Investing in the African renaissance


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Objective Capital's Global Resources Investment Conference 2011
Stationers' Hall, City of London
27-28 September 2011
Day 1- Session 8: Africa focus
Speaker: Christopher Goss, IFC

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Investing in the African renaissance

  1. 1. Closing Keynote: Investing in the African renaissance<br />Christopher Goss – IFC<br />
  2. 2. @Objectivelive<br />GLOBAL RESOURCESINVESTMENT CONFERENCE 2011<br />Lead sponsor:<br />Media partners:<br />Other sponsors & participating organisations:<br />
  3. 3. Mining, Africa and IFC; Opportunities, Risks, and Partnership<br />Christopher Goss<br />IFC Consultant<br />
  4. 4. 4<br />Over the last 18 months, junior mining companies have raised over $6.3 billion for their African projects<br />US$ million<br />35% spent on gold; 24% on iron-ore<br />Data Source: Intierra<br />
  5. 5. Debt Finance - About $22 billion raised in Africa Mining over the last 10 years<br />Between 2000-2011, African Mining raised $22billion in debt financing<br />78% was for projects in Southern Africa (South Africa, Botswana, Namibia, Zimbabwe, Zambia, Mozambique)<br />South-Africa alone accounted for 55%.<br />High concentration on Gold projects, which raised $9.5 billion, or 43% of the total.<br />Breakdown by African Region $m (2000-2011)<br />Breakdown by Commodity $m (2000-2011)<br />Where is the money going ? (IDA vs Non-IDA)<br />40%<br />60%<br />Data Source - Dealogic<br />5<br />
  6. 6. Summary IFC Investment in Africa <br />$578m. in 30 transactions since 1999, or an average of just over two per year.<br />But half of these transactions in the last three years:<br />4 in FY2011 (up to June 2011)<br />7 in FY2010<br />4 in FY 2009<br />Half investment volume in debt, half in equity<br />But debt in only 6 transactions<br />6<br />
  7. 7. Mining and Africa<br />Major global investment flows into Africa mining as investors and companies take on the country risks in their hunger for resources<br />But mining carries with it wide ranging investment risks, some of which are acute in many African countries.<br />7<br />
  8. 8. Risks in the Metals and Mining Sector<br />Ernst and Young released its annual report, “Business risks facing mining and metals” for 2011–2012<br />Through discussions with mining and metals leaders and from its global analysis of companies and projects, E&Y provides a snapshot of the most significant challenges currently facing the sector<br />8<br />Source: Ernst and Young, “Business risks facing mining and metals 2011 – 2012.”<br />
  9. 9. Challenges in Africa Mining<br />Risks 1-4 and 10. in the previous slide, ie: <br />Resource Nationalism<br />Skills<br />Infrastructure<br />Social Licence<br />Fraud and Corruption<br />apply particularly in many African countries.<br />Governance, Infrastructure and other challenges vary greatly across the continent. For example, by contrast:<br />Governance and infrastructure standards in Botswana are high. <br />The infrastructure challenges and investment needs for iron ore in West Africa are huge.<br />9<br />
  10. 10. Challenges in Africa Mining (cont.)<br />Where these risks are high, IFC can help; especially regarding the company’s social licence. <br />Recent events in Guinea and DRC, which have involved IFC, have demonstrated our willingness to maintain our partnership and support in challenging circumstances.<br />Infrastructure requirements, when large (risk 3.), are likely to need some form of project financing. <br />This financing will be very challenging to raise, given the sums needed, country risks and current global financial stresses. It will probably need extensive involvement of IFIs such as IFC to succeed.<br />10<br />
  11. 11. Examples of Large Infrastructure Requirements for Africa Mining Projects<br />11<br />
  12. 12. The World Bank Group<br />12<br />
  13. 13. Over $85 Billion Invested Since 1956<br />Largest multilateral source of loan/equity financing for the emerging markets private sector<br />Founded in 1956 with 182 member countries<br />AAA-rated by S&P and Moody’s<br />Equity, quasi-equity, loans, risk management and local currency products<br />Takes market risk with no sovereign guarantees<br />Promoter of environmental, social, and corporate governance standards<br />Resources and know-how of a global development bank with the flexibility of a merchant bank<br />Holds equity in over 800 companies worldwide<br />13<br />
