-0--0-

The changing business landscape within China

15th Annual Global Iron Ore & Steel Forecast ConferencePerth, 20 March 2012

Lilian LucaManaging Director, The Beijing Axis Procurement

www.thebeijingaxis.com

-1--1-

This document is issued by The Beijing Axis. While all reasonable care has been taken in the preparation of this document, no responsibility or liability is accepted for errors or omissions of fact or for any opinions expressed herein. Opinions, projections and estimates are subject to change without notice. This document is for information purposes only, and solely for private circulation. The information contained here has been compiled from sources believed to be reliable. While every effort has been made to ensure that the information is correct and that the views are accurate, The Beijing Axis cannot be held responsible for any loss, irrespective of how it may arise. In addition, this document does not constitute any offer, recommendation or solicitation to any person to enter into any transaction or to adopt any investment strategy, nor does it constitute any prediction of likely future movements or events in any form. Some investments discussed here may not be suitable for all investors. Past performance is not necessarily indicative of future performance; the value, price or income from investments may fall as well as rise. The Beijing Axis, and/or a connected company may have a position in any of the investments mentioned in this document. All concerned are advised to form their own independent judgement with respect to any matter contained in this document.

-2--2-

The Beijing Axis’ Knowledge & Network Synergies

Beijing Axis Commodities

• Commodity Marketing• Commodity Procurement

Beijing AxisCapital

• Transaction Origination• Corporate Finance

Advisory

Beijing Axis Procurement

• Comprehensive Procurement Solutions

Beijing Axis Strategy

• Strategy Formulation• Strategy Implementation

Founded in 2002; has successfully worked with many international and Chinese/Asian MNCs

Operates in four synergistic cross-border China/Asia businesses

Provides services across various sectors, with a core focus on the MINING, RESOURCES, INDUSTRIAL and ENGINEERING sectors

Provides solutions to international firms as they act in unfamiliar territory in China/Asia

Provides solutions to Chinese/Asian firms as they venture out and ‘go global’

-3--3-

Africa Axis’ Knowledge & Network Synergies

Africa Axis Commodities

• Commodity Marketing• Commodity Procurement

Africa AxisCapital

• Transaction Origination• Corporate Finance

Advisory

Africa Axis Procurement

• Comprehensive Procurement Solutions

Africa Axis Strategy

• Strategy Formulation• Strategy Implementation

Founded in 2010; has successfully worked with many international and African MNCs

Operates in four synergistic cross-border African businesses

Provides services across various sectors, with a core focus on the MINING, RESOURCES, INDUSTRIAL, ENGINEERING and OTHER SERVICES sectors

Provides solutions to international/African firms as they go global

Provides solutions to Asian/International firms as they venture into Africa

-4--4- -5--5-Source: The Beijing Axis Analysis

The backdrop

China’s rise … labour market and supply shock as a producer … engine as a consumer … investor

New competitive lines and forces, winners/losers – the rise of Asia, BRICS, etc

A two-speed global economy over the medium and long term

A lasting GDP trajectory in Asia, Africa and Latin America – governance, growth, stability, infrastructure, confidence, etc.

The issues now

Europe broken … fragile developed markets – and knock-on effects?

China’s landing – soft or hard? Implications for growth and resource demand?

Tapping into the China story vs. over-reliance on China and need to diversify economic ties

Strategic intelligence – to make decisions in boardrooms around the world in order to reposition

-6--6-

China’s Resource Consumption and Drivers

Trends in China’s Outbound Investments

Final Word

-7--7-

South AmericaAfrica

Other Asia

Regional GDP Comparison (USD bn, 2015F)*Bubble Size: Nominal GDP (USD bn, 2015F)

Developed economies are expected to continue to lose share in world GDP in the coming years

Asia-Pacific is expected to account for the largest share of world GDP (34%) by 2015F

2011E to 2015F

2011E to 2015F

GDP Average Growth Rate (%, 2011E-2015F)

Forecast world average GDP growth until 2015F: 3.95%

% of World GDP (2015F)

Shaded bubbles represent 2011E figures Rising real incomes

and high commodity prices will drive growth

BRICS 2015F GDP (USD bn)

2011* Growth Rate (%)

2010 GDP Per Capita (USD)

China 10,903.6 9.2% 4,382.1India 2,359.2 7.4% 1,370.8Russia 1,926.1 4.1% 10,355.7Brazil 2,546.7 2.9% 10,816.5South Africa 425.6 3.1% 7,274.4

