mining industry · pdf fileindustry overview boyi xie march 5, 2012 michael porter’s...

MiningIndustryOverviewBoyiXie

March5,2012

MichaelPorter’sFiveForces

Outline•  Products•  Suppliers/Customers

•  IndustryCompe?tors

•  Cost•  Revenue&profit•  Overalltrends•  Otherfactors

Products•  Aluminum•  Copper•  Lead•  Zinc•  Gold•  Silver•  Uraniumoxide•  Diamonds

•  StainlessSteelMaterials

•  IronOre•  Coal

Aluminum

Zinc

Copper

Ironore

Gold

Diamond

Marketing&Customers•  Marke?ngcentersofminingcompanies•  Sellproductsatthemostadvantageouspricetomakethemostoftheirintrinsicvalue

•  Actasasourceofspecialistexper?se•  Iden?fyvalueopportuni?es

•  Customerservice:•  Technicalassistance•  Transporta?on,e.g.BHPShipping,RioTintoMarine

•  Customers•  Jewelrymakers.E.g.gold,silveranddiamonds•  Manufacturing/construc?oncompanies.

•  E.gHyundaiSteel•  Government•  Otherretailers

BHPBilliton•  BHPBillitonisaglobalmining,oilandgascompanyheadquarteredinMelbourne,AustraliaandwithamajormanagementofficeinLondon,UK.Itistheworld’slargestminingcompanymeasuredbyrevenue.

•  BHPBillitonwascreatedin2001throughthemergeroftheAustralianBrokenHillProprietaryCompanyLimited(BHP)andtheAnglo‐DutchBillitonplc.(Billitonoriginsstretchbackto1860)

•  Itisnowadual‐listedcompanyinAustralianSecuri?esExchangeandLondonStockExchange.

•  Itoperatesawidevarietyofminingandprocessingopera?onsin25countries,employingapproximately41,000people.

•  Ithasopera?onson:aluminum,diamonds,ironore,petroleum,stainlesssteel,uranium,etc.

•  Minesin:Algeria,Australia,Brazil,Canada,SouthAfrica,USA

RioTinto•  RioTinto,nowheadquarteredinLondon,UK(andBrisbane,Australia),wasfoundedin1873,whenamul?na?onalconsor?umofinvestorspurchasedaminecomplexontheRioTintoriver,inHuelva,Spain.

•  Itisnowadual‐listedcompanyinAustralianSecuri?esExchangeandLondonStockExchange.

•  Itisonetheworldleadersintheproduc?onofaluminum,ironore,copper,uranium,coalanddiamonds.

•  Italsohassignificantopera?onsinrefining,par?cularlyforrefiningbauxiteandironore.

•  Ithasopera?onsonsixcon?nentsbutismainlyconcentratedinAustraliaandCanada.

Vale•  ValeisaBrazilianmul?na?onaldiversifiedmetalsandminingcorpora?onandoneofthelargestlogis?csoperatorsinBrazil.

•  It’sthelargestproducersofironore,pellets,andsecondlargestnickel;otherproductsincludemanganese,ferroalloys,copper,bauxite,aluminum.

•  It’slistedonstockexchangesofSaoPaulo,NewYork,Paris,HongKongandMadrid.

•  It’salsothecorpora?onwiththemost“contemptfortheenvironmentandhumanrights”andwasnamedworld’smostevilcompany.

GlobalIndices

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1%#/+)*,-(%,2#3@8+8+&%*1(9'+8$)%#'.$%*1+08+2$,%01%1209$/31/(%0#$%1.$/'44%('/;$06%')%*1+)2($/%)$*01/)%,$9$+,'+0%1+%,$('+,%3/1(%,$.$419$,%$*1+1(8$)%)0/2&&4$,%01%/$*1.$/:%A#84$%0#$%8+,2)0/5%?')%#80%#'/,%75%0#$%&417'4%*"."3!.,)3'!%!%8)7!"!"2)3174."!+%)0.9+),+#)&0+)'+&$'")'+,%&1+$%7$51+,:%

Global indices (February 1989=1)

0

1

2

3

4

5

6

7

8

9

201120092007200520032001199919971995199319911989

Source: Bloomberg.

