Opportunities within Africa’s Mining Sector

Urbanisation and Industrialisation to Drive Regional Mining Sector Growth

30th April, 2013

Frost & Sullivan International is a Level 3 BBBEE Contributor

James Fungai Maposa

Programme Manager

Mining – Africa

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Functional Expertise

6 years experience in growth consulting and market research, consisting of the write-up of over 30 market intelligence reports and 20 consulting engagements on a country, regional and global scale. Particular expertise in:

- Research on South Africa’s heat exchanger, low voltage switchgear, valve & actuator, industrial automation, welding and measurement and instrumentation product markets

- Research on Sub-Saharan Africa’s metals, minerals and mining industries including in-country mining sector analyses and metal commodity production and investment trend analyses

- Research on production and investment trends of Southern Africa’s process industries including the cement manufacturing, pulp and paper, food and beverage and chemicals and petrochemicals sectors

- Commercial due diligence within the retail, facilities management, mining and durable goods sectors

- Growth and strategy consulting experience on a sector, country and regional level on market penetration, market entry, product placement, investment and expenditure trend and revenue channel analyses

Industry Expertise

Experience base covering a broad range of sectors through the leveraging of long-standing, working relationships with executives’ of leading market participants

- A strong focus on South Africa’s industrial automation, heat exchangers, welding and switchgear markets

- Investment and expenditure trends in Southern Africa’s mining, pulp & paper and food & beverage industries

- Consulting engagements on automation, mining and mining equipment, transport, domestic appliance, facilities management, infrastructure and real estate industries

What I bring to the Team

Research expertise on the mining, manufacturing, automation, heat exchanger, welding & switchgear markets

Growth and strategy consulting experience in the areas of mining, cement, welding, heat exchangers, automation, automotive, domestic appliances, real estate and facilities management sectors

Career Highlights

Ran own beverages business in Bulawayo (Zimbabwe) from 2006 to 2007

Started professional career with Frost and Sullivan in 2008 as a Research Analyst

Promotion to Industry Analyst in 2010, Senior Industry Analyst in 2011 and Team Leader in 2012

Education

MBA, Edinburgh Business School, Scotland (In progress)

MCom. University of Cape Town, South Africa (2010)

James Fungai Maposa

Programme Manager

Mining, Manufacturing &

Industrial Automation

Frost & Sullivan

Africa

Cape Town

James Fungai Maposa

3

Focus Points

Focus Point #

Analyst biography 2

Overview of key African mining countries 4

Heat Map of key countries by region 5

Key challenges to doing business in Africa 6

Comparison of mining Investment destinations by region 7

Financing of mining investments in Africa 8

African mining sector growth drivers 9

Key growth sectors by commodity, region, country and company 10

Countries supporting Africa’s mining sector boom 11

Overview of the Opportunities within Africa’s mining sector 12

Key Takeaways 14

Conclusions 15

Contacts 19

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Africa’s mining sector is a key contributor the continent’s

economic growth and progression

KEY MINING COUNTRIES (AFRICA), 2013

1) Ghana (Gold, Bauxite)

2) Niger (Uranium)

3) Mali (Gold)

4) Guinea (Iron Ore, Bauxite)

5) Sierra Leone (Iron Ore, Diamonds)

WEST AFRICA

1. Egypt (Copper)

NORTH AFRICA

1. Tanzania (Gold, Diamonds, Tanzanite)

EAST AFRICA

1) South Africa (Platinum, Gold, Copper,

Coal, Uranium & Diamonds)

2) Zimbabwe (Platinum, Coal)

3) Botswana (Coal, Diamonds)

4) Namibia (Diamonds, Uranium)

5) Mozambique (Coal, Aluminium)

6) The DRC (Copper, Cobalt)

7) Zambia (Copper)

8) Angola (Diamonds)

SOUTHERN AFRICA

Africa’s mining industry is poised for strong growth over the next few years driven by:

the continent’s largely untapped resource base

an anticipated rise in Asian (China and India) demand for energy (coal and uranium), base (copper, iron-ore, nickel, zinc

and aluminium) and precious (gold, platinum and diamonds) minerals

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Heat Map of High Growth Mining Economies