*Note: Data based on IMF World Economic Outlook*Note: Other Asia includes Bangladesh, Sri Lanka, Nepal, Pakistan, Bhutan, Burma, North Korea, Kazakhstan, Tajikistan, Turkmenistan and Uzbekistan. Source: IMF 2012; The Beijing Axis Analysis

20,337

19,634

25,807

4,280

4,486

2,259

0

5

10

0% 5% 10% 15% 20% 25% 30% 35% 40%

Asia-Pacific

North America

Europe

-8--8-

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2010 2015F 2020F 2025F 2030F 2035F

China

IndiaYear 2010-

2015F2016F-2025F

2026F-2035F

GDP Per Capita

2035F (USD)China 8.0% 7.0% 6.5% 22,458India 7.5% 7.0% 6.5% 6,070

2016F: China adds 1 Germany

2025F: China adds 2 Japans

2028F: China adds 1 US

2026F: India adds 1 Germany

2032F: India adds 1 Japan

2010-2016

2010-2020

2010-2025

2010-2028

2010-20202010-2026

2010-2032

2020F: China’s economy doubles

2020F: India’s economy doubles

Sustainable Growth Phase

Continued Acceleration

Drive to Maturity Phase

Growth Moderation Phase

2013F: India adds 1 South Africa

Now 2010-2013

China

India

Moderating Phase China

IndiaAccelerating Growth

Box indicates additional nominal GDP from now to forecast yearChina’s and India’s Forecast Nominal GDP (USD bn, 2010-2035F*)

*Note: Forecast GDP growth rate for each period listed in the graph aboveSource: IMF; The Beijing Axis Analysis -9--9-

28% 26% 31%0%

50%

100%

1990 2000 2010

ROW* APAC*

GDP

12% 13%30%

0%

50%

100%

1990 2000 2010

ROW APAC

FDI Inflows

7% 10% 27%0%

50%

100%

1990 2000 2010

ROW APAC

13% 19% 25%0%

50%

100%

1990 2000 2010

Rest of GDP Imports

37% 44%65%

0%

50%

100%

1990 2000 2010

ROW APAC

40%57% 65%

0%

50%

100%

1990 2000 2010

ROW APAC

FDI Outflows

Imports as % of GDP Steel ConsumptionCopper Consumption

Asia-Pacific as % of World Total (%, 1990, 2000, 2010)

14% 21% 24%0%

50%

100%

1990 2000 2010

Rest of GDP ExportsExports as % of GDP

28% 27% 29%0%

50%

100%

1990 2000 2010

Rest of GDPGross Domestic Investment

GDI % of GDP

*Note: ROW stands for Rest of World and APAC stands for Asia-PacificSource: CEIC; CRU; UN; World Steel Association; The Beijing Axis Analysis

-10-

-40

-20

0

20

40

60

80

100

120

140

98 99 00 01 02 03 04 05 06 07 08 09 10 11F 12F

Net Exports of Goods and ServicesGross Capital FormationFinal Consumption Expenditure (Household + Government)

0%

5%

10%

15%

Q1 Q1 Q1 Q1F

China’s Quarterly Y-o-Y GDP Growth Rate (2009-2012F)

2009 2010 2011

3-year (2009-2011) average: 9.4%

Government stimulus package (USD 586 bn)

2011 y-o-y GDP: 9.2%

2012F

Falling net exports contribution

2012F y-o-y GDP: 8.0%

Policy easing to provide room for growth moderation

Effect from stimulus package

Contribution of Components to China’s GDP Growth (%, 1998-2012F)

Source: CNBS; Deutsche Bank; Morgan Stanley; The Beijing Axis Analysis -11--11-

4% 17%41%

0%

50%

100%

1990 2000 2010

ROW China

14% 18%45%

0%

50%

100%

1990 2000 2010

ROW China

7% 22%47%

0%

50%

100%

1990 2000 2010

ROW China

Primary Aluminium Steel Coal

China’s Share of Global GDP and Consumption of Selected Commodities (% 1990, 2000, 2010)

2% 4% 10%0%

50%

100%

1990 2000 2010

ROW ChinaGDP

4% 13%32%

0%

50%

100%

1990 2000 2010

ROW* ChinaRefined Nickel

13% 17% 33%0%

50%

100%

1990 2000 2010

ROW China

4% 12%38%

0%

50%

100%

1990 2000 2010

ROW ChinaChrome Ore Refined Copper

8% 20%41%

0%

50%

100%

1990 2000 2010

ROW ChinaRefined Zinc

*Note: ROW stands for Rest of World Source: World Bank; CNBS; CEIC; The Beijing Axis Analysis

