Exploring Africa Rich in minerals, natural resources and opportunities

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1 Exploring Africa Rich in minerals, natural resources and opportunities

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3 Foreword Africa is one of the most diverse and fascinating places to live and conduct business. A continent with 54 sovereign states, a billion people, hundreds of indigenous languages and a myriad of cultures; it is also home to massive untapped mineral resources ready to be unlocked by investors looking for great returns on their investments. Africa accounts for nearly two thirds of the world s known mineral reserves and even with the global economic slowdown and weakening Foreign Direct Investment (FDI) into the region, FDI has remained resilient, steadying at around $38b in 2012 compared to $32.5b in This is mostly due to the opportunities that exist in the mining sector, the relatively high levels of commodity prices and the ongoing resource prospecting and exploration. Exploring Africa guides mining investors not only in navigating the intricacies of conducting mining business in Africa but shares some of the interesting facts about the continent; what makes it a special place to invest in; and the vast cross-cutting opportunities that sets it apart from other continents. Mining companies have an opportunity to invest in the much-needed infrastructure developments in these countries a requisite for unlocking the value of the mineral wealth they behold and make a sustainable contribution to the socio-economic development in the countries that they are investing in. There is no doubt that positive returns are to be obtained especially with countries becoming increasingly attractive, growing at consistently high rates, making steady political and social progress and generally creating environments that are increasingly conducive to doing business. Wickus Botha Africa Mining and Metals Leader 3

4 Exploring the diversity of the African continent 4

5 Botswana s Okavango River Delta is one of the world s largest in-land deltas. 80% The Republic of Congo is home to 80% of the world s wild gorillas and chimpanzees. Rwanda is Africa s most densely populated country. Top 5 2nd Namibia is the second least densely populated country on earth. Rock paintings found in the region of Gao and Timbuktu suggest that the region of Mali was inhabited even around 50,000 BC. Tanzania is famous for its Mpingo tree, also known as the African blackwood tree (dalbergia melanoxylon) is the most expensive hardwood tree in the world. yambezhi Zambia s name comes from the Zambezi River. Zambezi is from a local word heart of all. Exploring Africa s diversity Exploring Africa s growth potential Exploring merger and acquisition activity in Africa FDI in the mining sector Exploration in Africa Nigeria is one of the top 5 producers of cocoa beans in the world. South Africa has the longest wine route in the world. 4th Bridging the infrastructure gap Niger has the highest fertility rate in the world births per woman according to 2012 estimates; this means that nearly half (49%) of the Nigerien population is under the age of 15. Madagascar is the world s fourth largest island and is about the size of Texas. Reserves and resources : the potential The Seychelles Island has a matriarchal society, with mothers being the head of the family. 5 Exploring Africa with the help of EY

6 What others are saying about Africa The Fraser Institute s Survey of Mining Companies 2012/2013 shows that most of the African countries measured have been improving their overall policy attractiveness. Mauritania and Namibia have shown a significant improvement in the index since the 2011/2012 survey. Looking at Africa s performance compared to selected emerging markets, Botswana s policy attractiveness ranked best, with Chile a close second. 1 The Extractive Industries Transparency Initiative (EITI) 2 is focused on improving transparency and accountability in the extractives sector. Eleven of the eighteen EITI compliant countries are in Africa while six of the thirteen EITI Candidate status countries are in Africa: EITI compliant countries Burkina Faso Central African Republic Ghana Liberia Mali EITI candidate status countries Cameroon Chad Côte d Ivoire Guinea Togo Mozambique Nigeria Niger Republic of Congo Tanzania Zambia 1 Fraser Institute Survey of Mining Companies 2012/2013, Fraser Institute, February EITI countries, EITI website, accessed 15 May

7 Reserves and resources : the potential Bridging the infrastructure gap Exploration in Africa FDI in the mining sector Exploring merger and acquisition activity in Africa Exploring Africa s growth potential Exploring the diversity of the African continent 7 Exploring Africa with the help of EY

8 Africa by numbers 54 sovereign states 1 17 billion Africa s population African countries ahead of India on the World Bank s Ease of Doing Business Index $400 billion South Africa s Government proposed infrastructure program 11of the world s fastest 20 growing economies through 2017 will be African 800+ active infrastructure projects across different sectors in Africa, with a combined value in excess of $700 billion 8 38 African countries ahead of China on the EIU s Democracy Index

