Mining in Africa: A great opportunity for investment
description
Transcript of Mining in Africa: A great opportunity for investment
1
Mining in Africa:A great opportunity for investment
P. Lazarus Zim
Chief Executive
Anglo American Corporation of South Africa Limited
8 February 2005
2
• A stable democracy under a sound constitution.
• 3 peaceful & free & fair elections.
• One nation, one flag, one anthem.
• Free press & independent judiciary.
• An established culture of dialogue and debate to resolve issues.
• Political transformation has laid the foundation for economic transformation
• Transformation that has already occurred is often overlooked…
South Africa’s political transformation…
3
Higher & less volatile GDP growth
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
84 86 88 90 92 94 96 98 00 02 04 06
% c
han
ge
1984-93 = 1% pa 1994-2003 = 2.9% pa
Forecast(Reuters Consensus)
2004-07 = 3.8% pa
… accompanied by an already remarkable economic transformation
4
... as well as improved capital flows
-5
-4
-3
-2
-1
0
1
2
3
4
5
84 86 88 90 92 94 96 98 00 02 04Jan-Sep
% o
f G
DP
1984-93 = -1.2% pa 1994-2003 = 2.2% pa
Reflected in rising private fixed investment ...
8.0
8.5
9.0
9.5
10.0
10.5
11.0
11.5
12.0
84 86 88 90 92 94 96 98 00 02 04Q3
% o
f G
DP
Private fixed investment
… accompanied by an already remarkable economic transformation
5
Improving fiscal balances
20.0
21.0
22.0
23.0
24.0
25.0
26.0
27.0
28.0
29.0
30.0
0.02.04.06.08.0
92/9
3
93/9
4
94/9
5
95/9
6
96/9
7
97/9
8
98/9
9
99/0
0
00/0
1
01/0
2
02/0
3
03/0
4
04/0
5
05/0
6
Expenditure
Revenue
Deficit
-8
-7
-6
-5
-4
-3
-2
-1
0
84 86 88 90 92 94 96 98 00 02 04 06
% o
f G
DP
Disciplined fiscal performance
30
35
40
45
50
55
% o
f G
DP
Med
ium
-ter
mE
con
om
ic
Fra
mew
or k
Budget deficit
Government debt
… accompanied by an already remarkable economic transformation
6
...provides scope for lower interest rates
0
5
10
15
20
25
30
84 86 88 90 92 94 96 98 00 02 04
%
Prime overdraft rate
CPI/CPIX (from 1998)
and significantly lower inflation
0
2
4
6
8
10
12
14
16
18
20
84 86 88 90 92 94 96 98 00 02 04 (Nov)
06
%
1984-93 = 14.3% 1994-03 = 7.8%
Target
CPI (CPIX from 1998)
Forecast(Reuters Consensus)
… accompanied by an already remarkable economic transformation
7
International liquidity position
-30
-25
-20
-15
-10
-5
0
5
10
15
93 95 97 99 01 03
US
$ b
n
Moody's Fitch
1994 Baa3 BB BB
1995 Baa3 BB+ BB
2000 Baa3 BBB- BB+ BBB-
2001 Baa2 BBB- BBB-
2002 Baa2 BBB- BBB-
2003 Baa2 BBB BBB
2004 Baa2 BBB BBB
2005 Baa1 BBB BBB
S&P
Recognised by improvedSovereign credit ratings
… accompanied by an already remarkable economic transformation
8
Although recent Rand strength largely offset higher commodity prices…
Platinum price - Rand & US Dollars
400
500
600
700
800
900
00 01 02 03 04 05
US
D/o
z
3000
4000
5000
6000
7000
Ra
nd
/oz
Rand/oz
USD/oz
Gold price - Rand & US Dollars
250
300
350
400
450
99 00 01 02 03 04 05
US
D/o
z
1500
2000
2500
3000
3500
Ra
nd
/oz
Rand/oz
USD/oz
9
…growth in mining investment has outstripped that of other sectors
South Africa: Gross Fixed Capital Formation(constant 2000 prices)
100
120
140
160
180
200
220
94 95 96 97 98 99 00 01 02 03 04
Q1
94 =
100
Mining & quarrying
Total excl mining
10
Rm Rm Rm Rm Rm Rm Rm
Dec Dec Dec Dec Dec Jun 1999 2000 2001 2002 2003 2004 TOTAL
CAPEX 4,529 6,425 10,703 13,390 14,030 6,020 55,097
Replacement 4,529 3,047 2,849 4,631 6,463 2,704 24,223 Expansionary - 3,378 7,854 8,759 7,567 3,316 30,874
Acq of subs 6,934 1,624 5,218 9,874 9,034 4,462 37,146 Acq of ass 800 357 205 3,988 542 9 5,901 Acq of JVs - 2,548 16 - - - 2,564
Total 12,263 10,954 16,142 27,252 23,606 10,491 100,708
Total Anglo American investment in SA
NB: Money of the day - figures would be higher if adjusted to today’s money
11
Selected major authorised projects with capex estimates. Unapproved projects unshaded. 100% of subsidiaries and AA plc’s share of JV’s and associates. Full production dates.
