1. 10753682_410753682_210753682_2 Deal-making in Africa 16 June 2011 Sean Chilvers (Macquarie), Adam Hing (Control Risks), David Eliakim (Mallesons) and Paul Schroder (Mallesons)

2. 1 © Mallesons Stephen Jaques Deal-making in Africa  Background - Mallesons  Understanding the market - Macquarie  Being honest about the risks – Control Risks  Navigating the legal minefields – Mallesons  Bringing it all together - Panel  Q & A - Panel

3. 2 © Mallesons Stephen Jaques Background – Paul Schroder, Mallesons  DFAT statistics on Australian investment in Africa: ⇒ 2010 surge: 48 new companies, 143 new projects ⇒ Australia represented 10% of all M&A activity in Africa by deal value (2010) ⇒ A$19bn investment pipeline ⇒ Australian exports to Africa – A$5.8bn in 2009-10  Our own recent experience is the increasing importance of Africa and in particular Africa resources to our clients: ⇒ high commodity prices ameliorates political risk and infrastructure costs ⇒ Africa welcomes Chinese/Indian investment ⇒ risk tolerance and technical expertise of Australian miners  Some of the most interesting recent Australian M&A deals have involved companies with all their resources in Africa. These include: ⇒ Xstrata’s successful $514 million bid for the shares in Sphere Minerals, an iron ore miner in Mauritania ⇒ Rio Tinto’s successful takeover of Riversdale with its Mozambique coal assets ⇒ Paladin’s bid for NGM Resource’s uranium assets in Niger, which went before the Takeover Panel who declined to find the invasion by al-Qaeda in the Maghreb (North Africa) was force majeure/MAC

4. 3 © Mallesons Stephen Jaques Understanding the market – Sean Chilvers, Macquarie  Three of the world’s 10 fastest-growing economies over the past five years have been from sub- Saharan Africa  The International Monetary Fund predicts that four of the top 10 fastest-growing economies in the next five years will also be from Africa  Of the 324 fastest-growing cities, 24.4% are located in Africa and the Middle East  Over the past decade sub-Saharan Africa’s real gross domestic product growth rate jumped to an annual average of 5.7%, up from 2.4% over the previous two decades  Africa’s consumer spending is predicted to total $US1.4 trillion by 2020, with around 128 million households having discretionary income and more than half living in cities  Foreign direct investment in Africa has increased from US$10 billion in 2000 to US$59 billion in 2009, significantly larger than the flow to China if measured relative to gross domestic product  c.220 ASX listed companies are mining and exploration companies active in c. 42 African countries  Australian investment in African resources has grown to c. A$20 billion 1  There are a number of opportunities for Australian companies to invest in infrastructure projects resulting from the development of a growing number of resource projects in Africa Source: Australia Africa Mining Industry Group 1 Australian Department of Foreign Affairs and Trade

5. 4 © Mallesons Stephen Jaques Resource rich Africa Driving mining and infrastructure investment opportunities 85% of the world’s platinum reserves are in South Africa alone The Zambia/DRC copper belt is among the richest in the world with Zambia ranking 9 th in world production Three of the world’s top five diamond producing countries are in Africa: Angola, Botswana, South Africa One of the top gold producing regions in the world is West Africa Algeria ranks 5th in global natural gas production Nigeria is the 14th largest oil producer in the world; Angola ranks 17th Niger and Namibia are in the top six uranium producing countries in the world US$93.3 billion needed to improve Africa’s infrastructure of which :  US$40.8 billion to boost power supply  US$21.9 billion to improve water supply and sanitation  US$18.2 billion to develop transport  US$9.0 billion to improve information and communication technology  US$3.4 billion to address irrigation requirements US$31 billion a year Africa’s infrastructure funding gap, mostly in the power sector Source: MINEAfrica, The International Bank for Reconstruction and Development / The World Bank 20 Iron ore mines to open in the West Africa region (Liberia, Guinea, Sierra Leone, Cameroon) by 2015; aggregate output could reach 600-million tonnes a year (equivalent to 62% of global production in 2012 and 38% in 2015) 75% of South Africa's energy needs are directly derived from coal and 92% of coal consumed on the African continent is produced in South Africa

6. 5 © Mallesons Stephen Jaques Record years for mining financings Equity capital raised globally for mining companies has increased dramatically since 2005… Source: Dealogic Global equity capital raised by mining companies from 2000 to 2010 (US$ billions) Rio Tinto ($15.9bn) Barrick Gold (US$4.0bn) Xstrata (US$5.8bn)

7. 6 © Mallesons Stephen Jaques Record years for mining financings … with US$7.9 billion raised in Australia in 2010 Source: Dealogic Includes Ivanhoe Mines (US$1.2bn) and Red Back Mining (US$0.6bn) Includes CONSOL Energy (US$1.9bn) Includes UC Rusal (US$2.4bn) Global equity capital raised by mining companies: 2010 (US$ billions) 303 / 2,11052427361610121 Number of financings Includes Anglo Platinum (US$1.7bn) and AngloGold (US$1.6bn) Includes African Barrick Gold (US$0.9bn) 12.5 TSX 4.5 TSXV