9 36 African countries ahead of Russia on Transparency International s Corruption Perception Index $2 trillion Africa s collective GDP Exploring the diversity of the African continent Exploring Africa s growth potential 71% of all new FDI projects (3,848) attracted by Africa s top 10 destinations since 2003 Exploring merger and acquisition activity in Africa FDI in the mining sector 22.3% 60% compound growth for Sub-Saharan Africa, and 12.8% for Africa in new FDI projects China-Africa proportion of BRICS trade (totalling $340 billion in 2012) with Africa Exploration in Africa Bridging the infrastructure gap Reserves and resources : the potential Source: Africa Attractiveness Survey 2013, EY; World Bank Ease of Doing Index 2013, World Bank; Corruption Perception Index 2013, World Bank; Economist Intelligence Unit Democracy Index Exploring Africa with the help of EY

10 Exploring Africa s growth potential Sub-Saharan Africa (SSA) is expected to continue growing strongly in the near term, with regional differences in prospects reflecting in part economies varying exposure to external shocks. As elsewhere, external risks remain elevated. Policymakers in the region should use the window provided by strong growth to rebuild budgetary space and normalize monetary conditions to be better prepared for downside risks. 3 10

11 Export diversification has reduced exposure to weak demand from advanced economies, and high commodity prices have supported the region s commodity exporters and boosted investment in resource extraction. Exploring the diversity of the African continent Improved policy frameworks and judicious use of policies in response to adverse shocks have been important elements in improved performance during the past decade. Leading risks for organizations investing in growth in Africa Source: Africa by Numbers: Assessing market attractiveness in Africa, EY, Threat of substitutes 9. Infrastructure access 8. Sharing the bene The risks closest to the center of the radar are those that pose the greatest challenges to the mining and metals sector in 2013 and into World Economic Outlook: Coping with high debt and sluggish growth, International Monetary Fund, October World Economic Outlook: Coping with high debt and sluggish growth, International Monetary Fund, October World Economic Outlook: Coping with high debt and sluggish growth, International Monetary Fund, October ts 7. Capital project execution 6. Price and currency volatility 5. Skills shortage 4. Social license to operate 3. Resource nationalism 2. Margin protection and productivity and access improvement 1. Capital allocation Up from 2012 Down from 2012 Same as 2012 Source: Business risks facing mining and metals , EY, June 2013 The EY risk radar presents a snapshot of the leading risks that affect these businesses doing business across Africa. The risks at the center of the radar are those that pose the greatest challenge to the organization. The radar is divided into four sections: Strategic threats are related to customers, competitors and investors. Financial threats stem from volatility in markets and the real economy. Operational threats affect the processes, systems, people and overall value chain of a business. Compliance threats originate in politics, law, regulations or corporate governance. New entry 5% Despite difficult global conditions, growth in SSA has remained largely on track, projected to stay above 5%. 4 41% 41% of Africans live in cities, with an additional one percent every two years. By 2033, Africa like the rest of the world will be a majority urban continent Africa s growth potential Exploring merger and acquisition activity in Africa FDI in the mining sector Exploration in Africa Bridging the infrastructure gap Reserves and resources : the potential Exploring Africa with the help of EY

12 Understanding the investment environment As Africa embarks on its growth trajectory, the value that lies beneath can only be unlocked by investors who understand the mining and investment environment in each country. Any mining investor in Africa will be advised to understand what infrastructure needs a country has and even be prepared at times to contribute to these infrastructure needs. Resource nationalism Resource nationalism has been widely reported on and commitment to current as well as future projects is dependent on two key points: Securing the tenure/ownership of mineral rights The cost of doing business / rate of return Although the debate about nationalizing mines is not topical anymore, the issue of resource nationalism is. Resource nationalism, the term used to describe situations where governments assert increased control over the natural resources located in their territories. Resource nationalism places a large cost burden on mining and metals companies and increases the risk of achieving long term project profitability and it can influence an entity s decision about whether to invest in a particular country - this comes in the form of increased taxes, increased royalties, resource rents, multi-party participation in projects and so forth. Natural resources management Managing natural resources remains crucial to economic and environmental sustainability of several countries across the continent. Some of the most successful mining-based economies have balanced the involvement of private enterprise and the state. Skills High up on mining companies agendas is securing skills - mining skills as well as other specialized skills such as finance, HR and IT skills. Competitive landscape Africa needs to improve the competitiveness of its mining industry, while ensuring more equitable distribution of the benefits flowing from the industry to the majority of its residents. While mining creates jobs and boosts tax revenues, its benefits are sometimes overshadowed by two themes: Criticism that the industry does not sufficiently address its environmental impact. Increasing calls for beneficiation. We are however seeing evidence of countries changing their operating models to overcome these issues. Going forward we will see this trend increase. 12

