, costs and timing of future exploration and development and targeted milestones. Often, but not always, forward‐looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “does not anticipate” or “believes” or variations (including negative 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. Accordingly, readers should not place undue reliance on forward‐looking statements. Forward‐looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company and/or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward‐looking statements. The Preliminary Economic Assessment, and the estimates contained therein, as well as the results of the optimization studies and mini pilot plant testing to date, are preliminary in nature and are based on a number of assumptions, any one of which, if incorrect, could materially change the projected outcome. Factors that could affect the outcome include, among others: the actual results of current exploration and development activities; nickel recovery, project delays; funding needs; general business, economic, competitive, political and social uncertainties; future prices of metals; availability of alternative nickel sources or substitutions; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; the future cost of capital to the company; possible variations of ore grade or recovery rates; failure of plant, equipment or processes to operate as anticipated; accidents, labour disputes and other risks of the mining industry; political instability, terrorism, insurrection or war; delays in obtaining governmental approvals, necessary permitting or in the completion of development or construction activities. For a more detailed discussion of such risks and other factors that could cause actual results to differ materially from those expressed or implied by such forward‐looking statements, refer to RNC’s filings with Canadian securities regulators available on SEDAR at www.sedar.com including RNC’s Preliminary Economic Assessment dated as of September 30, 2010. Such forward‐looking statements are based on a number of material factors and assumptions identified in the applicable document including, in the case of the estimate of NPV contained in the Preliminary Economic Assessment, an assumed long term nickel price of US$7.50/lb and an exchange rate of Cdn$1.00 = US$0.90. Although RNC has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward‐looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward‐looking statements contained herein are made as of the date of this presentation and RNC disclaims any obligation to update any forward‐looking statements, whether as a result of new information, future events or results or otherwise, except as required by applicable securities laws. There can be no assurance that forward‐looking statements 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 statements. Statement of Qualified Person Preparation of this presentation has been supervised by Alger St. Jean, P.Geo., Vice‐President, Exploration of Royal Nickel and a “Qualified Person” as defined in NI 43‐101. Scientific and technical information relating to the Dumont Nickel Project largely derived from Royal Nickel’s NI 43‐101 compliant technical report “Preliminary Assessment of the Dumont Property Launay and Trecesson Township, Quebec, Canada” dated as of September 30, 2010 (“Technical Report”) is available on Royal Nickel’s website and on SEDAR at www.sedar.com. 1 TSX: RNX All currency references in U.S. dollars, unless otherwise stated.
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1
THE ELEMENTS OF VALUE CREATIONJune 21, 2011
www.royalnickel.com
Disclaimer
Cautionary Statements Concerning Forward‐Looking Statements
This document contains “forward‐looking information” of Royal Nickel Corporation (“RNC”) which may include, but is not limited to, statements with respect to the future financial or operating performance of the company and its projects, the future price of metals, the estimation of mineral resources and grades, project life, stripping ratio, production, net present value, internal rate of return, the conversion of mineral resource estimates to mineral reserve estimates, the realization of mineral resources estimates, the timing and amount of estimated future production, costs of production, capital, operating and exploration expenditures, costs and timing of future exploration and development and targeted milestones. Often, but not always, forward‐looking statements can be identified by the use of words such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates”, or “does not anticipate” or “believes” or variations (including negative 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. Accordingly, readers should not place undue reliance on forward‐looking statements.
Forward‐looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the company and/or its subsidiaries to be materially different from any future results, performance or achievements expressed or implied by the forward‐looking statements. The Preliminary Economic Assessment, and the estimates contained therein, as well as the results of the optimization studies and mini pilot plant testing to date, are preliminary in nature and are based on a number of assumptions, any one of which, if incorrect, could materially change the projected outcome. Factors that could affect the outcome include, among others: the actual results of current exploration and development activities; nickel recovery, project delays; funding needs; general business, economic, competitive, political and social uncertainties; future prices of metals; availability of alternative nickel sources or substitutions; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; the future cost of capital to the company; possible variations of ore grade or recovery rates; failure of plant, equipment or processes to operate as anticipated; accidents, labour disputes and other risks of the mining industry; political instability, terrorism, insurrection or war; delays in obtaining governmental approvals, necessary permitting or in the completion of development or construction activities. For a more detailed discussion of such risks and other factors that could cause actual results to differ materially from those expressed or implied by such forward‐looking statements, refer to RNC’s filings with Canadian securities regulators available on SEDAR at www.sedar.com including RNC’s Preliminary Economic Assessment dated as of September 30, 2010. Such forward‐looking statements are based on a number of material factors and assumptions identified in the applicable document including, in the case of the estimate of NPV contained in the Preliminary Economic Assessment, an assumed long term nickel price of US$7.50/lb and an exchange rate of Cdn$1.00 = US$0.90.