8. 7 © Mallesons Stephen Jaques Market dynamics Mining market comparison – 2010 Number of issuers listed Quoted market value (US$ billions) Equity capital raised (US$ billions) Number of financings Number of new listings ASX666684.87.952475 TSX353520.912.530359 TSXV1,17842.0 5.32,110149 LSE52624.45.3163 AIM14527.92.212123 JSE59442.04.5104 HKEx50329.46.4368 NYSE/ NYSE Amex 1351,547.17.0279 Source: Dealogic

9. 8 © Mallesons Stephen Jaques Dual primary listing of Gold One International Limited  Gold One was listed on 18 May 2009 after ASX listed BMA Gold Limited implemented a reverse takeover of JSE listed Aflease Gold Limited  Gold One is an African focussed gold producer and explorer, and owns a producing gold mine and a gold development project in South Africa, as well as a gold exploration project in Namibia  Subsequent to its listing, Gold One received approval to amend its listing status on the JSE to a secondary listing during February 2010  During September 2009, Gold One raised A$30 million through a private placement of shares  During May 2011, Gold One announced the execution of a transaction implementation agreement with a Chinese consortium of investors  The cash consideration premium of 27.9% to the closing price and 25.1% premium to the 30-day VWAP of Gold One shares on the ASX on 12 May 2011 reflects the consortium’s serious intention to implement the takeover Australian incorporated first dual primary listing on the ASX and the JSE (ASX/JSE: GDO) Financial Adviser, Transaction Sponsor, and Sponsor 2009 Reverse take-over of JSE listed Aflease Gold by ASX listed BMA Gold and dual primary foreign inward listing of Gold One on the JSE and ASX A$100 million CONSIDERATION Aflease Gold / Gold One 2009 A$30 million Gold One’s general and specific issue of shares for cash to foreign institutions Gold One International Limited CONSIDERATION Financial Adviser, Transaction Sponsor, and Sponsor 2011 A$0.55 per share Takeover offer by a consortium of Chinese Investors including a US$150 million cash subscription by the consortium Gold One International Limited OFFER CONSIDERATION Financial Adviser, Transaction Sponsor. and Sponsor

10. 9 © Mallesons Stephen Jaques Rio Tinto 73.4% Tata Steel 26.3% Minority Shareholders 0.3% Rio Tinto A$4 billion acquisition of Riversdale Mining  On 23 December 2010 Rio Tinto announced a recommended cash takeover offer for Riversdale for $16 per share (A$3.9 billion)  On 10 March 2011, Rio Tinto announced that it would increase its offer to $16.50 if it reached 50% within 2 weeks  On 29 March 2011, Rio Tinto declared its offer unconditional at $16 with a relevant interest of 41%, and stated that the offer would increase to $16.50 if Rio achieved more than 47% acceptances before the end of the offer period  On 6 April 2011, Rio Tinto went through 47% acceptances and hence increased its offer to $16.50 (A$4.0 billion)  Two days later Rio Tinto’s interest exceeded 50% and it assumed control of Riversdale  On 29 April 2011, Rio Tinto announced that it had gained control of the Riversdale board and would seek to de-list the company  The offer has now been declared final and will close on 17 June 2011, with Rio Tinto currently owning 73.4%, Tata Steel 26.3% and free float of 0.3% Transaction Overview Macquarie is currently advising Rio Tinto on its A$4.0 billion acquisition of Riversdale Mining, delivering Rio control of substantial Tier 1 coking coal assets in Mozambique Riversdale’s Share Register Pre-offerCurrent Tata Steel 24.4% Passport Capital 16.1% Minority Shareholders 43.9% CSN 15.6%

11. 10 © Mallesons Stephen Jaques  The African investment climate is the best it has been in at least a decade  Africa’s current economy is comparable to where Australia was c. 20 years ago  The case for Africa presents a number of opportunities in terms of resource exploitation, as well as resources and infrastructure development  The Australian investment community presents a deeper pool of sophisticated investors (specifically in the resources sector) relative to African markets  The global mining industry is reliant on regions such as Africa as a future source of commodities  Australian firms are well place to provide capital and capability to exploit African opportunities Opportunities abound “West Africa is the new Pilbara for iron ore mining as well as a battleground between established miners and Chinese firms seeking to enter the region” Miningmx “India has stepped up its push to deepen its economic ties with Africa and emerge from the shadow of rival China by offering $5bn in new credit lines to the continent.” Miningmx

12. 11 © Mallesons Stephen Jaques Australia Africa Business Council Deal making in Africa – Being honest about the risks Adam Hing – Director Strategic Consulting

13. 12 © Mallesons Stephen Jaques Since 1975 we have worked in over 130 countries for more than 5,000 clients An international consultancy with 34 offices worldwide National and multinational clients in a wide variety of industrial and service sectors, governments and NGOs About us