13 Reserves and resources : the potential Bridging the infrastructure gap Exploration in Africa FDI in the mining sector Exploring merger and acquisition activity in Africa Africa s growth potential Exploring the diversity of the African continent 13 Exploring Africa with the help of EY

14 Mergers and acquisition activity in Africa In 2012, the African continent attracted investment as traditional mining regions become increasingly saturated and risk differentials began to narrow globally. Increasingly Africa is being looked to in order to provide mineral supply to meet the worlds future growth. Michael Bosman, Mining and Metals Transactions Leader, EY, South Africa 14

15 Exploring the diversity of the African continent Africa s relative wealth of untapped mineral resources continue to attract deals for resource security, despite a contraction of investment from the large-cap producers during The pull back in investments from the large-cap producers was an outcome of efforts to optimize capital amid increasing shareholder scrutiny. 6 Africa will continue to be an attractive destination for the large-cap producers as it is home to tier-one mineral resources, competition for which is expected to intensify in the coming years. Chinese and Indian investors have exhibited a higher risk tolerance through willingness to invest in infrastructure to bring greenfield projects to production and secure offtake. In 2012, Chinese state-owned enterprises (SOEs) were the most active acquirers in Africa s frontier markets, leveraging China s resource-for-infrastructure investment contracts with many African governments. $8.5b South Africa s $8.5b of M&A activity in 2012 was largely the outcome of portfolio optimization by major mining and metals companies, which prompted decisions to mothball high-cost operations, divest non-core assets and build on existing stakes in key assets to achieve the right risk-return balance. $182m ASX-, TSX- and AIM-listed juniors, as well as financial investors, showed great interest in copper, uranium, iron ore and gold. This doubled Africa s inbound deal volume year-on-year. However, these were largely small sized deals (<$200m) focused on exploration stage assets, consequently almost halving average deal size to $182m in Exploring Africa s growth potential Exploring mergers and acquisition activity in Africa FDI in the mining sector Exploration in Africa Expect to see a rise in M&A targeting existing African assets, for those with a long-term view of the market. Asian interest in Africa s mineral reserves will gain further impetus from improvements in the rail network that links mining and metals operations with the Africa s East coast, thereby providing easier access to Asian markets. In the longer term further investment is likely to follow from traditional investors as the impact on the regions infrastructure from the investments made by Chinese state owned entities and sovereign wealth funds filters through, translating into future M&A opportunities. Bridging the infrastructure gap Reserves and resources : the potential 6 Gold mining s Occupy moment, Mineweb, 11 December Exploring Africa with the help of EY

16 FDI in the mining sector I think like anything in life it takes people that s management to deliver on a change and it also requires that the investors understand that short-term drivers in the mining industry is counter-productive. And really to deliver value and to run big gold mines both with regards to investment and also government legislation, it needs to support a long-term vision. Randgold Resources CEO, Mark Bristow 7 16

17 We have no doubt that, with a critical mass of us pulling in the same direction, and with collaborative leadership across governments and those already doing business on the continent, Africa will continue its rise and will become an investment destination of choice in the decades to come. EY s attractiveness survey - Africa Getting down to business, EY, May Despite the global economic slowdown in 2012, growth in Sub-Saharan Africa remained robust supported by resilient domestic demand and still high commodity prices. In 2012, the region s growth was estimated at 4.7%. Excluding South Africa, the region s largest economy, the remaining economies grew at a robust 5.8% higher than the developing country average of 4.9%. 7 $54b FDI to the region is expected to remain strong, with FDI inflows projected to increase to record levels each year reaching $54b by % Africa grew its overall share of FDI project flows from 5.4 to 5.6%. 9 Exploring the diversity of the African continent $420b Robust export growth has underpinned Sub-Saharan Africa s economic expansion. However, much of the region s export growth has been driven by natural resources. Between 2000 and 2011, total Sub-Saharan exports increased from $100 billion to $420 billion, with the resource sector, including petroleum, ores, base metals and gold, accounting for three quarters of exports. 10 Reserves and resources : the potential Exploring Africa s growth potential Exploring merger and acquisition activity in Africa FDI in the mining sector Exploration in Africa Bridging the infrastructure gap 7 Africa s pulse: an analysis of issues shaping Africa s economic future, April 2013, Volume 7, World Bank. 8 Africa s pulse: an analysis of issues shaping Africa s economic future, April 2013, Volume 7, World Bank. 9 EY s attractiveness survey - Africa Getting down to business, EY, May Africa s pulse: an analysis of issues shaping Africa s economic future, April 2013, Volume 7, World Bank. 17 Exploring Africa with the help of EY

