African Energy Project Development Challenges POWER-GEN Africa Conference, Johannesburg, South Africa6 November 2012Ron Miller, P.E.

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Agenda

� Newmont Overview

� Energy Demand Growth

� Resource Assessment / Fuel

� Transmission / Reliability

� Project Economics / Financing

� Government Support, Environmental & Regulatory Policy

� Non-transmission Infrastructure

� Labor

� Opportunities

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Newmont Mining Corporation Overview

� The world’s second largest gold producers

� Founded in 1921 and publicly traded since 1925

� Only gold company included on the S&P 500 Index

� Fortune 500 listing

� More than 43,000 employees and contractors worldwide

� Joined the Dow Jones Sustainability World Index in 2007 and included every year since

� Ranked number 42 as Best Corporate Citizen by Corporate Responsibility Magazine (2012)

� Attributable gold reserves of 99 million ounces at the end of 2011

� Attributable copper reserves of 10 billion pounds at the end of 2011

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Energy Demand Growth

“The key to sustained economic growth in sub-Saharan Africa is access to energy.” *

� Current low power reserve ratio / spinning reserve contribute to a “stressed” power grid

� Power supply may be barely adequate or already behind demand in some African nations

� On-grid, additional backup power generation can range from 20% in Ghana to almost 50% in Nigeria

How to meet demand and keep up with Africa’s annual energy demand growth to aid in economic development?

* Assistant Secretary of State for the Bureau of African Affairs Mr. Johnnie Carson in his Opening Speech Outline, Africa Partnership Forum, OECD Paris, Wednesday, April 25, 2012

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Energy Demand Growth

� African nations in the 10 fastest growing economies in world for 2001-2015

� African countries’ GDP growth 6-11% per year range

� BP Energy Outlook 2030 Report projects ratio of global electricity growth to GDP growth as 70%

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Resource Assessment

� Type of demand: continuous 24/7 operation, variable, or daytime only

� Location: inland or coastal

� Fuel logistics, reliability, and price

� Energy storage capability (grid, hydro pumped storage)

� Regulations:

� Incenting renewable energy

� Carbon tax discouraging coal

� Renewables or fossil fuel?

Which resource is best used to meet local demand?

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Resource Assessment - Renewables

Solar Resources Biomass Resources

� High capacity factor� Logistics of feedstock delivery� Potential for tax incentives

� Intermittent energy production� Relatively-low capacity factor� Less site-specific

Source: USDOE, National Renewable Energy Lab Source: USDOE, National Renewable Energy Lab

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Resource Assessment - Renewables

Wind ResourcesHydro Resources

� Flow rate / Dam height� Impacted land area - resettlement� Relatively-low capacity factor� Site-specific

� Variable energy production� Relatively-low capacity factor� Site-specificSource: USDOE, National Renewable Energy Lab

Source: USDOE, National Renewable Energy Lab

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Resource Assessment - Renewables

� Determining the amount of energy each alternative can generate based on its “fuel” (solar irradiance, wind speeds, biomass tons/caloric value, hydro reservoir depth/flow rate, geothermal heat/pressure)

� Evaluate combining complementary energy generation technologies to achieve desired energy requirement

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Resource Assessment - Fossil Fuels

� More predictability in power production, higher capacity factors

� Fuel pricing mechanism, industry index/market, hedging strategies

� Alternative fuel supply plan as contingency

� If not domestically-available, must be imported with attendant coastal import and storage facilities, and dependent upon foreign long-term supply sources

� Liquid fuels incur truck logistics cost and potential liability

� Increasing world demand for petroleum products, can fuel future price inflation

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Resource Assessment - Fossil Fuels

� Natural Gas - domestic pipeline and gas processing infrastructure, low energy production cost, clean burning

� LNG - capital for regasification, relatively-low energy production cost, clean burning

� Coal - low energy production cost, potential for carbon tax levy, air emission equipment required

� Heavy Fuel Oil - heating of transport and storage required, air emission equipment required, mid energy production cost

� Light Crude Oil - air emission equipment required, mid energy production cost

� Diesel - high energy production cost

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High Energy Price - Diesel, Crude

• Liquid fuels tied to world crude pricing subject to both volatility and higher prices

• For 20-year life cycle for diesel engine generator, fuel is 90% of costs

Source: http://www.opec.org

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40

60

80

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OPEC Basket Price

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Transmission / Reliability

� Connecting energy supply to demand

� Africa has outstanding hydro renewable energy resources estimated at over 100,000 megawatts (MW) in potential capacity (DNC alone)

� African oil and gas discoveries in Kenya, Ghana, Côte d’Ivoire, Angola, Equatorial Guinea providing local fuel supplies

How to encourage development of these resources for power generation and export to other African nations?

How to gain economies of scale from larger generation facilities to supply needed power and lower price of power?

How to use stranded associated natural gas to produce low-priced, environmentally-friendly power and move to market?