Anglo American’s investment programme
Anglo Platinum AngloGold AshantiDiamonds Coal Base Metals Industrial Minerals Paper & Packaging Ferrous Metals
2005 2006 2007 20082004
FINSCH$130m
RPM PH 1$210m
MPONENG$191m
TAU TONA$52m
PMR Expan.$99m
ISIBONELO $65m
BLACK MTN$110m
RICHARDS BAY$235m
MEREBANK$150m
RPM PH 2$444m
BRPM$317m
CERREJÓN$17m
TWICKENHAM$343m
KROONDAL$138m
UNKI$84m
GROOTEGELUK$55m
MOAB KHOTSONG
$690m
CUIABÁ$121m
INYANDA$30m
Kleinkopje$56m
SIGUIRI$52m
W.L. TAILINGS$186m
RUZOMBEROK$233m
TICOR 2$54m
COPEBRAS$22m
CHAGRES$21m
EL SOLDADO$80m
GRASSTREE$106m
DAWSON $306m
CODEMIN 2$67m
Buxton$173m
Dartbrook$55m
Collahuasi$288m
Approved $6bn global project portfolio…
ACP Project$250m
Skorpion$454m
TICOR 1$137m
12
Anglo Platinum AngloGold AshantiDiamonds Coal Base Metals Industrial Minerals Paper & Packaging Ferrous Metals
Selected major authorised projects with capex estimates. Unapproved projects unshaded. 100% of subsidiaries and AA plc’s share of JV’s and associates. Full production dates.
2005 2006 2007 20082004
FINSCH$130m
RPM PH 1$210m
MPONENG$191m
TAU TONA$52m
PMR Expan.$99m
ISIBONELO $65m
BLACK MTN$110m
RICHARDS BAY$235m
MEREBANK$150m
RPM PH 2$444m
BRPM$317m
CERREJÓN$17m
TWICKENHAM$343m
KROONDAL$138m
UNKI$84m
GROOTEGELUK$55m
MOAB KHOTSONG
$690m
CUIABÁ$121m
INYANDA$30m
Kleinkopje$56m
SIGUIRI$52m
W.L. TAILINGS$186m
RUZOMBEROK$233m
TICOR 2$54m
COPEBRAS$22m
CHAGRES$21mTICOR 1
$137m
EL SOLDADO$80m
GRASSTREE$106m
DAWSON $306m
CODEMIN 2$67m
Buxton$173m
Dartbrook$55m
Collahuasi$288m
Approved $6bn global project portfolio……of which $4bn is in Southern Africa
ACP Project$250m
Skorpion$454m
Anglo American’s investment programme
13
• South Africa post-1994 is a much better place for doing business.
• Because of South Africa’s size, this has positive implications for the Continent.
• SA business – often lead by the mining sector - is seeking to expand across the Continent.
• This is occurring against the backdrop of a highly favourable global environment for mining producers.
• As well as a renewed global focus on Africa.
South Africa: A good story
14
* Angola, Botswana, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Swaziland, Tanzania, Zambia, Zimbabwe.
Source: World Bank, World Development Indicators, 2004.
Gross National Income Population
2002 figures USD bn
% of
Sub-Saharan Africa
Per capita (millions)
South Africa $113 36% $2 520 45
Rest of Southern Africa* $ 44 14% $ 401 108
Southern Africa $157 50% $1 023 153
Sub-Saharan Africa $311 100% $ 450 689
SA’s improved performance impacts positively on the Region & increasingly the Continent
Due to its size South Africa impacts on the Continent
15
GDP growth - 1990-2002
0
1
2
3
4
5
6
7
8
Zim
ba
bw
e
Za
mb
ia
S-S
ah
ara
n A
fric
a
An
go
la
S A
fric
a*
Ma
law
i
Sw
azi
lan
d
Ta
nza
nia
Le
so
tho
Na
mib
ia
Bo
tsw
an
a
Ma
uri
tiu
s
Mo
zam
biq
ue
% p
er
an
nu
m
Per capita incomes now growing in most countries in Southern Africa & increasingly the rest of the Continent
Source: World Bank, World Development Indicators, 2004.
