The Beijing Axis⎥ 1

Disclaimer

This document is issued by The Beijing Axis. While all reasonable care has been taken in the preparation of this document, no responsibility or liability is accepted for errors or omissions of fact or for any opinions expressed herein. Opinions, projections and estimates are subject to change without notice. This document is for information purposes only, and solely for private circulation. The information contained here has been compiled from sources believed to be reliable. While every effort has been made to ensure that the information is correct and that the views are accurate, The Beijing Axis cannot be held responsible for any loss, irrespective of how it may arise. In addition, this document does not constitute any offer, recommendation or solicitation to any person to enter into any transaction or to adopt any investment strategy, nor does it constitute any prediction of likely future movements or events in any form. Some investments discussed here may not be suitable for all investors. Past performance is not necessarily indicative of future performance; the value, price or income from investments may fall as well as rise. The Beijing Axis, and/or a connected company may have a position in any of the investments mentioned in this document. All concerned are advised to form their own independent judgement with respect to any matter contained in this document.

The Beijing Axis⎥ 2

The Beijing Axis’ Knowledge & Network Synergies

Beijing Axis Commodities

•  Commodity Marketing •  Commodity Procurement

Beijing Axis Capital

•  Transaction Origination •  Corporate Finance

Advisory

Beijing Axis Procurement •  Comprehensive

Procurement Solutions

Beijing Axis Strategy

•  Strategy Formulation • Strategy Implementation

  Founded in 2002; has successfully worked with many international and Chinese MNCs

  Operates in four synergistic cross-border China businesses

  Provides services across various sectors, with a core focus on the MINING, RESOURCES, INDUSTRIAL ENGINEERING and OTHER SERVICES sectors

  Provides solutions to international firms as they act in unfamiliar territory in China/Asia

  Provides solutions to Chinese/Asian firms as they venture out and ‘go global’

The Beijing Axis⎥ 3 The Beijing Axis⎥ 3

Agenda

1. Background to Chinese Rail Projects in Africa

2. The Chinese Rail Industry

3. Challenges

4. A Note on India in Africa

The Beijing Axis⎥ 4

China’s Share of Global GDP and Consumption of Selected Commodities (% 1990, 2000, 2010)

China has dramatically increased its share of world consumption of key metals and minerals over the past two decades. The drivers of this trend remain intact

4% 17% 41%

0%

50%

100%

1990 2000 2010

ROW China

14% 18% 45%

0%

50%

100%

1990 2000 2010

ROW China

7% 22% 47%

0%

50%

100%

1990 2000 2010

ROW China

Primary Aluminium Steel Coal

2% 4% 10% 0%

50%

100%

1990 2000 2010

ROW China GDP

4% 13% 32%

0%

50%

100%

1990 2000 2010

ROW* China Refined Nickel

13% 17% 33% 0%

50%

100%

1990 2000 2010

ROW China

4% 12% 38%

0%

50%

100%

1990 2000 2010

ROW China Chrome Ore Refined Copper

8% 20% 41%

0%

50%

100%

1990 2000 2010

ROW China Refined Zinc

*Note: ROW stands for Rest of World Source: World Bank; CNBS; CEIC; The Beijing Axis Analysis

The Beijing Axis⎥ 5

China’s steel consumption is poised for more moderate but sustained growth and the base effect matters

Steel Intensity Comparison of Top 30 Economies(1) and Other Selected Asian Economies (2010)

*Note: (1)Switzerland, Norway and Sweden are not included for comparison purposes (2) China in the year 2000 Source: IMF; World Steel Association; The Beijing Axis Analysis

0

200

400

600

800

1,000

1,200

0 10,000 20,000 30,000 40,000 50,000 60,000

Steel Consumption Per Capita (USD, 2010)

GDP Per Capita (USD, 2010)

 Emerging Economies except China  Mainland China

 Developed Economies

Bubble Size: GDP CAGR (2000-2010)

Russia

Brazil

South Africa

Japan

US

Germany

France UK

Italy

Spain

Mexico

Australia

Sweden Netherlands

Canada Austria

Belgium

Saudi Arabia

India

Indonesia

Iran

Thailand

China

Poland

Argentina Venezuela

With less infrastructure construction, developed economies have lower demand for finished steel

The trend line is indicative of the general pattern in steel consumption at different stages of industrialisation

Steel consumption declines after GDP per capita reaches USD 25,000

Developing economies consume less steel per capita, but their relatively large populations ensure years of steady demand growth

Malaysia

Philippines Vietnam

S. Korea

Turkey

China(2)

 China in 2000

35.1

2005 2006 2007 2008 2009 2010 2011

USD1bn

China’s imports of selected commodities from Africa (USD bn, 1995-2008)

