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Canada in Africa – Benchmarking Africas Progress and Development Against Canadian Best Practice Bruce Shapiro President Canada-South Africa Chamber of.

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Presentation on theme: "Canada in Africa – Benchmarking Africas Progress and Development Against Canadian Best Practice Bruce Shapiro President Canada-South Africa Chamber of."— Presentation transcript:

1 Canada in Africa – Benchmarking Africas Progress and Development Against Canadian Best Practice Bruce Shapiro President Canada-South Africa Chamber of Business & Principal, MineAfrica Toronto, Ontario, Canada

2 Presentation Outline Key trends in the Canadian mining sector Key trends in the Canadian mining sector Raising funds – exchange pros & cons Raising funds – exchange pros & cons The high risk culture of Canadas junior mining sector The high risk culture of Canadas junior mining sector Canadians in Africa Canadians in Africa Useful websites Useful websites Case study – First Uranium Case study – First Uranium

3 Key Trends in the Canadian Mining Sector Canadian mining and processing industry contributes 4% of the national gross domestic product Canadian mining and processing industry contributes 4% of the national gross domestic product Total production is $60 billion – most of which is exported Total production is $60 billion – most of which is exported 200 producing mining operations 200 producing mining operations World leader in potash and uranium World leader in potash and uranium Top 5 in aluminum, nickel, pgm, zinc, diamonds Top 5 in aluminum, nickel, pgm, zinc, diamonds

4 Key Trends continued… Global acquisitions of Canadian miners Global acquisitions of Canadian miners CVRD - INCO, Xtstrata - Falconbridge, Norilsk/Xstrata – LionOre CVRD - INCO, Xtstrata - Falconbridge, Norilsk/Xstrata – LionOre Leads to increased mergers of mid-sized producers Leads to increased mergers of mid-sized producers Also leads to profit-taking by shareholders which frees up money available to re-invest in junior miners (which grow into mid-sized miners) Also leads to profit-taking by shareholders which frees up money available to re-invest in junior miners (which grow into mid-sized miners) Offshore exploration and acquisition to diversify portfolios Offshore exploration and acquisition to diversify portfolios Corporate social responsibility Corporate social responsibility

5 Key Trends continued… Diamond production – 17.5 million carats/year Diamond production – 17.5 million carats/year Ekati, Diavik, Jericho in production Ekati, Diavik, Jericho in production Snap Lake, Victor, Gahcho Kue planned Snap Lake, Victor, Gahcho Kue planned Ontario Bill 187 – Diamond Royalty Bill Ontario Bill 187 – Diamond Royalty Bill Unpredictable tax regime Unpredictable tax regime Only one diamond company in Ontario Only one diamond company in Ontario Increases royalty rate from 5% to 13% after $1 billion investment decision made Increases royalty rate from 5% to 13% after $1 billion investment decision made Ontario mining tax is 5% for new remote mines, and 10% for non-remote mines Ontario mining tax is 5% for new remote mines, and 10% for non-remote mines

6 Analyzing the High Risk Culture of Investment in Canadas Junior Mining Sector Flow through share financing Flow through share financing 1,100 junior mining exploration companies 1,100 junior mining exploration companies Politically stable, safe, mineral rich Politically stable, safe, mineral rich However, Canadian companies are looking at other continents (diversification) However, Canadian companies are looking at other continents (diversification) Canadians tolerance for risk Canadians tolerance for risk Exploration and service sector expertise – Toronto-based and global Exploration and service sector expertise – Toronto-based and global

7 TSX – TSX Venture More mature, sophisticated market for mining finance, biggest in the world More mature, sophisticated market for mining finance, biggest in the world TSX Venture (junior exchange) – good for early stage projects TSX Venture (junior exchange) – good for early stage projects TSX – good for later stage, or producing mine or greater capital requirements TSX – good for later stage, or producing mine or greater capital requirements Excellent service sector in Toronto – exploration, technical, legal, financial, marketing, analysts, media Excellent service sector in Toronto – exploration, technical, legal, financial, marketing, analysts, media Good liquidity on secondary market – traded $369 billion in mining company stocks in 2006 Good liquidity on secondary market – traded $369 billion in mining company stocks in 2006

8 Global Mining Financing Trend 1999-2006 Source: Gamah International, 1999-2006, compiled by TSX Equity raised (US$ Billions) 52%36%28% 26% 43% Percentage of worldwide total raised through TSX and TSX Venture 47% There was a dramatic increase in equity financing for mining companies in 2006 38% of total world equity capital for mining in 2006 was raised for TSX/TSX Venture issuers 41% 38%

