Africa – Where to from here? 2008 Mark Cohen Resource Banking Africa Standard Bank’s Corporate...
-
Upload
roberta-chapman -
Category
Documents
-
view
212 -
download
0
Transcript of Africa – Where to from here? 2008 Mark Cohen Resource Banking Africa Standard Bank’s Corporate...
Africa – Where to from here?
2008
Mark CohenResource Banking AfricaStandard Bank’s Corporate and Investment Banking Division
2
Standard Bank is a global organisation with expertise in all aspects of banking and financial advisory services
South African head quartered financial services company. With over 50,000 employees globally Global 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**
* At 31 December 2007
** For the year ended 31 December 2007
Source: Standard Bank analysis
Corporate and 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 medium-sized enterprises
Products offered throughout South Africa and in certain African countries
Investment Management and Life Insurance
Subsidiary, Liberty Life, provides a range of life cover and investment products to individual and corporate clients
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
African roots with a global reach, and 145 years experience on the African continent
3
Standard Bank has a focused and dedicated Global Mining and Metals Capability
Capabilities
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
Advisory Services
Mergers and acquisitions
Corporate finance and strategic advice
Divestitures and asset sales
Valuations and fairness opinions
Project finance and debt-related advisory
Privatisations
Products & Services
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
Key strengths
Financing Services
Arranger and agent for:
Recourse and non-recourse project finance
Structured hedging and trading programs
Asset-backed finance
Corporate credit facilities
Deals of the year awards
Africa’s largest copper mine financing
US$583.8 million senior and subordinated project finance
Equinox’s Lumwana Copper Project
Finland’s first nickel mine
US$320 million senior project finance
Talvivaara Nickel Project
4
African Footprint
CountryCorporate & Investment
Banking
Personal & Business Banking
South Africa ✔ ✔
Angola ✔
Botswana ✔ ✔
Congo ✔
Ghana ✔ ✔
Kenya ✔ ✔
Lesotho ✔ ✔
Malawi ✔ ✔
Mauritius ✔
Mozambique ✔ ✔
Namibia ✔ ✔
Nigeria ✔
Swaziland ✔ ✔
Tanzania ✔ ✔
Uganda ✔ ✔
Zambia ✔ ✔
Zimbabwe ✔ ✔
Standard Bank Group trades under the name Standard Bank in Angola, Lesotho, Mauritius, Malawi, Mozambique, Namibia, South Africa and Swaziland;
Stanbic Bank in Botswana, Democratic Republic of Congo, Ghana, Madagascar, Tanzania, Uganda, Zambia and Zimbabwe;
Stanbic IBTC in Nigeria
CfC Stanbic Holdings in Kenya
5
Copper Consumption - China
3,000
5,000
7,000
2005 2006 2007 2008 2009 2010 2011
Cu
(k
t)
African Supply Growth
0
500
1,000
1,500
2,000
2,500
2005 2006 2007 2008 2009 2010 2011
Cu
(k
t)
African production and Chinese consumption – a Balancing Act
Source: CRU
The following scenarios were presented at last years Mine Africa and the potential impacts on price
The scenarios have fundamentally changed in the space of 3 months
Apparent Global Demand has fallen dramatically and whilst Africa has under-delivered and looks to continue this way for some time
“Africa delivers”
“African projects hit bottlenecks”
“China marches on”
“China slows”
‘Slow China’: China growth 8.5%,
‘Fast China’: China growth 16% BRI 9.5%
6
Copper price: High-price period or short-lived spike?
?
Previous ‘spikes’ are long-lived BUT so are the lows
The historical high and low spikes have been pronounced
The historical periods of high prices and low prices have been lengthy
Last year the question was: Is a USD 1.20-1.50/lb a realistic long term price forecast for copper? Projects have been using 1.80 – 2.20/lb, the question now begs are we returning to a protracted stay at old long-term prices
Source: CRU
?
