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© Simmons & Simmons LLP 2018. Simmons & Simmons is an international legal practice carried on by Simmons & Simmons LLP and it s affiliated partnerships and other entities.
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The mineral endowment of Southern Africa
Mark Burnett
November 2018
Southern Africa
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ht t ps://www.hindustantimes.com/india/anti-apartheid-hero-nelson-mandela-dies-at-95-world-bows-in-respect/story-kNbeKRL8yfsbuEuFGYdMXI.htmlht t ps://www.africasafari.co.uk/blog/experience-the-big-five-in-africa.htmht t ps://www.businesslive.co.za/bd/nat ional/education/2017-01-24-rhodes-must-fall-activist-mbalenhle-matandela-earns-rhodes-trust-scholarship/ht t ps://beatlikekerouac.com/photo-gallery/swaziland/#jp-carousel-1288ht t ps://sites.google.com/site/thedeepestminesoftheworld/south-africa/mponeng-mine
Southern Africa
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ht t ps://en.wikipedia.org/wiki/Southern_Africa
Southern AfricaAngola Namibia
Botswana South Africa
eSwatini Zambia
Lesotho Zimbabwe
Malawi
Mozambique
Southern African Development CommunityAngola Namibia
Botswana Seychelles
Comoros South Africa
DRC Tanzania
eSwatini Zambia
Lesotho Zimbabwe
Madagascar
Malawi
Mauritius
Mozambique
Geology and mineral deposits
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ht t ps://mrdata.usgs.gov/major-depositsEpisodes vol. 39 No. 2; http://www.episodes.org/journalArchiveArticle.do ht t ps://pubs.er.usgs.gov/publication/ofr20051294E
Africa’s mineral reserves
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ht t p://www.twnafrica.org/Maximising%20the%20Developmental%20Impact%20of%20Africa%E2%80%99s%20Mineral%20Endowments.pdf
Estimated mineral wealth
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CountryWealth
(USD billion)Subsoil
(USD billion)% National Wealth
Botswana 95,797 3,998 4.17
DRC 68,779 17,551 25.52
Madagascar 9,237 138 1.49
Malawi 10,442 4 0.04
Mozambique 7,718 333 4.31
Namibia 84,398 1,532 1.82
South Africa 77,348 7,149 9.24
Swaziland 52,670 380 0.72
Zambia 40,965 4,335 10.58
Zimbabwe 18,958 759 4.00
ht t ps://openknowledge.worldbank.org/bitstream/handle/10986/29001/9781464810466.pdf
Mining contribution to GDP (%)
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CountryApprox. Contrib. GDP
(%)
Botswana 18
eSwatini 2
Lesotho(a) 35
Namibia 12
South Africa 8
Zambia 12
Zimbabwe 2
Note these figures have been compiled from various sources and are indicators only.
(a) This figure is questioned.
That being said…
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South Africa
▪ 52% of world’s chromium
▪ World leader in production of manganese
▪ Controls 95% of global PGM reserves
▪ Largest producer of ilmenite
▪ Second biggest producer of vanadium
▪ Top-5 global rutile and zirconium producers
▪ World’s largest in-situ gold reserves
http://www.mining.com/feature-chinas-scramble-for-africa/
That being said…
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Botswana
▪ Global leader in diamond production by value
▪ Top-5 of other gemstones’ production
Zimbabwe
▪ Fifth biggest producer of lithium
▪ Top-5 of world’s largest PGM producers
Zambia
▪ Seventh largest producer of copper
Critical metals and minerals
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Iron South Africa Nickle Botsw ana
Aluminum Zinc Botsw ana, Namibia, South Africa, Zambia
Copper Botsw ana, South Africa, Namibia, DRC, Zambia Tin South Africa, Namibia
Chromium South Africa Uranium South Africa, Namibia
Manganese South Africa Coal Botsw ana, South Africa, M ozambique, Zimbabwe
ht t ps://www.youtube.com/watch?v=cimdDOvC-rA&feature=youtu.be
ht t p://www.resourceinvestor.com/2012/08/07/w hat-makes-critical-metal-or-strategic-element
The green economy and the
4th Industrial Revolution