Dow JonesFTSEHSBC Global Mining Index

BCDC%)'?%/$'4%0$+)81+%8+%0#$%('/;$0%')%&/1?0#%/$712+,$,6%133)$0%75%'%+2(7$/%13%8+*8,$+0)%0#'0%;$90%*'2081+%'+,%/8);%1+%0#$%'&$+,':%<($/&8+&%*12+0/8$)%*1+08+2$,%01%)01/(%'#$',6%?80#%,$('+,%31/%/$)12/*$)%#'!9+"):()%&'1"2);<=)2'1/&08)!"3,$#!"2)3,1%+)&1)>?@)&/1?0#%8+%E#8+':%

"#$)$%/$)240)%?$/$%'*#8$.$,%'&'8+)0%'%7'*;,/19%13%+'02/'4%#!%.%&+'%8)!"3,$#!"2)&0+)A0!,+.")+.'&0B$.C+)."#)D11#%)!")F2)0/'48':%G14808*'4%9/$))2/$%8+*/$')$,%?80#%/$.8$?)%13%

•  Miningcompanieshavecon?nuedtooutperformtheoverallmarket.

•  Whiletheindustrywashithardbytheglobalfinancialcrisis,miningcompanieshaveledthereturnandgonebeyond.

GlobalIndices•  Emergingcountriescon?nuedtostormahead,withdemandforresources

drivenbystrongGDPgrowth,includingcloseto10%growthinChina.

•  Miningmarketcapitaliza?oncon?nuedtoreboundin2010,withmanyplayersrecoveringtheremainingmarketcapitaliza?onlostduringtheglobalfinancialcrisisandsurpassingthelevelseenattheendof2007.

•  Thetotalyearendmarketcapitaliza?onofthetop40companiesincreasedby26%,withlargergainsgenerallyachievedbythesmallercompanies.

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1%#/+)*,-(%,2#3@8+8+&%*1(9'+8$)%#'.$%*1+08+2$,%01%1209$/31/(%0#$%1.$/'44%('/;$06%')%*1+)2($/%)$*01/)%,$9$+,'+0%1+%,$('+,%3/1(%,$.$419$,%$*1+1(8$)%)0/2&&4$,%01%/$*1.$/:%A#84$%0#$%8+,2)0/5%?')%#80%#'/,%75%0#$%&417'4%*"."3!.,)3'!%!%8)7!"!"2)3174."!+%)0.9+),+#)&0+)'+&$'")'+,%&1+$%7$51+,:%

Global indices (February 1989=1)

0

1

2

3

4

5

6

7

8

9

201120092007200520032001199919971995199319911989

Source: Bloomberg.

Dow JonesFTSEHSBC Global Mining Index

BCDC%)'?%/$'4%0$+)81+%8+%0#$%('/;$0%')%&/1?0#%/$712+,$,6%133)$0%75%'%+2(7$/%13%8+*8,$+0)%0#'0%;$90%*'2081+%'+,%/8);%1+%0#$%'&$+,':%<($/&8+&%*12+0/8$)%*1+08+2$,%01%)01/(%'#$',6%?80#%,$('+,%31/%/$)12/*$)%#'!9+"):()%&'1"2);<=)2'1/&08)!"3,$#!"2)3,1%+)&1)>?@)&/1?0#%8+%E#8+':%

"#$)$%/$)240)%?$/$%'*#8$.$,%'&'8+)0%'%7'*;,/19%13%+'02/'4%#!%.%&+'%8)!"3,$#!"2)&0+)A0!,+.")+.'&0B$.C+)."#)D11#%)!")F2)0/'48':%G14808*'4%9/$))2/$%8+*/$')$,%?80#%/$.8$?)%13%

Top10MiningCompanies

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C*!>?@?B!3#$/$!A$/$!&!*2'D$/!.-!1,&5$/(!3#&3!%/$&3,5!1*%*+(*!'4#25'62.,($.$(0'$%'-2552!$(0'5,#3*(/7'%2(,1.0').11$/!&*+!(0,6$/B!A03#!).'1&*0$(!,04$!:0,6$/!E#$&3.*!/)28$%&',%'$59#*//$6*':;<='2%*'0*,#'>?@A

"#$!+0--$/$*)$!0*!/$32/*(!D$3A$$*!$'$/%0*%!'&/4$3!1/.+2)$/(!&*+!3#.($!-/.'!3/&+030.*&,!).2*3/0$(!A0+$*$+!0*!>?@?7!"#$!-.2/!5$&/!":;!-./!$'$/%0*%!'&/4$3!1,&5$/(!'./$!3#&*!+.2D,$+!3#$!/$32/*(!.-!).'1&*0$(!-/.'!3/&+030.*&,!'0*0*%!).2*3/0$(7!"#0(!.231$/-./'&*)$!,0*4(!3.!3#$!A0+$/!$).*.'0)!(3./5!.-!-&(3$/!%/.A3#!0*!$'$/%0*%!'&/4$3(7!F6$*!3#.2%#!).'1&*0$(!-/.'!3/&+030.*&,!'0*0*%!).2*3/0$(!#.,+!&(($3(!&/.2*+!3#$!A./,+B!$'$/%0*%!'&/4$3!1,&5$/(!#&6$!(30,,!.231$/-./'$+7

Top 40 TSR 2007–2010

0%

50%

100%

150%

200%

250%

Traditional marketEmerging market

Source: Bloomberg and PwC analysis.