0
50
100
150
200
250
300
350
400
450
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030
US
¢/lb
(2
00
6$
)
7
8
17
26
35
44
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
$/bbl
Early 80’s (tight US monetary policy)Early 1990's (Housing market and credit problems)
2001- 2003 dot-com, 9/11
1998 Asian crises
Growth down – commodities down
Sources: Standard CIB Global Research; Bloomberg
WTI crude and previous downturns
Growth outlook deteriorating
The current Global crisis is a combination of the 4 highlighted downturns
8
-2.4
-1.2
0
1.2
2.4
Jan-0
0
Jun-0
0
Nov-0
0
Apr-
01
Sep-0
1
Feb-0
2
Jul-02
Dec-0
2
May-0
3
Oct-
03
Mar-
04
Aug-0
4
Jan-0
5
Jun-0
5
Nov-0
5
Apr-
06
Sep-0
6
Feb-0
7
Jul-07
Dec-0
7
May-0
8
Oct-
08
bps
Monetary conditions using the Fed funds rate Monetary conditions account for credit problems
US monetary and credit conditions
US monetary policy conditions still bearish despite rate cuts
Source: Standard CIB Global Research
Expansionary conditions
Restrictive conditions
The negative factors
Perceived default probability has increased and CDS spreads on the rise
Sources: Standard CIB Global Research; Bloomberg
0
180
360
540
720
Jan-0
7
Feb-0
7
Mar-
07
Apr-
07
May-0
7
Jun-0
7
Jul-07
Aug-0
7
Sep-0
7
Oct-
07
Nov-0
7
Dec-0
7
Jan-0
8
Feb-0
8
Mar-
08
Apr-
08
May-0
8
Jun-0
8
Jul-08
Aug-0
8
Sep-0
8
Oct-
08
Nov-0
8
bps
South Africa BHP Rio Tinto Brazil China
9
Consumer confidence and spending decline
Consumer confidence indices Motor vehicle sales (US, EU, Japan, China, S. Korea)
Sources: Standard CIB Global Research; Bloomberg Sources: Standard CIB Global Research; Bloomberg
2.5
3
3.5
4
4.5
Jan
Fe
b
Ma
r
Ap
r
Ma
y
Jun
Jul
Au
g
Se
p
Oct
No
v
De
c
Millions
2005 2006 2007 2008
40
60
80
100
120
Jan-0
4
Aug-0
4
Mar-
05
Oct-
05
May-0
6
Dec-0
6
Jul-07
Feb-0
8
Sep-0
8
Index
US EU Japan China
The negative factors
10
3bn people could more than double energy consumption and by inference metals and minerals
Sources: Standard CIB Global Research; BP; IMF
0.48
0.61
0.74
0.87
1
0 1 2 3 4 5 6 7 8 9 10 11 12
Tonnes of oil equivalent per capita
HDI
Human development vs. crude oil consumption
There are still positives
11
Outlook – recovery on the horizon
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
12
Africa snapshot – Never before has Africa been so well poised
Economist, May 2000
Broad-based GDP growth Fiscal balance
0
2
4
6
8
10
Asia Africa MiddleEast
CEE World LatinAmerica
G7 Euroarea
Per
cen
t
0
1
2
3
4
5
6
7
1960s 1970s 1980s 1990s 2000s
Per
cen
t
Oil importers Oil exporters
-4
1
6
11
97-02 2003 2004 2005 2006 2007e 2008f
% o
f GD
P
AfricaOil importing African countriesOil exporting African countries
Average real GDP growth
13
Africa snapshot – The wait has been long
External Debt
Current account balance GDP per capita
2
4
6
8
10
12
97-02 2003 2004 2005 2006 2007e 2008f
Res
erve
s/m
onth
s of
impo
rts
AfricaOil importing African countriesOil exporting African countries
-8
-6
-4
-2
0
2
4
6
8
1980 1984 1988 1992 1996 2000 2004 2008f
% o
f GD
P
Asia Africa
10
15
20
25
30
35
0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000
2007 GDP per capita (US$)
India
Africa
ChinaBrazil
Russia
0
10
20
30
40
50
60
70
80
1970 1974 1978 1982 1986 1990 1994 1998 2002 2006
% o
f GD
P
Asia Africa
Reserves to imports
14
$/mt
-
500
1,000
1,500
2,000
2,500
3,000
3,500
319
1694
2415
3221
3628
4069
4516
5075
6953
7297
7992
9756
1002
0
1024
5
1083
5
1127
9
1182
4
cumulative productionZ
inc
Zinc cost curve p50 zinc spot p70
Cost Curves and Africa’s Mines
$/mt
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
64.1
404
454
682
766
817
1115
1240
1265
1354
1455
1606
1687
cumulative production
Nic
kel
current Nickel cost curve p70 p90 current price
$/mt
-500
500
1,500
2,500
3,500
4,500
5,500
6,500
7,500
8,500
6.0
61
2878
3813
7240
8496
9144
10005
11078
11502
12028
12484
13016
14069
14780
15096
15728
16181
16324
cumulative production
Co
pp
er
copper cost curve current copper price p50 p70 p90
African projects are at different points of the cost curve
Average estimated cost of production (including depreciation) for African Copper projects is USD1.40/lb in 2006 money
How will these African projects as well as new greenfields and brownfields projects be affected by dropping commodity prices? From both operating and capital costs
15
African opportunities/project activity going forward
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
16
Some Insights and Challenges
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
17
DisclaimerThe analyst(s) who prepared this research report (denoted by an asterisk*) hereby certifies(y) that: (i) all of the views and opinions expressed in this research report accurately reflect the research analyst's(s') personal views about the subject investment(s) and issuer(s) and (ii) no part of the analyst’s(s’) compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed by the analyst(s) in this research report.