  14. 14. IFC’s Global and Africa Reach<br />14<br />22 Country offices in Africa, including 4 regional hubs<br />Moscow<br />Almaty<br />Washington<br />Istanbul<br />New Delhi<br />Cairo<br />Mexico City<br />Hong Kong<br />Dakar<br />Port-of-Spain<br />Bogota<br />Nairobi<br />Johannesburg<br />São Paulo<br />Buenos Aires<br />IFC HQ/Hub Offices<br />IFC Operational Centers<br />IFC Country Offices<br />
  15. 15. IFC’s Mining Portfolio<br />$507 million current portfolio comprising 36 projects in 24 countries<br />Major commitment to Africa: Half of our total current portfolio in Sub-Saharan Africa<br />Track record of long-life partnerships with companies<br />Equity represents 54% of portfolio<br />15<br />By Product<br />By Region<br />Gold<br />43%<br />Aluminum &<br />Bauxite<br />9%<br />Copper<br />18%<br />Note: Data as of March 2011<br />
  16. 16. IFC Value-Add in Mining<br />16<br />
  17. 17. Financing & Sustainability Expertise Under One Roof<br />IFC’s package deal brings together world-class talent, a global outlook and a social/environmental mandate to deliver sustainable business solutions; IFC’s team includes financial professionals, mining engineers, environmental specialists, development experts, and communications specialists<br />17<br />IFC Mining<br />Integrated Solutions Combining Capital and Expertise<br />
  18. 18. IFC: The Complete Package; African Examples<br />18<br />IFC Investment & Advisory Services<br />
  19. 19. One Example Closer Up: Allana Potash, Ethiopia<br />Allana Potash is a mineral exploration company focused on Ethiopia<br />Key assets are three licenses in the Danakil Depression near the Eritrean border<br />19<br />
  20. 20. When Does IFC Invest?<br />IFC funds projects in all stages of development<br />20<br />IFC in the Project Life Cycle<br />Project<br />Discovery<br />Project<br />Finance<br />Mature Production<br />Value<br />Early<br />Exploration<br />Senior Debts and <br />Equivalents<br />Equity/ <br />Mezzanine<br />Equity<br />Time<br />
  21. 21. A Broad Range of Financial Products<br />21<br />Equity<br />Mezzanine / Quasi-Equity<br />Senior Debts & Equivalents<br />
  22. 22. IFC as a Strategic Partner: Equity Investments<br />22<br />General IFC Offerings and Criteria<br />
  23. 23. IFC as a Strategic Partner: Debt Investments<br />23<br />General IFC Offerings and Criteria<br />
  24. 24. Past IFC Investments<br />24<br />Ahafo<br />$75,000,000<br />Senior Term Loan<br />Mandated Lead Arranger<br />Tanzania<br />Chile<br />South Africa<br />Ethiopia<br />Peru<br />Ghana<br />Guinea<br />Peru<br />Newmont / Yanacocha<br />Escondida Copper<br />Lonmin<br />$32,300,000<br />Senior Term Loan<br />Williamson<br />Simandou/RioTinto<br />Dallol<br />MineraQuellaveco<br />$94,600,000<br />Senior Term Loan<br />$40,000,000<br />Senior Term Loan<br />$100,000,000<br />Senior Term Loan<br />$35,000,000<br />Equity<br />$10,000,000<br />Equity<br />$94,000,000<br />Syndicated Loan<br />$42,000,000<br />Equity<br />$15,000,000<br />Equity<br />$50,000,000<br />Syndicated Loan<br />$50,000,000<br />Equity<br />$10,000,000<br />Equity<br />$330,000<br />Equity<br />Equity Investor<br />Equity Investor & Lender<br />Equity Investor<br />Equity Investor & Lender<br />Equity Investor<br />Equity Investor & Lender<br />Equity Investor & Lender<br />2011<br />2006<br />2006<br />1993 and 1999<br />1993-2011<br />2010<br />1989 and 1999<br />2006<br />Peru<br />Morocco<br />Anteres Minerals<br />Achmmach Tin<br />$12,800,000<br />Equity<br />$5,700,000<br />Equity<br />Equity Investor<br />Equity Investor<br />2009<br />2010<br />
  25. 25. Advisory Services<br />IFC relies on 50+ years of experience of working in developing countries to develop practical, sustainable business solutions for its clients<br />25<br />
  26. 26. IFC Africa and Global Mining Team<br />26<br />Tom Butler<br />Global Head, Mining<br />Washington DC<br />+1.202.473.5989<br /><br />Tom Bruington<br />Chief Engineer<br />Washington DC<br />+1.202.473.0651<br /><br />Africa<br />Latin America<br />Asia<br />MENA / CEU<br />Louis Vos<br />Washington DC<br />+1.202.458.5934<br /><br />Stephan Vermaak<br />Johannesburg<br />+27.11.731.3148<br /><br />Brian McNamara<br />Washington DC<br />+1.202.473.0461 <br /><br />Robin Weisman<br />Washington DC<br />+1.202.473.0174<br /><br />Christian Mulamula<br />Washington DC<br />+1.458.1218 <br /><br />KarstenFuelster<br />Jakarta<br />+62.21.2994.8036 <br /><br />GustafLilliehook<br />Istanbul<br />+46.708.559.338 <br /> <br />Juan Jose Rossel<br />Lima <br />+51.1.611.2520 <br /><br />
  27. 27. 27<br />Annex: IFC Deals In Africa<br />
  28. 28. Deals Done in Africa: FY1999-2011<br />28<br />
  29. 29. Deals Done in Africa: FY1999-2011 (Contd.)<br />29<br />