18 18 Exploration in Africa

19 Exploration level prospects, projects and mines have increased at a steady rate. Total mines increased year-on-year by 38 compared to the Resource Information Unit s previous edition of the Register of African Mining. According to the latest register, a total of 586 companies were active in Africa where 137 are producers and 100 new companies were set to register. There were also 1,390 deposits recorded and 264 active mines. Where to Invest in Africa, 2012 Edition, Rand Merchant Bank Global Markets Research. 3X 17% During the past few years, exploration activities across the African continent have significantly increased, more than tripling since In 2012, more than 17% of global exploration costs were incurred in Africa. Of particular interest are the recent significant findings of copper, cobalt, thermal coal, metallurgical coal, iron ore, uranium, bauxite, gold and nickel deposits. 11 Many of these findings have resulted in the development of new large-scale mining operations and the creation of many new jobs. Reserves and resources : the potential Bridging the infrastructure gap Exploration in Africa Exploring the diversity of the African continent Exploring Africa s growth potential Exploring merger and acquisition activity in Africa FDI in the mining sector 11 Worldwide exploration trends 2013: A Special Report from SNL Metals Economics Group for the PDAC International Convention, Metals Economics Group, Exploring Africa with the help of EY

20 Bridging the infrastructure gap Bridging the infrastructure gap will be a key enabler of regional integration, growth and development. It also remains a key challenge and opportunity for investors. 20

21 Exploring Africa s growth potential $93b Exploring merger and acquisition activity in Africa According to the World Bank, the continent requires $93b annually to build new infrastructure, restore rundown assets and operate and maintain all new and existing installations. 12 FDI in the mining sector In recent years there has been a plethora of exploration projects throughout the continent, encouraged by elevated metal prices. It is not just the quantity of resources that has attracted investment, but also quality. Accompanying these exploration projects has been a significant increase in infrastructure spending, largely by mining firms. This has helped address some of the impediments to investment. Mining investment in developing African economies is the key to much-needed infrastructure development in these countries a requisite for unlocking the value of the mineral wealth they behold. Many African governments recognize this need and have shown an inclination towards creating a conducive investment environment for FDI in mining. Reserves and resources : the potential Exploring the diversity of the African continent Exploration in Africa Bridging the infrastructure gap 12 Where to Invest in Africa, 2012 Edition, Rand Merchant Bank Global Markets Research. 21 Exploring Africa with the help of EY

22 Reserves and resources : the potential Africa the new treasure trove of the world in conjunction with China, would become the center of the world s trade Frank Gregory, MD - The Mineral Corporation. 13 Africa offers huge potential for resources companies as it possesses a large share of the world s natural resources. And as global demand for commodities is expected to continue its upward trajectory, the continent s extractive industries (including mining, oil and gas) have high growth potential. Where to Invest in Africa, 2012 Edition, Rand Merchant Bank Global Markets Research. 22

23 Key resource Units African reserves World reserves % of world reserves Platinum million oz 2,026 2, Diamonds million ct Cobalt million t Chromium million t Manganese million t Gold million oz 257 1, Gas Crude oil trillion cubic feet billion barrels 467 6, ,33 9 Coal billion t Copper million t Source: US Geological Survey Mineral Yearbook 2010; Edelweiss, BP 28% of GDP Minerals are a major source of income in Africa s resource-rich countries: Economic rents from oil and mining average around 28% of GDP; and natural resources make up over 77% of total export earnings and 42% of government revenues. 14 8% African countries share in global reserves and annual production of nonfuel minerals is sizeable as well. In 2010, Guinea alone represented over 8% of total world bauxite production; Zambia and the Democratic Republic Congo have a combined share of 6.7% of the total world copper production; and Ghana and Mali together account for 5.8% of the total world gold production. 15 Exploring the diversity of the African continent Exploring Africa s growth potential Exploring merger and acquisition activity in Africa FDI in the mining sector Exploration in Africa Mining production the reality Bridging the infrastructure gap more than 60 minerals Africa produces more than 60 minerals, and is a major producer of gold, platinum group metals, diamonds, uranium, manganese, nickel, bauxite, cobalt and chromium. However, Africa currently produces less than 7% of the world s copper, lead and zinc, and less than 3% of the world s iron ore and silver. Reserves and resources : the potential 13 Mining Weekly, 6 November Africa s pulse, October 2012, Volume 6, World Bank. 15 Africa s pulse, October 2012, Volume 6, World Bank. 23 Exploring Africa with the help of EY