Conflict of Interest
It is the policy of The Standard Bank Group Limited and its worldwide affiliates and subsidiaries (together the “Standard Bank Group”) that research analysts may not be involved in activities in a way that suggests that he or she is representing the interests of any member of the Standard Bank Group or its clients if this is reasonably likely to appear to be inconsistent with providing independent investment research. In addition research analysts’ reporting lines are structured so as to avoid any conflict of interests. For example, research analysts cannot be subject to the supervision or control of anyone in the Standard Bank Group’s investment banking or sales and trading departments. However, such sales and trading departments may trade, as principal, on the basis of the research analyst’s published research. Therefore, the proprietary interests of those sales and trading departments may conflict with your interests
Legal Entities:
To U. S. Residents
Standard New York Securities, Inc. is registered with the Securities and Exchange Commission as a broker-dealer and is also a member of the FINRA and SIPC. Standard Americas, Inc is registered as a commodity trading advisor and a commodity pool operator with the CFTC and is also a member of the NFA. Both are affiliates of Standard Bank Plc and Standard Bank of South Africa. Standard New York Securities, Inc is responsible for the dissemination of this research report in the United States. Any recipient of this research in the United States wishing to effect a transaction in any security mentioned herein should do so by contacting Standard New York Securities, Inc.
To South African Residents
The Standard Bank of South Africa Limited (Reg.No.1962/000738/06) is regulated by the South African Reserve Bank and is an Authorised Financial Services Provider.
To U.K. Residents
Standard Bank Plc is authorised and regulated by the Financial Services Authority (register number 124823) and is an affiliate of Standard Bank of South Africa. The information contained herein does not apply to, and should not be relied upon by, retail customers.
General
This research report is based on information from sources that Standard Bank Group believes to be reliable. Whilst every care has been taken in preparing this document, no research analyst or member of the Standard Bank Group gives any representation, warranty or undertaking and accepts no responsibility or liability as to the accuracy or completeness of the information set out in this document (except with respect to any disclosures relative to members of the Standard Bank Group and the research analyst’s involvement with any issuer referred to above). All views, opinions and estimates contained in this document may be changed after publication at any time without notice. Past performance is not indicative of future results. The investments and strategies discussed here may not be suitable for all investors or any particular class of investors; if you have any doubts you should consult your investment advisor. The investments discussed may fluctuate in price or value. Changes in rates of exchange may have an adverse effect on the value of investments. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Members of Standard Bank Group may act as placement agent, advisor or lender, make a market in, or may have been a manager or a co-manager of, the most recent public offering in respect of any investments or issuers referenced in this report. Members of the Standard Bank Group and/or their respective directors and employees may own the investments of any of the issuers discussed herein and may sell them to or buy them from customers on a principal basis. This report is intended solely for clients and prospective clients of members of the Standard Bank Group and is not intended for, and may not be relied on by, retail customers or persons to whom this report may not be provided by law. This report is for information purposes only and may not be reproduced or distributed to any other person without the prior consent of a member of the Standard Bank Group. Unauthorised use or disclosure of this document is strictly prohibited. By accepting this document, you agree to be bound by the foregoing limitations. Copyright 2008 Standard Bank Group. All rights reserved.