5%6&7.16%28"#$!".1!G?!-./!>?@?!(&A!-.2/!).'1&*0$(!/$H.0*!3#$!,0(3!,%!'()#**'+#/('($5*'*%(#,%(/A'>)*'%*8.0'.$/(*!'B2,.'C%!$,'A&(!3#$!,&/%$(3!*$A!$*3/&*3B!-.,,.A0*%!03(!CIJ!0*!J)3.D$/!>?@?7!"#$/$!#&(!D$$*!,$((!6.,&30,035!0*!>?@?B!A03#!.*,5!3A.!).'1&*0$(!'./$!3#&*!+.2D,0*%!3#$0/!'&/4$3!)&103&,0(&30.*!&*+!H2(3!-.2/!+$)/$&(0*%K!3#$!,&/%$(3!!*-#*,/*'1*$%&'DE='10'FGHBA'C%(*#*/($%&.0',..'42"#'24'3#$!+$)/$&($(!A$/$!C*+0&*!./!L#0*$($!).'1&*0$(7

M,$*)./$!#&(!/$)$*3,5!).'1,$3$+!03(!,0(30*%!0*!N.*+.*!&*+!O.*%!P.*%B!)/$&30*%!'&*5!#$&+,0*$(!0*!3#$!1/.)$((7!"#$!'.6$!D5!3/&+$/(B!(3$$,!).'1&*0$(!&*+!.3#$/(!3.!&)Q20/$!'0*0*%!&(($3(!'&4$(!03!'./$!)#&,,$*%0*%!$&)#!5$&/!3.!+$3$/'0*$!A#.!3#$!".1!G?!'0*0*%!).'1&*0$(!&/$7

Top 10 market capitalisation ($ billion)—31 December 2010

Source: Capital IQ.

20092010

0

50

100

150

200

250

Coa

lIn

dia

Pot

ashC

orp

Bar

rick

Gol

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Free

port

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Ang

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Xstr

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Chi

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BH

PB

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9%.#1:.%&7%2;-201$<%:3/.*%!+$'&*+!#&(!'&+$!>?@?!&!(3&*+!.23!5$&/!-./!3#$!'0*0*%!0*+2(3/57!R)/.((!3#$!".1!G?!3#$/$!A&(!&!-"5".,($6*'DE='$%-#*,/*'$%'#*6*%"*/7','IE='$%-#*,/*'$%',!J"/(*!'KLC>HM',%!',':N;='$%-#*,/*'$%'%*('9#2+(A'

S2)#!.-!3#$!0*+2(3/5T(!%..+!*$A(!#&(!D$$*!&)#0$6$+!3#/.2%#!&!).'D0*&30.*!.-!).''.+035!1/0)$!&*+!1/.+2)30.*!0*)/$&($(7!S&*5!&*&,5(3(!A.2,+!&/%2$!3#&3!0*!>?@?!3#$!".1!G?!A$/$!(0'1,5!0*!3#$!/0%#3!'&/4$3!&3!3#$!/0%#3!30'$7!O.A$6$/B!0-!03!0(!,2)4B!-./32*$!#&(!'.(3!%/$&3,5!/$A&/+$+!3#.($!A#.!0*6$(3$+!3#/.2%#!3#$!)5),$B!&(!3#$!6&,2$!-/.'!,&/%$!)&103&,!(1$*+!D5!3#$($!).'1&*0$(!0(!/$&10*%!/$A&/+(7!

80*&*)0&,!+0()01,0*$!&*+!'&*&%$'$*3!.-!).(3(!A0,,!D$!0'1./3&*3!0*!>?@@B!A#0,$!).'1&*0$(!).*30*2$!3.!+/06$!3#$0/!.1$/&30.*(!3.!'&U0'0($!1/.+2)30.*!&*+!/$32/*(7

•  Acrossthetopcompanies,therewasacumula?ve32%increaseinrevenue,a72%increaseinadjustedEBITDAanda156%increaseinnetprofit.

•  Newentrant:CoalIndia.FollowingitsIPOinOctober2010,it’sthelargestnewentrant.

•  Thebiggetbigger.Theyarealsodiversifyinginotherdirec?ons.Forinstance,somehavebegunexploringthebenefitsofver?calintegra?oninananempttocontroltheen?recommodityvaluechain–fromcoalminingtosteelproduc?ontopowergenera?on.

Note:EBITDA:earningsbeforeinterests,taxes,deprecia?on,andamor?za?on

TheSuperMajorsStepOut

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Top 3 market capitalisation ($ billion)—31 December

Source: Capital IQ.