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Transmission

� Improve intra-country and inter-country transmission system

� Increase reliability of the grid

� Reduce grid outages that adversely affect generation and load centers

� Gain economies of scale in generation

� Reduce need for high-cost, emergency diesel generators

� Leverage the entire Africa portfolio of different energy resources

Source: African Energy, Atlas 2010

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Transmission

� Effective power wheeling framework needed

� Certainty in future tariffs

� Standardized, transparent framework

� Pricing and risk sharing to facilitate wheeling

� Cross-border PPAs

� Mozambique’s Mpanda Nkuwa 1,500 MW hydro project would benefit entire region but needs collaboration with other country’s utilities

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Project EconomicsDevelop Cash Flow Model

� Focus on fuel availability, price, logistics, “Plan B”

� Estimate capital costs for each generation fuel source

� Allowances:

� Additional logistics costs and time due to different infrastructurebase

� Construction costs vary by country and site due to productivity differences

� Operating, logistics, fuel storage/handling, maintenance, plant operation staffing costs

� Financial and tax incentives from host government for new generation

� Import duties, infrastructure

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Financing

� Project must have sufficient rate of return to attract investment capital

� Structure of generation entity:� Independent power producer (IPP)� Public private partnership (PPP)

� Equity and debt financing limits

� Recent focus on lower risk markets, but reduced bank financing capacity is larger issue

� Ability of African banks to raise USD dramatically affected, may cap project size

� Funding Sources:

� African Development Bank Group

� World Bank

� International Monetary Fund

� Emerging Africa Infrastructure Fund

� InfraCo Africa

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Financing, cont’d.

� Market requires bankable Power Purchase Agreement (PPA) *

� Balanced liability� Protections for risks not within their control� A stabilization clause for changes of law� Fair termination events for buyer and seller� Appropriate termination compensation

� Attract private sector off-takers / quality creditors for power projects

� Integrated mining / power projects� New mining investment is key to our economies over next 20 years� Using Diesel Generators cost GDP and jobs

� Government support (PPP) may be required

� Stand behind buyer� Provide comfort to private sector (developers, equity participants, lenders)

* Source: “Financing Power Projects in Africa”, Jeannot Boussougouth, Standard Bank, 1 July 2011, UNECA 2011, Addis Ababa

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Project EconomicsRisk Mitigation

� Portfolio of power off-takers, mixture of private and public

� Portfolio of investors of different countries to balance risk

� Revolving letter of credit (LC) to ensure payment

� Creditworthiness and long-term viability of energy off-taker

� Develop “Plan B” for selling power; evaluate risk of one or more off-takers defaulting

� Penalties for non-payment

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Government Support, Environmental & Regulatory Policy

� Political risk

� Government policy toward energy generation

� Environmental policy and regulations differ by country

� Energy projects require many permits and studies:

� Environment impact statement / assessment

� Water usage

� Air emissions

� Land acquisition

� Construction permit

� Import licenses and duties

� Potential re-location of existing villages

� Work visas for both construction and ongoing operating staff

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Non-Transmission Infrastructure

� Highway and railway system for transportation of key equipment to generation site

� Pipelines, compression stations for natural gas delivery

� Logistics of fuel supply, handling, decanting, storage

� Fuel and freight import facilities: new terminal, port, jetties

� Communications systems

Source: Globeleq. Tanzanian 180 MW gas to electricity project

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Non-Transmission Infrastructure

� Positive correlation between infrastructure expenditure and GDP growth for increased productivity, reduced logistics costs

� Inadequate infrastructure cited as a key constraint to investment and growth

� Sub-Sahara Africa requires US$ 93 billion/year in infrastructure investment

� Cost of trucking increases in Africa by between 684% - 1,560% due to poor road conditions from lack of adequate roads and bridges (Council for Scientific & Industrial Research (CSIR)

* Economic Research (Aschauer, 1989; Munnell, 1990)

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Labor

� Adequate skilled labor for:

� Generation construction

� Operation and maintenance

� Ex-pat vs. local labor supply cost evaluation

� In-country productivity

� Training programs to develop the skill sets required for both infrastructure improvements and new generation facilities

Source: Africa Energy Yearbook 2011

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Opportunities - Summary

� Better policy frameworks to attract investment and align economic returns with investor risks and returns

� Encourage independent power producers (IPP) and public private partnerships (PPP) to facilitate development deals

� Seek private sector power off-takers to secure financing

� Improve transmission grid and its reliability to:

� Access power generation fuels (wind, natural gas, hydro) and connect to load centers

� Reduce reliance on high price emergency diesel generators

� Limit load shedding which inhibits economic growth

� Decrease highway logistics issues with truck transport of diesel

� Harvest abundant energy sources with larger scale projects

� Limit importation of liquid petroleum fuels due to high price for power generation, high life cycle costs, and future price inflation

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Contact Information

Ron Miller, P.E.

Energy Solutions Manager – Africa Region

Newmont Mining Corporation

303-837-5236

ronald.miller@newmont.com

www.newmont.com