-12--12-Source: SWS; CNBS; The Beijing Axis Analysis

Fixed Asset Investment (USD tn, 2000-2011) Steel Consumption Driven by the Major Components (mn tons, 2002-2011E)mn tons

0

100

200

300

400

02 03 04 05 06 07 08 09 10 11E

Investment Consumption Export Others

0.4 0.4 0.5 0.70.9

1.11.4

1.8

2.5

3.3

4.1

4.7

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

00 01 02 03 04 05 06 07 08 09 10 11

Fixed Asset InvestmentFAI as % of GDP (rhs)

USD tn

FAI rose 23.8% in 2011 -Primary sector was up 25%, secondary sector was up 27.3% and the tertiary sector was up 21.1%

-13--13-

348

422

488 498

566

627

683712

348

388436 453

559

610 649702

0

100

200

300

400

500

600

700

800

2005 2006 2007 2008 2009 2010 2011 2012E

Production Apparent ConsumptionChina’s government has been talking about controlling supply growth for years, but the actual production growth has still been strong

0%

10%

20%

30%

10th Five-Year Plan(2001-2005)

11th Five-Year Plan(2006-2010)

12th Five-Year Plan(2011-2015)

0%

20%

40%

60%

2005 2006 2007 2008 2009 2010 2015F

Top 10* Steel Group Share of Total Output (2005-2015F) Steel industry consolidation is a

key initiative of 12th Five Year Plan

Source: CNBS; Various; The Beijing Axis Analysis

China’s Crude Output Target Growth RateChina Steel Demand/Supply Forecast (mn tons, 2005-2012E)

Actual Crude Output

21%

28.2%

-14--14-

0

200

400

600

800

1,000

1,200

0 10,000 20,000 30,000 40,000 50,000 60,000

Steel Consumption Per Capita(USD, 2010)

GDP Per Capita (USD, 2010)

Emerging Economies except ChinaMainland China

Developed Economies

Bubble Size: GDP CAGR (2000-2010)

Russia

Brazil

South Africa

Japan

US

Germany

FranceUK

Italy

Spain

Mexico

Australia

Sweden Netherlands

CanadaAustria

Belgium

Saudi Arabia

India

Indonesia

IranThailand

China

Poland

ArgentinaVenezuela

With less infrastructure construction, developed economies have lower demand for finished steel

The trend line is indicative of the general pattern in steel consumption at different stages of industrialisation

Steel consumption declines after

GDP per capita reaches USD 25,000

Developing economies consume less steel per capita, but their relatively large populations ensure years of steady demand growth

Malaysia

PhilippinesVietnam

S. Korea

Turkey

Steel Intensity Comparison of Top 30 Economies* and Other Selected Asian Economies (2010)

*Note: Switzerland, Norway and Sweden are not included for comparison purposesSource: IMF; World Steel Association; The Beijing Axis Analysis -15--15-Source: The Beijing Axis Analysis

Economic GrowthGDP growth to continue at 7-8% for the next 5 years

Social DevelopmentGrowing middle-class with an increasing purchasing power

UrbanisationCurrent rate is low compared to developed countries’

IndustrialisationRising labour costs, improving industry efficiency and increasing R&D investment

ModernisationInvestments in improving strategic new industries -telecommunications, transportation, energy, etc.

Structural ChangeShift to a domestic driven economy

Import DependencyChina’s demand outstrips domestic supply of mineral resources

5 Year PlanConsolidation, moving inland, steady GDP growth, and sound policy, high tech and value added production

Global External FactorsArising concerns over debt problems in Western economies

Sustained Resource Demand

-16--16-

Asia occupies a far more crucial role in the global economy – the world has changed and is changing still, with many far-reaching implications

China’s demand drivers remain intact, but there are clearly more risks in the supply/demand picture

Continuous and robust domestic consumption will drive growth moving forward – China will have a key influence in resource demand if at lower growth

China will face the toughest policy challenges ‘ever’ in the next 5-10 years

Heightened market volatility and redistribution of global influence require a more informed and strategic decision-making process

Resources sector will become more ‘competitive’ – players must out-market, not just out-produce peers – strategic marketing will be a differentiator

-17--17-

China’s Resource Consumption and Drivers

Trends in China’s Outbound Investments

Final Word

18

350

15,092

438

7,620 7,246

9,118

2,1651,775

500 3401,150

128 456

3,5002,800

1,1506 202

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Cobalt Ore('000 tons)

Aluminium(mn tons)

Nickel ('000tons)

Iron Ore (mn tons)

Platinum ('000 oz)

Chrome Ore ('000 tons)

