IFC - Current Trends in Mining - A Development Institution Perspective: Jesse O. Ang Resident Representative

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Current Trends in Mining - A Development InstitutionPerspective …

Current Trends in Mining - A Development InstitutionPerspective

Jesse O. Ang
Resident Representative

Mining Philippines 2011
Manila, Sofitel

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  • Ang yaman ng Palawan ay yaman ng Pilipinas It is known as the Philippines’ Last Ecological Frontier. It has 40% of our country’s remaining mangrove areas, 30% of our coral reefs, at least 17 Key Biodiversity Areas (KBAs), 2 UNESCO World Heritage Sites, and 8 declared Protected Areas (PAs). It is unmatched anywhere in the country
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  • NO TO MINING IN PALAWAN and other Key Biodiversity Areas, Natural Forests, Island Ecosystems, Critical Watersheds and Agricultural Areas!
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  • 1. Current Trendsin Mining -A DevelopmentInstitutionPerspectiveJesse O. AngResident Representative
  • 2. •IFC in MiningThe Outlook for Mineral Commodities 2
  • 3. International Finance CorporationIFC is the private sector arm of the World Bank Group 3
  • 4. Over US$85 Billion Invested Since 1956• Largest multilateral source of loan/equity financing for the emerging markets IFC FY2010 Highlights private sector Portfolio US$48.8 billion• Founded in 1956 with 182 member Committed US$12.7 billion countries Mobilized US$5.3 billion• AAA-rated by S&P and Moody’s # of Companies 1,656• Equity, quasi-equity, loans, risk # of Countries 120 management and local currency products• Takes market risk with no sovereign Sub-Saharan Middle East Africa & N.Africa guarantees 19% 12% Global 1% South Asia• Promoter of environmental, social, and 8% corporate governance standards Europe & Central Asia• Resources and know-how of a global 23% development bank with the flexibility of a Latin East Asia and merchant bank the Pacific America 24% 13%• Holds equity in over 800 companies worldwide 4
  • 5. Supporting Development through Mining Investments•IFC’s support to the mining industry helps raise living standards for people throughout the developing world. In 2010 our clients’ projects: • Provided over 32,000 jobs • Paid over US$570 million in revenues to governments • Spent over US$2.3 billion on local goods and services • Invested over US$7 million in community development programs 5
  • 6. US$500 Million Mining Portfolio (57% equity) 37 Projects in 25 Countries Book value as of June 2011 By Product By Region Diamonds Eastern & MENA: US $8M 10% Central Europe World: US $8M US $53M East Asia & Pacific US $43M Other Metals Gold Sub-Saharan 22% 44% Africa Latin America US $280M US $107MAluminum & Bauxite Copper 4% 12% Iron Ore 9% 6
  • 7. IFC Value-Add in Mining Long-Term Environmental Regional Global Mining Country Risk AdvisoryCompetitive & Social Risk Knowledge Expertise Mitigation Services Financing Management• Equity • Extensive • 50+ Years of • Government • Advice on • Local Local Sector Relations Environmental Supplier• Fixed & Office Experience & Social Best Development Floating Network • World Bank Practices Rates, Local • Greenfield Synergies • Local Currencies • Local • Equator Economic Transaction • Expansion / • Withholding Principles Development• Up to 15 Year Experience Modernization Tax Benefit Modeled after Loan Maturity IFC Standards • Community • World Bank • Corporate Development• Catalyst for Synergies Strategy • Local Funding Other Consultation & Investors and • Access to • Financial Disclosure Lenders International Valuation Tool Investors• Capital • Resource Mobilization • Technical Efficiency Advice 7
  • 8. Examples of IFC InvestmentsAsia China Asia Region China Solomon Islands Philippines Sino Mining Asian Lion Fund Gold Ridge Far East Energy Corp. Mindoro Resources $5,000,000 $6,000,000 Quasi-Equity Equity $15,000,000 $30,000,000 $2,000,000 Equity Debt Equity Lender Equity Investor Equity Investor Mandated Lead Arranger Equity Investor 2002 2006 2007 2010 2010Other Regions Peru Chile Solomon Islands Morocco Ethiopia Escondida Copper Gold Ridge Achmmach Tin DallolMinera Quellaveco $94,600,000 $5,700,000 $10,000,000 $42,000,000 Senior Term Loan $15,000,000 $30,000,000 Equity Equity Equity Equity Debt Equity Investor Equity Investor & Lender Mandated Lead Arranger Equity Investor Equity Investor 1993-2011 1989 and 1999 2010 2010 2011 8
  • 9. •IFC in MiningThe Outlook for Mineral Commodities 9
  • 10. Driving the MarketInvestment trend over the last 30 years • Low prices and 20 years of underinvestment in mining • Higher prices and 10 years of growing investment interrupted by the financial crisis in 2008/9Crucial Importance of China and other DevelopingCountries • Chinese demand in particular is underpinning high prices and continued investmentShort Term Risks • Short term economic outlook looks uncertain with possible implications for metals prices 10
  • 11. Price trends in last ten years have been mainly upward Gold Copper 1800 5.00 1600 4.50 4.00 1400 3.50 1200US$ / ounce 3.00 US$ / lbs 1000 2.50 800 2.00 600 1.50 400 1.00 200 0.50 0 0.00 Aug-91 Aug-96 Aug-01 Aug-06 Aug-11 Aug-91 Aug-96 Aug-01 Aug-06 Aug-11 Silver Nickel 50 60000 45 50000 40 35 40000 US$ / ounce US$ / tonne 30 25 30000 20 20000 15 10 10000 5 0 0 Aug-91 Aug-96 Aug-01 Aug-06 Aug-11 Aug-91 Aug-96 Aug-01 Aug-06 Aug-11 Source: Bloomberg. 20-year data shown. Nominal figures shown. 11
  • 12. Driven by Chinese & other Developing Country demand 12
  • 13. But, A Weaker Global Economy in 2H’11 poses risksSource: Haver, CCS as of end August2011 PMIs In Perspective Source: Haver, CCS as of end August 2011 13
  • 14. Business & Consumer Confidence Falling Fast ! 14
  • 15. Year to Date Commodity Performance is mixed 15
  • 16. Sector Outlook – Re-capShort Term Vs Long Term As global GDP slows down and expectations about robust commodity demand get paired down, commodities could correct in the short term However, the Medium Term outlook is still quite positive as the process of industrialization of India and the move up the value added chain in China remain in force, the main drivers behind consumption growth.Other related trends likely to continue Growth in trade in metals Increase in investment in new and “difficult” areas as best deposits get exploited and investors compete for viable resources Growth in the importance of developing country investors and traders internationally Continued issues about fair benefit sharing - at national and community levels In some cases concerns about resource riches management 16
  • 17. Though 650 yrs of prices gives a different perspective! 17
  • 18. Thank You 18