24 24 Exploring Africa with the help of EY

25 EY is a professional services firm that has set itself apart from its competitors by its extensive footprint across Africa (offices established in 33 countries on the continent), supported by a fully integrated business model. EY s ambitious growth strategy, its pan-african vision, inclusive leadership philosophy and leading people culture all contribute to attracting and retaining the best talent allowing them to deliver seamless and innovative, value adding solutions to their clients across the continent. Corporate Research Foundation At EY, we are passionate about the mining and metals industry, and optimistic about the abundance of opportunities presented across the African continent. Whether you are considering entering the African market, expanding or optimizing your existing operations, or improving your governance, compliance or control environment, EY has the right people in the right places with the energy, enthusiasm, skills and experience to assist you in unlocking value. Although the risks in investing in Africa may appear high, risks can be managed, and the rewards can be great. That is why we are investing in growing our integrated Africa presence and capacity to serve our clients who are also investing in and across the continent. Our African footprint Western Sahara Cape Verde Senegal Gambia Guinea Bissau Mauritania We now enjoy an integrated representation in 33 countries across Africa, described in the media as one of the biggest changes in the accounting profession in more than 100 years. Today, we are able to navigate successfully through the complexity that our clients are experiencing across the geographies and the diversity of market sizes and sophistication. We do this through our Africa Business Center TM : its sole purpose is to assist clients in making their investment and expansion decisions in Africa. Morocco Mali Algeria Burkina Faso Ghana Nigeria Benin Guinea Togo Equatorial Guinea Sierra Leone Liberia Sao Tome Côte d Ivoire Gabon Congo Niger EY No EY, but support available Tunisia Libya Central African Republic Cameroon Egypt Chad Sudan Eritrea Angola Democratic Republic of Congo Burundi Zambia Zimbabwe Namibia Botswana South Africa South Sudan Ethiopia Kenya Rwanda Tanzania Swaziland Lesotho Uganda Djibouti Malawi Mozambique Somalia Seychelles Comoros Madagascar Mauritius Reunion Exploring the diversity of the African continent Exploring Africa s growth potential Exploring merger and acquisition activity in Africa FDI in the mining sector Exploration in Africa Bridging the infrastructure gap The Africa Business Center TM is supported by a network of professionals across Africa and in key investor markets such as China, India, the Middle East, the United Kingdom, Europe and the United States. This network includes experienced sector professionals who are intimately familiar with opportunities and trends in their sector across the continent, as well as knowledge professionals whose research insights are invaluable in considering new markets. 25 Reserves and resources : the potential Exploring Africa with the help of EY

26 Why we are excited about Africa? Africa is receiving unparalleled attention from large global companies, including substantial opportunities in mining. Africa is becoming increasingly more attractive to international investors and perceptions are becoming distinctly more positive over the medium to long term. Business leaders are planning new developments and expanding their existing investments, supporting higher levels of foreign investment projected into the future. Most importantly, Africans themselves are leading the growth across the continent, and are displaying an overwhelming optimism about the growth prospects and investment potential of the continent. How will it benefit our clients? EY is an integrated firm across Africa, with a single leadership and a single set of goals, objectives and performance criteria. The significance for our clients is that we manage our business by service line, sectors and functions rather than by country, which means that our clients receive: Consistent quality standards everywhere Utilization of a single point of contact service We believe these are significant enhancers of the quality of service and speed of response that you will receive from us. Geographically we have representation in most African countries, and our footprint across Africa helps ensure that communication is responsive to the needs of our clients, thereby stimulating trade and enhancing business relationships. Across Africa, we provide our mining and metals clients with service teams that understand the challenges and complexities of their businesses, including the industry operating processes, growth drivers, regulatory considerations and market dynamics. We have an impressive footprint across Africa, with skilled and experienced professionals that really understand the jurisdictions and operating environments. Connected Most globally connected Impressive Impressive African footprint Exceptional Demonstrable track record of exceptional client service. Passionate Highly motivated, passionate and experienced professionals across Africa Understand Integrated Single, integrated African practice Deliver All the rights service offerings to truly deliver on client expectations Thorough understanding of local and international issues facing the mining industry 26

