M.farooki - An Industry at Risk - Project Finance Mining Sector

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Presented by: Masuma Farooki

International Study Groups

Project Finance in the Mining Sector

April 24, 2013

About IntierraRMG

• 30 years leadership in data, mapping, analysis and

Exploration Success

.

• Lease ownership, company evaluations, M&A, due

diligence, production statistics and project pipeline.

• Market and project reports, material flows analysis and

mineral economics policy

• Raw Materials Grou is the consultanc unit of

IntierraRMG

Disclaimer:

IntierraRMG makes reasonable and diligent efforts to obtain accurate information for our clients and presentations. No warranty, expressed or implied is made regarding the accuracy, adequacy,

completeness, reliability, or usefulness of any information contained herein. Neither IntierraRMG nor the contributors of data to this presentation shall be held liable for any improper or incorrect use of

the information contained herein and assume no responsibility for the use of the information.



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Global Mining Operations

Source: Raw Materials Data, 2013

RMG Price Index

Global Trends

Source: Raw Materials Group, Stockholm 2013



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Global Trends

200

250

400

450

D

Mining CAPEX

50

100

150

50

100

150

200

250

300

R M G P r i c e I n d e x

C a p e x t o t a l , b i l l i o n U

00

Capex Total, billion USD RMG price index


Global Trends

Mining Project Investment Pipeline, 2012

Investment

(billion US$)

Share (%) Share Trend

2011‐2012

Greenfield Projects

Conceptual & Pre

Feasibility 269 37 →

Feasibility 204 28 ↓

Construction 82 11 →

Brownfield Projects

All stages 180 24

TOTAL 735 100Source: Raw Materials Group, Stockholm 2013



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Global Trends

Mining Project Investment by Metal, 2012

Investment

(billion US$)


2011‐2012

Iron Ore 245 34 ↑

Copper 200 27 ↓

Gold 125 17 →

Nickel 60 8 ↓

Lead/Zinc 17 2 ↓

Others 88 12

Total 735 100


Global Trends

Mining Project Investment by Region, 2012

Investment

(billion US$)


2011‐2012

Africa 106 14 →

Asia 75 10 ↓

Europe 77 10 ↓

Latin America 210 29 ↑

Oceania 121 17 →

TOTAL 735 100




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Global Trends

Mining Project

Investment

by

Country,

2012

Investment

(billion US$)

Share (%) Rank in 2011

Australia 105 14 1

Canada 104 14 2

Chile 96 9 3

Brazil 52 7 4

Russia 48 7 5

Peru 44 6 6

United States 43 5 7

South Africa 23 3 8

Guinea 16 2 10

Philippines 15 2 9

TOTAL 519 71Source: Raw Materials Group, Stockholm 2013



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Value

Canadian 2 Year Exploration Success Rates

Industry

D scover es

projects

Explored

discovered

per

Hectare

Major

Metals

26 / 710

(3.7%)$2,300

Iron Ore9 / 20

$2.5 M

Projects with drilling undertaken in last 2 years

Industrial

Minerals /

Rare Earths

4 / 38

(10.5%)$154,000

Industry

Discoveries

/ projects

Explored

Value

discovered

per Hectare

Australian 2 Year Exploration Success Rates

Major Metals32 / 570

(5.6%)$3,500

Iron Ore19 / 85

(22.3%)$180,000

Coal19/65

(29.2%)$131,000

Uranium7/88

(7.9%)$300

Industrials, Rare

Earths, Heavy mins,

Phosphate

10 / 36

(27.8%)$39,000

Bulk commodities:

Titano‐Vanadium,

Bauxite, Manganese

17/38

(44.7%)$52,000

Projects with drilling undertaken in last 2 years



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Global Trends

Falling ore grades

6.0

7.0

1.2

1.4

1.0

2.0

3.0

4.0

5.0

0.2

0.4

0.6

0.8

1.0

G r a d e P b a n d Z n

G r a d e C u a n d N i

..

Cu Ni Pb Zn




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Open Pit Development Projects and Concepts

Las Bambas (Peru)

El Pachon (Argentina)

Source: News releases and technical reports

Size of Bubble indicates Expected Capital Cost

Open Pit Copper Mines

Resources and Head Grades for New Copper Open Pit Mines

t )

c e s a t b e g i n n i n g o

f d e v e l o p m e n t (

C o p p e r r e s o u



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New Copper Resources Through Time

d

2003-2012

0.80%500

Initial Cu Tonnes Grade

i o n T o n n e s o f C o p p e r D i s c o v e r

A v e r a g e G r a d e o f D i s c o v e r i e s

0.30%

0.40%

0.50%

0.60%

0.70%

200

250

300

350

400

450


M i l l

0.00%

0.10%

0.20%

0

50

100

2003‐2004 2005‐2006 2007‐2008 2009‐2010 2011‐2012

New Copper Resources Through Time2003-2012

1.80%

2.00%

180,000,000

200,000,000

Resource Grade

T o n n e s o f C o p p e r D i s c o v e r e d

A v e r a g e G r a d e o f

D i s c o v e r i e s

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000


0.00%

0.20%

0.40%

‐

20,000,000

40,000,000



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• South America dominated new copper discoveries in past 10 years

Is the Industry at Risk?

Industry Risk Profile Worsening

• Annual rate of copper discoveries flat for past eight years

• Grades of upcoming mines will be significantly lower than new mines

• Underground projects are averaging three times grade of open pit

Generall u ward trend in ro ect costs affected b :


Industry Risk Profile for Copper

• Complex ore bodies

• Deeper lying deposits

• Remote locations of new mines

• Equipment suppliers at full capacity already

• Skill staff shortages emerging again

• se n me a pr ces



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• Projects at feasibility stage has increased strongly (28%) in 2011-


Industry Risk Profile Worsening

2012

• Projects at conceptual and pre-feasibility stage has decreased

• There is a decline in risk appetite affecting funding

• Increasing financial problems for junior companies that initiate most

projects

Thank You

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M.farooki - An Industry at Risk - Project Finance Mining Sector