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The mineral endowment of Southern Africa

Mark Burnett

November 2018

Southern Africa

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ht t ps://www.hindustantimes.com/india/anti-apartheid-hero-nelson-mandela-dies-at-95-world-bows-in-respect/story-kNbeKRL8yfsbuEuFGYdMXI.htmlht t ps://www.africasafari.co.uk/blog/experience-the-big-five-in-africa.htmht t ps://www.businesslive.co.za/bd/nat ional/education/2017-01-24-rhodes-must-fall-activist-mbalenhle-matandela-earns-rhodes-trust-scholarship/ht t ps://beatlikekerouac.com/photo-gallery/swaziland/#jp-carousel-1288ht t ps://sites.google.com/site/thedeepestminesoftheworld/south-africa/mponeng-mine

Southern Africa

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ht t ps://en.wikipedia.org/wiki/Southern_Africa

Southern AfricaAngola Namibia

Botswana South Africa

eSwatini Zambia

Lesotho Zimbabwe

Malawi

Mozambique

Southern African Development CommunityAngola Namibia

Botswana Seychelles

Comoros South Africa

DRC Tanzania

eSwatini Zambia

Lesotho Zimbabwe

Madagascar

Malawi

Mauritius

Mozambique

Geology and mineral deposits

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ht t ps://mrdata.usgs.gov/major-depositsEpisodes vol. 39 No. 2; http://www.episodes.org/journalArchiveArticle.do ht t ps://pubs.er.usgs.gov/publication/ofr20051294E

Africa’s mineral reserves

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ht t p://www.twnafrica.org/Maximising%20the%20Developmental%20Impact%20of%20Africa%E2%80%99s%20Mineral%20Endowments.pdf

Estimated mineral wealth

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CountryWealth

(USD billion)Subsoil

(USD billion)% National Wealth

Botswana 95,797 3,998 4.17

DRC 68,779 17,551 25.52

Madagascar 9,237 138 1.49

Malawi 10,442 4 0.04

Mozambique 7,718 333 4.31

Namibia 84,398 1,532 1.82

South Africa 77,348 7,149 9.24

Swaziland 52,670 380 0.72

Zambia 40,965 4,335 10.58

Zimbabwe 18,958 759 4.00

ht t ps://openknowledge.worldbank.org/bitstream/handle/10986/29001/9781464810466.pdf

Mining contribution to GDP (%)

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CountryApprox. Contrib. GDP

(%)

Botswana 18

eSwatini 2

Lesotho(a) 35

Namibia 12

South Africa 8

Zambia 12

Zimbabwe 2

Note these figures have been compiled from various sources and are indicators only.

(a) This figure is questioned.

That being said…

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South Africa

▪ 52% of world’s chromium

▪ World leader in production of manganese

▪ Controls 95% of global PGM reserves

▪ Largest producer of ilmenite

▪ Second biggest producer of vanadium

▪ Top-5 global rutile and zirconium producers

▪ World’s largest in-situ gold reserves

http://www.mining.com/feature-chinas-scramble-for-africa/

That being said…

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Botswana

▪ Global leader in diamond production by value

▪ Top-5 of other gemstones’ production

Zimbabwe

▪ Fifth biggest producer of lithium

▪ Top-5 of world’s largest PGM producers

Zambia

▪ Seventh largest producer of copper

Critical metals and minerals

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Iron South Africa Nickle Botsw ana

Aluminum Zinc Botsw ana, Namibia, South Africa, Zambia

Copper Botsw ana, South Africa, Namibia, DRC, Zambia Tin South Africa, Namibia

Chromium South Africa Uranium South Africa, Namibia

Manganese South Africa Coal Botsw ana, South Africa, M ozambique, Zimbabwe

ht t ps://www.youtube.com/watch?v=cimdDOvC-rA&feature=youtu.be

ht t p://www.resourceinvestor.com/2012/08/07/w hat-makes-critical-metal-or-strategic-element