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▪ Renewable energy
▪ Green buildings
▪ Sustainable transport
▪ Water management
▪ Waste management
▪ Land management
▪ Robotics
▪ Artificial intelligence
▪ Nanotechnology
▪ Quantum computing
▪ Biotechnology
▪ The Internet of Things (IOT)
▪ 3D printing
▪ Autonomous vehicles
Green economy 4th Industrial Revolution
https://www.mnn.com/green-tech/research-innovations/blogs/how-do-you-define-the-green-economy
https://en.wikipedia.org/wiki/Fourth_Industrial_Revolution
Specialty metals and minerals
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Antimony South Africa Beryllium Madagascar
Cobalt DRC, Zambia Fluorspar South Africa
Gallium Guinea Germanium DRC
Graphite Mozambique, Tanzania Indium South Africa
Niobium Tanzania REE South Africa, Namibia,
Malawi
Tantalum Rwanda, Mozambique Tungsten Zimbabwe
Vanadium South Africa Lithium Namibia,
Zimbabwe
Diamonds and kimberlites
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http://www.complete-mt-solutions.com/users/ajones/publications/122.pdf
http://www.spectral-international.com/gifs/kimberfig1.GIFhttps://ac.els-cdn.com/S0012825214001627/1- s2. 0-S0012825214001627-main.pdf?_tid=d91e 6f79-f9e 3-4844-a6d9-642ff 156e7f 6&acdnat=1540984080_af 48fe 06972195f4d5e 2164bd 92556c
Diamonds
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https://www.petradiamonds.com/media/image-library/
http://www.diamcormining.com/diamond_info/recovery_methods/
http://orderofsplendor.blogspot.com/2012/04/queens-top-10-d iamonds- 1-cullinan.html
https://www.google.co.uk/search?q=cullinan+diamond&rlz=1C1CHBF_en-GBGB809GB809&source=lnms&tbm=i sch&sa=X&ved=0ahUKEwj0iJ2Ejaze AhWUbsAKHYhgDNIQ_ AUIDig B&biw=1536&bih=754#imgrc=jgz4b BSD8FyTvM:
The Ridge of White waters
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https://en.wikipedia.org/wiki/Witwatersrand#/media/File:Waterfall,_Witwater srand_National_Bot anical_ Gardens.jpg
Source: Dr. Glen Nwaila
https://www.911metallurgist.com/blog/witwatersrand-gold- depos its
The Witwatersrand
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https://www.sciencedaily.com/releases/2015/02/150204075253.htm
https://www.miningglobal.com/top-10/west-wits-gold-mine-south-afric a
http://www.miningartifacts.org/South-African-Mines.html
https://www.mining-technology.com/projects/ezulwini/
https://www.miningreview.com/uranium-production-cuts-expected-to-bode-well-for-spot-price/
https://www.royalmint.com/invest/bullion/international-coin-ranges/south-african-krugerrand/
Hans and the BIC
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https://en.wikipedia.org/wiki/Hans_Merensky#/media/File:Hans_Merensky.jpg
https://en.wikipedia.org/wiki/Bushveld_Igneous_Complex#/media/File: Bushveld_Igneou s_Complex.png
Platinum
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http://www.specialtymetals.com/blog/2018/3/12/how-much-platinum-is -in-a-cata lytic-converter
https://www.nist.gov/si-redefinition/kilogram-introduction
▪ Ruthenium
▪ Rhodium
▪ Palladium
▪ Osmium
▪ Iridium
▪ Platinum
Of flowers and mines
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http://copperflora.org/eflora/species.php?id_e=193
https://seekingalpha.com/instablog/2366771-rock stone/4938083-king-manit oba- s-unmined-high-grade-copp er-zinc-depos its
https://www.zambianobserver.com/another-kcm-miner-dies-underground/
Becium central africanum
Copper and cobalt
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http://www.saimm.co.za/Conferences/BM2013/021-Theron.pdf
http://www.portergeo.com.au/database/mineinfo.asp?mineid=mn872
Cobalt
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https://static.seekingalpha.com/uploads/2018/1/17/37628986- 15161978031525364_orig in.png
https://capitalandmain.com/is-a-conflict-minerals-law-helping-or-harming-african-miner s-0416
https://www.miningreview.com/tenke-fungurume-the-drcs-copper-goliath/