27 Exploring merger and acquisition activity in Africa Exploring Africa s growth potential Exploring the diversity of the African continent It s our experience that makes a difference to your business. With a strong but volatile outlook for the sector, the global mining and metals industry is focused on future growth through expanded production, without losing sight of operational efficiency and cost optimization. The sector is also faced with the increased challenges of changing expectations in the maintenance of its social license to operate, skills shortages, effectively executing capital projects and meeting government revenue expectations. At EY we understand the key business drivers and challenges facing the mining and metals sector and believe our significant industry credentials set us apart. Our experience working with companies within the mining and metals sector means that we understand the issues, challenges and opportunities of your business and can provide you with deep insight into leading practices in assurance, tax, transactions and advisory services. You will also experience our interactive and collaborative working style as we provide you with a unique perspective insights, observations and advice. Our people have a passion for serving the industry and the specific experience and knowledge to recognize, respond and work with our clients in delivering exceptional client service. We aim to have a positive impact on businesses and markets, as well as on society as a whole. Working with our clients. Our 167,000 people are the foundation of our success. We assemble the right multidisciplinary team for your business, drawing on our global network of professionals. Working with you in a collaborative style, we gain a clear understanding of your organization and strive to identify issues before they become problems. You get the people you need, wherever in the world you need them, backed up by leading practices, methodologies and tools. Developing people. We attract talented people from diverse backgrounds. Our emphasis on inclusiveness matters more than ever today. As business challenges become more complex, we need to call upon the widest spectrum of views and opinions to address them. Our open culture offers continuous personal and professional development. Because when our people grow and succeed, your company benefits. Strengthening communities. We help to improve regulatory regimes and company reporting models. We promote transparency in financial reporting and use our influence to strengthen global corporate governance. We encourage entrepreneurship, which leads to growth, jobs and prosperous communities. And our people share their business skills and knowledge with others in their communities. 27 FDI in the mining sector Exploration in Africa Bridging the infrastructure gap Reserves and resources : the potential Exploring Africa with the help of EY

28 Our African mining and metals network Region Country Primary contact Telephone Malawi Shiraz Yusuf Central Zambia Henry Nondo Zimbabwe Nqaba Mkwananzi Ethiopia Amaha Bekele Kenya Joseph Cheboror East Uganda Michael Kimoni Rwanda Herbert Gatsinzi South Sudan Patrick Kamau Tanzania Joseph Sheffu Egypt Christian Mion Algeria Philippe Ausseur philippe.ausseur@fr.ey.com North Morocco Patrick Montlahuc patrick.montlahuc@ma.ey.com Libya Christian Mion christian.mion@fr.ey.com Tunisia Christian Mion christian.mion@fr.ey.com Angola Luis Marques luis.marques@pt.ey.com Botswana Bakani Ndwapi bakani.ndwapi@za.ey.com Madagascar Yann Rasamoely yann.rasamoely@mu.ey.com South Mauritius Yann Rasmoely yann.rasamoely@mu.ey.com Mozambique Gildo Come hermenegildo.come@mz.ey.com Namibia Gerhard Fourie gerhard.fourie@za.ey.com Seychelles Yann Rasmoely yann.rasamoely@mu.ey.com South Africa Wickus Botha wickus.botha@za.ey.com Cameroon Joseph Pagop Noupoue joseph.pagop.noupoue@ey-avocats.com Chad Erik Watremez erik.watremez@ga.ey.com Congo Ludovic Ngatse ludovic.ngatse@cg.ey.com Côte d Ivoire Jean-Francois Albrecht jean-francois.albrecht@ci.ey.com DR Congo Lindsey Domingo lindsey.domingo@cd.ey.com West Equatorial Guinea Erik Watremez erik.watremez@ga.ey.com Gabon Erik Watremez erik.watremez@ga.ey.com Ghana Victor Gborglah victor.gborglah@gh.ey.com Guinea Joseph Pagop Noupoue joseph.pagop.noupoue@ey-avocats.com Nigeria Henry Egbiki henry.egbiki@ng.ey.com Senegal Jean-Francois Albrecht jean-francois.albrecht@ci.ey.com

29 In 2011 the Kennedy Report revealed that EY has done the best job of uniting its offices into one Africa practice. We are without doubt the most integrated professional services firm in Africa. We will continue to leverage our competitive integration as a differentiator to solidify our position as the go-to firm for doing business in Africa. Sugan Palanee, Markets Leader, EY Africa Reserves and resources : the potential Bridging the infrastructure gap Exploring the diversity of the African continent Exploring Africa s growth potential Exploring merger and acquisition activity in Africa FDI in the mining sector Exploration in Africa 29 Exploring Africa with the help of EY