The green economy and the

4th Industrial Revolution

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▪ Renewable energy

▪ Green buildings

▪ Sustainable transport

▪ Water management

▪ Waste management

▪ Land management

▪ Robotics

▪ Artificial intelligence

▪ Nanotechnology

▪ Quantum computing

▪ Biotechnology

▪ The Internet of Things (IOT)

▪ 3D printing

▪ Autonomous vehicles

Green economy 4th Industrial Revolution

https://www.mnn.com/green-tech/research-innovations/blogs/how-do-you-define-the-green-economy

https://en.wikipedia.org/wiki/Fourth_Industrial_Revolution

Specialty metals and minerals

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Antimony South Africa Beryllium Madagascar

Cobalt DRC, Zambia Fluorspar South Africa

Gallium Guinea Germanium DRC

Graphite Mozambique, Tanzania Indium South Africa

Niobium Tanzania REE South Africa, Namibia,

Malawi

Tantalum Rwanda, Mozambique Tungsten Zimbabwe

Vanadium South Africa Lithium Namibia,

Zimbabwe

Diamonds and kimberlites

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http://www.complete-mt-solutions.com/users/ajones/publications/122.pdf

http://www.spectral-international.com/gifs/kimberfig1.GIFhttps://ac.els-cdn.com/S0012825214001627/1- s2. 0-S0012825214001627-main.pdf?_tid=d91e 6f79-f9e 3-4844-a6d9-642ff 156e7f 6&acdnat=1540984080_af 48fe 06972195f4d5e 2164bd 92556c

Diamonds

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https://www.petradiamonds.com/media/image-library/

http://www.diamcormining.com/diamond_info/recovery_methods/

http://orderofsplendor.blogspot.com/2012/04/queens-top-10-d iamonds- 1-cullinan.html

https://www.google.co.uk/search?q=cullinan+diamond&rlz=1C1CHBF_en-GBGB809GB809&source=lnms&tbm=i sch&sa=X&ved=0ahUKEwj0iJ2Ejaze AhWUbsAKHYhgDNIQ_ AUIDig B&biw=1536&bih=754#imgrc=jgz4b BSD8FyTvM:

The Ridge of White waters

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https://en.wikipedia.org/wiki/Witwatersrand#/media/File:Waterfall,_Witwater srand_National_Bot anical_ Gardens.jpg

Source: Dr. Glen Nwaila

https://www.911metallurgist.com/blog/witwatersrand-gold- depos its

The Witwatersrand

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https://www.sciencedaily.com/releases/2015/02/150204075253.htm

https://www.miningglobal.com/top-10/west-wits-gold-mine-south-afric a

http://www.miningartifacts.org/South-African-Mines.html

https://www.mining-technology.com/projects/ezulwini/

https://www.miningreview.com/uranium-production-cuts-expected-to-bode-well-for-spot-price/

https://www.royalmint.com/invest/bullion/international-coin-ranges/south-african-krugerrand/

Hans and the BIC

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https://en.wikipedia.org/wiki/Hans_Merensky#/media/File:Hans_Merensky.jpg

https://en.wikipedia.org/wiki/Bushveld_Igneous_Complex#/media/File: Bushveld_Igneou s_Complex.png

Platinum

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http://www.specialtymetals.com/blog/2018/3/12/how-much-platinum-is -in-a-cata lytic-converter

https://www.nist.gov/si-redefinition/kilogram-introduction

▪ Ruthenium

▪ Rhodium

▪ Palladium

▪ Osmium

▪ Iridium

▪ Platinum

Of flowers and mines

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http://copperflora.org/eflora/species.php?id_e=193

https://seekingalpha.com/instablog/2366771-rock stone/4938083-king-manit oba- s-unmined-high-grade-copp er-zinc-depos its

https://www.zambianobserver.com/another-kcm-miner-dies-underground/

Becium central africanum

Copper and cobalt

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http://www.saimm.co.za/Conferences/BM2013/021-Theron.pdf

http://www.portergeo.com.au/database/mineinfo.asp?mineid=mn872

Cobalt

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https://static.seekingalpha.com/uploads/2018/1/17/37628986- 15161978031525364_orig in.png