Africa
Manganese
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https://www.capeminerals.co.za/the-kalahari-manganese-fields
http://www.manganese.org/news-and-publications/mn-global-picture/
Manganese
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https://en.wikipedia.org/wiki/Nchwaning_mine#/media/File:N%27Chwaning_II_headgear_ as_ seen_in_2007.jpg
https://www.miningreview.com/pallinghurst-coo-executive-director-resigns-with-immed iate-effec t/
http://www.turnstone.ca/rom157mn.htm
REEs: Not rare at all…
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https://en.wikipedia.org/wiki/Rare-earth_element#/media/File:Rareearthoxides.jpg
https://en.wikipedia.org/wiki/Rare-earth_mineral#/media/File:USGS_rare_earth_oxides_production_graph.PNG
▪ Cerium
▪ Dysprosium
▪ Erbium
▪ Europium
▪ Gadolinium
▪ Holmium
▪ Lanthanum
▪ Lutetium
▪ Neodymium
▪ Praseodymium
▪ Promethium
▪ Samarium
▪ Scandium
▪ Terbium
▪ Thulium
▪ Ytterbium
▪ Yttrium
REEs
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https://www.researchgate.net/publication/305918070_Rare_ Earth_ Deposits_of_Afr ica
Uranium
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http://www.mme.gov.na/files/publications/bfe_economic_uranium_poster.pdf
http://www.oecd-nea.org/ndd/pubs/2016/7301-uranium-2016.pdf
https://en.wikipedia.org/wiki/Uranium_mining_in_Namibia
Lithium: pegmatites
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Bradley, D., McCauley, A. (2013). “A preliminary deposit model for lithium-cesium-tantalum (LCT) pegmatites”, USGS Open File
Report 2013-1008
https://pure.unileoben.ac.at/portal/files/1071180/Tantalum_niobium_tin_mineralisa tion_in_ African_pegm atite s_and_rare_me tal_gr ani tes._constraints_from_Ta_Nb _oxide_minera logy_ geochemistr y_and_U_Pb_g eochronology.pdf
Hard rock lithium sources
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Questions?
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Thank you
Southern Africa – political update
Simmons & Simmons : Mining Masterclass
1 November 2018
Philip Worman, Managing Director, GPW
32
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Reasons to be bearish…
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Not helped by commodities..
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African debt – how big is the problem?
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The problem with easy credit...
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Mozambique – changing its tuna
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Under new management
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Zimbabwe – shifting power structures
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Towards technocraticgovernments?
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Reasons to be bullish…
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Reasons to be bullish…
Mining MasterclassSOUTHERN AFRICAN
POLITICAL RISK ASSESSMENT
Peter Ruxton
Tembo Capital
AFRICAN POLITICAL RISK ASSESSMENT
Mining Risk is not the same as other sectors – an “Enclave” Risk Profile
SECURITY/STABILITY – no armed conflict/freedom to move around
FISCAL FRAMEWORK- Stable & Transparent Fiscal Terms- Repatriation of Funds/International Arbitration
- Affordable Royalties & Duties- Corporation Tax – within an acceptable range
CORRUPTION FREE – minimal corruption/impartial legal recourse
BASIC INFRASTRUCTURE – ability to get around/access for mining equipment
BASIC GEOLOGICAL/GEOPHYSICAL DATA – geological map base – airborne geophysics – access to previous exploration data/results
TRAFFIC LIGHT FRAMEWORK
• The “Traffic Light System” provides a framework of quantifying political risk
• The “Traffic Light” colour is an agglomeration of a wide number of risk factors:
• adherence to “the Rule of Law”• freedom of the Press• independence of the Police Force & Security Forces
