Brisbane Mining Club Australia and Asia - Capital and Minerals

Transcription

1 Brisbane Mining Club Australia and Asia - Capital and Minerals 25 February 2010 Owen Hegarty Vice Chairman G-Resources, Chairman Tigers Realm Minerals, Director Fortescue Metals, Director Range River Gold, Director of the AUSIMM, Member SAMPEG

2 Introduction The GFC, Green shoots, Asia s role and strong minerals demand Minerals supply still under pressure Australia s challenge: to attract capital and pursue our place as supplier of choice to Asia The special case of gold G-Resources, Tigers Realm and the AusIMM 2

3 GFC, global response, green shoots 1. Massive value destruction GFC will cast a long shadow DJI 2. Positive swift global response Aided by strong Asian economies Australia, China, Indonesia 3. Growth resuming V-shaped recovery China GDP Growth by Component (%, y/y) 3

4 China remains the major driver of commodities demand with India to follow World has been in a long period of economic expansion China still the main game Traditional markets of US, Japan, Europe still important but emerging markets including India and Indonesia are the future China s GQ Growth Quadrella GDP real growth rate 2009 by country 1. Accelerating consumption GDP 2009 and 2050 Forecasts Car Ownership Projections from growing middle class 2. A metal intensive stage of economic development 3. Largest urban migration in world history 4. Massive infrastructure development Car Ownership (millions) India China Airports Railways Highways Ports Water Subways Source: IMF;Goldman Sachs; CIA World Fact Book; Macquarie research; ICSG; The Balloch Group; Beijing Traffic Management Bureau 4

5 Supply- still under pressure 1. Supply will be running to catch up FMG Example 2. We are uniquely positioned Geopolitically Technically Financially 3. Some structural challenges Physical, financial and regulatory infrastructure 5

6 Copper - Red gold powering the world Asia consumes 51% of the world s copper production but attracts just 4% of global exploration spend Consumption 51% Smelting 41% Mining 15% Exploration 4% Asia World 27,000 Copper Supply / Demand Forecast Whilst copper demand grows rapidly, supply growth remains modest at best and can t match Asia and the worlds needs Copper (Kt) 25,000 23,000 21,000 19,000 17,000 15,000 13,000 Source: ICSG; Brook Hunt; Citi Refined Production (Kt) Consumption demand (Kt) 6

7 Asia has great prospectivity Gold discoveries by size for the period 1970 to

8 Mining is Australia s GDP growth, revenue and capital investment driver and continues to increase in importance We must recognise mining s importance to: The economy and its growth Employment Equal opportunity employment Workplace health and safety improvements Social infrastructure Regional and outback Australia s development Building international relationships We must nurture and grow the industry Don t kill the goose or let it to fly away! A$ Millions Australian Capital Expenditure by Sector 40,000 35,000 30,000 25,000 20,000 15,000 10,000 Transport Manufacturing Mining 5,000 Real Estate 0 Australia s GDP Growth % 4.0% All other sectors Mining Sources: ABS, BHP Billiton, Current Prices 8

9 Commodity demand continues to grow, supply is challenged & mining will power our economy. What do we need to do to ensure Australia is best positioned to meet these challenges? Challenges Solutions GFC Attract vast amounts of capital for huge mining and infrastructure projects and exploration Improve the rate of mineral resource discovery Ensure we have the people to do the job and achieving brain gain not brain drain! Stimulus package - a job well done Stable, fair and competitive fiscal regime Flow through share scheme/ tax credits Public funding support FIRB maintain its current approach Support high levels of mining R & D Funding for Geoscience Australia Flow through share scheme to increase exploration spend Support resource industry education and training Encourage a flexible, skilled workforce Competitive income tax rates 457 visas We as an industry and country are competing for human and financial capital for exploration and mining projects to become Asia s long-term partner and supplier of choice 9

10 Increased business risk directly impacts on the level of exploration Policy Potential Index Peru: In June 2004, increased royalty rate from zero to 3% Mongolia: In 2006, changed investment rules and increased royalty rate from 2.5% to 5% South Africa: In 2004 introduced BEE rules and increased royalty rate from zero to 3%. Bolivia: In 2005 the President repeated his vow to nationalize the mining industry As a consequence of adverse fiscal policies these countries all lost market share in global exploration - down by 20-50% over their previous trends Sources: Derived from Fraser Institute; Metal Economics Group 10

11 ... and conversely, improvements in fiscal policy can significantly stimulate exploration Share of World Exploration Spend Canada: In Oct 2000, introduced a 15% exploration tax credit for flow-through shareholders Canada Australia USA On average, every $1 spent on exploration ultimately leads to ~$6 worth of capital investment in new mines. So the benefit of stimulating exploration can be very significant to Australia s future economy Note: Based on Grassroots exploration spend only Source: Metal Economics Group 11

12 Large resource projects require large, long term investments and FDI is crucial and is well supported by FIRB A$ billions FDI in Australian Mining FDI in the Australian mining sector has doubled in five years Number of transactions reviewed by FIRB (excluding Real Estate) est est Over the last decade, of the ~4000 applications to FIRB only 4 acquisitions were rejected Source: ABS: Table 15a. Foreign Investment in Australia(a) Foreign Investment Review Board Annual Reports 12

13 China s Investment in Australia is crucial: FMG and Hunan Valin Hunan Valin completed acquisition of 17% of FMG for A$644m Gives China a major stake in one of the world s leading iron ore companies Ensures FMG has the funding to continue its aggressive growth strategy Provides growing economic benefit to Australia Source: FMG 13

