AFRICA S GOLD MINING INDUSTRY Looking back 20 years can we learn from the past? Who are the stakeholders? Looking ahead opportunities and impediments Commodity prices the past 20 Years Commodity prices indexed to 100 1200 1000 800 600 400 200 0 London Gold (PM Fixing $/ozt) Copper (LME Cash $/t) Brent Crude Oil (ICE $/bbl) Iron Ore 62% Fe, FOB
Past 20 years of mining 1000 900 800 700 600 500 400 300 200 100 0 Equity index prices indexed to 100 HUI Gold Index Dow Jones Global Oil & Gas Total Stock Market Index Copper Index Iron Ore Index Market cap of mining sector value creation or destruction? The mining sector experienced a ~50% contraction from its peak of ~$2.3T in 2011 to just over $1.1T in mid-2013 and has retreated further to just below ~$1.0T today approaching bottom of Global Financial Crisis US$ billion $2 500 Diversifieds / Base Metals $2 250 Gold / Silver $2 000 Other $1 750 $2T $2.3T $1 500 $1 250 $1.1T $1 000 $750 $985B $500 $235B $735B $250 30% CAGR (2003 to 2011) 11% CAGR (2003 to present) -- 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Scotiabank
World gold mine production a shift in geography and risk profile 1993 2013 Africa...will it overtake China and other emerging markets as the global economic engine? 8 of continent s fastest growing economies not dependent on oil or mining Democracy spreading through the continent Stronger trade and economic ties African leaders made more accountable for providing basic services and infrastructure More efficient financial services Growth supported by high commodity prices and increased foreign investment African global growth likely to increase with slowdown of China OBSTACLES Political volatility and corruption Transparency and compliance Legislative and regulatory issues Infrastructure and Power Skills shortage
Investing in Africa barriers to beat Productivity industry pursuing volume growth at any cost during the boom in commodity prices Capital access a critical challenge for junior miners and effective capital allocation not a once off reaction to market conditions but a continuous cycle of review Social licence to operate balancing immediate stakeholder demands with inherent value of being a socially and environmentally reliable operator Resource nationalism balance between promoting investment and maximising in country benefits Capital projects failure to keep them on time and on budget Price and currency volatility changes in customer buying preferences Infrastructure access financing, ownership Skilled rather than unskilled workers focus on increasing productivity Access to water and energy unreliable power supply and rising energy costs Africa are we prepared to waste 20 years of progress? Perception of political risk Labour employment Communication Infrastructure Emerging markets World Bank and UN driven End of Cold War End of apartheid no business into Africa BRIC absent 1995 Market cap based on intangibles 2015 GDP growth Skills development and innovation Scramble for resources - commodity prices, tax models Return to democracy more accountable politics Boom in communication Infrastructure development social changes New trade zones Satellite technology and new ways of doing business Energy sources
Africa s future needs the mining sector and long term economic plans Responsible and accountable politics with along term outlook Low commodity prices High commodity prices Social media driven, populist politics with a short term outlook Viability of Africa s Mining industry lost opportunities AFRICA Mining code legislation changes Mining codes currently under review Sources: EY Research, Deloitte, Randgold Overview of companies covered US$ billion 100 90 80 70 60 50 40 30 20 10 0 Market Cap Outstanding Impairments (Feb 2015) Debt 2013 + 9 mnths 2014 Source: Barclays / Company Reports
Together we can deliver a better future Responsibility of mining companies: Attract first world finance Guard against exploitation of equity markets at expense of host country Deal honestly and transparently with governments Create jobs Transfer skills Support local suppliers Have meaningful social responsibility programmes Mine profitably, pay taxes Mining Companies and Investors Governments NGO s and Regulators Employees and Communities Responsibility of Governments: Provide enabling platform for business Provide or incentivise development of infrastructure Mining legislation to enable investment, conducive to fiscal and legal stability, as well as good governance Provide regional safety and security