Transcript Slide 1

Africa – Where to from here?
Mark Cohen
Resource Banking Africa
Standard Bank’s Corporate and Investment Banking Division
2008
Standard Bank is a global organisation with expertise in all aspects
of banking and financial advisory services
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 Corporate and
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African roots with a global reach, and 145 years experience on the African continent
Investment Banking
Provides corporate and
investment banking and
related services to large
corporates
Services offered across
our African and
international bank
networks
 Personal and Business
Banking
 Provides banking,

investment, insurance
and other financial
services to individuals
and small to mediumsized enterprises
Products offered
throughout South Africa
and in certain African
countries
 South African
head quartered financial services company. With over 50,000 employees globally
 Global
 Investment
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Management and Life
Insurance
Subsidiary, Liberty Life,
provides a range of life
cover and investment
products to individual
and corporate clients
presence operating from 17 African countries and 22 other countries globally
 Largest African banking group by assets, market capitalization and earnings
- Total assets of USD150 bn*, Market capitalisation of USD17 bn* Headline earnings of USD1.7 bn**
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* At 31 December 2007
** For the year ended 31 December 2007
Source: Standard Bank analysis
African achievements and awards
2007/8 Bank of the Year for Emerging Markets – The Banker Magazine
2007/8 Ranked best sub-Saharan bank – The Banker Magazine
2007 Ranked 106th in the Top 1 000 World Banks Awards – The Banker Magazine
2007 Best Project Finance House in Africa – Euromoney Magazine
2007 Best Debt house in Africa – Euromoney Magazine
Standard Bank has a focused and dedicated Global Mining and
Metals Capability
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Capabilities
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The Mining & Metals’ team provides financing, advisory, trading and hedging services exclusively to the mining, metals and
minerals industries
The Mining & Metals’ team of professionals is based in Johannesburg, London, New York, Sydney and Shanghai and is
supplemented by staff in Moscow
Products & Services
Advisory Services
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Mergers and acquisitions
Corporate finance and strategic advice
Divestitures and asset sales
Valuations and fairness opinions
Project finance and debt-related advisory
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Financing Services
Arranger and agent for:
Recourse and non-recourse project finance
Structured hedging and trading programs
Asset-backed finance
Corporate credit facilities
Privatisations
Key strengths
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Comprehensive industry knowledge and relationships
Global coverage including cross border capability and emerging market expertise
Extensive mining and metals financing and advisory experience
Ability to lever off other Resource Banking products
Deals of the year awards
Equinox’s Lumwana Copper Project
Talvivaara Nickel Project
US$583.8 million senior and
subordinated project finance
US$320 million senior
project finance
Africa’s largest copper mine financing
Finland’s first nickel mine
African Footprint
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 Standard Bank Group
trades under the name
Standard Bank in
Angola, Lesotho,
Mauritius, Malawi,
Mozambique, Namibia,
South Africa and
Swaziland;
 Stanbic Bank in
Botswana, Democratic
Republic of Congo,
Ghana, Madagascar,
Tanzania, Uganda,
Zambia and Zimbabwe;
 Stanbic IBTC in Nigeria
 CfC Stanbic Holdings
in Kenya
Corporate &
Investment
Banking
Personal &
Business
Banking
South Africa
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Angola
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Botswana
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Congo
✔
Ghana
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Kenya
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Lesotho
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Malawi
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Mauritius
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Mozambique
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Namibia
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Nigeria
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Swaziland
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Tanzania
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Uganda
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Zambia
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Zimbabwe
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Country
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African production and Chinese consumption – a Balancing Act
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African Supply Growth
 The following
‘Slow China’: China growth 8.5%,
scenarios were
presented at last
years Mine Africa and
the potential impacts
on price
‘Fast China’: China growth 16% BRI 9.5%
2,500
“Africa delivers”
Cu (kt)
2,000
 The scenarios have
1,500
1,000
“African projects
hit bottlenecks”
500
fundamentally
changed in the space
of 3 months
0
2005
2006
2007
2008
2009
2010
2011
Copper Consumption - China
7,000
 Apparent Global
“China marches on”
Cu (kt)
Demand has fallen
dramatically and
whilst Africa has
under-delivered and
looks to continue this
way for some time
“China slows”
5,000
3,000
Source: CRU
2005
2006
2007
2008
2009
2010
2011
Copper price: High-price period or short-lived spike?
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 The historical high
and low spikes have
been pronounced
Previous ‘spikes’ are long-lived
BUT so are the lows
450
400
 The historical periods
350
of high prices and low
prices have been
lengthy
?
 Last year the question
was: Is a USD 1.201.50/lb a realistic long
term price forecast for
copper? Projects
have been using 1.80
– 2.20/lb, the question
now begs are we
returning to a
protracted stay at old
long-term prices
US¢/lb (2006$)
300
250
200
?