30 Transactions and capital raising QR code Our knowledge in the mining sector and of the African continent Mergers, acquisitions and capital raising in mining and metals (Released annually with quarterly updates) This report examines transactions and financing in the mining and metals sector for the year, and discusses the outlook for the year ahead. It provides an in-depth analysis of the major global mining and metals transactions, capital markets and resulting capital flows, with a deeper dive into commodities and geographies. The Mining Eye The Mining Eye provides key analysis and commentary on the top twenty AIM listed mining shares by market weight on a monthly basis. As well as reporting on the index itself, the Mining Eye provides regular analysis and commentary on global mining activity. Trends and strategic issues Global steel report 2012 trends, 2013 outlook A new world, a new strategy The challenge for steelmakers in 2013 is to be cost competitive while maintaining enterprise value. This paper examines the key challenges for this sector, how steelmakers can compete for growth and the outlook for Effective capital project execution Managing the complexity of major capital projects in today s landscape has never been more challenging, critical or costly. The report discusses the challenges and risks in capital project execution and the ways of effectively managing these extensive capital projects for successful outcomes. Risk and Assurance Business Risks: mining and metals Mining and metals businesses face risks that are becoming more extreme and more complex, with capital dilemmas capital allocation and capital access, margin protection and productivity improvement and resource nationalism as the top three, and the newcomer being threat of substitution. Fraud and corruption in mining and metals Management of fraud and corruption in the mining and metals sector is critical as it can erode a company s license to operate through loss of reputation and financial impact. This report draws on our experience at the coalface, helping you understand the changing fraud and corruption risk environment. Global survey of audit committees EY undertook a survey of audit committee members from many of the largest global mining and metals companies. Key themes to emerge from these interviews include: Technical compliance vs. commercial assurance Focus moving towards risk Changing risk appetite Responding to subjectivity Business risks facing mining and metals

31 Tax QR code Conflicts minerals: new reporting regulations Increasing international focus on conflict minerals has led to new reporting regulations. This report covers the Dodd-Frank Section 1502 and the Conflict-Free Gold Standard, including the implications for mining and metals companies. Mining and metals global tax rates Country by country analysis These comprehensive guides summarize standard tax rates in significant mining and metals jurisdictions. They include fiscal regime, capital allowances, incentives, withholding taxes, and indirect taxes. Countries available include: Angola, Argentina, Australia, Bolivia, Botswana, Brazil, Canada, Chile, China, Colombia, Ecuador, Guinea, India, Kazakhstan, Malaysia, Mexico, Mongolia, Namibia, Papua New Guinea, Peru, Philippines, Russia, South Africa, United Kingdom, United States. Available upon request from your local contact Global mining and metals tax survey: From backroom to boardroom This report is based on a global tax survey of 40 of the top mining and metals houses in the second half of 2012, to examine the challenges and issues they are now facing. This is a follow up to our 2009 mining and metals tax survey, to see where the tax function has moved and how it has been affected by the dramatic changes in the mining and metals landscape over the past few years. Resource Nationalism Update Released quarterly, we look at the latest updates in resource nationalism, how it affects our clients and steps mining and metals companies can take to respond to this risk. Available upon request from your local contact IFRS IFRS reporting issues (IFRS updates) Refining and Applying IFRS is our newsletter series which aims to examine the complex, but unique issues faced by mining and metals companies applying IFRS. These issues will be considered in the context of recent and current developments in the global mining and metals market place. This series is complemented by our IFRS alerts. IFRS reporting guidelines (Illustrative financial statements for Good Mining) This publication provides an illustrative set of consolidated financial statements, prepared in accordance with IFRS in issue at 31 December 2011, for Good Mining (International) Limited, a fictitious group of mining companies. Contacts EY s Global Mining and Metals Center brings together a worldwide team of professionals to help you achieve your potential a team with deep technical experience in providing assurance, tax, transactions and advisory services to the mining and metals sector. Please contact us if you have any questions on any of the materials listed on this page. 31

32 A view of the Growing Beyond thought leadership available Read more at Rapid-Growth Markets Forecast Prospects are bright for rapid-growth markets if they learn from the past, says our latest Rapid-growth markets forecast. The report identifies four key lessons that can be learnt from the development paths of countries that have enjoyed sustained rapid growth in the past. Read more at: Growingbeyond.info As part our of focus on co-development of your growth strategy, we have developed the GrowingBeyond.info tool. This is a simple and fast way of identifying what your growth position is, and the options it might have to move forwards. The tool also offers a comparison to an industry peer group and suggests where opportunities might exist. For more on how to receive a report like this please contact your EY client service contact. Note: this is an EY internal tool. EY s 2013 attractiveness survey - Africa Africa s time has arrived. The second edition of Africa Attractiveness covers foreign direct investment, perceptions, key challenges and opportunities to unlocking value on the continent. Read more in the Africa Attractiveness Survey 32

