Funding for the African Miner Today

1. Funding for the African Miner Today Vaughan WickinsHead of Mining & Metals, LondonStandard Bank Plc 29 November 2010

2. Contents Funding for the African Miner Today • The performance and outlook for commodities • Financiers considerations • The changing landscape of mine finance • The outlook for the African Miner

3. Nov 10 The rebound in commodities continues Performance of Selected Equity & Commodity Indexes (2007 to date) Precious & Base Commodities and Emerging Markets all outperforming Developed Markets Source: SB Commodities and Bloomberg

4. … with Analysts’ forecasts remaining bullish Standard Bank’s outlook remains Bullish * Market consensus from Bloomberg as of 22/11/10

5. An investor’s dilemma Cash Cash rich investors are increasingly considering commodities within their investment portfolios Commodities Equities Government Bonds Property The Son of Man, René Magritte (1964) About the painting Magritte said, “Everything we see hides another thing, we always want to see what is hidden by what we see, but it is impossible. Humans hide their secrets too well ...” (also featured in The Thomas Crown Affair)

6. … and the Global portfolio flows The Global Portfolio (2010) Commodities continue to attract investment, although currently below the consensus level for portfolio risk diversification Major Commodity Indices within the Global Portfolio (2007 to date) Energy and Crude Oil continue to dominate as an asset class within the Commodities basket Source: SB Plc, Bloomberg & Reuters

7. Unprecedented deleveraging in 2009 … Net Debt Movements and Equity Issuances in the Mining and Metals Industry (2000 to date) Financial Crisis in 2008/09 severely impacted supply of debt Source: Ernst & Young, Worldscope via Thomson Datastream Forecasts are Reuters consensus estimates, via Reuters Knowledge

8. * … offset by equity issuance Mining Equity: Amount Raised in USD (2000 to date) The debt crisis led to a boom in equity raisings with record raisings in 2009 In 2009, around 40% of the total funds raised was accounted for by the majors and diversified players (Rio, Barrick, Arcelor Mittal and Xstrata) Source: Capital IQ Note: * to Oct 2010

9. The recovery of the loan market Value of Mining Project Finance by Region (2005-2010) 2010 has shown strong signs of recovery in the debt market Source: SB Plc/Dealogic Note: * to 23 Nov 2010

10. So how are African Miners faring? Share Price Performance of Selected Mining & Metals companies (2007 to date) * Portfolio of African copper companies includes: African Copper Plc, African Eagle Resources Plc, Anvil Mining Limited, Discovery Metals Limited, Equinox Minerals Limited, First Quantum Minerals Limited, Katanga Mining Limited, Metorex Mining Limited, Mwana Africa Plc and Tiger Resources Inc ** Portfolio of Precious Metal Companies includes: Centamin, Randgold, Perseus, Mineral Deposits, Cluffgold plc, Nevsun Resources Ltd, Sunridge Gold Corp, Colden Star Resources Ltd, Avion Gold Corp, Volta Resources Inc, GMA Resources plc, Gryphon Minerals Limited, Resolute Mining Ltd, Adamus Resources Ltd and Platinum Australia Source: SB Global Markets Research Performance of African Mining companies is accelerating

11. Current copper price is well above cash-cost Copper Production Cost Curve Copper producers generating strong cash flows at current market prices Source: GFMS and SB Global Markets Research - Mine Costs Note: * Based on data from 155 mines

12. Current gold price is well above cash-cost Gold Production Cost Curve Gold producers generating strong cash flows at current market prices Source: GFMS and SB Global Markets Research - Mine Costs Note: * Based on data from 213 mines

13. Financing Commodities Funding Available • Base Metals • Precious Metals • Bulks • Uranium Funding Restricted • Diamonds • Rare earth metals • Alloy metals & metals in steel making (eg. tungsten, molybdenum, manganese, chromium) WHY? • No terminal markets • Lower volume markets • Less certainty in demand & supply fundamentals Neodymium Scandium Samarium Lanthanum Europium Yttrium Cerium Gadolinium Terbium Dysprosium Holmium Promethium Praseodymium

14. Financing Risk Assessment Increasing Risk Regardless of the funding solution, financiers need to assess the inherent project risks Decreasing Cost

15. Finance considerations & outlook • Considerations • Deal size and Distribution: North of USD300M capex requires structuring • Complexity of terms – snowball effect • Equator Principles – requirements accurately understood ? • Time to close • Competitive pricing • Leverage • Outlook • Increasing volume of PF loans this year • Long-term commodity fundamentals remain compelling • Strong appetite from banks for high qualityassets with strong cash-flow • Political risk monitored carefully Standard Bank’s outlook on Project Financing is Bullish

16. Historic sources of capital for African mining companies Source of capital for selected African mining companies (2005 to date) Whilst equity is the primary source for the start up mines, developing mining companies increasingly utilize debt and physical linked funding solutions 330 301 736 361 513 953 291 793 130 149 1726 1951 458 1000 354 Totals (USDm): Source: SB Global Markets Research * Copper Portfolio includes African Eagle Resources Plc, Elnino Ventures Inc, Geovic Mining Corporation, Mwana Africa Plc, Africo Resources; ** Discovery Metals Ltd source of capital includes recently announced funding plans

17. Financing sources providing new funding solutions Sources of Financing Market players have diversified their funding product offerings to mining companies with the lines between traders and bankers blurring Equity Physical Linked Finance Debt Equity Market Traders / End Users Banks Debt & Physical Linked Finance

18. Financing considerations Funding Solutions and their comparable advantages Careful cost-benefit analysis of each of the funding solutions remains a crucial decision for management

19. GLOBAL MARKETS Conclusion Funding outlook for the African Miner • Increasing funding alternatives • Investor appetite for equity remains strong • Debt available in a number of forms • Cost of financing competitive The Canaries in the Coal Mine* Global Economy: • Long dated government bond yields • US Dollar • Crude oil price * David Fuller from Fuller Money

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