0

50

100

150

200

250

Rio TintoValeBHP Billiton

200520062007

200820092010

"#$%/)01$%2-)%3)-4.#L5/$+&5#$+0+&%,$('+,%A6/%7/0('/B%/$)6./*$)=%7/$,6(0+'+5<B%A/6(%$($/&0+&%$*6+6(0$)=%#')%E$$+%5#$%E0&%)56/B%A6/%1232C%M+,%.)$/%+$$,%A6/%(0+$/'<)%)#64)%+6%9*3$(:;(-#88*$3(%<'(#9<#+*&--=(3*1#$(8"#(8&23#8#,(>0(?@A(&/645#%0+*<.,$,%0+%H#0+'I)%/$*$+5<B%/$<$')$,%315#%N0J$%B#&2(A-&$6(C"#(<-&$(*$+-%,#,(9*3$*D+&$8(*$;2&982%+8%2#()7$+,=%).*#%')%5#$%*6+)5/.*506+%6A%O2=222%D(%6A%+$4%/'0<4'B%<0+$C

P5%5#$%)'($%50($=%5#$/$%0)%5#$%*#'<<$+&$%6A%,$*<0+0+&%$G5/'*506+%&/',$)=%(6/$%&$6&/'7#0*'<<B%/$(65$%'+,Q6/%76<050*'<<B%*#'<<$+&0+&%/$&06+)%'+,%5#$%0+*/$')0+&%)*'<$%6A%7/6K$*5)%/$R.0/$,%56%&$+$/'5$%$*6+6(0*%/$5./+)C%!%<<-=*$3(9%;D+*#$8(2#9:%2+#9(8:(E##8(8"#(32:)*$3(,$('+,%0)%'%D$B%*#'<<$+&$%A6/%5#$%0+,.)5/BC

"#$%46/<,%*6+50+.$)%56%+$$,%/'4%('5$/0'<)%'+,%%(0+0+&%*6(7'+0$)I%/$).<5)%)#64%5#0)C%:64$J$/=%405#%7/$))./$)%A/6(%'%&/640+&%+.(E$/%6A%)5'D$#6<,$/)%6+%":)(8:(,*982*F%8#(8"#(F#$#D89'(E*$#29("&1#(8"#(+"&--#$3#(6A%,$<0J$/0+&%6+%5#$0/%)6*0'<%*6((05($+5)%'+,%$+)./0+&%5#$0/%*6+5/0E.506+)%'/$%E65#%'77/67/0'5$%'+,%7/67$/<B%.+,$/)566,C

•  During2010wesawthetopthreeminers(BHPBilliton,ValeandRioTinto)stepclearoftherestoftheindustry.

•  Atthetop,BHPBilliton’smarketcapitaliza?onfurtherstrengthened,pupngitclearlyabovetherest.

•  Themarketcapitaliza?onofthirdplaceRioTintoisdoublethesizeofthenextlargestplayer,ChinaShenhua,whichdeclined25%invalueduring2010.

•  Priceandproduc?onincreasesinironoreweremajordriversofthegrowthbythetopthree.

ProductionandRevenue

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Share of revenue by commodity

Source: PwC analysis.

20092010

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15%

20%

25%

30%

Oth

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Zinc

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S0'(9+,)%E*'-':)F DH EDF

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

Total production(Using Copper equivalent tonnes—2010 closing spot)

Source: PwC Analysis.

55

56

57

58

59

60

2010CopperOtherBauxiteIron ore2009

1.8

1.0

0.5 (0.3)

"#$%&-';#%'19.$%)#9T)%'%*9(;'-0)9+%9<%:9:'8%;-9,/*:09+%9<%:#$%"9;%HC%2$'-U9+U2$'-G%/)0+&%9+$%:9++$%9<%*9;;$-%')%'+%$[/0.'8$+:%/+0:G%1')$,%9+%BCDC%*89)0+&%;-0*$)6%"#0)%($:#9,989&2%'889T)%<9-%'%*9(;'-0)9+%9<%-$8':0.$%(*",.'/-"+&#'*"??&#$$&'"CC",-/-)?A&4>)&*)?.$/?&?>"F&#&E3&0+*-$')$%0+%9.$-'88%;-9,/*:09+6%"#0)%0)%(9-$%:#'+%&891'8%$*9+9(0*%&-9T:#%1/:%8$))%:#'+%:#$%$*9+9(0*%&-9T:#%0+%:#$%,$.$89;0+&%*9/+:-0$)%:#':%#'.$%1$$+%:#$%;-0('-2%,-0.$-)%<9-%#0&#$-%,$('+,6%"#$%0+*-$')$%0+%;-9,/*:09+G%8$,%12%0-9+%9-$G%):$()%<-9(%8'-&$%$=;'+)09+%;-9>$*:)%*9(0+&%9+!80+$%-$)/8:0+&%0+%#0&#$-%;-9,/*:09+%'*-9))%'%+/(1$-%9<%*9((9,0:0$)6%\9-%:#9)$%:#':%T$-$%T0880+&%'+,%'18$%:9%0+.$):%12%*9+:0+/0+&%*';:0'8%$=;'+)09+)%,/-0+&%:#$%=$"G#$&I+#+'-#$&'*-?-?%&/>)&(#@"00%&-+&/>)&0"*C&"0&-+'*)#?),&;-9,/*:09+G%0)%1$&0++0+&%:9%1$%)$$+6

