TechnoServe Report on theRMGC Potential Private Sector Impact

8 July 2010

Objectives and Content

PRESENTATION OBJECTIVEPresent the potential sustainable development impact of the RMGC project on theRomanian private sector

CONTENTS

1. Technoserve Overview Mission and Approach Countries and Partners

2. Examples of Work in Mining Communities Local Development Regional and National Development

3. RMGC Potential Summary Local Development Regional and National Development

4. Wrap-up Methodology Impact

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Technoserve Mission:TechnoServe helps entrepreneurial men and women to build businesses that create income, opportunity and economic growth for their families, their communities, and their countries.

Technoserve Approach1. Empower Entrepreneurs2. Build Businesses & Industries3. Transform Lives

Technoserve Engagement with RMGCTo develop a plan to maximize the project’s sustainable development impact on the Romanian economy

TechnoServe Mission and Approach

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• A U.S.-based, nonprofit economic development organization.

• Philosophy: Private enterprise can drive economic growth and positive social change; a hand up is better than a handout.

• History: Founded in 1968 by businessman Ed Bullard, who pioneered the private-enterprise approach to solving poverty.

• Staff: Talented business advisors, many of them former management consultants or industry experts.

• Partners: Leverage the expertise of strategic corporate, non-profit and government partners.

• Funding Sources: U.S. and foreign government agencies, multi-lateral organizations, corporations, foundations and individuals.

TechnoServe Company and Partners

PartnersCompany

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Active ProgramsHonduras

IndiaKenya

MozambiqueNicaragua

PeruRwanda

South AfricaSwazilandTanzaniaUganda

VenezuelaZambia

BeninBoliviaBrazil

Burkina FasoChile

ColombiaCôte d'Ivoire

EcuadorEl Salvador

EthiopiaGhana

GuatemalaHaiti

Where We Work

Past Work (extensive)Democratic Republic

of CongoGuinea-BissauMadagascar

MaliSudan

BelizeCosta RicaDominicaPanamaPoland

Norwalk, CT OfficeWashington, DC Office

London, UK Office

Emerging ProgramsGuineaMalawiMexicoNigeria

Zimbabwe

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• Rated one of the top 5 NGOs for corporate partnerships by the Financial Times• Named one of the world’s “Outstanding Social Entrepreneurs” by the Schwab Foundation

for Social Entrepreneurship• Rated one of “America’s 100 Best Charities” by Worth Magazine• Received the Presidential End Hunger Award from USAID

“TechnoServe’s partnership with our government is bringing concrete results in the fight against poverty:

jobs, opportunities, and globally competitive industries.”— Aiuba Cuereneia,

Minister of Planning and Development, Mozambique

"I was greatly impressed by the variety of sectors that

TechnoServe is involved with and the tremendous impact that TechnoServe’s work is having

with regards to economic development and job creation."

— Titus Brenninkmeijer, Founder of Solgenix and

Energy Access Foundation and TechnoServe member

since 1998

“Google is an entrepreneurial company, so we appreciate TechnoServe’s business focused approach to

development…Together we are helping men and women turn their good business ideas into thriving enterprises.

— Rachel Payne, Google.org manager

TechnoServe Recognition

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Contents

1. Technoserve Overview Mission and Approach Countries and Partners

2. Examples of Work in Mining Communities Local Development Regional and National Development

3. RMGC Potential Summary Local Development Regional and National Development

4. Wrap-up Methodology Impact

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Case 1: Developing Local Entrepreneurs

Context

Opportunity to develop small and medium enterprises within the Cajamarca region in partnership with the Yanacocha gold and silver mine. The mine is a high-value buyer of diverse products

and services that can be supplied locally, serving as a springboard for regional, national and export markets.

Our solution

Identify 54 high-potential small and medium enterprise businesses in diverse sectors of the region.

Deliver comprehensive entrepreneurship skills training program.Deliver practical and technical training.

Facilitate access to finance.Improve the enabling environment by establishing SME financing

relationships and funding models.

Results

Dissemination of the model for replication with other natural resource companies throughout Latin America and Africa.

54 small and medium enterprise entrepreneurs trained, resulting in US $1.8 million in incremental sales, 373 new jobs, and

purchases from more than 1,500 local suppliers of agricultural primary products.

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Case 2: Developing Regional and National Entrepreneurs

ContextOpportunity to develop local, regional, and national enterprises in South Africa in partnership the Lonmin Platinum mine. Focus on

supporting women and minority owned businesses.