Although RNC has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward‐looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Forward‐looking statements contained herein are made as of the date of this presentation and RNC disclaims any obligation to update any forward‐looking statements, whether as a result of new information, future events or results or otherwise, except as required by applicable securities laws. There can be no assurance that forward‐looking statements 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 statements.
Statement of Qualified Person
Preparation of this presentation has been supervised by Alger St. Jean, P.Geo., Vice‐President, Exploration of Royal Nickel and a “Qualified Person” as defined in NI 43‐101. Scientific and technical information relating to the Dumont Nickel Project largely derived from Royal Nickel’s NI 43‐101 compliant technical report “Preliminary Assessment of the Dumont Property Launay and Trecesson Township, Quebec, Canada” dated as of September 30, 2010 (“Technical Report”) is available on Royal Nickel’s website and on SEDAR at www.sedar.com.
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All currency references in U.S. dollars, unless otherwise stated.
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RNC – Elements of Value Creation
Broad MiningExperience
StrategicAsset
Excellent Jurisdiction
SignificantValue Creation
Potential
100+ years of proven mining industry experience
Senior members of Inco, Falconbridge management teams
Knowledge, experience to acquire additional assets
Mammoth resource – potentially 4th largest nickel sulphide operation
7 billion pound M&I resource , larger than Voisey’s Bay
25+ year expected project life, deposit remains open at depth
Outstanding mining jurisdiction ‐ Abitibi region of Quebec
Well‐defined permitting process, low cost power ($0.05/kWh)
All infrastructure (road, rail, gas, power, townsite) in place
$1+ billion project after‐tax NPV8% @ $7.50/lb Ni price, $C/$US 0.90
$1 billion revenue / $450 MM EBITDA annually ($7.50/lb)
A $1 increase in nickel price increases after‐tax NPV8% by ~$700 million
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Highly Experienced Management Team & Board
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Scott M. Hand ‐ Former Chairman & CEO of Inco Limited
‐ Over 30 years in nickel industry
Peter C. Jones ‐ Former President & COO of Inco Limited
‐ Board member of Century Aluminum; former CEO of HBMS
Peter Goudie ‐ Former Executive Vice President, Marketing at Vale Inco and Inco Limited
‐ Recognized authority on global nickel markets and China
Tom Griffis ‐ 20 years in the natural resource industry focused on early to mid stage financing and management
‐ Co‐chairman of Juno Special Situations Corporation
Frank Marzoli ‐ Chairman, President and CEO of Marbaw International Nickel Corporation
Gilles Masson ‐ Former Partner at PricewaterhouseCoopers LLP (25 years)
Darryl Sittler ‐ Director of Wallbridge Mining Company Limited
DIRECTORS
MANAGEMENT
Tyler Mitchelson ‐ Recently, Vice President, Strategy, Business Planning and Brownfield Exploration, Vale Inco
President, CEO & Director ‐ Over 15 years experience at Vale Inco and Inco Limited
Fraser Sinclair ‐ Former CFO Romarco Minerals Inc. and North American Palladium Ltd.
