Chamber of Mines in Zambia24 November 2008

Source of capital for: Exploration Pre-development activities Mine Development Investment/Expansion

Play a major role in M & A Activity Influence Investment Flows Determine (to some extent)

commodity prices

3

1. Exploration, discovery, drilling, resource estimation

2. Metallurgical and mining method testwork3. Mining and process method selection and

optimisation4. Operating and capital cost estimates5. Economic Optimisation of economic resource

(sub-economic remains behind)6. Detailed engineering design of economic

optimisation7. Development of mining and processing schedules8. Inclusion of the above as well as other relevant

economic data (eg: fiscal measures) into a financial model.

9. Project decision and if positive, funding10.Development

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Development Schedulefor a typical large copper project

Development Schedulefor a typical large copper project

Adapted from Resource Stock Guide (RSG)

Risks, No. of Players

Rewards, No. of Winners

Investor (n)“One who

commits capital in order to gain

a financial return”

Individuals Pension Funds Mutual Funds Hedge Funds Companies Sovereign

Wealth Funds Banks

General Weakening in global demand Slow down in economic activity

Depressed economic output Weak demand for durable goods, housing

units Slow down in construction activity

Marked reduction in investor confidence Reduced availability of investible funds

Investors have become risk averse In the current situation, investors see

little “upside” in long term risky investments

The few investible funds available will only go to high quality “safe” investments

The few investors remaining will be very rigorous in evaluating their portfolios

Exploration is the major source of growth in the mining industry

At present, more than half of exploration activity is carried out by mid-tiers, juniors and exploration companies (US$11bn – US$15bn)

With restricted funds availability, only quality projects with the right parameters will continue

Recent reports indicate approx. US$50bn of investment is likely to be deferred between 2008/9

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• Geological potential for target mineral• Profitability of potential operations • Security of tenure & permitting• Ability to repatriate profits• Consistency of mineral policies• Realistic foreign exchange controls• Stability of exploration terms/conditions• Ability to predetermine environmental obligations• Ability to predetermine tax liability• Stability of fiscal regime

United Nations Survey of45 companies

Source: James Otto

Top 10 ranked Company Decision Criteria for exploration(out of 62 factors)

No Major Structural Effect –

Focus on Efficiency/Acquisitio

nFocus switch from

exploration to efficiency or M & A

Take over, barely survive or close

down

Marked reduction leaving very few

players

Central African Copper/Cobalt 86%BHP Billiton 57.8%Freeport McMoran 82.2%

Pre-2008, Zambia had just started to emerge as a prime destination for investment, much more work is still ahead

In the Zambian mining sector a considerable number of assets are running old technology, this has implications on costs

The current global crisis will impact on recapitalisation and investment programmes

Mineral Exports still account for majority of foreign earnings

Mining activity accounts for a very large part of GDP: Tourist enterprises (hotels, lodges, car

hire) Support industries (drilling, suppliers,

construction, banks, others) “Spin-off” industries (business services,

local entrepreneurship)

The international financial markets are good sources of capital, but they are very sensitive

With increasing globalisation developments in one part of the world can bring far reaching consequences

In times of crisis, the winners will always be the investments and countries that pose the least risk to investors in the international markets