CAGR 1995-2008

0%

20%

40%

60%

80%

100%

0% 20% 40% 60% 80% 100% 120% 140%

China’s imports from Africa as a % of total imports

Cobalt

Ferroalloys

Nickel

Petroleum Gases

Electronics Steel

Platinum

Crude Oil

Copper

Chromium

Manganese

Diamonds

Iron Ore Wood

Tobacco

Cotton

- High growth rate - Low quantity

- High growth rate - High quantity

Note: Bubble size is based on the commodity’s share of China total commodity imports from Africa in 2008 Source: UN Statistical Database; The Beijing Axis Analysis

China 37%

Italy 15%

France 10%

USA 8%

Turkey 5%

All Others 25%

Share of all contract revenue in Africa (2009)

Middle East 16.6%

North America 0.4%

Africa 41.1% Europe

3.2%

Asia 36.0%

South America 2.7%

Breakdown of China’s international contract revenue (2009)

Source: ENR; The Beijing Axis Analysis

The Beijing Axis⎥ 9 The Beijing Axis⎥ 9

Agenda

1. Background to Chinese Rail Projects in Africa

2. The Chinese Rail Industry

3. Challenges

4. A Note on India in Africa

THE CHINESE PARTS AND EQUIPMENT MARKET The railway industry can be divided into 3 sub-sectors: Infrastructure, Vehicle/Components and Services

ABC-Zhuzhou

Jinxi

CCCC

Angang

Alstom-CSRC, Siemens -CSRC

ABC - Daton

Beichuang

Zhongtie

Wuhan

Nanrui

Datong

Qiqihaer

Nafang

Beiya

Shentong

China Railway Construction

Baotou

China Railway Communication

Taiyuan

Taiyuan

China Southern Railway

China Southern Railway

Shidai

Tielong

Guangshen

China Railway Engineering

Panzhihua

China Railway Signal & Comm

Maanshan

Jinxi

China Northern Railway

China Northern Railway

Zhuzhou

China Railway Material Supply

Daqin

Construction

Tracks

Signal/Power

Wheels

Axles

Locomotives

Coach/Wagon

Components

Logistics

Operators

Infr

astr

uctu

re Ve

hicl

es/

Com

pone

nts

Serv

ices

Tonkolili CCCC – EPCM Contractor SISG – Off-take CRM – Related infrastructure

Kalia CIF - Funding, 100% off-take

CREC - Feasibility study CCCC - Feasibility study

Western Cluster Shougang Steel

Bong China Union CDB

Putu

Mt Nimba Liberia

Simandou Chalco

Possibly Baosteel

Simandou 1-2 & South

Mt Nimba Cote d’Ivoire

Mt Ginka

Marampa MCC, SISG Acquisition

Mt Nimba Guinea

Guinea

S. Leone

Liberia

Cote d’Ivoire

Close to infrastructure that exists or could be rehabilitated Far from infrastructure Source: RBC, Company Reports, Reuters, The Beijing Axis Analysis

Kango

Belinga CMEC Construction & off-take EXIM Bank Financing

Nkout CRCC Related rail

Mt Avima

Zanaga

Mbalam Sichuan Hanlong Group

Equity stake CHEC, CRCC-CAC

Rail feasibility study

Nabeba CHEC, CRCC-CAC

Deepwater port, rail & rolling stock

Topa

Mayoko

CAR

Cameroon

Gabon Congo-B

Close to infrastructure that exists or could be rehabilitated Far from infrastructure Source: RBC, Company Reports, Reuters, The Beijing Axis Analysis

The Beijing Axis⎥ 13 The Beijing Axis⎥ 13

Agenda

1. Background to Chinese Rail Projects in Africa

2. The Chinese Rail Industry

3. Challenges

4. A Note on India in Africa

14

Political:

 Chinese commodity demand

 Availability of cheap credit

 Risk appetite

 Options outside Africa

15

Operational:

 Cost projections

  Local content and labour requirements

Commercial:

 Competition from the rest of the world amidst weak growth in developed countries

 Changing of the projects landscape in Africa

The Beijing Axis⎥ 16 The Beijing Axis⎥ 16

Agenda

1. Background to Chinese Rail Projects in Africa

2. The Chinese Rail Industry

3. Challenges

4. A Note on India in Africa

-17-

Exploration blocks

Two biggest markets

Exploration blocks

Zain footprint Exploration blocks Exploration blocks Zain footprint

-18-

Zain footprint

50% stake in Kenya Petroleum Refineries, operating an 80,000bpd refinery in Mombasa

Zain footprint

Exploration blocks

Coal Concessions

Exploration blocks Service centre in South Africa

Controlling stake in Zimbabwe Iron & Steel Company (ZISCO)

Large subsidiary

Exploration blocks

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THANK YOU!

Dirk Kotze Director & General Manager Africa E-mail: dirk@thebeijingaxis.com