Our solution

Develop a network of over 500 minority ownedbusinesses in South Africa.

Restructure procurement policies and procedures to reach local businesses.

Deliver comprehensive entrepreneurshipand technical skills training program.

Facilitated access to finance

Results

Increased procurement from women and minority owned South African firms to over USD 500 million annually, 55% of USD 1

billion annual spendDeveloped 70 start up new suppliers and new joint ventures

over a two year period awarding them over USD 100 million in contracts

Diversified local suppliers with goal of over 50% of sales from non mine sources.

Contents

1. Technoserve Overview Mission and Approach Countries and Partners

2. Examples of Work in Mining Communities Local Development National Development

3. RMGC Potential Summary Local Development Regional and National Development

4. Wrap-up Methodology Impact

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TechnoServe and RMGC have identified the potential for significant local, regional, and national benefits from the project (USD).

Projections RMGC Plan AdditionalPotential

Total Potential

Local purchase of goods and services 120 million 110 million 230 million

Local economic development - - 464 million

Total 694 million

Projections RMGC Plan AdditionalPotential

Total Potential

Romanian purchase of goods and services (including local)

2.5 billion 880 million 3.4 billion

Local Economic Development

Regional and National Procurement of Goods and Services

Summary RMGC Project Projections

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Local Context

Population Jan-063 Nov-081 % Change

Rosia Montana 3,557 3,227 -9.3%

Abrud 5,980 5,809 -2.9%

Campeni 8,178 7,805 -4.6%

Total 17,715 16,841 -4.9%

Population Characteristics Local : Rosia Montana, Abrud, CampeniTotal Population: 16, 8411

Aging population, 41% of working age2

RM 14.86% official unemployment1, 24.6 % salariedemployment2, therefore high potential for unreportedunemployment and underemployment 5% population loss over two year period

1 Report of the Socio-Economic State of the Roşia Montana Village, Socio-Economic Research and Development Center “Muntii Apuseni” Association, December 2009.2 National Institute of Statistics3 The County Statistics Department of Alba Iulia.

The local population is relatively small with high unemployment and significant out-migration.

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The local economy has 439 registered businesses generating 120.2M USD of sales in 2008, although the top ten businesses account for 53.5 % of all sales. 1

Sector RM, Abrud, Campeni 2008 Turnover

Food and Beverage 39,557Construction 19,314Timber/Furniture Manufacturer 13,809

Copper Mine 12,135Transport 12,012Other retail 6,920Textile Industry and Retail 4,610Other Service 4,207Other Wholesale 2,741Livestock 1,905Auto Body Repair/Part Sales 906Other 893Business Consultancy Services 776

Hotel 375Total USD 120,160

Local Economy

1 Romanian Companies Database www.romanian-companies.eu/default.asp

Sector Number of Companies Employees Income USD % of

Total

Food & Beverage 3 180 23,700,617 19.4 %

Mining 1 148 11,819,896 9.7%Timber/

Furniture 2 240 10,553,216 8.6%

Construction 2 201 10,424,027 8.6%

Transport 1 15 5,146,491 4.2%Textile and

Retail 1 206 3,728,713 3.1%

Total 990 65,372,961 53.5%

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Technoserve and RMGC have identified 230M USD of procurement opportunities that could create 445 entrepreneurial jobs locally over the life of the mine.

Local Supplier Development

Reagents and Consumables Transport

Construction EarthworksDrilling and exploration SecurityContract Mining Services Cleaning

Maintenance (mine fleet) Contract MaintenanceSample Preparation and Analysis Contract Electrical and Instrumentation

Light Vehicle Servicing Contract Blasting Services Forestry Monitor& Manage Tire Maintenance and MonitoringCatering Contract Surveying Services Accommodation Courier Rapid Service

Closure Demolition (3 yrs only) House Demolition (3 yrs only)

Local Purchase of Goods and Services

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Local Supplier Capacity

Sector RMGC Mine

Demand Per Year (000k)

Local Opportunity

(000k)

% of 2008 Total

Catering 350 17,765 2.0%

Construction 3,139 13,761 22.8%

Transport 300 12,012 2.5%

Auto Body Repair

405 1,905 21.3%

Hotel 315 375 84.0%

Cleaning 275 63 436.5%

Total 4,784 45,881 10.4%

2%

23%

2%

21%

0%

5%

10%

15%

20%

25%

-

5,000

10,000

15,000

20,000

Catering Construction Transport Auto BodyRepair

RMGC Spend as a % of Local Economy

Total Local Economy RMGC % of Total Economy

The capacity to meet this demand exists locally or can be developed.