9 Number of Equity Financings 5-Year (2002 to 2006) Total = 10,261 Deals Value of Equity Financings 5-Year (2002 to 2006) Total = US$64.9 Billion Source: Gamah International, 2002- 2006 Compiled by TSX Group TSX Group is the leading exchange group for mining financing

10 LSE - AIM Listing rules are relatively short and simple Listing rules are relatively short and simple Affinity and familiarity with Africa Affinity and familiarity with Africa Logistics – better time zone Logistics – better time zone Large capital pool Large capital pool Less stringent listing requirements than TSX Less stringent listing requirements than TSX Less expensive than TSX Less expensive than TSX

11 JSE – ALT-X Lower fee listing jurisdiction Lower fee listing jurisdiction Familiarity of investors with Africa and mineral regions Familiarity of investors with Africa and mineral regions Rapidly increasing involvement in resource companies by pension funds and asset mgt companies Rapidly increasing involvement in resource companies by pension funds and asset mgt companies Lower multiples for resource companies than one gets on AIM or TSX Lower multiples for resource companies than one gets on AIM or TSX Investor pool is smaller than Toronto or London Investor pool is smaller than Toronto or London It is a mature financing market but primarily for advanced-stage companies not exploration It is a mature financing market but primarily for advanced-stage companies not exploration Lower liquidity for mining stocks Lower liquidity for mining stocks

12 CNQ Canadas newest alternative exchange Canadas newest alternative exchange Started in 2003 Started in 2003 Market cap just reached $1 billion Market cap just reached $1 billion Considerably lower listing fees Considerably lower listing fees Minimal ongoing fees Minimal ongoing fees Simple listing procedure Simple listing procedure Less liquidity Less liquidity Minimal marketing benefits or recognition from listing Minimal marketing benefits or recognition from listing

13 Canadians in Africa Canadians are in Africa in a big way in mining and infrastructure - $30 billion Canadians are in Africa in a big way in mining and infrastructure - $30 billion Bombardier – lead partner in Gautrain - Bombardier – lead partner in Gautrain - SNC Lavalin – Pebble Bed Reactor - SNC Lavalin – Pebble Bed Reactor - Sherrit/Dynatec – Ambatovy Nickel Project in Madagascar Sherrit/Dynatec – Ambatovy Nickel Project in Madagascar CIC Energy Corp.– coal plant in Botswana CIC Energy Corp.– coal plant in Botswana Alcan – COEGA aluminum smelter - Alcan – COEGA aluminum smelter - Hatch – South African port infrastructure Hatch – South African port infrastructure MAG Industries – hydro plant in DRC MAG Industries – hydro plant in DRC

14 Canadians in Africa continued… 150 TSX listed mining companies in Africa active in 37 African countries 150 TSX listed mining companies in Africa active in 37 African countries Anooraq, Anvil, Banro, Barrick, Cassidy Gold, Dynatec, Etruscan, First Uranium, Forsys Metals, Goldbelt Resources, Homeland Energy, High River Gold, Hunter Dickinson, MAG Industries, Nevsun Resources, Platinum Group Metals, Riverstone Resources, Rockwell Diamonds, SouthernEra Diamonds, SXR Uranium One, Teal Exploration and Mining Anooraq, Anvil, Banro, Barrick, Cassidy Gold, Dynatec, Etruscan, First Uranium, Forsys Metals, Goldbelt Resources, Homeland Energy, High River Gold, Hunter Dickinson, MAG Industries, Nevsun Resources, Platinum Group Metals, Riverstone Resources, Rockwell Diamonds, SouthernEra Diamonds, SXR Uranium One, Teal Exploration and Mining

15 Canadians in Africa continued… A total of $45 billion of new mining investments planned for next five years A total of $45 billion of new mining investments planned for next five years Canadians accounting for $13 billion of this total Canadians accounting for $13 billion of this total By 2010 Canadian mining interests in Africa will double By 2010 Canadian mining interests in Africa will double Canadian companies account for 24% of all exploration expenditures in Africa Canadian companies account for 24% of all exploration expenditures in Africa Capital assets of $10 billion Capital assets of $10 billion Some key countries: Algeria, Angola, Burkina Faso, DRC,, Ghana, Guinea, Kenya, Madagascar, Mali, Nigeria, South Africa, Tanzania, Uganda, Zambia Some key countries: Algeria, Angola, Burkina Faso, DRC,, Ghana, Guinea, Kenya, Madagascar, Mali, Nigeria, South Africa, Tanzania, Uganda, Zambia

