Where to for Australia s Gold Industry? Melbourne Mining Club 22 February 2002

Transcription

1 M I N I N G L I M I T E D Where to for Australia s Gold Industry? Melbourne Mining Club 22 February 2002

2 Presentation Summary 1. Exploration success in Australia 2. How competitive is Australia 3. The investor supporter base in Australia 4. What one needs to build a global gold business 5. The outlook

3 Introduction 1. Australia has world class gold assets and potential 2. Lowest Sovereign Risk and is a wonderful place to do business and live 3. Domestic equity market has failed to recognise the strategic value of Australian mining assets

4 The Perception is not the Reality 1. The gold price is range bound, production is declining 2. Major companies abandoning gold, ie WMC, Rio Tinto 3. Exploration has been capital destructive, development is difficult 4. Industry returns poor and gold sector irrelevant Result No Investor support for the Gold Sector but gold is Australia s 3rd largest export earner

5 Has Australian Exploration Been Successful?. YES Gold Reserves Top Four Producing Countries 10,000 South Africa Reserves (tonnes gold) 5,000 AUSTRALIA USA 0 Canada

6 Best Success Rate?. YES : discoveries > 250kozs in past 30 yrs > 1m ozs > 4m ozs 4. 3 > 10m ozs (Super Pit, Boddington, Telfer) Recent discoveries: 1. 7 significant deposits with greater than 12m ozs reserves, operating or under construction advanced projects with potential for in excess of 40mozs currently under feasibility study Has any country done better?

7 Are We Cost Competitive?. YES Comparative cost of Reserve Additions Exploration cost per oz of reserve (US$) Africa Asia/Oceana AUSTRALIA Latin America Canada USA Low Risk Medium Risk High Risk Very High Risk Reference Sources: Reserves: Brook Hunt. Gold Costs Mines and Projects 2000/2001 Edition. Exploration Expenditure: Metals Economics Group

8 Can we continue the success?. YES 1. Advanced projects alone represent over four years potential production at current rates 2. Vast areas of Australia remain largely unexplored or we have only really scratched the surface (Central Australian Proterozoic; Gawler Craton, Pilbara, Musgraves, Kimberleys, Yilgarn at depth) 3. Recent success highlights the potential (Minotaur - Prominent Hill (Gawler Craton SA); Sipa Resources - Waugh Deposit (Pilbara, WA), Placer/Delta - Wallaby (Yilgarn, WA), Tanami, NT, Normandy NFM - Groundrush

9 Central Australian Proterozoic Over 500,000km2 of prospective terrains Over 11 million ozs discovered to date Much of the region is grossly under explored, or completely unexplored The opportunity exists to obtain title at a district scale Equivalent to Carlin after discovery of Gold Quarry Central Australian Proterozoic Archaean Proterozoic Paleozoic NEVADA > one million ounce orebody

10 Can we build and operate competitively?. YES Nine new mines successfully commissioned for a total investment exceeding $240 million 2. US$25 average development cost /oz - half the world average 3. World class support available in (a)feasibility studies (b) Procurement and Construction (c)mining plant/fleet (d) Maintenance (e) Environmental Management (f) A wealth of the best mining professionals

11 The Reality 1. Australian gold exploration - outstanding 2. Low sovereign risk and low cost 3. Discovery success will continue if funding and faith are maintained 4. Advanced projects approaching construction underpin production levels and provide gold sector growth 5. A wealth of exploration/mining professionals available 6. Exciting returns to shareholders across the full spectrum from major producers to junior explorers 7. We have the Right People, Right Location and Low Costs Why do we lack support?