150
100
50
0
1900
1910
Source: CRU
1920
1930
1940
1950
1960
1970
1980
1990
2000
2010
2020
2030
Growth down – commodities down
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WTI crude and previous downturns
 Growth outlook
deteriorating
$/bbl
44
Early 80’s (tight US monetary policy)
2001- 2003 dot-com, 9/11
Early 1990's (Housing market
and credit problems)
35
 The current Global
1998 Asian crises
26
17
Sources: Standard CIB Global Research; Bloomberg
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
8
1983
crisis is a combination
of the 4 highlighted
downturns
US monetary and credit conditions
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2.4
bps
1.2
Restrictive conditions
US monetary policy
conditions still bearish
despite rate cuts
 The negative factors
0
-1.2
Monetary conditions using the Fed funds rate
Oct-08
May-08
Dec-07
Jul-07
Feb-07
Sep-06
Apr-06
Nov-05
Jun-05
Jan-05
Aug-04
Mar-04
Oct-03
May-03
Dec-02
Jul-02
Feb-02
Sep-01
Apr-01
Nov-00
Jun-00
Jan-00
-2.4
Expansionary conditions
Monetary conditions account for credit problems
Source: Standard CIB Global Research
720
bps
540
Perceived default
probability has
increased and CDS
spreads on the rise
360
South Africa
BHP
Sources: Standard CIB Global Research; Bloomberg
Rio Tinto
Brazil
China
Nov-08
Oct-08
Sep-08
Aug-08
Jul-08
Jun-08
May-08
Apr-08
Mar-08
Feb-08
Jan-08
Dec-07
Nov-07
Oct-07
Sep-07
Aug-07
Jul-07
Jun-07
Apr-07
Mar-07
Feb-07
Jan-07
0
May-07
180
Consumer confidence and spending decline
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Consumer confidence indices
Index
4.5
100
Millions
4
80
3.5
60
US
EU
Japan
China
Sources: Standard CIB Global Research; Bloomberg
2005
2006
2007
Dec
Oct
Nov
Sep
Aug
Jun
Jul
May
Apr
Feb
Mar
2.5
Jan
Sep-08
Feb-08
Jul-07
Dec-06
Oct-05
Mar-05
Aug-04
40
May-06
3
Jan-04
 The negative factors
120
Motor vehicle sales (US, EU, Japan, China, S. Korea)
2008
Sources: Standard CIB Global Research; Bloomberg
3bn people could more than double energy consumption and by
inference metals and minerals
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Human development vs. crude oil consumption
 There are still positives
HDI
1
0.87
0.74
0.61
0.48
0
1
2
3
4
5
6
7
Tonnes of oil equivalent per capita
Sources: Standard CIB Global Research; BP; IMF
8
9
10
11
12
Outlook – recovery on the horizon
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 Global financial risk remains elevated
 There are substantial recovery and stimulus packages in the US, Europe and China
 Demand and supply-side of the economy under severe pressure in developed markets
 EM commodity demand should remain, but
 Demand growth should be lower
 Financial risk is spilling over into Emerging Markets real GDP growth
 Look out for Emerging Markets Foreign Exchange
 Should LIBOR rates decline, and policy stays expansionary, support could start filtering through.
Brunt of the MP stance felt:
 Almost immediately by gold
 With a lag of 12 months on energy
 With a lag of 18 months on industrial metals
Africa snapshot – Never before has Africa been so well poised
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Economist, May 2000
Average real GDP growth
10
Per cent
8
6
4
2
0
A sia
Broad-based GDP growth
A frica
M iddle
East
CEE
Wo rld
Latin
A merica
G7
Euro
area
2007e
2008f
Fiscal balance
7
11
% of GDP
6
Per cent
5
4
3
6
1
2
-4
1
97-02
0
1960s
1970s
1980s
1990s
Oil importers Oil exporters
2000s
2003
2004
2005
2006
Africa
Oil importing African countries
Oil exporting African countries
Africa snapshot – The wait has been long
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Reserves to imports
80
70
% of GDP
60
50
40
30
20
10
0
1970 1974 1978 1982 1986 1990 1994 1998 2002 2006
Asia
6
% of GDP
4
2
0
-2
-4
-6
-8
1988
1992
Asia
10
8
6
4
2
97-02
1996
2000
Africa
2004
2008f
2003
2004
2005
2006
2007e
Africa
Oil importing African countries
Oil exporting African countries
GDP per capita
8
1984
12
Africa
Current account balance
1980
Reserves/months of imports
External Debt
2008f
Cost Curves and Africa’s Mines
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 African projects are at
$/mt
different points of the
cost curve
8,500
7,500
6,500
Copper
5,500
 Average estimated
cost of production
(including
depreciation) for
African Copper
projects is USD1.40/lb
in 2006 money
4,500
3,500
2,500
1,500
16324
16181
15728
15096
14780
14069
13016
12484
12028
11502
11078
10005
9144
8496
7240
3813
2878
-500
6.061
500
cumulative production
copper cost curve
 How will these African
$/mt
p50
p70
p90
$/mt
40,000
3,500
35,000
3,000
30,000
2,500
Zinc
25,000
20,000
15,000
2,000
1,500
cumulative production
current Nickel co st curve
p70
p90
cumulative production
current price
Zinc cost curve
p50
zinc spot
p70
11824
11279
10835
10245
10020
9756
7992
7297
6953
5075
4516
4069
3628
3221
2415
319
1687
1606
1455
1354
1265
1240
1115
817
766
-
682
-
454
500
404
5,000
1694
1,000
10,000
64.1
Nickel
projects as well as
new greenfields and
brownfields projects
be affected by
dropping commodity
prices? From both
operating and capital
costs
current copper price
African opportunities/project activity going forward
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 Short to medium term “wait and see” with pockets of opportunities
 Industry consolidation via:
 Strategic Partnering and Investment
 Merging of Explorers and Juniors
 Acquisitions of green and brownfield projects
 Strategic Partnering and Acquisitions to be done by:
 Multinational Resource Companies
 Chinese, Indian and Russian Resource Companies
 Renewed focus on “quality” assets and projects
 Africa to remain a swing producer/supplier
Some Insights and Challenges
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 Internal bureaucracy
 Differential legislation and governance
 Mineral rights
 Young democracy
 Resurgence in violent upheaval
 Skewed views of mining companies
 Citizen empowerment, Indigenisation and Economic Empowerment
Disclaimer
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