(Southern Africa), 2013 – 2030

High Growth: > 7.0%

Medium Growth: 4.0 – 6.9%

Low Growth: <3.9%

Heat Map of High Growth Mining Economies

(West Africa), 2013 – 2030

Heat Map of High Growth Mining Economies

(East Africa), 2013 – 2030

FDI into Africa’s mining sector has risen and contributed to

significant growth of the region’s mining sectors

EAST AFRICA

Asian investment into Tanzania’s mining industry is on the rise

Key developments include:

China National Gold Corporation’s interest in Africa Barrick Gold’s gold

mining assets (worth an estimated USD 3.05 billion)

The Sichuan Hongda Group’s proposed USD 3.00 billion investment in

developing the Mchuchuma coal and Liganga iron ore projects

WEST AFRICA

West Africa’s large scale iron ore and infrastructure upgrade projects

will attract significant foreign direct investment inflows The Mount Nimba iron ore deposits that stretch from Ivory Coast, Guinea

and Liberia hosts approximately 6.00 billion tons of high quality iron ore reserves

In 2012, 15 iron ore development projects worth a collective USD 37.00 billion were being developed within West Africa

SOUTHERN AFRICA

Mozambique, Botswana and the DRC’s governments are driving

strong growth of these respective economies’ mining sectors

The Mozambican government announced plans to grow it coal sector to

export >100.0 million tons by 2020

Botswana is also looking to export 40+ million tons of coal by 2015

Canadian investment into the DRC continues on an upward trend

Going forward, most of the region’s economies will continue to rely

on foreign investment to develop the continent’s mining industry

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Although strong growth is forecast for Africa’s mining

sector, major challenges exist

6. Skills shortages

7. Safety and environmental concerns

8. Tax rates and regulations

9. Increasing social responsibility

1. Capital project deceleration

2. Combating corruption

3. Infrastructure constraints

4. Government bureaucracy

10. Merger and acquisition threats

5. Resource nationalism threats

Fraser Institute’s Global Survey of Mining Companies (2013) identified access to

financing, corruption, infrastructure constraints and government bureaucracy as the most significant challenges

facing mining companies in Africa

0 5 10 15 20

Access to financing

Corruption

Infrastructure constraints

Government bureaucracy

Tax rates

Skills shortages

Inflation

Policy instability

Tax regulation

Restrictive labour regulations

Foregin currency regulations

Crime & theft

Government instability

Poor health

Number of respondents

KEY CHALLENGES TO DOING BUSINESS IN AFRICA (2013 – 2020)

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Despite the challenges, Africa remains one of the world’s

largest mining investment destinations

Southern Africa will be Africa’s largest mining investment destination followed by West Africa and Central Africa

regions

PROJECTED MINING INVESTMENT BY

COUNTRY (AFRICA); 2013 – 2031

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

Inv

estm

en

t (U

SD

Billio

n)

Country

South America41%

Australia27%

Africa12%

North America11%

Asia7%

Russia2%

PROJECTED MINING INVESTMENT BY REGION (GOBAL);

2013 – 2031

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What are the factors that are driving the African mining

sector’s growth?

Based on the anticipated rise in global mineral commodity demand, Africa, which produces more than 60 metal

and mineral products, has significant growth potential with respect to mineral reserves exploration and

production

Increasing global energy demand1

Asia’s (China and India) industrialisation growth2

Global vehicle demand increase3

Anticipated recovery of the US & European

economies4

Rapid urbanisation of the developing world5

Relatively underexploited mineral resource base6

KEY AFRICAN MINING SECTOR GROWTH DRIVERS

(AFRICA); 2013 – 2020

COAL DEMAND BY SECTOR (WORLD); 2010 – 2030

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

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30

Bil

lio

n t

oe

Year

Other

Industry

Power

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Which African mining industries are poised to witness

strong investment & development growth from 2012 to 2030

Africa hosts an estimated 30% of the world’s total mineral reserves and even a higher share of deposits of

diamonds, vanadium, manganese, platinum, cobalt and gold

COMMODITY ESTIMATED RESERVES, 2012 KEY COUNTRIES KEY COMPANIES

COAL 6% of world reservesSouth Africa, Mozambique,

Botswana, Tanzania, Zimbabwe

Anglo Coal, BHP Billiton, Vale, Rio

Tinto, Morepule Collier, Hwange

Colliery Company Limited

PLATINUM 77% of world reserves South Africa, Zimbabwe Anglo Platinum, Lonmin, Implats