Chief Financial Officer ‐ Over 30 years financial experience
Mark Selby ‐ 5 years with Inco Limited leading market research and later strategic planning
SVP, Business Development ‐ Recently senior member of business development and market research team for Quadra Mining
Alger St‐Jean ‐ 15 years in the mining industry, primarily focused on nickel
Vice President, Exploration ‐ Former Senior Geologist with Xstrata Nickel (formerly Falconbridge)
Johnna Muinonen ‐ Strong technical and operating mineral processing background; 9 years at Vale Inco / Inco limited
Vice President, Metallurgy ‐ Recently in project management group in Vale Inco, project leader for Vale ultramafic project
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Dumont:Mammoth Resource + Upside Potential
3.75km
1.2 km
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Low strip ratio – 1.2 (life‐of‐mine)
High grade nickel minerals (33‐73% Ni) generate high grade concentrate
No acid generating rock or tails
Conventional proven technology
SAG Ball Mill Desliming Flotation
Upside potential – remains open at depth
Excellent Orebody Characteristics
Resources Grade Contained Metals
(M t) (%) (Bln lbs) (M t)
Measured 156 0.29% 1.0 0.5
Indicated 1,003 0.27% 6.0 2.7
Measured + Indicated 1,159 0.27% 7.0 3.2
Inferred 581 0.25% 3.2 1. 5
Resource Estimate
Source: Preliminary Economic Assessment dated September 30, 2010, available on www.sedar.com. Mineral resources that are not mineral reserves do not have demonstrated economic viability. There are no mineral reserves presently identified on the Dumont Nickel Project.
% Nickel
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Quebec: One of World’s Best Mining Jurisdictions(1)
Mining‐friendly province
Well‐defined permitting process
Established mining district
Low cost, reliable grid power available at Quebec rate of C$0.05/kWh
All infrastructure in place (rail, road, gas, power, nearby towns)
Malartic
Source: Technical Report
(1) According to the Fraser Institute’s Annual Survey of Mining Companies 2010/2011 report
Dumont Nickel Project Location
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Significant Value Creation Potential
Dumont Preliminary Economic Assessment
Source: Preliminary Economic Assessment dated September 30, 2010, available on www.sedar.comNote: 1. Assumes nickel price of US$7.50/lb, US$0.90 = C$1.00
Mill Throughput (tonnes/day) 100,000
LOM Mill Feed (Mt) 896
Concentrator Recovery 65.5%
Project Life (years) 25
Net Cash Costs (US$/lb) $3.87
Initial Capital (US$ millions) $2,304
After‐Tax NPV8% (US$ millions) $1,146
After‐Tax IRR 15.4%
Average EBITDA (US$ millions/year) $446
Each $1 increase in the nickel price increasesNPV8% by ~$700 million
$1+ Billion Project Value with Significant Leverage
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Dumont Expected to be Among Largest Nickel Sulphide Operations(RNC 100ktpd (LOM) vs Brook Hunt 2013 estimates)
(Ktpa)
Source: Brook Hunt ‐ A Wood Mackenzie Company 2010, Technical Report
186
79 7464.5
5341
Norilsk Jinchuan ValeSudbury
RNCDumont
Voisey'sBay
Norilsk-Kola
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Flowsheet optimization1
2
3
4
Simplified front‐end (2 SAG / 4 ball mills)
Single wet desliming step rather than 2 stage dry/wet steps
Significantly reduced usage of higher cost reagents
Access to additional power will allow:
•Use of trolley assist
•In‐pit crushing, conveyors
Potential to shrink footprint to reduce both capex and opex
Open at depth
Pre‐Feasibility Study: Opportunities to Add Further Value
Increased electrification
Tailings optimization
Resource Expansion
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Scoping/43‐101
Mini‐Pilot Plant Testing
Pre‐Feasibility
Feasibility
Permitting
Long Lead Items
Construction
Commissioning & Ramp Up
Advancing Towards Production at Dumont
2010 2011 2012 2013 2014 2015 2016
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Project Development On‐Time, On‐Budget
September 2010 ‐ Preliminary Economic Assessment: $1.15 B after tax NAV8%
April 2011 ‐ Prefeasibility study awarded to Ausenco/SRK Consulting
May 2011 ‐ Optimization Study results support a simplified, lower cost and more robust flowsheet
Site work to support pre‐feasibility study on schedule
Community engagement process underway
Project Milestones
August – Preliminary mine / mill design
End Q3 / early Q4 2011 – pre‐feasibility study, resource estimate update
2012 – Project level partner (30‐40%)