Z$%#'.$%*'8*/8':$,%:#$%-$('0+0+&%(0+$%80<$%9<%:#$%"9;%HC%/)0+&%-$)$-.$)%'+,%BCDC%;-9,/*:09+%,':'6%Z#$+%*9+.$-:$,%0+:9%*9;;$-%$[/0.'8$+:%/+0:)%':%:#$%$+,%9<%BCDCG%:#$%"9;%HC%#',%'%-$('0+0+&%(0+$%80<$%9<%45%2$'-)6%"#0)%(0+$%80<$%#')%,$*-$')$,%12%:T9%2$'-)%<-9(%BCCI%')%'%-$)/8:%9<%;-9,/*:09+%0+*-$')0+&%12%(9-$%:#'+%:#$%',,0:09+)%:9%-$)$-.$)6

!"#$!"#$%&'($%#')%*#'+&$,%%%%!"

#$%$&'$()*(+,--,./0*

Share of revenue by commodity

Source: PwC analysis.

20092010

0%

5%

10%

15%

20%

25%

30%

Oth

erm

etal

s

Dia

mon

ds

Zinc

Pla

tinum

Nic

kel

Fert

ilize

r

Bau

xite

Gol

d

Iron

ore

Cop

per

Coa

l

!"#$%&'"(()*&#+,&-*"+&"*)&#''".+/&0"*&123&"0&4"(&56&*)7)+.)&8966:&;&163<&=)+)*#/),&/>-?&@)#*A&B*"+&"*)&-$.$+/$)%0+*-$')$,%12%34567%108809+%0+%:#$%2$'-%'+,%*)(*)?)+/),&963&"0&/"/#$&*)7)+.)?%&.(&0*"C&DE3&-+&/>)&;-09-%2$'-6%"#$%-0)$%0)%,/$%:9%#0&#$-%;-0*$)%'+,%0+*-$')$,%(*",.'/-"+&7"$.C)?%&F-/>&(*",.'/-"+&.(&D13&"+&/>)&G#'H&9<%$=;'+)09+%;-9>$*:)%'+,%:#$%-$:/-+%:9%</88%*';'*0:2%12%?'8$6%@9'8A)%)#'-$%9<%:#$%:9:'8%,$*80+$,%0+%BCDC%,/$%:9%:#$%):-$+&:#%9<%0-9+%9-$6

!121(34,.'+0/,&

5,--,./0*%E($')/-$F

6,7(81(74,.'+0/,&(

E(08809+F

59:&;$(<4,-(09$(74/,4(*$:4(

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R0+*%E:9++$)F 4 C

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K+*-$')$)%0+%;-9,/*:09+%'*-9))%:#$%19'-,%'-$%$.0,$+*$,%'19.$G%T0:#%9+82%*9;;$-%'+,%,0'(9+,)%)#9T0+&%,$*80+$)6%

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

Total production(Using Copper equivalent tonnes—2010 closing spot)

Source: PwC Analysis.

55

56

57

58

59

60

2010CopperOtherBauxiteIron ore2009

1.8

1.0

0.5 (0.3)

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

Z$%#'.$%*'8*/8':$,%:#$%-$('0+0+&%(0+$%80<$%9<%:#$%"9;%HC%/)0+&%-$)$-.$)%'+,%BCDC%;-9,/*:09+%,':'6%Z#$+%*9+.$-:$,%0+:9%*9;;$-%$[/0.'8$+:%/+0:)%':%:#$%$+,%9<%BCDCG%:#$%"9;%HC%#',%'%-$('0+0+&%(0+$%80<$%9<%45%2$'-)6%"#0)%(0+$%80<$%#')%,$*-$')$,%12%:T9%2$'-)%<-9(%BCCI%')%'%-$)/8:%9<%;-9,/*:09+%0+*-$')0+&%12%(9-$%:#'+%:#$%',,0:09+)%:9%-$)$-.$)6

•  A5%increaseinoverallproduc?on•  Theincreaseinproduc?onisledbyironore.•  Morethanglobaleconomicgrowthbutlessthantheeconomicgrowthinthedevelopingcountries•  Developingcountriesaretheprimarydriversforhigherdemand