GOLD 17% of world reservesSouth Africa, Ghana, Papua New

Guinea, Mauritania, Tanzania, Mali

Anglo Gold Ashanti, Goldfields,

Great basin Gold, Newmont,

Newcrest, Barrick

IRON ORE 4% of world reservesSouth Africa, Mauritania, Algeria,

Zimbabwe and Morocco

Kumba Resources, Sphere

Investments, ZISCO,

COPPER 10% of world reserves Zambia, South Africa, Congo, Egypt

First Quantum Limited, Glencore

International, Konkola Copper

Mines, Rio Tinto, Equinox

NICKEL 4% of world reservesSouth Africa, Botswana,

Madagascar

Anglo Platinum, Lonmin, Implats,

Norlisk Nickel, Sherritt, Sumitomo,

Korea Resources, SNC Lavelin

ALUMINIUM 5% of world reserves South Africa, Mozambique, Egypt BHP Billiton, Rio Tinto, Valco

ZINC 2% of world reservesMorocco, South Africa, Namibia,

Algeria and Tunisia

Vedanta Resources, Rio Tinto,

Kumba Resources, Anglo

American, Breakwater Resources

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Which countries are already taking advantage of the African

mining sector’s growth opportunities?

Other key countries investing into Africa’s mining sector include Brazil, Russia, India and Japan

As of 2011, there was an estimated 155 Canadian companies operating in 39 African

countries. The aforementioned companies combined assets were worth an estimated

USD30.80 billion

Canadian mining companies are most active East Africa (USD 12.7 billion worth of investment up to

2011), West Africa (USD 9.9 billion) and Central Africa (USD 3.4 billion)

Key countries where Canada has sizeable investment include Zambia, Mauritania, South Africa,

Madagascar, the DRC, Ghana, Tanzania, Mali, Senegal and Eritrea

Over 230 Australian mining and exploration companies developing projects in Africa’s

mining sector

Australian investment into Africa tripled between 2005 and 2011

143 new African projects commenced in 2010 and a further 100 were added to this number in 2011

Between 2010 and 2011, Australian mining companies have raised nearly $4 billion to support the

development of respective African projects

China has shown a growing interest in southern Africa’s mining belt which includes

countries such as South Africa, Zambia, Tanzania, and Mozambique

Chinese companies made seven major investments in the African mining sector in 2011, totaling

USD14.7 billion

According to the Mining Review, Chinese investment into Africa may rise by 70% to US$50 billion by

2015 from 2009, as the nation invests in acquiring more resources, namely cobalt, coal, platinum,

copper and iron ore

CANADA

AUSTRALIA

CHINA

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In terms of investment, Australian and Canadian companies

are targeting Cu, Fe, Pt and U resource-rich countries

AUSTRALIAN AND CANADIAN MINING INVESTMENT

DESTINATIONS (AFRICA), 2000- 2013

A total of USD 2.35 billion in equity finance earmarked for African mining projects was raised from four (4)

main world stock exchanges in 2012

Copper, iron ore, platinum, uranium and coal are likely to remain the key commodities to attract Australian and Canadian

investment during the 2013 to 2030 period

Exchange

Listed Mining

Companies

Operating in

Africa, 2012

Mining Equity

Finance for Africa

Projects Raised in

2012

Hong Kong Stock Exchange 7 USD 53.0 Mln

Johannesburg Stock Exchange 60 USD 110.0 Mln

London Stock Exchange /AIM 100 USD 250.0 Mln

Toronto Stock Exchange/

TSXV

200 USD 1.70 Bln

Australian Securities Exchange 207 USD 239.0 Mln

TOTAL 574 USD 2.35 Bln

KEY STOCK EXCHANGE FINANCING MINING

INVESTMENT (AFRICA), 2012

LEGEND

Australian Companies Canadian Companies

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What opportunities are out there for stakeholders with a

vested interest in developing Africa’s mining sector

The African mining industry offers significant growth opportunities for both local and international

investors, mining companies, EPCMs, mining contractors, infrastructure developers and beneficiation

companies.

•Engineering and technical skills shortages will create several opportunities for local and international EPCMs

•Africa intends to attract skills and technology that will enable the continent to further process locally mined commodities

•A maturing mining industry in the developed world has resulted in several first world mining companies expanding geographically

•Due to losses incurred in 2012, investment banks are preferring to invest in the smaller and less riskier mining project

Investment Banks

&

Private Equity

Mining Companies

Engineering,

Procurement,

Construction &

Management

Companies

Beneficiation Companies

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Increasing emphasis on beneficiation offers Australian

companies opportunities to produce steel and jewellery

Africa’s mining industry is increasing looking up to Australia and Canada for the development and

construction of new mines, provision of finance and technology

KEY AUSTRALIAN & CANADIAN INVESTMENT BANKS IN AFRICA KEY AUSTRALIAN & CANADIAN MINING COMPANIES IN AFRICA

KEY AUSTRALIAN & CANADIAN BENEFICIATION COMPANIES IN

AFRICAKEY AUSTRALIAN & CANADIAN EPCMs IN AFRICA

1. Greenhill and Company Ltd (Platinum-SA)

2. CIBC Ltd (Gold- West Africa)

3. Macquarie Investment Bank Ltd (Southern Africa-Gold)

1. BHP Billiton Ltd (South Africa)

2. Barrick Gold Ltd (Tanzania, Zambia)

3. Rio Tinto Ltd (South Africa, Guinea)

4. Paladin Energy Ltd (Namibia, Malawi)

5. First Quantum Minerals Ltd (Zambia)

6. Aquarius Platinum Ltd (South Africa)

7. Perseus Mining Ltd (Ghana)

8. Coal of Africa (South Africa)

1. Increasing emphasis on mineral beneficiation and value

addition by African governments will potentially offer

Australian and Canadian companies opportunities to produce:

a) -Steel and stainless steel

b) -Gold and platinum jewellery

c) -beneficiated nickel products

d) -beneficiated coal products

1. Ausenco Ltd (Gold projects in West & East Africa)

2. Lycopodium Ltd (Gold & copper projects in West & Southern

Africa)

3. SNC Lavalin Ltd (Uranium Projects in Southern Africa)

4. Amec Min Proc (Uranium Projects in Southern Africa)

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What are the key takeaways?

Africa’s mining industry contributes between 8 – 10% to the regional economy’s GDP

Although Africa has a vast wealth of untapped mineral resources, standout challenges

include funding constraints, corruption, infrastructure constraints and demand uncertainty

The African mining sector’s key growth drivers include a maturing mining industry within

the developed world, higher extraction and production costs within the developed world,

rapid urbanisation and industrialisation of the developing world and an expected recovery

in mineral commodity demand growth of the developed world

Spurred by these drivers, significant opportunities exist for both local and international

companies with a vested interest within Africa’s mining sector

In terms of regions, high growth potential regions include Southern, West and Central Africa

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Before investing into Africa’s mining sector key financing, trade, operating, sourcing and

distribution partnerships should be established

Conclusions

Most mining majors are revisiting their planned investment projects due to losses incurred in 2012

with the immediate focus being channeled towards improving operations of existing operations

Mining Juniors vs. Mining Majors

In light of the losses incurred by several of the world’s major mining companies in 2012, investors

are shying away from the larger and riskier investment deals

Financing Considerations

Strategic Partnerships

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For Additional Information

Samantha James

Corporate Communications

+27 (0)21 680 3574

Samantha.james@frost.com

Wonder Nyanjowa

Industry Analyst – Mining

+27 (0)21 680 3216

Wonder.nyanjowa@frost.com

James Fungai Maposa

Programme Manager – Mining

+27 (0)21 680 3203

James.maposa@frost.com

Guillaume de Bassompierre

Director – Business Development

+27 (0)21 680 3203

Guillaume.deBassompierre@frost.com