Near Term Catalysts to Unlock Value (<12 months)
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Nickel Continues to Surprise Market
Nickel market expected to remain robust and provide support for prices higher than the $7.50 per pound nickel price used in Dumont Preliminary Economic Assessment (PEA)
Prices have remained higher than $7.50 per pound for 18 of the last 21 quarters,the only exception was the 3 quarters during the depth of the global financial crisis
Nickel is only metal with a declining LME inventory to date in 2011
9
(US
$/p
ou
nd
)
LME Quarterly Cash Nickel Price(2006 to date; Q2 2011 to June 20)
Source: MetalPrices.com
0
5
10
15
20
Q1
200
6
Q2
200
6
Q3
200
6
Q4
200
6
Q1
200
7
Q2
200
7
Q3
200
7
Q4
200
7
Q1
200
8
Q2
200
8
Q3
200
8
Q4
200
8
Q1
200
9
Q2
200
9
Q3
200
9
Q4
200
9
Q1
201
0
Q2
201
0
Q3
201
0
Q4
201
0
Q1
201
1
Q2
201
1
Average nickel price since January 1, 2008: $9.09
DumontPEA price
assumption$7.50
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6388 98
131156
183
261
345365
470
576
670
0
100
200
300
400
500
600
700
Chinese Nickel Demand2000–2010 (kt)
25% CAGR from 2000–2010
Growth of ~100kt in 2009, 2010 and 2011
10
Chinese Nickel Demand
Source: CRU, Macquarie
China’s economic development has driven a 10‐fold increase in nickel demand and will continue to be the primary driver of global demand
1.3 1.3
0.4
0.00
0.20
0.40
0.60
0.80
1.00
1.20
1.40
Germany Japan China
Nickel Consumption per Capita2010 (kg/capita)
At Japanese and German per capita consumption levels, Chinese nickel demand would increase by +1 million tonnes
This is equivalent to 16 Dumont scale projects
Source: CRU, RNC Analysis
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248 9%
17%
242
0
100
200
300
400
500
600
NickelSupply2011‐15
Nickel 2011–2015 Supply Growthvs. Chinese Demand Growth Required
to Absorb it
Low risk projects only permit9% per year growth in Chinese demand(~1/3 of trend growth of 25%)
Including all higher risk projects,only 17% demand growth possible(still only 2/3 of trend growth)
Assumes no demand growth in the rest of the world, mine supply from existing operations will not decline
NPI supply effectively is swing production for the nickel market and a positive market force by tightening prices through cycles
11
Current Wave – Can’t Meet Current Needs
Source: Brook Hunt – A Wood Mackenzie Company, RNC Analysis
Even with all current projects, supply still insufficient to satisfy Chinese demand
Lower RiskFeNi,Sulphide
Higher RiskPAL
490
Chinese DemandGrowth Required to
Absorb Supply
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Nickel Industry – Increasing Complexity
12
Higher RiskJurisdictions
Increased production from higher risk jurisdictions (Indonesia, Madagascar, New Caledonia, Papua New Guinea, Philippines, etc.)
Increased nickel production from remote locations
More Complex,Higher TechFlowsheets
Increased production from laterite ores using pressure acid leach technology which requires significant capital expenditure and has faced a significant number of operating challenges
IncreasedEnergyIntensity
Increased production from laterite ores using highly energy intensive smelting processes
Royal Nickel’s Dumont project is expected to be alarge scale, low energy intensity nickel sulphide projectwhich will use conventional, proven technology and is
located in Quebec, a low risk mining-friendly jurisdiction.
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A mammoth resource that stands apart from its peers
13
Dumont: A World Class Base Metals Project
Dumont Compared to Large Scale Copper Projects on Copper‐Equivalent1 Basis
Comparable to some of the world’s bestlarge scale copper projects
on a copper‐equivalent basis
Sourced from information contained in the UBS Investment Research report “A royal seat in the new nickel theatre”, dated June 13, 2011
Resource Estimates at Open Pit Nickel Sulphide Deposits
Resource Grade
(% Ni equivalen
t)
Resource Grade (recoverable Cu equivalen
t)
Resources (mm tonnes of ore, measured, indicated & inferred) Resources (mm tonnes of ore, measured, indicated & inferred)
Dumont
Measured & Indicated
Dumont
InferredMeasured & Indicated
Inferred
1. UBS calculation converts Dumont nickel grade to a recoverable copper equivalent grade (ratio of UBS’s long‐ term nickel price of $8.20 and copper price of $2.55, adjusted for UBS’s typical recovery assumptions for low‐grade nickel (61%) and copper mills (90%)).