Copper Ore('000 tons)

Zinc Ore ('000 tons)

ManganeseOre ('000 tons)

Demand Production

x

China’s Implied Demand and Domestic Production of Commodities (2010)

Source: USGS; BP; WGC; USDA; Various; The Beijing Axis Analysis

0

50,000

100,000

150,000

200,000

250,000

300,000

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10

Exports Imports

Mineral Product Imports and Exports(USD mn, 1992-2010)

-19--19-

0 50 100 150 200 250 300 350

USGermany

FranceHong Kong

ChinaSwitzerland

JapanRussia

CanadaBelgium

NetherlandsSweden

AustraliaSpain

ItalyBr. Virgin Is.

SingaporeS. Korea

LuxembourgIreland

World’s Top 20 Outward FDI Originators, Flows(USD bn, 2010)

China ranked 6th in 2009

China ranked 13th

in 2008 and 2007

China ranked 5th in 2010

China ranked 18th in 2006 29.9 33.2 44.8 57.2

90.6117.8

184.0

245.8

317.2

383.4

560.0

0

100

200

300

400

500

600

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2015F

Flows Stock

China OFDI Stock and Flows (USD bn, 2002-2015F)

*Note: China OFDI flows for 2011 do not include financial investments from September-December 2011 Source: WIR 2011; The Beijing Axis Analysis

In 2011 alone, China invested in 1,392 overseas projects in 132 countries

-20--20-Source: MOFCOM; The Beijing Axis Analysis

Breakdown of Overseas Investments by Sector(USD bn, 2004-2010)

2010 Mining Investment: USD 5.7 bn

0

20

40

60

80

2004 2005 2006 2007 2008 2009 2010

OthersLeasing & Commercial ServiceBanking and InsuranceWholesale & Retail TradeTransport, Storage and Postal ServiceManufacturingMining

Commercial services include investments in holding companies, regional headquarters or SPVs that are often established in offshore centres to invest in other countries and sectors

31%

28%

17%

10%

5%2%

2%2%2%

1%Iron Ore

Copper

Aluminium

Platinum

Exploration

Steel

Coal

Gold

Rare Earths

Other Base Metals

Value of China’s Mining and Metals Investments by Commodity (2010)

China’s investments in chrome, nickel, and manganese are still very small compared to other commodities

-21--21-

CHN/HK Outward Deals for Top 30 Countries and Target Sectors (2000-2011)

≥ 300≥ 200≥ 100≥ 50≥ 30≥ 15≥ 10≥ 5

Number of Deals

1

North America59

South America16

94

Mining

211

24

18

8

22

2

2

1

1

1

1Asia272

Australia

Mongolia

Indonesia

Philippines

71

UK

4

1

58

Canada

3

*Note: The Dealogic M&A database was used here, it groups China and Hong Kong outward investments.Source: Deutsche Bank; Dealogic; The Beijing Axis Analysis

1

0 100 200 300 400

MiningElectronics

Oil & GasFinance

Professional ServicesTelecom

Real Estate/PropertyConsumer Products

TransportationDining & Lodging

Utility & EnergyRetail

Food & BeverageMachinery

TextileConstruction/Building

HealthcareChemicals

Auto/TruckLeisure & Recreation

Metal & SteelHolding Companies

PublishingForestry & Paper

AgribusnessinsuranceInsurance

Government

-22--22-Source: Various; China Steel Association; The Beijing Axis Analysis

Share of Imported Iron Ore Owned by China (Mn tonnes, 2002-2011E)

Going forward, China Iron Steel Association announced that China would seek to derive 40% of ore imports from Chinese-invested sources by 2015 and 50 percent by 2020 driven by:

- Over-reliance on high priced imports of the mineral

- Shrinking profit margins for Chinese steel companies

- Reduce its reliance on the big global miners

It is estimated that Chinese-invested overseas sources will bring in 100 million tonnes to 200 million tonnes of iron ore annually in the coming three to five years

Australia and West Africa will remain as the key focused markets for such investments

0

100

200

300

400

500

600

700

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011E

Imported Iron Ore Owned by China

Others

-23--23-

Cumulative capital stock must align

Annual investment flow must adjust

Government policies set the tone

Global challengers look different

Internationalised corporate balance sheets

Geopolitical ambitions necessitate ‘reach’

Wider industry acquisitions

Strengthening RMB & Foreign Reserves

Pursuit of advanced technologies

Wider market interest‘Go global’ policy to continue

Resource pipelines are being built

China Overseas Direct Investment – Key Drivers

Source: The Beijing Axis Analysis

-24--24-Source: UN Comtrade; The Beijing Axis Analysis

Australia Export Structure (2000) Australia Export Structure (2010)