16 Mining Companies by Origin Total = 83

17 Source: TSX, based on Gamah International Limited Equity Financing Raised for Mining Companies, Selected Regions of the World,2006 = $11.1 billion Canada - a Global Player: Equity Financing *Includes China Shenhua Energy US$3 billion IPO, 31%

18 Stock of Canadian Capital Mining Assets in Africa 2006 $7 billion 2010 $16-17 billion $100 M to $500 M $500 M to $1 billion More than $1 billion Less than $10M $10 M to $100 M No identifiable assets Sources: Natural Resources Canada

19 Case Study – First Uranium First Uranium Corporation - TSX: FIU First Uranium Corporation - TSX: FIU Listing Date - December 19, 2006 Listing Date - December 19, 2006 Listing Type - IPO Listing Type - IPO $233 Million total proceeds $233 Million total proceeds FIU was the largest mining IPO on TSX in 2006 FIU was the largest mining IPO on TSX in 2006 Market Cap - $1.1 Billion (as at January 29, 2007) Market Cap - $1.1 Billion (as at January 29, 2007) Secondary listing on JSE Secondary listing on JSE

20 Case Study continued… Focused on the development of uranium and gold projects in South Africa Focused on the development of uranium and gold projects in South Africa The re-opening and development of the Ezulwini underground mine and the construction of the Buffelsfontein tailings recovery facility The re-opening and development of the Ezulwini underground mine and the construction of the Buffelsfontein tailings recovery facility Identify and acquire additional uranium projects in South Africa Identify and acquire additional uranium projects in South Africa

21 Case Study continued… Simmer & Jack Mines Limited, a JSE listed company, transferred two development stage uranium and gold assets located in South Africa to First Uranium Simmer & Jack Mines Limited, a JSE listed company, transferred two development stage uranium and gold assets located in South Africa to First Uranium Structured to allow the SA company to access the North American equity markets, while at the same time it will remain compliant with South African Reserve Bank capital control requirements (50% required ownership) and BEE requirements (required ownership is 26%). This is accomplished by Simmer and Jacks controlling interest in First Uranium Structured to allow the SA company to access the North American equity markets, while at the same time it will remain compliant with South African Reserve Bank capital control requirements (50% required ownership) and BEE requirements (required ownership is 26%). This is accomplished by Simmer and Jacks controlling interest in First Uranium

22 Case Study continued… The management team is comprised of several high profile South African mining executives and the board will be supported by four Canadian mining executives. CFO and corporate secretary are based executive offices in Toronto. The management team is comprised of several high profile South African mining executives and the board will be supported by four Canadian mining executives. CFO and corporate secretary are based executive offices in Toronto.

23 Case Study continued… Underwriting syndicate: Underwriting syndicate: RBC Capital Markets, Canaccord Capital Corporation, National Bank Financial Inc., GMP Securities L.P., Sprott Securities Inc., Orion Securities Inc., Raymond James Ltd., Wellington West Capital Markets Inc RBC Capital Markets, Canaccord Capital Corporation, National Bank Financial Inc., GMP Securities L.P., Sprott Securities Inc., Orion Securities Inc., Raymond James Ltd., Wellington West Capital Markets Inc Legal advisors: Legal advisors: Fasken Martineau Fasken Martineau

24 Useful Websites MineAfrica- www.mineafrica.comwww.mineafrica.com Canada-South Africa Chamber of Business www.canadasachamber.com www.canadasachamber.com Prospectors and Developers Association of Canada www.pdac.ca www.pdac.ca Toronto Stock Exchange - www.tsx.comwww.tsx.com Natural Resources Canada - www.nrcan.gc.cawww.nrcan.gc.ca Ontario Ministry of Northern Development & Mines www.mndm.gov.on.ca www.mndm.gov.on.ca

25 Bruce Shapiro President Canada-South Africa Chamber of Business andPrincipalMineAfrica Tel: 416-588-7749 Fax: 416-588-7504 Email: bruce@mineafrica.combruce@mineafrica.com Web: www.mineafrica.comwww.mineafrica.com Web: www.canadasachamber.comwww.canadasachamber.com Special thanks to David Kaiser of TSX, Michel Miron of Natural Resources Canada, Darryl Levitt of Fasken Martineau, and Wayne Floreani, MineAfrica for inputs into this presentation


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