• Traffic Light colours can change over time (For PE investment purposes the direction of change can be most important)
GREEN – investible – open to investment
ORANGE – invest with caution (complete country review & visit[s])
RED – un-investible (avoid)
AFRICA – Risk Map (Norm) – 2018 - African Fund 1&2 + Track Record Deals
Gold
Copper (Cobalt)
PGMs
Mineral
Sands
Iron Ore
Green
Orange
Red
Uranium
Zinc/Copper
Coal
Country Risk
“Traffic Light” Indicator
Aluminium
AFRICA – Risk Map (Conservative) – 2018 - Fund 1&2 + Track Record Deals
Gold
Copper (Cobalt)
PGMs
Mineral Sands
Iron Ore
Green
Orange
Red
Uranium
Zinc/Copper
Coal
Country Risk
“Traffic Light” Indicator
Aluminium
Appendix
AFRICA – Mining Risk Map – Pre-2008 – Historical Track Record Deals
Mineral
Sands
Gold
Copper
Coal
Aluminium
Green
Orange
RedPlatinum
Country Risk
“Traffic Light” Indicator
AFRICA – Risk Map – 2014-2016 - African Deal Flow 2014 + Fund 1 Deals
Gold
Copper
Manganese
Mineral
Sands
Iron Ore
Green
Orange
Red
Phosphate
Nickel
REE & Niobium
Potash
Coal
Bauxite
Tin
Zinc
LENDER ATTITUDES TO
SOUTHERN AFRICA
Mark Tyler
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OUTLINE
• Banks• Others
• Bond• DFI’s• Fund / Streaming / Royalty
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BANK ATTITUDE
Return = σ 𝐴𝑙𝑙 𝐼𝑛𝑐𝑜𝑚𝑒
𝐶𝑎𝑝𝑖𝑡𝑎𝑙 𝑎𝑙𝑙𝑜𝑐𝑎𝑡𝑒𝑑
Income - fees, interest, hedging income, cross- sell
Capital allocated - 10% X (a factor)
Since about 2001,
a factor = credit factor (< 1) X country factor (≥ 1)
Also, bank management is becoming more risk averse
• Profits go to shareholders
• Pain goes to management
• There is nothing to be gained from doing things differently
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COUNTRY RISK
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BANK ATTITUDE
Lenders active
South African Banks• Anything in South Africa• Possibly Namibia, Lesotho and Botswana• Some might consider elsewhere with ECIC cover
European Banks(Soc Gen, BNP Paribas, Natixis, ING)• Will look at most countries in Southern Africa• Projects need to be world class• Not competitive in South Africa
Other banks (BMO, Macquarie, Scotia, Investec,)• Unlikely to look at higher risk countries• Not competitive in South Africa
Chinese banks (ICBC, BOC, CCB)• Support Chines companies
African Banks(Ecobank, UBA, FBN) • Not well represented in Southern Africa
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BOND INVESTOR ATTITUDE
• There is currently significant appetite for credit risk among bond investors. Bond pricing is very competitive with bank finance
• Typically bond investors want • Rating, or• Cash flow history and low country risk
• Modest number of investors that will consider greenfield mining projects in Southern Africa• Projects need to be world class • Often hard to predict what would attract them
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DFI/ECA ATTITUDE
Lenders active
Export Credit Agencies(UKEF, Hermes, COFACE, ECIC, Afri-Exim, USExim, EDC)• Some are lenders in own right, others insure banks• Need foreign content• Open for business
Multilaterals (IFC, AfDB, TDB)• Only IFC active in Southern Africa• Not open for South Africa
DFI’s (FMO, DEG, Proparco, OPIC, IDC of SA)• Open for business in Southern Africa• Probably need larger projects
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FUNDS / ROYALTY
Credit Funds(Orion Mine Finance, Taurus Funds, Sprott)
Precious Metal Royalty / Streaming (Osisko, Royal Gold, Wheaton, Triple Flag, Red Kite, Maverix, etc etc)
General Royalties(Franco Nevada, Anglo Pacific)
• Most will actively look at all of Southern Africa but they have individual “no-go” countries
• Skilled and experienced in mining finance• Quick to execute • Base metals less well served than precious• Industrial minerals hard
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THANK YOU