20%2%3%

3%4%

4%4%

7%

9%19%

17%

3%5%

25%

Others SingaporeThailand New ZealandUkraine TaiwanUS IndiaSouth Korea Japan

31%

3%3%3%5%

5%5%

6% 8%10% 6%

2%2%2%

9%21%

Others IndonesiaHong Kong UkraineTaiwan SingaporeChina New ZealandSouth Korea US

USD 51 bn

Total: USD 206.7 bnTotal: USD 63.8 bn

China

Ores

Mineral fuels, oils

Others

Ores

Mineral fuels, oils,MeatAluminium products

Others

Japan

USD 154 bn

-25--25-Source: UN Comtrade; The Beijing Axis Analysis

Sources of China’s Imports of Resources Australian Resource Exports (USD bn)

0

20

40

60

80

100

120

140

2000 2005 2010

China

Japan

S. Korea

IndiaUK

Rank 2000 2005 2010

1 Oman Saudi Arabia Australia

2 South Korea Australia Saudi Arabia

3 Angola Russia Angola

4 Iran Angola Brazil

5 Saudi Arabia Iran Iran

6 Australia India Russia

7 Indonesia Brazil India

8 Singapore Oman Indonesia

9 Russia South Korea Oman

10 Vietnam Yemen South Korea

TaiwanThailand

Others

Singapore

-26--26-Source: FIRB; The Beijing Axis Analysis

Australian Natural Resources M&A Inflow by Buyer’s Nation (% share of total, 2001-2010)

0% 20% 40% 60% 80% 100%

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

China US UK Japan Switzerland Canada Netherlands India Others

-27--27-

Australia’s Mineral Deposits

Mineral deposits: gold, silver, iron, coal, copper, nickel, lead, zinc, tin, tungsten, etc.

Coal

Oil

Iron Ore/Ferrous

Copper Gold & Uranium

Aluminum

Diversified

Non-ferrous*

2

5

4

16

Major Chinese Investments in Australia(2007 – present)

Focus: Iron Ore

Focus: Coal and Oil

2009MCC– Waratah Coal

USD 7.2 bn (10%)

2008Chinalco – Rio TintoUSD 12.85 bn (9.3%)

2010CNPC – Arrow En.USD 3.2 bn (100%)

2009Yanzhou Coal Mining - Felix Resources

USD 3.2 bn (100%)

2011Yanzhou Coal Mining - Whitehaven Coal USD 3.7 bn

3

2006CITIC Pacific- Sino Iron ProjectUSD 5.7 bn

*Note1: Zinc, nickel, lead and copper, China Minmetals – OZ Minerals dealNote2: Top six deals by value are highlighted on the right hand side chartSource: Geoscience Australia; The Beijing Axis Analysis

-28--28-

China’s outbound capital will continue to hit the headlines - Australia has not yet seen the full impact of this

OFDI participation by private enterprises has just started – Expect this to pick up at a rapid pace

Overseas investment is moving beyond trade facilitation and natural resources, driven by an increasing need to reach high-growth markets - Link and align these trends to the existing strategy

Steel makers will continue overseas iron ore investments in order to reduce the over reliance on high priced imports and increase profit margins for Chinese steel companies –diversification and security of supply

Chinese investors proceeding more cautiously and are becoming more selective about asset quality. Valuation, cost escalation, operations in unfamiliar jurisdictions, and operational risks are the major concerns

-29--29-

Australia will continue riding its resource boom buoyed by increasing trade with China, a largely mineral-based trade that has increased multi-fold in the last decade

With a booming economy at home with a high demand for steel and energy, China’s demand for Australian minerals will remain focused on iron ore and coal

With many Chinese mining firms rich in cash, acquisitions of mineral producers in Australia will continue although most deals will most likely remain at mid-market levels

Australian mining industry’s expertise in exploration and developing new mines around the world (e.g. Africa) can be a successful asset for potential JVs with Chinese mining companies

-30--30-

China’s Resource Consumption and Drivers

Trends in China’s Outbound Investments

Final Word

-31--31-

Tap into China / Asia opportunity

Hedge against global (developed country)

risks

Attract strategic capital

Supply raw materials, manufactures/services

Strategic marketing

Own end-user relationships

Develop strategic

intelligence

‘Be completely comfortable in the new world: China/Asia/New

Winners –informed, strategic,

systematic’