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Why Invest Now ?
Broad MiningExperience
StrategicAsset
Excellent Jurisdiction
SignificantValue Creation
Potential
2011 Unlocks the Value
Market Capitalization <0.2X NAV
$1+ Billion Project Value
Multiple De‐Risking Events
Nickel Market Exposure
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Corporate Overview
Share Structure:
Basic Shares Outstanding: 88.9 million
Options (Average exercise price: C$1.89) 7.7 million Warrants (Average exercise price: C$2.56) 16.5 million Deferred/Restricted Shares 1.9 million
Fully Diluted Shares Outstanding: 115.0 million
Directors, Officers and Insiders Share Ownership: 13%
Balance Sheet Highlights:
Cash and Cash Equivalents: $46 million
Working Capital: $44 million
Market Capitalization: $95 million
15
Shares outstanding as at May 31, 2011Share ownership as at June 13, 2011Balance sheet highlights as at March 31, 2011; Market Capitalization as at June 20, 2011
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Appendix 1
Dumont Nickel ProjectAdditional Information
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Grinding Circuit Optimization
Trade‐off study recommended use of 2 SAG mills / 4 ball mills to replace dry quaternary crushing followed by ball mills evaluated in the scoping study
Additional testwork that recommended flowsheet with single wet desliming step achieves similar recoveries as scoping study flowsheet
Recommended flowsheet has multiple benefits, partially offset by higher power consumption:
Elimination of drying of ore
Reduction in mill maintenance and sustaining capital
Reduction in amount of ventilation required
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Ore Drying
Tertiary Crushing
GrindingPrimary
Crushing
SAG MillGrinding
Hydrocyclone Desliming
Ball MillGrinding
Hydrocyclone Desliming
Quaternary Crushing
Fibre Removal
Secondary Crushing
Optimized Front‐end Flowsheet
Primary Crushing
Scoping Study Front‐end Flowsheet
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Milling Optimization
Reagent Optimization
In the scoping study, reagent cost was 70% of the consumables operating budget and 50% of the total mill budget
Reduction of one of highest cost reagents, CMC, replaced with much lower cost quantities of other reagents
Initial open circuit concentrate cleaning tests on ~200kg sulphide material produced high nickel grade concentrates
Sulphide concentrate containing 35% nickel with MgO levels of 3%
Ferronickel concentrate containing 30% nickel, 26% iron. Sulphur grade of 2.7% was higher than expected as source material contained mostly sulphideminerals
Recovery testwork remains underway on two key components of overall recovery and will be completed for the pre‐feasibility study
Concentrate cleaning including recovery/concentrate grade tradeoff
Slimes recovery
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Project ‐ Capex and Opex Breakdown
100 ktpd
Mine $457
Processing $859
Tailings $138
Infrastructure $152
Indirects $274
Contingency $424
Total $2,304
Project Capital$US millions
100 ktpd
Mining $/tonne mined $1.52
Mining $/tonne treated $3.40
Processing $/tonne treated $6.63
G&A $/tonne treated $0.42
Total Site Costs $/tonne treated $10.45
Total Site Costs $/lb Ni $2.85
TC/RC $/lb Ni $1.18
By‐Product Credit $/lb Ni ($0.16)
Total $/lb Ni $3.87
Cash Operating Cost$US
Note: Dumont cash cost estimate based on life of mine average per Technical Report
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Estimated Project Cash Flows
Dumont Project Cash Flow – 100 ktpd Case
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Competitive Capital and Operating Costs
Capital Expenditure Intensity(US$ / tonne annual nickel production)
Dumont Production (life‐of‐mine) vs. Large Scale Projects(1,2)