https://capitalandmain.com/is-a-conflict-minerals-law-helping-or-harming-african-miner s-0416

https://www.miningreview.com/tenke-fungurume-the-drcs-copper-goliath/

Africa

Manganese

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https://www.capeminerals.co.za/the-kalahari-manganese-fields

http://www.manganese.org/news-and-publications/mn-global-picture/

Manganese

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https://en.wikipedia.org/wiki/Nchwaning_mine#/media/File:N%27Chwaning_II_headgear_ as_ seen_in_2007.jpg

https://www.miningreview.com/pallinghurst-coo-executive-director-resigns-with-immed iate-effec t/

http://www.turnstone.ca/rom157mn.htm

REEs: Not rare at all…

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https://en.wikipedia.org/wiki/Rare-earth_element#/media/File:Rareearthoxides.jpg

https://en.wikipedia.org/wiki/Rare-earth_mineral#/media/File:USGS_rare_earth_oxides_production_graph.PNG

▪ Cerium

▪ Dysprosium

▪ Erbium

▪ Europium

▪ Gadolinium

▪ Holmium

▪ Lanthanum

▪ Lutetium

▪ Neodymium

▪ Praseodymium

▪ Promethium

▪ Samarium

▪ Scandium

▪ Terbium

▪ Thulium

▪ Ytterbium

▪ Yttrium

REEs

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https://www.researchgate.net/publication/305918070_Rare_ Earth_ Deposits_of_Afr ica

Uranium

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http://www.mme.gov.na/files/publications/bfe_economic_uranium_poster.pdf

http://www.oecd-nea.org/ndd/pubs/2016/7301-uranium-2016.pdf

https://en.wikipedia.org/wiki/Uranium_mining_in_Namibia

Lithium: pegmatites

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Bradley, D., McCauley, A. (2013). “A preliminary deposit model for lithium-cesium-tantalum (LCT) pegmatites”, USGS Open File

Report 2013-1008

https://pure.unileoben.ac.at/portal/files/1071180/Tantalum_niobium_tin_mineralisa tion_in_ African_pegm atite s_and_rare_me tal_gr ani tes._constraints_from_Ta_Nb _oxide_minera logy_ geochemistr y_and_U_Pb_g eochronology.pdf

Hard rock lithium sources

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Questions?

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Thank you

Southern Africa – political update

Simmons & Simmons : Mining Masterclass

1 November 2018

Philip Worman, Managing Director, GPW

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Reasons to be bearish…

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Not helped by commodities..

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African debt – how big is the problem?

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The problem with easy credit...

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Mozambique – changing its tuna

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Under new management

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Zimbabwe – shifting power structures

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Towards technocraticgovernments?

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Reasons to be bullish…

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Reasons to be bullish…

Mining MasterclassSOUTHERN AFRICAN

POLITICAL RISK ASSESSMENT

Peter Ruxton

Tembo Capital

AFRICAN POLITICAL RISK ASSESSMENT

Mining Risk is not the same as other sectors – an “Enclave” Risk Profile

SECURITY/STABILITY – no armed conflict/freedom to move around

FISCAL FRAMEWORK- Stable & Transparent Fiscal Terms- Repatriation of Funds/International Arbitration

- Affordable Royalties & Duties- Corporation Tax – within an acceptable range

CORRUPTION FREE – minimal corruption/impartial legal recourse

BASIC INFRASTRUCTURE – ability to get around/access for mining equipment

BASIC GEOLOGICAL/GEOPHYSICAL DATA – geological map base – airborne geophysics – access to previous exploration data/results

TRAFFIC LIGHT FRAMEWORK

• The “Traffic Light System” provides a framework of quantifying political risk

• The “Traffic Light” colour is an agglomeration of a wide number of risk factors:

• adherence to “the Rule of Law”• freedom of the Press• independence of the Police Force & Security Forces

• Traffic Light colours can change over time (For PE investment purposes the direction of change can be most important)

GREEN – investible – open to investment

ORANGE – invest with caution (complete country review & visit[s])