33 Growing Beyond Africa by numbers Foreign direct investment (FDI) into Africa has increased significantly over the last decade and this trend is set to continue, but the decision on where to invest in this vast and diverse continent can prove challenging. The report sets out the risk profile of 17 of the most popular countries for investment in Africa and balances them against the rewards on offer. Read More Repositioning the South African investment case Repositioning the South African investment EY s Africa 2012 attractiveness survey provides evidence of the growing interest in the African continent as an investment destination and place to do business. The research shows that foreign direct investment (FDI) projects into Africa have grown at a compound rate of almost 20% between 2007 and This trend continued last year, with projects increasing at a rate of 27% year-on-year. Equally importantly is the increase of Africa s global share of FDI from 4.5% in 2010 up to 5.5% in 2011 to all new FDI projects globally. In this context of increasing interest and investment into Africa, there appears to be a growing perception that South Africa is losing ground, both in terms of its status as a so-called gateway to the rest of Africa and in terms of competition for FDI. Read more at Growing Beyond Borders To further support our activity on the continent and in strategy co-development with businesses, we have developed a dedicated, interactive tool, for doing business in Africa and across the globe. Growing beyond Borders is an EY developed and owned software that visually maps data through the lens of the world s geography, in a highly intuitive manner. Contact your client service executive for an interactive facilitated session. 33

34 EY s Global Mining & Metals Center With a strong but volatile outlook for the sector, the global mining and metals sector is focused on future growth through expanded production, without losing sight of operational efficiency and cost optimization. The sector is also faced with the increased challenges of changing expectations in the maintenance of its social license to operate, skills shortages, effectively executing capital projects and meeting government revenue expectations. EY s Global Mining & Metals Center brings together a worldwide team of professionals to help you succeed a team with deep technical experience in providing assurance, tax, transactions and advisory services to the mining and metals sector. The Center is where people and ideas come together to help mining and metals companies meet the issues of today and anticipate those of tomorrow. Ultimately it enables us to help you meet your goals and compete more effectively. Area contacts Global Mining & Metals Leader Mike Elliott Tel: michael.elliott@au.ey.com Oceania Scott Grimley Tel: scott.grimley@au.ey.com China and Mongolia Peter Markey Tel: peter.markey@cn.ey.com Japan Andrew Cowell Tel: cowell-ndrw@shinnihon.or.jp Europe, Middle East, India and Africa Leader Mick Bardella Tel: mbardella@uk.ey.com Africa Wickus Botha Tel: wickus.botha@za.ey.com Commonwealth of Independent States Evgeni Khrustalev Tel: evgeni.khrustalev@ru.ey.com France and Luxemburg Christian Mion Tel: christian.mion@fr.ey.com India Anjani Agrawal Tel: anjani.agrawal@in.ey.com United Kingdom & Ireland Lee Downham Tel: ldownham@uk.ey.com Americas and United States Leader Andy Miller Tel: andy.miller@ey.com Canada Bruce Sprague Tel: bruce.f.sprague@ca.ey.com South America and Brazil Leader Carlos Assis Tel: carlos.assis@br.ey.com Service line contacts Global Advisory Leader Paul Mitchell Tel: paul.mitchell@cn.ey.com Global Assurance Leader Tom Whelan Tel: tom.s.whelan@ca.ey.com Global IFRS Leader Tracey Waring Tel: tracey.waring@au.ey.com Global Tax Leader Andy Miller Tel: andy.miller@ey.com Global Transactions Leader Lee Downham Tel: ldownham@uk.ey.com

35 Exploring This is an exciting time for Africa. The world is taking a stronger interest in the potential we have to offer. Our vision is to actively participate in accelerating the opportunities to build and grow with our people and clients. We are already operating as one integrated business across the continent. We are a truly African business. Ajen Sita, CEO, EY Africa

36 EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com EYGM Limited. All Rights Reserved Studio ref Artwork by Sewpersadh. EYG no. ER0092 ED no This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. The views of third parties set out in this publication are not necessarily the views of the global EY organization or its member firms. Moreover, they should be seen in the context of the time they were made. ey.com/miningmetals