14 Citic Pacific s Sino Iron Project: a Chinese owned and funded project having major benefits for Australia A$4.4billion capital cost Australia s first major magnetite project About 27Mtpa Magnetite is a low margin, high volume product Downstream processing of iron ore First production mid 2010 Underwriting new gas field development Anticipated workforce Operations 600 Construction Significant economic benefits for Australia And there are more giant, capital intensive projects like these in the pipeline Source: Citic Pacific 14

15 We must support R & D Distribution of known Australian Mineral Deposits: The majority have been found in areas of outcrop or shallow cover The next generation of Australia s discoveries will be under deep cover The challenge is to find them This requires effective tools for exploration, talented geoscientists to do it and the money to make it all happen In short, we need: Technical education Geoscience Australia funding Commitment of public and private capital Support R&D Source: Geoscience Australia 15

16 Gold The perfect metal Gold Historical & Forward Price US$ / oz 1,200 1,100 1, ,127 1,064 1,091 1,059 Forward Curve Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Spot Forward Source: Bloomberg as of 12 Dec 2009 Supply: Declining mine production and discovery rates Tonnes 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Total Mine Production Scrap Gold e 1, Official Sector Sales Avg Gold Price US$ Gold Price US$/oz Source: GFMS Why Gold? Gold is: a commodity, a currency, a store of value, a hedge against inflation and geopolitical and financial uncertainty Supply fundamentals: Mine production provides majority of gold supply Declining mine production expected to continue as easy-tomine and easy-to-process ore is depleted years from discovery to project completion Demand fundamentals: Investment demand the primary driver in 2010 due to inflationary fears and risk aversion Growing national reserve demand Jewelry demand increasingly bolstered by consumers in China where demand increased 6% in H Source: GFMS; World Gold Council 2Q 2009 Update Demand: China and India underweight gold Gold - Percentage of Total Foreign Reserves United States Germany France Switzerland United Kingdom Australia India Japan China 0 20 % Gold - Tonnes 8,134 3,408 2,435 1, ,054 Source: World Gold Council 3Q

17 Going for gold but not finding enough Although exploration expenditures have grown, the amount of gold found continues to decline Moz Global gold discovery rates and exploration expenditure Expenditures (2009 US$B) Estimated Source: MinEx Consulting Jan

18 The average grade of gold discovered and mined continues to decline g/t Au Average grade of gold mined in USA+Canada+Australia+South Africa Average grade of gold mined in World 1 Average grade of gold discovered in the World (3-Year rolling average for discoveries >1 Moz) Note: Primary gold deposits only Sources: Discovery data from MinEx Consulting Jan 2010; Production data derived from GM Mudd Nov 2007; Production data from GFMS Mine Economics Feb

19 G-Resources Overview G-Resources: Is an Asia/Pacific gold company based and listed in Hong Kong Owns the Martabe gold and silver project in North Sumatra Is looking to grow an Asia Pacific focused world class gold company by: Building Martabe to time, budget and quality Organic growth from increases in Martabe Reserves and Resources and through discovery on the large Martabe licence area Acquisition and development of other quality projects or producing assets in Asia, Australasia and the Pacific Region Leveraging off management s regional gold and base metals experience and knowledge Martabe production commencing 2011 will be 250koz/a gold and 2.5Moz/a silver Is targeting 1 million ounces per annum gold production within 5 years Tianshan Mineral Belt Hong Kong Headquarters SE Asian Mineral Belt Martabe Jakarta office Melbourne office Asia hosts some of the worlds great gold deposits in the Tianshan and SE Asian mineral belts 19

20 Corporate Overview G-Resources Group Limited Hong Kong based and listed Market capitalisation 1 of US$835 million / HK$6,486 million Martabe Project Other Potential Gold Projects 14.1 billion shares on issue 13 billion shares issued in July 2009 at HK35c raising US$587 million to: G-Resources (HK1051) Share Price HK$ Purchase Martabe for US$220 million Complete the project development Provide funds for exploration and business development Cash at end 2009 of US$350 million Top 20 shareholders include major international resource funds and Hong Kong and Mainland China institutions and tycoons Management have shares and options up to 10% of capital Notes: 1. Share price as of 1 February 2010 of HK$ 0.46 and TSO of 14.1Bn 20

21 Martabe Overview The Martabe Project is a world class gold and silver project located in North Sumatra Province, Indonesia Discovered some 10 years ago 7.4 million ounces of gold equivalent 1 resources 6 known deposits within a 5 x 6km area with Purnama the largest so far Part of a large-scale mineralised district which has the potential to host further gold and gold-copper deposits Fully permitted under a sixth generation Contract of Work Construction underway with completion at end 2010 Excellent location Significant value accretion in train Plant Site January 2010 Notes: 1. Gold equivalent calculated as 70g/t Ag being equal to 1g/t Au 21

22 The Year of the Tiger Tigers Realm Minerals Mongolia Generative Thai-TGV Gold Woyla Gold Indonesian Coal Jakarta office Colombia Generative Melbourne HQ Exploration Development Mining Gold & base metal projects Coal projects Magallanes Coal Corporate overview Melbourne based global resources group Tony Manini, CEO Unlisted private company First Group Company IPO in Focused on exploration and acquisition of early stage projects in gold, copper, coal and iron ore Current Focus Rapidly multiplying the value of existing projects through exploration and delineation of gold and coal resources Drilling underway in Thailand at TGV, next to Kingsgate s Chatree gold mine Mapping and sampling of Woyla high grade gold project and Chilean coal project Negotiating entry into other outstanding projects 22

23 The AusIMM 23

24 Contacts Thank you For media or investor enquiries please contact: G-Resources: Craig Parry T craigparry@g-resources.com Owen Hegarty T owenhegarty@g-resources.com Richard Hui T richardhui@g-resources.com Tigers Realm Minerals: Tony Manini T Antony.manini@tigersrm.com.au Websites: