Mine Africa Presentation Mike Salamon. Co-President - AMCI Capital Chairman of New World Resources

Transcription

1 Mine Africa Presentation Mike Salamon Co-President - AMCI Capital Chairman of New World Resources 2007

2 Major Occurrences of Africa s Rich Mineral Endowment 2 Africa hosts approximately 30% of the world s mineral resources Africa is relatively under-explored and under-exploited with South Africa as the exception Most African countries are rich in at least one mineral KEY (1) Au Cu Co Coal Diamonds Iron Ore Al Ni Sn Ti U Zn Oil PGMs Mn Cr (1) Major known mineral resources Source: Standard Bank, Raw Materials Group

3 Copper is a proxy for global growth Global Copper Consumption Refined copper consumption, f (000t) Gradual growth between with accelerated consumption thereafter Developing economies appetite for copper is driving strong consumption growth China = 30% of world demand 7500 China = 10% of world demand RoW China

4 Forecast Copper Production Growth 4 Over 4mtpa of refined copper is forecast to come on line by 2011 Africa is forecast to supply 25% of this projected increase Zambia is the first mover, being followed by the DRC

5 Africa s Copper Production Growth Considerations Opportunities 5 World class copper deposits Supportive supply/demand fundamentals Supportive Governments New wave of capital Challenges Infrastructure Time horizons: Political vs. Industry Security of tenure Equipment availability and experienced leadership New competition / different hurdle rates

6 Electricity Usage in Africa 6 Electricity demand presently outstrips available supply Supply reliability & volumes across Africa vary Egypt Electricity Output 88.29TWh Population Size 74.0 m USD 89.3 bn DRC Electricity Output Population Size 5.19 TWh m USD 4.9 bn Forecast copper production will need new infrastructure including electricity Is the necessary infrastructure going to be available? Nigeria Electricity Output TWh Population Size m USD 99.0 bn Namibia Electricity Output 2.79 TWh Population Size 2.0 m USD 6.1 bn Zambia Electricity Output 7.94 TWh Population Size 11.7 m USD 7.3 bn Mozambique Electricity Output 7.13 TWh Population Size 19.8 m USD 6.6 bn Botswana Electricity Output 1.25 TWh Population Size 1.8 m USD 9.4 bn South Africa Electricity Output TWh Population Size 45.2 m USD bn TWh TeraWatt Hour(s) Definition One thousand Gigawatt hours Source: International Energy Agency, Standard Bank

7 Rail Infrastructure and Constraints 7 Copper as a bulk commodity needs effective transport infrastructure to smelters A combination of rail and road is presently used to transport intermediate coal Whilst rail covers much of the coastal countries, its usage and efficiency is inconsistent Source: Exploring Africa

8 DRC & Zambia Historic Copper Production 8 From 1960 s to 1980 s DRC produced over 500ktpa copper DRC was also the world s largest cobalt producer DRC s copper and cobalt production collapsed in the 1990 s DRC & Zambia are experiencing a new dawn in terms of copper production

9 Only 2 of the large global copper projects are presently under construction DRC has some of the world s largest underutilised copper and cobalt deposits What happens to the copper price if these projects do not occur or come on line later? Global & African Top 10 projects Top 10 Global Projects Region Cu Production (ktpa) Oyu Tolgoi Asia 400 Olympic Dam Expansion Australasia 300 Toromocho South & Central America 260 Resolution North America 250 KOV Africa 250 Reko Diq Asia 240 El Pachόn South & Central America 223 Tampakan Asia 210 El Arco North America 205 Toki South & Central America 200 Projects currently under construction Top 10 African Projects Region Cu Production (ktpa) KOV DR Congo 250 Lumwana Zambia 180 Kamoto DR Congo 150 Konkola Deep Zambia 120 Tenke Fungurume DR Congo 116 Frontier DR Congo 73 Musoshi DR Congo 40 Chingola Zambia 38 Muliashi North Zambia 34 Various Gecamines DR Congo 30 9

10 Chinese Investment in Africa Cape to Cairo Over 800 Chinese firms have invested in Africa Angola Benguela Railway Luanda-Uige Bridge Repairs Housing projects Born Jesus Airport Luanda General Hospital Palace of Justice Water infrastructure Ministry of Finance Democratic Rep. of Congo 3400 km Highway 3200 km Railway 31 Hospitals & 145 Health Clinics 2 Universities Rehabilitating Mining Infrastructure Sudan Port Sudan/Khartoum Railway Sudan Power Station Sudan Merowe Dam Oil exploration 10 Chinese Banks have provided significant funding for infrastructure projects Kenya Mombasa-Nairobi Oil Pipeline Oil exploration In Sept 07, China agreed to lend the DRC Government US $5bn to modernise infrastructure and terms include mining concessions Zambia Chambishi Copper Mine Textile mill Government complex Lumwana Power Project Lafarge cement plant Lundazi-Chama Road Namibia Low-cost housing Borehole Drilling & irrigation Regional Council Buildings Numerous interest free loans Primary Schools Medical Facilities Chrome mining Coal mining Platinum mining Iron mining Zimbabwe Tanzania Tanzam/Tazara Railway Shinyanga Water Project Chalinze Water project Dar-es-Salaam Stadium Tanzania/Mozambique border Kiwira coal mine Mozambique Moamba Bridge Mepanda Nkua Dam and Hydro- Electric Power South Africa VRESAP water pipeline Richards Bay dry dock Mittal Steel coke oven/kilns Chrome/ Ferrochrome mining Source: Standard Bank

11 African production and Chinese consumption a Balancing Act 11 There are multiple scenarios but for the sake of examples we have highlighted two different production and demand scenarios Africa delivers Slow China : China growth 8.5%, Fast China : China growth 16% BRI 9.5% How do these scenarios impact each other and price? African projects hit bottlenecks Possible impacts are highlighted on the next slide China marches on China slows

12 African copper projects are at different points of the cost curve Estimated Copper Cost Curve (incl. depreciation) New Projects between Indicative long-run cost = US$ 2.38/lb Average estimated cost of production (including depreciation) for African projects is USD1.40/lb in 2006 money African Projects It is important to note that the copper project pipeline may also suffer from cost escalation in terms of both the forecast operating and capital costs BOC: Business operating costs=site operating costs + realisation costs by-product credits Capital charge applied = 6-year straight-line depreciation of CRU project capital cost estimate on a per lb Cu basis

13 Africa s Impact as a Swing Supplier 13 The market has been largely in deficit the last few years African production will play a key role in the supply / demand balance What impact will this have on price? Bearish: China growth 8.5%, Bullish: China growth 15% (BRI 9.5%)

14 Copper price: High-price period or short-lived spike? 14 The historical high and low spikes have been pronounced Previous spikes are long-lived 450 The historical periods of high prices and low prices have been lengthy ? Is a USD /lb a realistic long term price forecast for copper? US /lb (2006$)