(1) All large scale (>50ktpa) nickel projects under construction(2) Dumont Nickel Project cash cost estimate based on life of mine average per Technical ReportSource: Technical Report, Company reports, Brook Hunt ‐ A Wood Mackenzie Company 2010
Source: Technical Report, Brook Hunt ‐ A Wood Mackenzie Company 2010
2015 Nickel Industry Cost Curve – Flexed Data
(4)
(2)
0
2
4
6
8
10
0 1,000 2,000 3,000 4,000
Cumulative Production (Paid Mlbs Nickel)
Cash Cost (US$/lb nickel)
Dumont Nickel Project:
80,000 tpd Case: US$3.96/lb
100,000 tpd Case: US$3.87/lb
$75$72
$63
$46
$39$36
‐
10
20
30
40
50
60
70
80
Ambatovy Goro Koniambo Onça‐
Puma
Dumont ‐
80,000
tpd Case
Dumont ‐
100,000
tpd CaseAnnual nickel
production
capacity (kt)60 60 60 58 52 64.5
(US$
/t)
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Mineralogy Drives Low Strip & Bulk Mining
Mineralization extends hundreds of metres in width
Low strip ratio 1.24
High tenor nickel minerals yield high grade concentrates
Sulphide:Pentlandite (33% Ni), Heazlewoodite (73% Ni)
Alloy: Awaruite (72% Ni)+Fe
Detailed mineralogicaltesting to fully define ore characteristics
Waste rock and tailings non‐acid generating due to absence of pyrrhotite and pyrite
Additional explorationpotential at depth
Dumont Cross Section 8100E: Surface 310m el
Source: Technical Report
>0.2%outlineresource
PrelimEconomicAssessmentPitShell
DepositRemainsOpenat Depth
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Additional Lab Testing completed
Rougher recovery basis for scoping study was 32 lab scale tests from 5 drill holes
An additional 38 tests have been completed (total 70)
Results show that the scoping study equations continue to adequately predict performance
Equations are being updated for the PFS to include Ni in silicates and other factors that effect recovery
y = 0.9514xR² = 0.4981
30
35
40
45
50
55
60
65
70
75
80
30.0 35.0 40.0 45.0 50.0 55.0 60.0 65.0 70.0 75.0 80.0
Actual Rough
er Recovery
Predicted Rougher Recovery
Predicted Recovery Vs. Actual for Additional Domain Samples
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Geological Confidence
Explomin Samples for Geomet Modeling increased to 722 from 195 used in the scoping study
Increases confidence in the nickel mineralization
Resource Drilling
46 holes – 17,500 meters
Increase confidence of resource in pit‐shell
Add tonnage within the pit shell (convert waste to mill‐feed)
Geotechnical
Rock Mechanics / Slope Stability
10 holes; 5200metres;
Overburden Characterization ‐Pit & Infrastructure
64 sonic holes (27 monitored); 30 CPT
Hydrogeology / Hydrology
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$(4)$(2)$‐$2$4$6$8$10$12$14
0% 25% 50% 75% 100%
Global Nickel Production
Cash Cost (US$/lb)
2000 Cash Cost 2009 Cast Cost
Dumont – Right Project, Right Time
Dumont development increasingly attractive in context of sector‐wide escalating operating costs
RNC builds on Mt. Keith metallurgical work – demonstrating recoveries at a bench scale of over 65% into a high grade (>25% Ni) nickel sulphide concentrate, and unlocks value of Dumont
~US$4.00 cash cost project is the middle of the cost curve and combined with proven technology in a mining friendly jurisdiction creates a very attractive project opportunity
Beyond 2011‐2013 period, Dumont is one of few advanced nickel projects in the pipeline resulting in a deficit market position post 2015
Few greenfield discoveries in prior cycle
Global financial crisis slowed development of other projects
2009
2000
Fundamental Supply ShiftsBrook Hunt Cash Cost Curve 2000 vs 2009
Dumont Net Cash Cost <$4
Source: Brook Hunt – A Wood Mackenzie Company 2010
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Appendix 2
Key Nickel Market Insights
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179
345
419
0
100
200
300
400
3.3
13.5
10.1
0
5
10
15
27
Evolution of Metal Demand