RED – un-investible (avoid)

AFRICA – Risk Map (Norm) – 2018 - African Fund 1&2 + Track Record Deals

Gold

Copper (Cobalt)

PGMs

Mineral

Sands

Iron Ore

Green

Orange

Red

Uranium

Zinc/Copper

Coal

Country Risk

“Traffic Light” Indicator

Aluminium

AFRICA – Risk Map (Conservative) – 2018 - Fund 1&2 + Track Record Deals

Gold

Copper (Cobalt)

PGMs

Mineral Sands

Iron Ore

Green

Orange

Red

Uranium

Zinc/Copper

Coal

Country Risk

“Traffic Light” Indicator

Aluminium

Appendix

AFRICA – Mining Risk Map – Pre-2008 – Historical Track Record Deals

Mineral

Sands

Gold

Copper

Coal

Aluminium

Green

Orange

RedPlatinum

Country Risk

“Traffic Light” Indicator

AFRICA – Risk Map – 2014-2016 - African Deal Flow 2014 + Fund 1 Deals

Gold

Copper

Manganese

Mineral

Sands

Iron Ore

Green

Orange

Red

Phosphate

Nickel

REE & Niobium

Potash

Coal

Bauxite

Tin

Zinc

LENDER ATTITUDES TO

SOUTHERN AFRICA

Mark Tyler

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OUTLINE

• Banks• Others

• Bond• DFI’s• Fund / Streaming / Royalty

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BANK ATTITUDE

Return = σ 𝐴𝑙𝑙 𝐼𝑛𝑐𝑜𝑚𝑒

𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑎𝑙𝑙𝑜𝑐𝑎𝑡𝑒𝑑

Income - fees, interest, hedging income, cross- sell

Capital allocated - 10% X (a factor)

Since about 2001,

a factor = credit factor (< 1) X country factor (≥ 1)

Also, bank management is becoming more risk averse

• Profits go to shareholders

• Pain goes to management

• There is nothing to be gained from doing things differently

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COUNTRY RISK

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BANK ATTITUDE

Lenders active

South African Banks• Anything in South Africa• Possibly Namibia, Lesotho and Botswana• Some might consider elsewhere with ECIC cover

European Banks(Soc Gen, BNP Paribas, Natixis, ING)• Will look at most countries in Southern Africa• Projects need to be world class• Not competitive in South Africa

Other banks (BMO, Macquarie, Scotia, Investec,)• Unlikely to look at higher risk countries• Not competitive in South Africa

Chinese banks (ICBC, BOC, CCB)• Support Chines companies

African Banks(Ecobank, UBA, FBN) • Not well represented in Southern Africa

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BOND INVESTOR ATTITUDE

• There is currently significant appetite for credit risk among bond investors. Bond pricing is very competitive with bank finance

• Typically bond investors want • Rating, or• Cash flow history and low country risk

• Modest number of investors that will consider greenfield mining projects in Southern Africa• Projects need to be world class • Often hard to predict what would attract them

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DFI/ECA ATTITUDE

Lenders active

Export Credit Agencies(UKEF, Hermes, COFACE, ECIC, Afri-Exim, USExim, EDC)• Some are lenders in own right, others insure banks• Need foreign content• Open for business

Multilaterals (IFC, AfDB, TDB)• Only IFC active in Southern Africa• Not open for South Africa

DFI’s (FMO, DEG, Proparco, OPIC, IDC of SA)• Open for business in Southern Africa• Probably need larger projects

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FUNDS / ROYALTY

Credit Funds(Orion Mine Finance, Taurus Funds, Sprott)

Precious Metal Royalty / Streaming (Osisko, Royal Gold, Wheaton, Triple Flag, Red Kite, Maverix, etc etc)

General Royalties(Franco Nevada, Anglo Pacific)

• Most will actively look at all of Southern Africa but they have individual “no-go” countries

• Skilled and experienced in mining finance• Quick to execute • Base metals less well served than precious• Industrial minerals hard

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THANK YOU