Current Trends in Mining - A Development InstitutionPerspective Jesse O. Ang Resident Representative Mining Philippines 2011 Manila, Sofitel

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

2. •IFC in Mining
The Outlook for Mineral Commodities
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3. International Finance Corporation
IFC is the private sector arm of the World Bank Group
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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
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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
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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 $107M
Aluminum &
Bauxite Copper
4% 12%
Iron Ore 9%
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7. IFC Value-Add in Mining
Long-Term Environmental
Regional Global Mining Country Risk Advisory
Competitive & 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
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8. Examples of IFC Investments
Asia
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 2010
Other Regions
Peru Chile Solomon Islands Morocco Ethiopia
Escondida Copper
Gold Ridge Achmmach Tin Dallol
Minera Quellaveco $94,600,000
$5,700,000 $10,000,000
$42,000,000 Senior Term Loan
$15,000,000 $30,000,000
Equity Equity
Equity
Equity Debt
Equity Investor Equity Investor & Lender Mandated Lead Arranger Equity Investor Equity Investor
1993-2011 1989 and 1999 2010 2010 2011
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9. •IFC in Mining
The Outlook for Mineral Commodities
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10. Driving the Market
Investment trend over the last 30 years
• Low prices and 20 years of underinvestment in mining
• Higher prices and 10 years of growing investment
interrupted by the financial crisis in 2008/9
Crucial Importance of China and other Developing
Countries
• Chinese demand in particular is underpinning high
prices and continued investment
Short Term Risks
• Short term economic outlook looks uncertain with
possible implications for metals prices
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11. Price trends in last ten years have been mainly upward
Gold Copper
1800 5.00
1600 4.50
4.00
1400
3.50
1200
US$ / 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.
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12. Driven by Chinese & other Developing Country demand
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13. But, A Weaker Global Economy in 2H’11 poses risks
Source: Haver, CCS as of end August2011
PMIs In Perspective
Source: Haver, CCS as of end August 2011
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14. Business & Consumer Confidence Falling Fast !
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15. Year to Date Commodity Performance is mixed
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16. Sector Outlook – Re-cap
Short 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
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17. Though 650 yrs of prices gives a different perspective!
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18. Thank You
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