Procurement and supply chain a MUST

Understand variability, volatility & exceptions

Equity level / disposals

Project level

CAPEX / projects

MRO

Equity, debt, off-take, infrastructure

Products & services

Aware

Source: The Beijing Axis Analysis

Action

-32--32-

There are new markets that matter – a new competitive landscape is unfolding. China, India, rest of Asia to be central in this reconfiguration

Location, location, location - China and rest of Asia are key economic regions for the future –growth, resource demand, outbound investment, wider (non-resource) consumption, etc, all make them relevant for Australian policy, economy, companies

Australia Inc’s overall ‘China-position’ is solid, and will only expand. More China investment inevitable – focus on win-win, shape and quality

Is there a need for deliberate diversification – to tap into the rise of India, Africa, South America?

Complexity and change means that resources industry becoming increasingly competitive –asset ownership and production growth not enough; exemplary use of information, strategic intelligence and strategic end-user marketing to play a crucial role in shaping competitive advantage and mitigating risk

Iron ore buyers becoming more sophisticated. As Chinese steel makers push for cost reduction and product innovation, miners’ technical support and value added will be crucial in maintaining and growing the relationship

-33--33-

THANK YOU!

Lilian LucaManaging Director, The Beijing Axis Procurementluca@thebeijingaxis.com

Beijing, ChinaCheryl Tang, GM, Chinacheryl@thebeijingaxis.com+86 10 6440 2106

Shanghai, ChinaJulia WangProcurement Specialistjuliawang@thebeijingaxis.com+86 21 5158 3584 ext. 6249

Hong Kong TBA Secretary Corporate Office 3806 Central Plaza, 18 Harbour Rd, Wanchai, HK

SingaporeKobus van der Wath, FounderPenthouse & LV 42,Suntec Tower 3, 8 Temasek Blvd, Singapore 038988+65 6829 2189

Perth, AustraliaKobus van der Wath, Founderkobus@thebeijingaxis.com

Johannesburg, South AfricaDirk KotzeDirector; GM, Africadirk@thebeijingaxis.com+27 (0)11 201 2453

London, UK/EuropeMatt PieterseMD, Beijing Axis Capital matt@thebeijingaxis.com

Russia DeskLilian Luca (Beijing)MD, Beijing Axis Procurementluca@thebeijingaxis.com

Latin America DeskJavier Cuñat (Beijing)GM, Beijing Axis Strategyjaviercunat@thebeijingaxis.com

www.thebeijingaxis.com

-34--34- -35--35-

Rising Energy and Commodity Consumptionin EM

New Global Technologies

Stronger Emerging Market Companies

Rising Risks

Emerging Market GDP Growth

Rising Global Integration

Industrialisation and Urbanisation

Aging of the Global Population (DM and EM)

Rising Emerging Market Consumption

Megatrends

12

3

6

7

4

5

8

9

Source: Deutsche Bank; The Beijing Axis Analysis

-36--36-

Economic Growth

Industrialisation

Urbanisation

Modernisation

By 2020-2025, China will potentially have an urbanisation rate of 60% and the number of households with an annual disposable income above USD 10,000 will reach 222 million

Source: The Beijing Axis Analysis

Substantial investments to upgrade China‘s telecommunications, transportation, energy sectors, etc.

Government has set China‘s target GDP growth rate at 7.5% for 2012 with emphasis on gradually rebalan-cing of the economy

Development in strategic new industries and the evolution of high-tech R&D due to a dramatic increase of domestic consumption

-37--37-

0

200

400

600

800

1,000

1,200

2003 2004 2005 2006 2007 2008 2009 2010

China Japan South Korea Other Asia Rest of World

Seaborne Iron Ore

2734

% World40 45 49 54

68 62

China’s Demand for Iron Ore (mn tn, 2003-2010)

Source: CEIC; WBR; The Beijing Axis Analysis

10 11 15 1824 23

41 37

0

400

800

1,200

1,600

2003 2004 2005 2006 2007 2008 2009 2010

China Japan BRIC-China Other Asia Rest of the World

Semi-Refined Nickel

China’s Demand for Nickel (‘000 tn, 2003-2010)

% World

-38--38-

GDP and Mining Industry as a % of GDP of Top Mining Countries (USD bn, %, 2010)

0%

5%

10%

15%

20%

25%

0

1,000

2,000

3,000

4,000

USA

Chi

na

Bra

zil

Indi

a

Can

ada

Rus

sia

Aus

tral

ia

Indo

nesi

a

S. A

fric

a

Thai

land

Chi

le

Phili

ppin

es

Peru

Kaz

akhs

tan

Viet

nam

32845 34 41

13484

34

11

40

4

18

24

12

14,527 5,878

Mineral sector contributes 20% to Chile's GDP

China has the world’s largest mining sector with an overall mining industry value of USD 328 bn (2010)