Cost•  Costsaregoingupacrosstheboard•  Bumperprofitshavefuelledlaborunrest

•  Newandreplacementequipment

•  Haultruck?resalonehadtripled•  Newtaxesandroyal?esispushingupregulatorycompliancecosts

Cost•  Educa?on,suchasminingmajor

•  Long‐terminfrastructureinvestment,includingrailways,ports,communityhousingandschools

•  Highcommoditypricesaredrivingshortagesinequipment,laborandotherkeyinputs,pushingcostsup.Thismeansminingcompaniesmustwalka?ghtropebetweenrampingupvolumestomeetdemandandcontainingtheircosts.

MergersandAcquisitions

PwC !

!"#$%"&'()()*&+,-&./%"&0#"1'/2&%).&0%"1/2&3%""4&

.13()*&56&78559&:#"%;("/&<%=(;%"&'%3>/;2&?(""&

=3#'=;&./%"'%>/32&;#&=3#<//.&<%1;(#12"49

!""#$%&'"()*+,"-./01"2&#"34++4.5"-)/)"*55.657)("(6/458"01)"&

9/,0",4:";.501,".<"=>##?"@)*+"A.+6;),"*5("*88/)8*0)"A*+6),"

-)/)"#>B"*5("=CB"1481)/"01*5"01)"9/,0"1*+<".<"=>#>?"D5"*5"

%))1%"(2/.&$%2(2@&./%"&0#"1'/2&%).&%**3/*%;/&0%"1/2&?/3/&

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01*5"=>>'?"E."F60"014,"450."F)/,F)704A)$"7.5,4()/"01*0"

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F&&+%)4&2(*)2@&C#?/0/3@&=#();&;#&%&2"#?.#?)&E#3&;C/&3/'%()./3&

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"&#&%).&'#&3/2=/<;(0/"4&()&-1*12;9&L()</&K1)/@&#)&

%**3/*%;/@&*"#$%"&'()()*&./%"&0%"1/2&C%0/&./<"()/.&$4&&

(%#&%).&./%"&0#"1'/2&C%0/&./<"()/.&$4&"&#&9

!""E1)"*A)/*8)"()*+"A*+6)"(6/458"01)"9/,0"1*+<".<"=>##"-*,"

)$*(+,-..-/01&%&(*#&()<3/%2/&#0/3&78589&I#3&=1$"(<"4&&

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588&Q)./R&%2&%;&K1)/&D8@&7855H9

F&&K(;;/34&*"#$%"&/S1(;4&'%3>/;2&?(""&"(>/"4&=1;&.#?)?%3.&

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;/3'9&-2&%&=3#R4&E#3&/R=/<;/.&<#'=3/22(#)2&()&./%"&0%"1/@&

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/%<C&#E&;C/&'/;%"2&;#&%==3/<(%;/&"!#&#0/3&;C/&"%2;&;?#&

'#);C2&%"#)/9&

Source: Capital IQ, PwC Analysis

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

0

500

1,000

1,500

2,000

2,500

3,000

FY20

05

FY20

06

FY20

07

FY20

08

FY20

09

FY20

10

1H 2

010

1H 2

011

Num

ber o

f tra

nsac

tion

s

US

$ (m

illio

ns)

Global mining M&A volume and aggregate value

Total number of transactions Total deal value ($mm)

Figure 1: Global mining M&A volume and aggregate value

Global Mining M&A (1H 2011) by transaction size

Greater than $1 billion (1%)

Less than $100mm (47%)

Undisclosedvalue (47%)

$100-$499.9mm (4%)

$500-$999.9mm (1%)


Figure 2: Global mining M&A (1H 2011) by transaction size

•  Theglobalminingindustrybecomesincreasinglymoreconsolidated

•  1,379dealsworth$71billionwereannouncedduringthefirsthalfof2011.

•  Dealsvolumesandaggregatevalueswere10%and25%higherthanthefirsthalfof2010.

•  Theaveragedealvalueduringthefirsthalfof2011was$104million,a40%increaseover2010.

20111HTop10GlobalMiningDeals

!"# Mining Deals 2011 Mid-year update

Announced Date

Target Target Description Target Headquarters

Transaction Value (millions)

Target Resource Type

Acquirer Acquirer Description Acquirer Headquarters Transaction Status (as at August 8, 2011)

01/28/2011 Massey Energy Corporation

Massey Energy Company, through its wholly owned subsidiary, A.T. Massey Coal Company, Inc., produces, processes, and sells bituminous coal primarily in the United States.

United States US$8,500 Coal Alpha Natural Resources, Incorporated

Alpha Natural Resources, together with its subsidiaries, engages in the production, processing, and sale of coal in the United States.

