Canada in Africa Benchmarking Africas Progress and Development
Canada in Africa – Benchmarking Africa’s Progress and Development Against Canadian Best Practice Bruce Shapiro President Canada-South Africa Chamber of Business & Principal, Mine. Africa Toronto, Ontario, Canada
Presentation Outline n n n Key trends in the Canadian mining sector Raising funds – exchange pros & cons The high risk culture of Canada’s junior mining sector Canadians in Africa Useful websites Case study – First Uranium
Key Trends in the Canadian Mining Sector n n n Canadian mining and processing industry contributes 4% of the national gross domestic product Total production is $60 billion – most of which is exported 200 producing mining operations World leader in potash and uranium Top 5 in aluminum, nickel, pgm, zinc, diamonds
Key Trends continued… n Global acquisitions of Canadian miners n n n CVRD - INCO, Xtstrata - Falconbridge, Norilsk/Xstrata – Lion. Ore 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) Offshore exploration and acquisition to diversify portfolios Corporate social responsibility
Key Trends continued… n Diamond production – 17. 5 million carats/year n n n Ekati, Diavik, Jericho in production Snap Lake, Victor, Gahcho Kue planned Ontario Bill 187 – Diamond Royalty Bill n n Unpredictable tax regime Only one diamond company in Ontario 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
Analyzing the High Risk Culture of Investment in Canada’s Junior Mining Sector n n n Flow through share financing 1, 100 junior mining exploration companies Politically stable, safe, mineral rich However, Canadian companies are looking at other continents (diversification) Canadians tolerance for risk Exploration and service sector expertise – Torontobased and global
TSX – TSX Venture n n n More mature, sophisticated market for mining finance, biggest in the world TSX Venture (junior exchange) – good for early stage projects TSX – good for later stage, or producing mine or greater capital requirements Excellent service sector in Toronto – exploration, technical, legal, financial, marketing, analysts, media Good liquidity on secondary market – traded $369 billion in mining company stocks in 2006
Global Mining Financing Trend 1999 -2006 Equity raised (US$ Billions) There was a dramatic increase in equity financing for mining companies in 2006 Percentage of worldwide total raised through TSX and TSX Venture 41% 26% 52% 36% 43% 38% 47% 28% • 38% of total world equity capital for mining in 2006 was raised for TSX/TSX Venture issuers Source: Gamah International, 1999 -2006, compiled by TSX
TSX Group is the leading exchange group for mining financing Value of Equity Financings 5 -Year (2002 to 2006) Total = US$64. 9 Billion Source: Gamah International, 2002 - 2006 Compiled by TSX Group Number of Equity Financings 5 -Year (2002 to 2006) Total = 10, 261 Deals
LSE - AIM n n n Listing rules are relatively short and simple Affinity and familiarity with Africa Logistics – better time zone Large capital pool Less stringent listing requirements than TSX Less expensive than TSX
JSE – ALT-X n n n n Lower fee listing jurisdiction Familiarity of investors with Africa and mineral regions 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 Investor pool is smaller than Toronto or London It is a mature financing market but primarily for advancedstage companies not exploration Lower liquidity for mining stocks
CNQ n n n n Canada’s newest alternative exchange Started in 2003 Market cap just reached $1 billion Considerably lower listing fees Minimal ongoing fees Simple listing procedure Less liquidity Minimal marketing benefits or recognition from listing
Canadians in Africa n Canadians are in Africa in a big way in mining and infrastructure - $30 billion n n n Bombardier – lead partner in Gautrain SNC Lavalin – Pebble Bed Reactor Sherrit/Dynatec – Ambatovy Nickel Project in Madagascar CIC Energy Corp. – coal plant in Botswana Alcan – COEGA aluminum smelter Hatch – South African port infrastructure MAG Industries – hydro plant in DRC
Canadians in Africa continued… n 150 TSX listed mining companies in Africa active in 37 African countries n 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, Southern. Era Diamonds, SXR Uranium One, Teal Exploration and Mining
Canadians in Africa continued… n A total of $45 billion of new mining investments planned for next five years n n n Canadians accounting for $13 billion of this total By 2010 Canadian mining interests in Africa will double Canadian companies account for 24% of all exploration expenditures in Africa Capital assets of $10 billion Some key countries: Algeria, Angola, Burkina Faso, DRC, , Ghana, Guinea, Kenya, Madagascar, Mali, Nigeria, South Africa, Tanzania, Uganda, Zambia
Mining Companies by Origin Total = 83
Canada - a Global Player: Equity Financing Raised for Mining Companies, Selected Regions of the World, 2006 = $11. 1 billion *Includes China Shenhua Energy US$3 billion IPO, 31% Source: TSX, based on Gamah International Limited
Stock of Canadian Capital Mining Assets in Africa 2006 $7 billion More than $1 billion $500 M to $1 billion $100 M to $500 M $10 M to $100 M Less than $10 M No identifiable assets Sources: Natural Resources Canada 2010 $16 -17 billion
Case Study – First Uranium n n n n First Uranium Corporation - TSX: FIU Listing Date - December 19, 2006 Listing Type - IPO $233 Million total proceeds FIU was the largest mining IPO on TSX in 2006 Market Cap - $1. 1 Billion (as at January 29, 2007) Secondary listing on JSE
Case Study continued… n n n 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 Identify and acquire additional uranium projects in South Africa
Case Study continued… n n 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
Case Study continued… n 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.
Case Study continued… n Underwriting syndicate: n n 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: n Fasken Martineau
Useful Websites n Mine. Africa- www. mineafrica. com n Canada-South Africa Chamber of Business www. canadasachamber. com n Prospectors and Developers Association of Canada www. pdac. ca n Toronto Stock Exchange - www. tsx. com n Natural Resources Canada - www. nrcan. gc. ca n Ontario Ministry of Northern Development & Mines www. mndm. gov. on. ca
Special thanks to David Kaiser of TSX, Michel Miron of Natural Resources Canada, Darryl Levitt of Fasken Martineau, and Wayne Floreani, Mine. Africa for inputs into this presentation Bruce Shapiro President Canada-South Africa Chamber of Business and Principal Mine. Africa Tel: 416 -588 -7749 Fax: 416 -588 -7504 Email: bruce@mineafrica. com Web: www. canadasachamber. com
- Slides: 25