14. 13 © Mallesons Stephen Jaques Worldwide office network

15. 14 © Mallesons Stephen Jaques Our service areas Information Investigation Security Response  Pre-entry country studies  Online political analysis and forecasting  Online travel security advice  Due diligence  Competitor intelligence  Vetting services  Fraud prevention and investigation  Litigation support  Information leaks  Asset tracing  Business and reputational audit  Sabotage  Protection of people, assets and information  Risk analysis and evaluation  Security planning and consultancy  Security design and implementation  24 hour manned hotline service  Crisis management planning  Response: extortion, product contamination, kidnap and ransom  Post-incident evaluation and victim rehabilitation

16. 15 © Mallesons Stephen Jaques Agenda  Three of the top risks when doing deals in Africa: ⇒ Political stability ⇒ Infrastructure ⇒ Corruption  Piecing together the risks: ⇒ Political and macro economic stability ⇒ Integrity/corruption ⇒ Regulatory issues ⇒ Social & environmental issues ⇒ Availability of reliable infrastructure ⇒ Security

17. 16 © Mallesons Stephen Jaques Risk 1: Political stability

18. 17 © Mallesons Stephen Jaques Risk 2: Infrastructure  Insufficient infrastructure single largest constraint on private sector growth  Unreliable electricity and inadequate roads especially burdensome/ problematic for 2011  These problems will only increase as mining expands into ever more remote regions

19. 18 © Mallesons Stephen Jaques Risk 3: Corruption  African countries and corruption have a long and unhealthy relationship  During 2010, 64.5% of approximately 15,000 transactions in Tanzania were characterised by requests for bribery payments  Corruption ⇒ “Dishonest or fraudulent conduct by those in power, typically involving bribery” Oxford Dictionary 3 rd edition  Bribe ⇒ “Dishonestly persuade (someone) to act in one’s favour by a gift of money or some other inducement” Oxford Dictionary 3 rd edition

20. 19 © Mallesons Stephen Jaques Extractives and corruption  More often than not extractives companies are operating in countries with a high risk of corruption; often corruption is endemic  The extractives industry will require the issue of many licences, concessions, permits and consents, which are nearly always discretionary and involve public officials  There is a very high use of agents and third parties, many of whom are operating in high-risk countries and dealing with public officials  The vast majority of cases involve agents paying bribes on behalf of the parent company  Vetco International (Panalpina case)

21. 20 © Mallesons Stephen Jaques It’s not just about legal risk Project Fraud risk Security risk Reputation risk Political risk Legal risk Commercial risk

22. 21 © Mallesons Stephen Jaques Issues – Big picture  Political and macro economic stability  Integrity/corruption  Regulatory issues  Social & environmental issues  Availability of reliable infrastructure  Security

23. 22 © Mallesons Stephen Jaques Political and macro-economic threats  The political environment and key players  Regulatory bodies  Political stability  Prospects for the next legislative and presidential election cycles  Macro-economic policy-making agenda  Foreign relations  Insurable risks

24. 23 © Mallesons Stephen Jaques Operational environment Regulatory and governance threats  Regulatory environment  Security of tenure  Taxation and royalty schemes and potential changes to these regimes  Bureaucratic and judicial systems Social and environmental threats  Overview of society  Land access and ownership issues  Labour and employment issues  Artisan mining  Social and environmental issues  International and local NGO and media scrutiny Infrastructure threats  Power supplies  Transport and logistics  Public health situation  Information and telecommunications facilities

25. 24 © Mallesons Stephen Jaques Security threat environment  Terrorism  Organised crime  General crime  Political and socio-economic unrest  Labour strikes and unrest  Public and private security provision

26. 25 © Mallesons Stephen Jaques Navigating the legal minefields – David Eliakim, Mallesons  Usual cross-border issues associates with multiple regulators ⇒ Australia:  FIRB  ASX  ACCC ⇒ China outbound investment approvals ⇒ Africa:  South Africa as a case-study  Exchange Controls  Competition authorities  JSE  Takeover Regulation Panel  Department of Mineral Resources ⇒ US$25bn MTN/Bharti mobile phone deal fell over when South African and Indian currency control authorities could not agree

27. 26 © Mallesons Stephen Jaques Navigating the legal minefields – David Eliakim, Mallesons

28. 27 © Mallesons Stephen Jaques Asia-Pacific competing as a place where Africa raises capital: ASX & HKSE – David Eliakim, Mallesons  Historic dominance of LSE (AIM) and TSX  Emergence of ASX  HKSE as the future ⇒ More capital was raised on the HKSE (US$52.8 billion) in 2010 than on all the US exchanges combined (US$42 billion). ⇒ Our Hong Kong offices have seen a flurry of resources IPOs on the HKSE which they attribute to factors such as the resources boom generally and the desire of issuers to associate themselves with the China story. ⇒ The HKSE has developed a reputation for resources, with Singapore having more success in REITs

29. 28 © Mallesons Stephen Jaques Bringing it all together: Panel members comments on each others’ presentations – Paul Schroder, Mallesons

30. 29 © Mallesons Stephen Jaques Q&A – Paul Schroder, Mallesons