An Expanded Role for EBRD in Mining Finance: Exploration Stage Equity

Kevin BortzKevin BortzCERBA International Mining ConferenceCERBA International Mining Conference

Toronto – 4 March 2008Toronto – 4 March 2008

Agenda

Introduction to the EBRD

EBRD in the Natural Resources Sector

EBRD and Health, Safety and the Environment

EBRD in the Mining Sector

EBRD Equity Investments

Case Studies

Agenda

Introduction to the EBRD

EBRD in the Natural Resources Sector

EBRD and Health, Safety and the Environment

EBRD in the Mining Sector

EBRD Equity Investments

Case Studies

What is the EBRD?

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International financial institution, promotes transition to market economies in 29 countries from central Europe to central Asia

Owned by 61 countries and two inter-governmental institutions

Capital base of €20 billionCumulative commitments

€35 billion

Unaudited September 2007

What are the EBRD’s objectives?

To promote transition to market economies by investing mainly in the private sector

To mobilise significant foreign direct investment

To support privatisation, restructuring and better municipal services to improve people’s lives

To encourage environmentally sound and sustainable development

Foundations of EBRD operations

1 Apply sound banking principles to every project

2 Support but not replace private investors

3 Advance the transition to a full market economy

Sound banking principles

Each project requires:

careful assessment of risk / rewards for all parties

commercial viability

good prospect of returns

Complementary to the private sector

Innovative and flexible financial structures

Extending boundaries / breaking new ground (maturity, equity, political risks)

Opportunity for commercial partners

IFI with investment banking skills

Specialised knowledge of central and eastern Europe and the CIS

Multi-national staff from our member countries

In-depth legal know-how

Dedicated teams with expertise in a variety of sectors

Agenda

Introduction to the EBRD

EBRD in the Natural Resources Sector

EBRD and Health, Safety and the Environment

EBRD in the Mining Sector

EBRD Equity Investments

Case Studies

EBRD, a major natural resources player

As of today €2.3 billion have been lent to projects worth €14.3 billion of investment

Oil and gas extraction 52%

Metal ore mining 11%Petroleum

refineries 14%

Pipeline transportation

20%

Gasoline stations 1%

Natural Resource sector objectives

Increase private sector participation and promote direct foreign investment

Reduce bottlenecks and ensure competitive market access

Improve regulatory and institutional frameworks

Set high standards of business conduct, transparency, corporate governance and environmental protection

Some EBRD resource partners

Agenda

Introduction to the EBRD

EBRD in the Natural Resources Sector

EBRD and Health, Safety and the Environment

EBRD in the Mining Sector

EBRD Equity Investments

Case Studies

Environmental mandate

Every project is screened for environmental impact

Around 17% of total commitments are designed to make environmental improvements

EBRD takes account of theenvironment in all its operations

Environmental standards for EBRD projects

Local, national, EU and World Bank standards and regulations

Where standards cannot be met initially, project will include programme for achieving compliance

Environmental Action Plan

EBRD environmental policy and procedures

Ensure environmental soundness of all EBRD operations

Invest in projects with specific environmental and energy efficiency benefits

Disclosure of environmental information

Environmental appraisal

Helps the Bank decide if an activity should be financed and how to address environmental issues

Helps identify ways in which operations can be designed to provide environmental benefits

Environmental, Health & Safety Loans(EHS) Purpose: protect the environment, cut emissions and prevent accidents by

investing in:

– Pollution clean-up

– Pipeline replacement

– Gas flaring and emission safety measures

– Energy efficiency

But NOT production related investments that do not have an overriding environmental benefit

Attractive Credit Profile: A loans from €3 million to €450 million with long tenors available (10 years+)

Client-driven programme with straightforward funding procedure and simple monitoring

Projects totalling €530 million signed to date

–Mittal Steel Temirtau

–LUKOIL

–CGI

–MOL

–Rosneft SMNG

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EHS Loans track record

€33 m

€52 m

Loans in € millions

€223 m

€75 m

€150 m

€75 m

Agenda

Introduction to the EBRD

EBRD in the Natural Resources Sector

EBRD and Health, Safety and the Environment

EBRD in the Mining Sector

EBRD Equity Investments

Case Studies

Mining Sector Investments

Gold

CoalOther

Bauxite

Iron Ore

241,311Total

  

7,300Other

24,234Iron Ore

10,125Bauxite

30,375Coal

169,277Gold

EBRD Mining Investments

(EUR, 000)

• Total EBRD debt and equity investment of EUR 240 million in support of EUR 1.2 billion in mining capital investments.

Mining Sector Equity Investments

Mining

Non-mining

Total Natural Resource Equity Portfolio of EUR 194.7 Million;

Mining Equity Investments of EUR 44.8 million (23%);

Five equity investments with an average size of just under EUR 10 million;

Four out of five equity investments have been in the precious metals sector;

Pipeline of more than a dozen equity investments in the mining sector.

Selected EBRD mining partners

Agenda

Introduction to the EBRD

EBRD in the Natural Resources Sector

EBRD and Health, Safety and the Environment

EBRD in the Mining Sector

EBRD Equity Investments

Case Studies

Equity Investments - Previously

Prospecting Exploration Development Operation Mine Closure

EBRD Appetite

• Maximum 20% stake

• USD 5 million – USD 20 million

• Board Representation

• Proven Reserves

• Bankable Development Plan

Equity Investments - Today

Prospecting Exploration Development Operation Mine Closure

EBRD Appetite

• Maximum 20% stake

• USD 1 million – USD 20 million

• Board Representation

• Positive Exploration Results

• Reasonable Exploration Program

Early Stage Equity Criteria

Experienced sponsor with proven track record and financial capacity, or in parallel with a seasoned sector investor;

Typical 4 – 6 year investment period, with exit strategies identified up-front (put option, IPO, sale to strategic investor, etc.);

Positive mineralogy / metallurgy– confirmed by our own consulting geologist;

Very rigorous analytical methodology.

Agenda

Introduction to the EBRD

EBRD in the Natural Resources Sector

EBRD and Health, Safety and the Environment

EBRD in the Mining Sector

EBRD Equity Investments

Case Studies

Case Studies

Bulgaria – Chelopech EADS

Kyrgyzstan – Kumtor Gold Company

Armenia – Deno Gold Mining Company

Chelopech EADS (Bulgaria/2006)

Signed in April 2006

USD 10 million direct loan, guaranteed by Dundee Precious Metals

Mine produces copper/gold concentrate which is processed off-shore

Financing of environmental remediation, resource definition and ore mining and concentrate production capacity

Kumtor Gold CompanyKyrgyzstan

Kumtor Gold Company is 100% owned by Centerra Gold

EBRD and IFC made debt and quasi-equity investments into Kumtor Gold in 1995

EBRD and IFC converted some of their investments into equity investments in Centerra

EBRD continues to be an investor in Centerra

Deno Gold Mining Company Armenia

Loan of USD 4.5 million signed December 2005

DGMC acquired by Dundee Precious Metals in August, 2006

DGMC produces copper, gold, silver and zinc concentrate

Original financing of equipment purchases for expansion and environmental improvements

Currently considering USD 25 million for further expansion and delineation drilling program.

Contacts

Kevin BortzDirector, Natural Resources Tel: +44 20 7338 7119Email: bortzk@ebrd.com

Raymond Conway Senior Banker, Natural Resources Tel: +44 20 7338 7675 Email: conwayr@ebrd.com

European Bank for Reconstruction and DevelopmentOne Exchange Square, London EC2A 2JNFax: +44 20 7338 6101