SA’s improved performance impacts positively on the Region & increasingly the Continent
16
Significant improvement on pre-1994 performance
South Africa's boom/bust cycle of the '80s
-3
-2
-1
0
1
2
3
4
5
6
7
8
80 81 82 83 84 85 86 87 88 89 90 91 92 93
% c
ha
ng
e
1.4% pa
Source: SA Reserve Bank & World Bank, World Development Indicators, 2004.
GNP per capita - 1980-91
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
An
go
la
Za
mb
ia
So
uth
Afr
ica
*
Na
mib
ia
Mo
zam
biq
ue
Ta
nza
nia
Le
so
tho
Zim
ba
bw
e
Ma
law
i
Sw
azi
lan
d
Mo
zam
biq
ue
*
Bo
tsw
an
a
Ma
uri
tiu
s
% p
er
an
nu
m
* 1985-94
Declining per capita incomes
But some successes
17
1993- 18 of SA top 100 listed companies
invested in rest of Africa
SA business as a regional investor
Source: Who Owns Whom, Africa Inc, Nov 2004
2004- 40 of SA top 100 listed companies
invested in rest of Africa- 232 investments in 27 countries
employing 72 000 people
18
• Favourable global environment for mining producers.
• Accompanied by renewed global focus on Africa.
• As the major source of many of the globe’s unexploited mineral reserves, Africa in particular stands to benefit from the improved environment for mining.
19
China's Share of WorldFirst-use Metals
Consumption(%)
20041994
20100
10
20
30
40Copper
Zinc
Fe Ore
Steel
Aluminium
Nickel
Note: Fe ore is sea-borne.Ni includes Ni content of stainless imports.Source: MSU, WBMS, INSG, Macquarie (Fe Ore, Steel and Al).
Favourable global environment now reinforces improved business climate
Source: Anglo American, MSU & Macquarie
20
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Jan 97 Jan 98 Jan 99 Jan 00 Jan 01 Jan 02 Jan 03 Jan 0460
70
80
90
100
110
120
Stocks, Mt
NickelAl
Zn
Cu
Lead Price Index 1990=100
LME Inventories* and Base Metals Price Index Jan 1997 to Dec 2004
* Cu includes Comex.
Favourable global environment now reinforces improved business climate
Source: Anglo American, MSU
21
• 2005 WEF (Davos) – unprecedented focus on Africa.• Strong African presence & participation: Presidents
Mbeki, Obasanjo, Mkapa.• PM Tony Blair has placed Africa high on the agenda of his
G8 & EU presidencies.• Awaiting Report of the Africa Commission.• Growing consensus that Africa should be assisted in the
same structured way as Europe post World War 2.• Important proposals from the United States, Britain and
France of the funding mechanism.• It is vital to synthesise these into one Africa Plan by the
G8 Summit in July.
2005: Africa in the global spotlight
22
• Peace & security are vital.– Will make the full exploitation of Africa’s
mineral wealth possible.– We applaud the AU, Ecowas & President
Mbeki’s current peace making efforts.– The current focus of time and resources on
peace making is necessary.– Good for economic development, good for
Africa, good for business.
Africa in the global spotlight: What we need to do
23
• Continue to promote investor friendly policies.• Ensure regulatory and policy certainty.• For example: in SA the rules are clear
– New Mining legislation– Mining Charter.
• The key challenge and focal area is that of implementation.
• It is vital to see mineral right conversion early.• Continue the fight against HIV-Aids.
Africa in the global spotlight: What we need to do
24
• Promote strong partnerships between government and business.
• Public Private Partnership (PPP) – much more that a buzzword.
• PPP is a necessity – especially in mining.• Mining projects are high risk, capital intensive,
infrastructure and power (energy) hungry.• Need the collective and collaborative effort of
government and business.• Past year: Good experience in relations with DME.• Recent Transnet-Kumba MOU on expansion of export
capacity and tariff structure is a good example of PPP.
Africa in the global spotlight: What we need to do
25
Africa’s business challenges are manageable
• Anglo American sees transformation as a strategic imperative.
• This is driven at CEO level through the Transformation Committee with strong operational interface.
• We will continue to focus on:– Employment Equity– Ownership– Procurement– Enterprise development
26
Anglo American’s BEE track record – Procurement & Enterprise dev.
TOTAL TOTAL
Rm NOMINAL REAL (since inception) (2003 money)
Procurement 9,532 11,142
Development (SMEI’s) 706 783
Large Transactions 13,193 17,382
Future:
Continued 20% - 30% per annum procurement growth
Major BEE focus in Anglo Platinum, De Beers, Kumba, Mondi, Anglo Coal
27
• Africa is at a critical historical crossroads.• The developed world is indicating its
willingness to assist.• Global economic circumstances provide a
supportive backdrop.• Vital that we, as Africa, seize the moment.• Confident that mining will play a leading role
in driving Africa forwards.
Summary & conclusions