United States Closed

04/24/2011 Equinox Minerals Limited Equinox Minerals Limited engages in the mining and exploration of mineral properties.

Australia C$7,300 Copper Barrick Gold Corporation

Barrick Gold Corporation engages in the production and sale of gold, as well as related activities, such as exploration and mine development.

Canada Closed

01/11/2011 Consolidated Thompson Iron Mines Limited

Consolidated Thompson Iron Mines Limited, a mining company, engages in the exploration and development of mineral properties in Canada.

Canada C$4,900 Steel Cliffs Natural Resources Incorporated

Cliffs Natural Resources, a mining and natural resources company, produces iron ore pellets, lump and fines iron ore, and metallurgical coal products.


05/02/2011 International Coal Group, Incorporated

International Coal Group, Inc. produces coal in northern and central Appalachian regions of the United States.

United States US$3,400 Coal Arch Coal Incorporated

Arch Coal engages in the production and sale of steam and metallurgical coal from surface and underground mines located throughout the United States.


04/14/2011 KazzInc Kazzinc JSC primarily produces zinc with copper, precious metals, and lead credits in Kazakhstan.

Kazakhstan US$3,200 Zinc Glencore International plc

Glencore International plc, together with its subsidiaries, engages in producing, sourcing, processing, refining, transporting, storing, financing, and supplying commodities to industries worldwide.

Switzerland Announced

06/10/2011 PT Bumi Resources Minerals Tbk

PT Bumi Resources Minerals Tbk, through its subsidiaries, engages in the exploration and development of mineral properties in Indonesia and in west Africa.

Indonesia US$2,100 Diversified Metals and Mining

Bumi plc Bumi plc, through its subsidiaries, engages in the exploration, mining, and processing of coal and other minerals in Indonesia and West Africa.

United Kingdom Announced

02/03/2011 Fronteer Gold Incorporated

Fronteer Gold Inc. engages in the acquisition, exploration, and development of mineral resource properties in Canada, the United States, and Turkey.

Canada C$2,300 Gold Newmont Mining Corporation

Newmont Mining, together with its subsidiaries, engages in the acquisition, exploration, and production of gold and copper properties.


03/02/2011 Companhia Brasileira de Metalurgia e Mineracao

Companhia Brasileira de Metalurgia e Mineração engages in the extraction, processing, manufacture, and marketing of niobium-based products.

Brazil US$1,950 Diversified Metals and Mining

POSCO, Sojitz Corporation, Nippon Steel Corporation, JFE Holdings Incorporated, The Japan Oil, Gas and Metals National Corporation & National Pension Service

JFE Holdings, Inc., through its subsidiaries, engages in steel and engineering operations in Japan.

National Pension Service is a pension fund manager.

Nippon Steel Corporation, through its subsidiaries, engages in the manufacture and sale of steel and related products in Japan and internationally.

POSCO engages in the manufacture and sale of steel products in South Korea and internationally.

Sojitz Corporation operates as a general trading company worldwide.

Japan oil, Gas and Metals National Corporation provides financial assistance, technology development, technical support, stockpiling, gathering/providing information, mine pollution control, and overseas field survey services in Japan.

JFE Holdings Inc.: Japan

National Pension Service: South Korea

Nippon Steel Corp.: Japan

POSCO: South Korea

Sojitz Corporation: Japan

The Japan Oil, Gas and Metals National Corporation: Japan

Announced

06/22/2011 Vale Fertilizantes SA Vale Fertilizantes S.A. produces and supplies phosphate- and nitrogen- based inputs for the production of fertilisers and inputs for chemical companies in Brazil.

Brazil US$1,390 Fertilisers and Agricultural Chemicals

Vale S.A. Vale S.A. engages in the exploration, production, and sale of basic metals in Brazil. Brazil Announced

06/15/2011 Drummond Company, Inc., Colombian Mining Operations and Related Infrastructure

Drummond Companys, Colombian Mining Operations and Related Infrastructure comprises coal exploration properties with probable reserves of about 2 billion net tons.

Colombia US$1,524 Coal Itochu Corporation ITOCHU Corporation operates as a general trading company primarily in Japan and internationally. Japan Announced

!$%%#&'(#%$#)*'+,*#-././0#12,*3

!"# Mining Deals 2011 Mid-year update

Announced Date













Canada Closed






































POSCO: South Korea



Announced







!$%%#&'(#%$#)*'+,*#-././0#12,*3

PwC !"