USD bn

77

GDP (lhs)Mining as a % of GDP (rhs)Mining Industry Value (USD bn)

306

Source: Research and Markets; IMF; The Beijing Axis Analysis -39--39-Note: Forecast GDP growth based on IMF Economic OutlookSource: IMF; The Beijing Axis Analysis

Top Economies’ GDP, excl. US (USD bn, 1990-2015F) China Rank 10 10 9 7 9 8 7 7 7 7 6 6 6 6 6 5 4 3 3 3 2 2 2 2 2 …1?

0

2,000

4,000

6,000

8,000

10,000

12,000

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11F 12F 13F 14F 15F

ChinaJapanGermanyFranceUKBrazilIndiaRussiaIndonesiaSouth Africa

2005: ChinaSurpassed

France

2007:Chinasurpassed Germany

2006: Chinasurpassed

UK

Q2 2010: China

surpassed Japan

2000: Chinasurpassed

Italy

1996: China

surpassed Brazil

1995: China surpassed

Canada

20102345679

111829

2015F23467598

1628

2007: India surpassed Korea

RankIndia Rank 12 14 15 15 15 14 14 14 12 13 13 13 12 12 12 13 14 12 12 11 10 10 10 9 9 …5?

-40--40-Source: Economist Intelligence Unit; Various; The Beijing Axis Analysis

China Percent Stake Obtained through Acquisition (2004-2010)

Type of Overseas Assets Acquired by China (2004-2010)

47%

15%

5%

1%

32%

Ownership Stake: PubliclyListed

Operating Assets: Resources

Operating Assets: Plant,Property, Equipment

Operating Assets: Intangible

Ownership Stake: Private

40%

36%

13%

11%

75-100%

50-75%

25-50%

1-25%

-41-

0 5 10 15 20

Ashanti GoldfieldsXstrataCAEMI*

Gold Fields LtdTeck Corp

Cominco Ltd.Barrick Gold Corp.

Placer Dome Inc.AngloGold Ltd.

Newmont MiningCameco Corp.

Falconbridge Ltd.Grupo Mexico S.A.Freeport McMoRan

Potash CorporationPeabody Energy

Inco Ltd.MIM Holdings

IMC GlobalCoal India

CodelcoVale SA

Phelps DodgeNorilsk Nickel

Noranda IncPechineyRio Tinto

AlcanAnglo American

BHP Billiton

BRICS-based Company

0 10 20 30 40 50 60

Kinross GoldFortescue Metals

KazakhmysIvanhoe Mines

AntofagastaGold Fields Ltd.

Industrias PenolesConsol Energy

AngloGold AshantiYanzhou Coal Mining

ENRCPeabody Energy

The Mosaic CompanyGrupo Mexico S.A.

Potash Corp.Newmont Mining

Barrick GoldJiangxi Copper

Coal IndiaChina Coal Energy

Norilsk NickelCodelco

Freeport-McMoRanJizhong Energy

China Shenhua EnergyAnglo American

XstrataVale SA

BHP BillitonRio Tinto

BRICS No. of Mining Companies

Total Revenue (USD bn)

China 0 0India 1 3.55Russia 1 4.50Brazil 2 4.63South Africa 2 2.57Total 6 15.25

BRICS No. of Mining Companies

Total Revenue (USD bn)

China 5 77.57India 1 12.20Russia 1 15.00Brazil(1) 1 45.29South Africa 2 10.15Total 10 160.21

*Note: (1) CAEMI was acquired by Vale in 2006 Companies marked in red are BRICS-based companies

Source: Fortune 500; Various; The Beijing Axis Analysis

2010

Top 30 Mining Companies by Revenue (USD bn, 2000-2010)

2000

2000 2010

BRICS-based Company

-42--42-Source: CNBS; The Beijing Axis Analysis

Industrial Value Added, Yearly (USD bn, 2000-2011) Annual Retail Sales Y-o-Y Growth (%, 1981-2011)