As an economy industrializes, demand moves from more basic materials like carbon steel into stainless steels and ultimately into specialty alloys that require a lot of nickel and will drive non‐stainless nickel consumption in China
0.3
1.3 1.3
0
0.5
1
1.5
Carbon Steel Stainless Steel Nickel
China
China
China
2009 Kg/capita consumption 2010 Kg/capita consumption 2009 Kg/capita consumption
Source: World Steel Association, ICSG, World Stainless Steel Statistics, Brook Hunt – A Wood Mackenzie Company, RNC Analysis
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$0
$5
$10
$15
$20
0.0
0.5
1.0
1.5
2.0
2.5
3.0
1-J
an-
08
1-A
pr-0
8
1-J
ul-0
8
1-O
ct-0
8
1-J
an-
09
1-A
pr-0
9
1-J
ul-0
9
1-O
ct-0
9
1-J
an-
10
1-A
pr-1
0
1-J
ul-1
0
1-O
ct-1
0
1-J
an-
11
1-A
pr-1
1
$9-$10 range
Saved the nickel market in 2007—and has become a positive market force by tightening price range through cycle
Effective swing producer as ore imports:
Fell by 1+ Mt in 2008 to only 0.5Mt when prices fell to $5/lb
Fell by ~ 1Mt in 2009 when prices failed to break $9/lb
Rose by 1.5Mt as prices remained above $9/lb
NPI producers will face increased cost pressure going forward which will push trigger price higher
Coke, electricity availability and prices, RMB appreciation, environmental compliance
Not as new as everybody believes
28
NPI – Effective Swing Producer
LME Nickel Prices &Chinese Laterite Ore Imports January 2008 to April 2011(3 month moving average) Ni
$/lbOre(Mt)
Source: MetalPrices.com, GTIS, RNC Analysis
TSX: RNX
www.royalnickel.com
NPI – Not China !!, but Japan in 1960s
29
3.9%
5.9%6.6%
10.2%
12.4% 12.2%
4.7%
0%
2%
4%
6%
8%
10%
12%
14%
1965 1966 1967 1968 1969 1970 2010
Japan Nickel Ore Imports% Share of World Mined Nickel Production
Ore imports for nickel production quickly became a large share of overall global mine production in Japan in the 1960s
NPI is not new, it is effectively same as Japan in 1960s. First time was France in the 1880s–1920s
Even by 1960s, ore grades in New Caledonia were falling. Minimum ore grade imported to Japan in 1963 was 3%. By 1970, it was down to 2.5%
By 1970, ore imports into Japan leveled off. By 2010, ore imports were still at 1970 levels of approximately 4.5 Mt
Due to a combination of lower ore grades, higher energy costs, and rising input costs in Japan
Source: USGS, Brook Hunt – A Wood Mackenzie Company
16
www.royalnickel.com
But Already Seeing Pressure on Ore Availability
Highest grade ore prices (1.8–1.9%, 2.0%) have moved sharply higher during the past year and are now $4/lb nickel contained—increased demand should mean even higher prices?
30
$0
$1
$2
$3
$4
$5
$6
$7
$8
Apr‐07
Sep‐07
Feb‐08
Jul‐08
Dec‐08
May‐09
Oct‐09
Mar‐10
Aug‐10
Jan‐11
Nickel Laterite Ore Prices – ChinaUS$/lb (based on % of LME Cash Price)
0.9~1.1%1.4~1.6%
1.8~1.9%2%
Nickel Laterite Ore Prices – China% of LME Cash Price
0.9~1.1%1.4~1.6%
1.8~1.9%2%
0%
10%
20%
30%
40%
50%
60%
Apr‐07
Sep‐07
Feb‐08
Jul‐08
Dec‐08
May‐09
Oct‐09
Mar‐10
Aug‐10
Jan‐11
Source: Metalligence
www.royalnickel.com
Nickel Supply – Low Growth for Last 35 Years
Significant capacity growth in 1965–75 was followed by 35 years of low supply growth and weak project pipeline development
31
5.2%
1.4% 1.6% 1.4%
1.3%
1.7%1.2%
2.8%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
1965-75 1975-90 1990-00 2000-10
Global Nickel Supply Growth“Traditional” vs. Alternative
1965–2010 (% CAGR)
< 2% growth for 35 years !
1965–75 saw a burst of new projects driven by inability of Sudbury to continue to meet global demand
1975–90 saw significant project rationalization
Collapse of former Soviet Union demand(20% of world total) provided supply during 1990s
Ni pig iron and demand destruction in 2000–10 closed gap caused by lack of new supply from weak project pipeline development
StainlessDemand Destruction
NPI
FSUCollapse
JapanFeNi
Source: Brook Hunt – A Wood Mackenzie Company, Macquarie, RNC Analysis
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