Deal-making in Africa

1. Deal-making in Africa 16 June 2011 Sean Chilvers (Macquarie), Adam Hing (Control Risks), David Eliakim (Mallesons) and Paul Schroder (Mallesons) 10753682_410753682_2 10753682_2

2. Deal-making in Africa • Background - Mallesons • Understanding the market - Macquarie • Being honest about the risks – Control Risks • Navigating the legal minefields – Mallesons • Bringing it all together - Panel • Q & A - Panel

3. Background – Paul Schroder, Mallesons • DFAT statistics on Australian investment in Africa: • 2010 surge: 48 new companies, 143 new projects • Australia represented 10% of all M&A activity in Africa by deal value (2010) • A$19bn investment pipeline • Australian exports to Africa – A$5.8bn in 2009-10 • Our own recent experience is the increasing importance of Africa and in particular Africa resources to our clients: • high commodity prices ameliorates political risk and infrastructure costs • Africa welcomes Chinese/Indian investment • risk tolerance and technical expertise of Australian miners • Some of the most interesting recent Australian M&A deals have involved companies with all their resources in Africa. These include: • Xstrata’s successful $514 million bid for the shares in Sphere Minerals, an iron ore miner in Mauritania • Rio Tinto’s successful takeover of Riversdale with its Mozambique coal assets • Paladin’s bid for NGM Resource’s uranium assets in Niger, which went before the Takeover Panel who declined to find the invasion by al-Qaeda in the Maghreb (North Africa) was force majeure/MAC

4. Understanding the market – Sean Chilvers, Macquarie • Three of the world’s 10 fastest-growing economies over the past five years have been from sub-Saharan Africa • The International Monetary Fund predicts that four of the top 10 fastest-growing economies in the next five years will also be from Africa • Of the 324 fastest-growing cities, 24.4% are located in Africa and the Middle East • Over the past decade sub-Saharan Africa’s real gross domestic product growth rate jumped to an annual average of 5.7%, up from 2.4% over the previous two decades • Africa’s consumer spending is predicted to total $US1.4 trillion by 2020, with around 128 million households having discretionary income and more than half living in cities • Foreign direct investment in Africa has increased from US$10 billion in 2000 to US$59 billion in 2009, significantly larger than the flow to China if measured relative to gross domestic product • c.220 ASX listed companies are mining and exploration companies active in c. 42 African countries • Australian investment in African resources has grown to c. A$20 billion1 • There are a number of opportunities for Australian companies to invest in infrastructure projects resulting from the development of a growing number of resource projects in Africa 1 Australian Department of Foreign Affairs and Trade Source: Australia Africa Mining Industry Group

5. Resource rich AfricaDriving mining and infrastructure investment opportunities • Algeria ranks 5th in global natural gas production 20 Iron ore mines to open in the West Africa region (Liberia, Guinea, Sierra Leone, Cameroon) by 2015; aggregate output could reach 600-million tonnes a year (equivalent to 62% of global production in 2012 and 38% in 2015) • US$31 billion a year Africa’s infrastructure funding gap, mostly in the power sector • US$93.3 billion needed to improve Africa’sinfrastructure of which : • US$40.8 billion to boost power supply • US$21.9 billion to improve water supply and sanitation • US$18.2 billion to develop transport • US$9.0 billion to improve information and communication technology • US$3.4 billion to address irrigation requirements • Nigeria is the 14th largest oil producer in the world; Angola ranks 17th • One of the top gold producing regions in the world is West Africa • The Zambia/DRC copper belt is among the richest in the world with Zambia ranking 9thin world production • Niger and Namibia are in the top six uranium producing countries in the world • 75% of South Africa's energy needs are directly derived from coal and 92% of coal consumed on the African continent is producedin South Africa • Three of the world’s topfive diamond producing countries are in Africa: Angola, Botswana, South Africa • 85% of the world’s platinum reserves are in South Africa alone Source: MINEAfrica, The International Bank for Reconstruction and Development / The World Bank

6. Record years for mining financings Equity capital raised globally for mining companies has increased dramatically since 2005… Global equity capital raised by mining companies from 2000 to 2010 (US$ billions) Rio Tinto($15.9bn)Barrick Gold(US$4.0bn)Xstrata(US$5.8bn) Source: Dealogic

7. Record years for mining financings … with US$7.9 billion raised in Australia in 2010 Global equity capital raised by mining companies: 2010 (US$ billions) • Includes Ivanhoe Mines (US$1.2bn) and Red Back Mining (US$0.6bn) • Includes CONSOL Energy (US$1.9bn) • Includes Anglo Platinum (US$1.7bn)and AngloGold (US$1.6bn) 4.5TSXV • Includes African Barrick Gold (US$0.9bn) • Includes UC Rusal (US$2.4bn) 12.5TSX Number of financings Source: Dealogic

8. Market dynamics Source: Dealogic

9. Dual primary listing of Gold One International Limited Australian incorporated first dual primary listing on the ASX and the JSE (ASX/JSE: GDO) • Gold One was listed on 18 May 2009 after ASX listed BMA Gold Limited implemented a reverse takeover of JSE listed Aflease Gold Limited • Gold One is an African focussed gold producer and explorer, and owns a producing gold mine and a gold development project in South Africa, as well as a gold exploration project in Namibia • Subsequent to its listing, Gold One received approval to amend its listing status on the JSE to a secondary listing during February 2010 • During September 2009, Gold One raised A$30 million through a private placement of shares • During May 2011, Gold One announced the execution of a transaction implementation agreement with a Chinese consortium of investors • The cash consideration premium of 27.9% to the closing price and 25.1% premium to the 30-day VWAP of Gold One shares on the ASX on 12 May 2011 reflects the consortium’s serious intention to implement the takeover Aflease Gold / Gold One Gold One International Limited Gold One International Limited Reverse take-over of JSE listed Aflease Gold by ASX listed BMA Gold and dual primary foreign inward listing of Gold One on the JSE and ASX Gold One’s general and specific issue of shares for cash to foreign institutions Takeover offer by a consortium of Chinese Investors including a US$150 million cash subscription by the consortium OFFER CONSIDERATION CONSIDERATION CONSIDERATION A$0.55 per share A$30 million A$100 million Financial Adviser , Transaction Sponsor, and Sponsor Financial Adviser, Transaction Sponsor, and Sponsor Financial Adviser , Transaction Sponsor. and Sponsor 2009 2009 2011

10. Minority Shareholders Tata Steel 0.3% 24.4% Tata Steel Minority 26.3% Shareholders 43.9% Passport Capital 16.1% Rio Tinto CSN 73.4% 15.6% Rio Tinto A$4 billion acquisition of Riversdale Mining Macquarie is currently advising Rio Tinto on its A$4.0 billion acquisition of Riversdale Mining, delivering Rio control of substantial Tier 1 coking coal assets in Mozambique Transaction Overview • On 23 December 2010 Rio Tinto announced a recommended cash takeover offer for Riversdale for $16 per share (A$3.9 billion) • On 10 March 2011, Rio Tinto announced that it would increase its offer to $16.50 if it reached 50% within 2 weeks • On 29 March 2011, Rio Tinto declared its offer unconditional at $16 with a relevant interest of 41%, and stated that the offer would increase to $16.50 if Rio achieved more than 47% acceptances before the end of the offer period • On 6 April 2011, Rio Tinto went through 47% acceptances and hence increased its offer to $16.50 (A$4.0 billion) • Two days later Rio Tinto’s interest exceeded 50% and it assumed control of Riversdale • On 29 April 2011, Rio Tinto announced that it had gained control of the Riversdale board and would seek to de-list the company • The offer has now been declared final and will close on 17 June 2011, with Rio Tinto currently owning 73.4%, Tata Steel 26.3% and free float of 0.3% Riversdale’s Share Register Pre-offer Current

11. Opportunities abound • The African investment climate is the best it has been in at least a decade • Africa’s current economy is comparable to where Australia was c. 20 years ago • The case for Africa presents a number of opportunities in terms of resource exploitation, as well as resources and infrastructure development • The Australian investment community presents a deeper pool of sophisticated investors (specifically in the resources sector) relative to African markets • The global mining industry is reliant on regions such as Africa as a future source of commodities • Australian firms are well place to provide capital and capability to exploit African opportunities “West Africa is the new Pilbara for iron ore mining as well as a battleground between established miners and Chinese firms seeking to enter the region” Miningmx “India has stepped up its push to deepen its economic ties with Africa and emerge from the shadow of rival China by offering $5bn in new credit lines to the continent.” Miningmx

12. Australia Africa Business Council Deal making in Africa – Being honest about the risks Adam Hing – Director Strategic Consulting