0%

10%

20%

30%

40%

50%

0

500

1,000

1,500

2,000

2,500

3,000

00 01 02 03 04 05 06 07 08 09 10 11

China‘s WTO accessionin December 2001

Industrial value added output increased by 13.9% in 2011

0%

10%

20%

30%

40%

81 84 87 90 93 96 99 02 05 08 11

Income tax cut enacted in September 2011 hassupported consumption growth

-43--43-

66.2%

1.5%

32.3%

SOE

Private Enterprise

Others

0 2000 4000 6000 8000

Limited Liability Company

State Owned Enterprise

Private Enterprise

Joint-stock company

Joint-equity

Foreign InvestedEnterprise

Hong Kong, Macao andTaiwanese Enterprises

Collective Enterprise

Others

Chinese Overseas Investors by Type (2010) China’s Non-financial Overseas Investment Stock by Value (2010)

As % of Total

57.1%

10.2%

8.2%

7.0%

4.6%

3.2%

2.0%

1.1%

6.6%

Source: MOFCOM; The Beijing Axis Analysis

Private enterprises have only recently started looking beyond China

-44--44-Source: Platts; Various; The Beijing Axis Analysis

Period ChineseInvestor

Project / Company

Mine Location

Proven Resources(bn tons)

Investment (USD mn)

Acquisition Share

Dec 2011 Sichuan Hanlong SDL, Australia Cameroon 2.8 1,300 100%

Nov 2011 Sichuan Taifeng FWL’s Yogi Australia 1.2 500 67%

Nov 2011 Nanjing Iron & Steel Bumi Makmur Indonesia n/a n/a 50%

Aug 2011 Shandong Iron & Steel Tonkolili Sierra Leone 12.8 1,500 25%

Apr 2011 Nanjing Iron & Steel 6 Iron ore Projects Malaysia n/a 50 10%

Feb 2011 Wuhan Iron & Steel 3 Iron ore Projects Quebec, Canada 1 57 25%

Feb 2011 Wuhan Iron & Steel Lac Otelnuk Quebec, Canada 6 120 60%

Sep 2010 Chongqing Iron & Steel Extension Hill Australia 1.8 300 60%

Jul 2010 Chalco Simandou Guinea 2.25 1,350 47%

May 2010 Wuhan Iron & Steel Soalala Madagascar 0.8 100 n/a

Apr 2010 Wuhan Iron & Steel Bong Iron ore Liberia 1.31 68 60%

Jan 2010 Sichuan Taifeng Cairn Hill Australia n/a 42 50%

Aug 2009 Baoshan Iron & Steel Aquila Resource Australia n/a 286 15%

Dec 2007 Citic Pacific Sino Iron Australia n/a 460 n/a

Sep 2007 Anshan Iron & Steel Karara Australia 1.43 2,570 50%

Australia Deals

List of Selected Recent Acquisition of Iron Ore Assets by China (2007-2011)

-45--45-Source: The Beijing Axis Analysis

1. Cape Lambert Project—Iron Ore, USD 370 mn

2. Waratah—Coal, USD 515 mn

3. BHP’s Ravensthorpe Mine—Nickel, bid withdrawn

4. Galiliee—Coal, 10% equity, debt financing for USD 7.2 bn project

5. Resource House—Coal, USD 200 mn

1 2 3 4 5

2007 2008 2009 2010

1

23

4

5

-46--46-Source: Various; The Beijing Axis Analysis

AustraliaSyntech Resources Pty. Ltd.Aug 2011USD 202.5 millionAcquired

Yangzhou Coal Mining acquired Australia’s Syntech Resource for about USD 200 mn in Aug 2011. Syntech Resource owns the CarnabyDowns thermal coal project in Queensland’s Surat Basin

Australia Whitehaven Coal Ltd.2011USD 3.7 billionPending

Yangzhou Coal Mining offredmore than USD 3.74 bn to acquire Whitehaven Coal, an Australian coal miner. The Chinese company is attempting to secure overseas resources to meet the increase domestic demand for steel coal

AustraliaFelix Resources Ltd.2009USD 3.5 billionAcquired

In 2009 Yangzhou Coal Mining acquired 100% of Felix Resources for a total of USD 3.5 bn making it the first Chinese state-owned company to fully acquire a public Australian firm

Australia Yanzhou Australia Ltd.Dec 2011USD 2.1 billionOngoing

Yangzhou Coal Mining initiated a bid to merge its Australian unit, Yancoal Australia Ltd., withSydney-based Gloucester Coal Ltd. This transaction will leave Yanzhou with a 77%stake in the new company, while Noble-backed Gloucester will have a 14.8% stake in the merged group

Australia Wesfarmers Premier Coal & Wesfarmers Char Sep 2011USD 296 millionAcquired

Yangzhou Coal Mining In a separate transaction, Yanzhousigned agreements to fully acquire Wesfarmers Premier Coal and Wesfarmers Char for USD 296 mn in September 2011

Location of Mines or Companies