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TechnoServe has designed a program to develop local entrepreneurs (beyond selling goods and services to the mine) to result in USD 464 M in incremental sales over the life of the mine.

Entrepreneurial Needs

High Priority Business Planning Marketing Strategies Financial Projections

Medium Priority Access to Finance Strategic positioning

Program Projections

•Cumulative Incremental Increase in Sales over 20 years: 464.0M

• Annual Incremental Sales at the end of 20 years: 25.8M

• Year 0 to Year 5: 50% increase in sales of 150 companies, with limited growth from Year 5 to Year 20

Local Non-Supplier Business Development

Program Focus

• Largest 150 businesses in area

• Training, skilling, access to finance, development of new markets, diversification beyond mining

• Intensive mentoring with select businesses

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National Context

-10

-5

0

5

10

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

European Union Romania

Real GDP Growth Rate: Growth Rate of GDP Volume -% change over Prior Year

Romanian Population Characteristics Total Population: 21,513,6621

Population declined 6.5% since 1990 Unemployment at 7.5% (Dec 2009) up from 5.8% in 20082

Negative 7.3% GDP growth in 20093

Government deficit increase by 142% in 2008 and 27% in 20093

1 World Bank, World Development Indicators 2008.2 Harmonized unemployment rate, European Commission – Eurostat3 European Commission – Eurostat

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Development of Romanian Suppliers

Romanian Goods and ServicesReagents and Consumables Transport

Drilling and exploration Security

Contract Mining Services Cleaning

Construction Services Social and Environmental Services

Earth Works Rehabilitation Services

Maintenance (mine fleet) Contract Maintenance

Sample Prep and Analysis Contract Electrical and Instrumentation

Light Vehicle Servicing Contract Blasting Services

Forestry Monitor& Manage Tire Maintenance and Monitoring

Catering Contract Surveying ServicesAccommodation Courier Rapid ServiceClosure Demolition (3 yrs only) House Demolition (3 yrs only)

Potential Romanian Goods and ServicesMining Reagents

Grinding MediaMechanical Equipment

Lubricants

RMGC plans USD 2.5 billion of purchases from Romanian suppliers, with potential for an additional USD 880 million, for a total of USD 3.4 billion over the life of the mine.

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Contents

1. Technoserve Overview Mission and Approach Countries and Partners

2. Examples of Work in Mining Communities Local Development Regional and National Development

3. RMGC Potential Summary Local Development Regional and National Development

4. Wrap-up Methodology Impact

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Access to InformationRMGC with potential suppliers

Database Workshops on opportunities Opportunity distribution

channels

Contract Structuring Contract disaggregation Outsourcing Contractor subcontractor

requirements Offsets

Training & Development Business vs. Technical Classes and Coaching Mentoring

Access to Finance Debt Financial institutions Contract advance Special purpose Equity Grants

Joint Venture Creation Majority local/Romanian Gradual transfer of ownership

SUPPLIER DEVELOPMENT

Tools for Developing Romanian Suppliers and Businesses

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Program Methodology

Local Supplier DevelopmentOngoing Program to Identify and Develop Suppliers from the local community: Selection Training Joint Ventures Access to Finance

Regional and National Supplier Development

• Orientation of procurement department to Romanian procurement

• Communication and selection of Romanian suppliers

• Development of key sectors for the advancement of Romanian economy.

Local Economic Development3 Year program to develop local business community: Broad outreach training Advanced training for selected entrepreneurs Development of key sectors (agriculture, timber, etc.)

Local Economic Development Regional & National Development

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Impacts

Local PurchasesSupporting the local economy through USD 230 million of purchases over the life of the mine

Local Economic DevelopmentSupporting the local economy through developing USD 464 million of additional sales for local businesses over the life of the mine

Regional & National PurchasesSupporting the Romanian economy through USD 3.3 billion of purchases over the life of the mine (including local purchases).

Regional & National Economic DevelopmentSupporting the development of Romanian industries especially including hospitality, construction, earthworks, and mining related services

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Rosia Montana Private Sectors Impacts