Announced Date













Canada Closed






































POSCO: South Korea



Announced







20111HTop10GlobalMiningDeals


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Figure 10: Global M&A Activity Market Share of Deal Values by Geography (1H 2011)

Figure 11: Change in Share of Global Mining M&A Market: 1H 2011 vs FY 2010 (measured by aggregate deal values)


United States 31%

Canada 19%China 7%

Global M&A ActivityMarket Share of Deal Values by Geography(1H 2011)

Australia 4%

United Kingdom 1%

Brazil 3%

India

Other 35%


-20% -15% -10% -5% 0% 5% 10% 15% 20% 25%

United States

Canada

Australia

United Kingdom

Brazil

China

India

Change in Share of Global Mining M&A Market: 1H 2011 vs FY 2010(measured by aggregate deal values)

•  TheUSovertakesCanadaandAustraliatobecometheminingsector’smostacquisi?vena?onbyvalue.

•  BuyersfromtheUSannouncedover$21billioninacquisi?ons,101%higherthantheen?re2010.

•  FourofthetoptendealsofwereledbyUSbuyers.

•  Bigbetsonrisingdemandforthekeysteelmakingingredients,metallurgicalcoalandironore.


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0

20

40

60

80

100

120

140

160

180

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4,000

6,000

8,000

10,000

12,000

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003

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Num

ber

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rans

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US

$ (m

illio

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Value Volume

Figure 6: Chinese equity acquisitions in the global mining sector (excluding cancelled/withdrawn deals)

Figure 7: Chinese acqusitions in the mining sector (by geography, 1H 2011)


Chinese Acqusitions in the Mining Sector(by geography, 1H 2011)

Europe 0%

Asia / Pacific(Emerging) 68%

Asia/Pacific(Developed) 15%

Africa/Middle East 4%

United States and Canada 9%

Latin America and Caribbean 4%

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Chinese equity acquisitions in the global mining sector(excluding cancelled/withdrawn deals)

0

20

40

60

80

100

120

140

160

180

2,000

0

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

FY 2

000

FY 2

001

FY 2

002

FY 2

003

FY 2

004

FY 2

005

FY 2

006

FY 2

007

FY 2

008

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FY 2

010

1H 2

010

1H 2

011

Num

ber

of t

rans

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ns

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$ (m

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Value Volume

Figure 6: Chinese equity acquisitions in the global mining sector (excluding cancelled/withdrawn deals)

Figure 7: Chinese acqusitions in the mining sector (by geography, 1H 2011)


Chinese Acqusitions in the Mining Sector(by geography, 1H 2011)

Europe 0%

Asia / Pacific(Emerging) 68%

Asia/Pacific(Developed) 15%

Africa/Middle East 4%

United States and Canada 9%

Latin America and Caribbean 4%

•  Inthefirstsixmonthsof2011,Chineseen??esannounced75acquisi?onsintheglobalminingsectorworthatotal$4.7billion.

•  DespiterepeatedeffortstoextenditsgeographicalreachviaM&A,Chineseen??esremainedclosetohome.68%ofacquisi?onswereinAsia/Pacificemergingmarkets.(HongKonglistedMongolianMiningCorpora?on’sacquisi?onofMongoliancokingcoalminerfor$465million)

GovernmentRegulation•  Governmenttouchesallaspectsoftheopera?ons•  Aleaseorlicenseoftherighttoaccessthelandandextracttheproduct

•  Therightstotransport•  Taxes•  Produc?onsharing•  Landrehabilita?on

GovernmentRegulation•  Governmentaroundtheworldarereassessingtheir

approachtotheminingsector.It’snotsimplyabouttaxesanymore.It’saboutgovernmentsstrivingtotakeagreatershareineveryareaoftheindustry.As?megoeson,thismaydriveminingcompaniestoinvestinregionsbasednotonlyontheirpoli?calstability,butalsoonthestabilityoftheirfiscalregime.

Sustainability•  Keepingpeoplesafeandhealthy•  Exposuretonoise•  Hazardousmaterials

•  Isola?onwork•  Disease

Sustainability•  Reducingclimatechangeimpacts•  Engagementinpolicydevelopment

•  ReducingenergyandGHGemissions

•  Managingwateruse

•  Enhancingbiodiversityandlandmanagement

‐‐Valeturnedfarmlandsintomines.Itwasnominatedasthemostevilcompanyof2011.

Reference•  Mine2011–TheGamehasChanged.Reviewofglobaltrendsintheminingindustry.PWC.

•  Mine2010–BacktotheBoom.Reviewofglobaltrendsintheminingindustry.PWC.

•  RidersontheStorm–Globalminingdeals2011mid‐yearupdate.PWC.

•  TrackingtheTrends2012–thetop10trendsminingcompaniesmayfaceinthecomingyear.Deloine.

•  MiningMarketReview.Willis.Spring2010.

•  BHPBillitonAnnualReport2011.•  RioTintoReview.YearXX.•  Someotheronlinepublicresources.

ThankYou.

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