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An Industry at Risk?
Project Finance in the Mining Sector
Presented by: Masuma Farooki

International Study Groups April 24, 2013

Exploration Success About IntierraRMG

30 years leadership in data, mapping, analysis and reporting. Lease ownership, company evaluations, M&A, due diligence, production statistics and project pipeline. Market and project reports, material flows analysis and mineral economics policy Raw Materials Group is the consultancy unit of IntierraRMG

Disclaimer: IntierraRMG makes reasonable and diligent efforts to obtain accurate information for our clients and presentations. No warranty, expressed or implied is made regarding the accuracy, adequacy, completeness, reliability, or usefulness of any information contained herein. Neither IntierraRMG nor the contributors of data to this presentation shall be held liable for any improper or incorrect use of the information contained herein and assume no responsibility for the use of the information.

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Global Mining Operations

Source: Raw Materials Data, 2013

Global Trends

RMG Price Index

Source: Raw Materials Group, Stockholm 2013

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Global Trends

MiningCAPEX
450 400 SD Capextotal,billionUS 350 300 250 200 150 100 50 0 0 200 150 100 50 RMGPriceIndex 250

CapexTotal,billionUSD

RMGpriceindex

Source: Raw Materials Group, Stockholm 2013

Global Trends

MiningProjectInvestmentPipeline,2012
Investment (billion US$) ( $) Conceptual &Pre Feasibility Feasibility Construction All stages TOTAL
Source: Raw Materials Group, Stockholm 2013

Share(%)

ShareTrend 20112012

GreenfieldProjects 269 204 82 BrownfieldProjects 180 735 24 100 37 28 11

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Global Trends

MiningProjectInvestmentbyMetal,2012
Investment (billion US$) IronOre Copper Gold Nickel Lead/Zinc / Others Total
Source: Raw Materials Group, Stockholm 2013

Share(%) 34 27 17 8 2 12 100

ShareTrend 20112012

245 200 125 60 17 88 735

Global Trends

MiningProjectInvestmentbyRegion,2012
Investment (billion US$) ( $) Africa Asia Europe LatinAmerica NorthAmerica Oceania TOTAL
Source: Raw Materials Group, Stockholm 2013

Share(%) 14 10 10 29 20 17 100

ShareTrend 20112012

106 75 77 210 146 121 735

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Global Trends

MiningProjectInvestmentbyCountry,2012
Investment (billion US$) Australia Canada Chile Brazil Russia Peru UnitedStates SouthAfrica Guinea Philippines
Source: Raw Materials Group, Stockholm 2013

Share(%) 105 104 96 52 48 44 43 23 16 15 519 14 14 9 7 7 6 5 3 2 2 71

Rankin2011 1 2 3 4 5 6 7 8 10 9

TOTAL

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Canadian2YearExplorationSuccessRates

Industry

Value Discoveries i i / discovered projects per Explored Hectare 26/710 (3.7%) 9/20 (45%) 4/38 (10.5%) $2,300 $2.5M

Major Metals IronOre Industrial Minerals/ RareEarths

Projectswithdrillingundertakeninlast2years

$154,000

Australian2YearExplorationSuccessRates
Discoveries /projects Explored
32/570 (5.6%) 19/85 (22.3%) 19/65 (29.2%) 7/88 (7.9%) 10/36 (27.8%)

Industry
MajorMetals IronOre Coal Uranium Industrials,Rare Earths, Heavy mins, Phosphate Bulkcommodities: TitanoVanadium, Bauxite,Manganese

Value discovered perHectare

$3,500 $180,000 $131,000 $300

$39,000

17/38 (44.7%)

$52,000

Projectswithdrillingundertakeninlast2years

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Global Trends

Fallingoregrades
1.4 1.2 GradeCuandNi 1.0 0.8 0.6 0.4 0.2 00 0.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 00 0.0 GradePbandZn

Cu
Source: Raw Materials Group, Stockholm 2013

Ni

Pb

Zn

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OpenPitDevelopmentProjectsandConcepts

LasBambas(Peru)

ElPachon(Argentina)

Size of Bubble indicates Expected Capital Cost Source:Newsreleasesandtechnicalreports

Open Pit Copper Mines

ResourcesandHeadGradesforNewCopperOpenPitMines

Copper resour rces at beginning of development (t t)

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2003-2012

NewCopperResourcesThroughTime

InitialCuTonnes
500

Grade
0.80%

MillionTonnesofCopperDiscovere ed

0.70%

400 0.60% 350 300 250 200 150 0.20% 100 50 0 0.10% 0.50%

0.40%

0.30%

0.00%

20032004
Source:Newsreleasesandtechnicalreports

20052006

20072008

20092010

20112012

2003-2012

NewCopperResourcesThroughTime
Resource Grade
2.00% 1.80% 1.60% 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00%

200,000,000 180,000,000

TonnesofCopperDiscovered T

160,000,000 140,000,000 120,000,000 100,000,000 80,000,000 60,000,000 40,000,000 20,000,000

Source:Newsreleasesandtechnicalreports

AverageGradeofDiscoveries A

AverageGradeofDiscoveries A

450

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IstheIndustryatRisk?
Industry Risk Profile Worsening South America dominated new copper discoveries in past 10 years Annual rate of copper discoveries flat for past eight years Grades of upcoming mines will be significantly lower than new mines Underground projects are averaging three times grade of open pit

IstheIndustryatRisk?
Industry Risk Profile for Copper Generally, y, upward p trend in project p j costs affected by: y Complex ore bodies Deeper lying deposits Remote locations of new mines Equipment suppliers at full capacity already Skill staff shortages emerging again Rise Ri i in metal t l prices i

10

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IstheIndustryatRisk?
Industry Risk Profile Worsening Projects at feasibility stage has increased strongly (28%) in 20112012 Projects at conceptual and pre-feasibility stage has decreased There is a decline in risk appetite affecting funding Increasing financial problems for junior companies that initiate most projects

Thank You

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