12 There is support for emerging companies but will the nursery continue? 800 1,594% % Increase in Share Price Centamin Croesus Kagara Zinc * 6 month low vs price at 01/02/02 Relode Bendigo Dioro Expl Gallery Gold Greenstone Res Oxiana Res Adelaide Res Gippsland Res Grenfell Res Sipa res Gateway Mining Minotaur Res Big 4 Banks

13 The local market has not understood strategic value Valuation of North Limited $5.00 Additional strategic value A$669m $4.75 Value per North share ($A) $4.00 $3.00 $2.00 $1.00 $2.90 $3.85 $0.00 Market Price (26/6/00) DCF (average broker) Rio Tinto offer (final)

14 Strategic Value - Critical to the Industry Consolidation Process 8.0 Production (moz) (YE June ) The Rest Mid Tier Gold Fields AngloGold Normandy Newmont Placer Dome Global Gold Producers (> 500,000 oz pa) There are very few opportunities at this level... to reach this level. and acquisition of producers at this level is unlikely to make a material difference Top Tier Barrick Homestake 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 Market Capitalisation (US$m) Source: Macquarie Bank

15 What did Newmont & Anglo see that the local market didn t? Valuation of Normandy Mining Limited Value per Normandy share (A$) $2.50 $2.00 $1.50 $1.00 $0.50 $1.10 Additional strategic value A$558m $1.68 $1.93 $0.00 Market Price (4/9/01) DCF (Grant Samuel) Newmont offer (2/1/02)

16 Comparative Returns 150 A$5.1 billion 100 NORMANDY 50 A$2.4 billion LIHIR 0 NEWCREST -50 Source: Bloomberg Sep 2001 Oct 2001 Nov 2001 Dec 2001 Jan 2002 Feb times the trading volume of competitors

17 Normandy vs International Equivalents based on Trading Multiples $4.00 $3.50 $3.00 Enterprise value (US$) per reserve ounce Enterprise value (US$) per resource ounce Enterprise value (US$)/EBITDA (Year ended 30 June 01) $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 Pre-bid Normandy share price Multiples on Barrick's acquisition of Homestake Barrick's current trading multiple Multiples on AngloGold's acquisition of Acacia Enterprise value = market capitalisation plus net debt; EBITDA = Earnings before interest, tax, depreciation and amortisation Source: Macquarie Bank January 2002

18 What do you need strategically to build a world class global gold business NORMANDY 1. Long life, low cost assets 2. Low geo-political risk (Australia) 3. Large reserve/resource base 4. Growth projects 5. Pure gold 6. Uncomplicated transparent structure 7. Profit / cash-flow performance 8. Good People and Systems 9. Large land holdings 10. Strong research support

19 No Credit for Normandy s Lowest Geopolitical Risk PRODUCTION. NORMANDY Placer Barrick AngloGold Newmont Gold Fields RESERVES.. Low Risk Medium Risk High Risk Very High Risk NORMANDY Placer Barrick AngloGold Newmont Gold Fields Source: Macquarie Bank - based on RESOURCESTOCKS/AIG World Investment Risk Survey 2001

20 Gold Analyst Coverage has waned in Australia Dedicated Analysts Today No front line analysts now fully dedicated to Australian golds Consolidation has accelerated this process Allocation of broker resources to gold is now low

21 Australian Gold Sector Outlook 1. A global block of assets must include Australia 2. Assets have strategic value not recognised domestically 3. Local companies can t compete with foreign acquirers 4. Service industries lose through takeovers Result: Capital outflow will continue, Australian market will continue to shrink, and no diversity of choice Trend will continue until Fund Managers price in strategic value

22 Australia falling off the radar screens 1. Wall street s view unanimous: strong economy, staunch US ally - but don t expect investments 2. Australia is disappearing from New York trading rooms 3. Australian assets at bargain prices but few deals done 4. Global players want to go after the big markets 5. (Australia) it s a long way away. It s sometimes hard for the smaller players to get on people s radar screens. Luke Collins, New York, Australian Financial Review, 4 February 2002

23 A Young Terribly Underexplored Country The Proterozoic Only just begun Queensland More Vera-Nancys The Yilgarn Potential at depth Victorian Goldfields Ignored for decades NSW Copper-Gold

24 The information contained in this presentation is current as at 22 February All statements and forecasts are based on the Company s best information available at that date. The Company does not makes any representation or give any assurance that those statements will prove to be accurate or forecast results achieved as future circumstances or events may differ from those which have been anticipated by the Company.