13. About us Since 1975 we have worked in over 130 countries for more than 5,000 clients An international consultancy with 34 offices worldwide National and multinational clients in a wide variety of industrial and service sectors, governments and NGOs

14. Worldwide office network

15. Our service areas • Pre-entry country studies • Online political analysis and forecasting • Online travel security advice • Due diligence • Competitor intelligence • Vetting services • Fraud prevention and investigation • Litigation support • Information leaks • Asset tracing • Business and reputational audit • Sabotage • Protection of people, assets and information • Risk analysis and evaluation • Security planning and consultancy • Security design and implementation • 24 hour manned hotline service • Crisis management planning • Response: extortion, product contamination, kidnap and ransom • Post-incident evaluation and victim rehabilitation Information Investigation Security Response

16. Three of the top risks when doing deals in Africa: Political stability Infrastructure Corruption Piecing together the risks: Political and macro economic stability Integrity/corruption Regulatory issues Social & environmental issues Availability of reliable infrastructure Security Agenda

17. Risk 1: Political stability

18. Insufficient infrastructure single largest constraint on private sector growth Unreliable electricity and inadequate roads especially burdensome/ problematic for 2011 These problems will only increase as mining expands into ever more remote regions Risk 2: Infrastructure

19. Risk 3: Corruption • African countries and corruption have a long and unhealthy relationship • During 2010, 64.5% of approximately 15,000 transactions in Tanzania were characterised by requests for bribery payments • Corruption • “Dishonest or fraudulent conduct by those in power, typically involving bribery” Oxford Dictionary 3rd edition • Bribe • “Dishonestly persuade (someone) to act in one’s favour by a gift of money or some other inducement” Oxford Dictionary 3rd edition

20. Extractives and corruption • More often than not extractives companies are operating in countries with a high risk of corruption; often corruption is endemic • The extractives industry will require the issue of many licences, concessions, permits and consents, which are nearly always discretionary and involve public officials • There is a very high use of agents and third parties, many of whom are operating in high-risk countries and dealing with public officials • The vast majority of cases involve agents paying bribes on behalf of the parent company • Vetco International (Panalpina case)

21. Commercial risk Fraud risk Project Political risk Legal risk Reputation risk Security risk It’s not just about legal risk

22. Issues – Big picture • Political and macro economic stability • Integrity/corruption • Regulatory issues • Social & environmental issues • Availability of reliable infrastructure • Security

23. Political and macro-economic threats • The political environment and key players • Regulatory bodies • Political stability • Prospects for the next legislative and presidential election cycles • Macro-economic policy-making agenda • Foreign relations • Insurable risks

24. Operational environment Regulatory and governance threats • Regulatory environment • Security of tenure • Taxation and royalty schemes and potential changes to these regimes • Bureaucratic and judicial systems Social and environmental threats • Overview of society • Land access and ownership issues • Labour and employment issues • Artisan mining • Social and environmental issues • International and local NGO and media scrutiny Infrastructure threats • Power supplies • Transport and logistics • Public health situation • Information and telecommunications facilities

25. Security threat environment • Terrorism • Organised crime • General crime • Political and socio-economic unrest • Labour strikes and unrest • Public and private security provision

26. Navigating the legal minefields – David Eliakim, Mallesons • Usual cross-border issues associates with multiple regulators • Australia: • FIRB • ASX • ACCC • China outbound investment approvals • Africa: • South Africa as a case-study • Exchange Controls • Competition authorities • JSE • Takeover Regulation Panel • Department of Mineral Resources • US$25bn MTN/Bharti mobile phone deal fell over when South African and Indian currency control authorities could not agree

27. Navigating the legal minefields – David Eliakim, Mallesons

28. Asia-Pacific competing as a place where Africa raises capital: ASX & HKSE – David Eliakim, Mallesons • Historic dominance of LSE (AIM) and TSX • Emergence of ASX • HKSE as the future • More capital was raised on the HKSE (US$52.8 billion) in 2010 than on all the US exchanges combined (US$42 billion). • Our Hong Kong offices have seen a flurry of resources IPOs on the HKSE which they attribute to factors such as the resources boom generally and the desire of issuers to associate themselves with the China story. • The HKSE has developed a reputation for resources, with Singapore having more success in REITs

29. Bringing it all together: Panel members comments on each others’ presentations – Paul Schroder, Mallesons

30. Q&A – Paul Schroder, Mallesons