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Canada in Africa – Benchmarking Africa’s Progress and Development Against Canadian Best Practice

Canada in Africa – Benchmarking Africa’s Progress and Development Against Canadian Best Practice. Bruce Shapiro President Canada-South Africa Chamber of Business & Principal, MineAfrica Toronto, Ontario, Canada. Presentation Outline. Key trends in the Canadian mining sector

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Canada in Africa – Benchmarking Africa’s Progress and Development Against Canadian Best Practice

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  1. Canada in Africa – Benchmarking Africa’s Progress and Development Against Canadian Best Practice Bruce Shapiro President Canada-South Africa Chamber of Business & Principal, MineAfrica Toronto, Ontario, Canada

  2. Presentation Outline • 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

  3. Key Trends in theCanadian Mining Sector • 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

  4. Key Trends continued… • Global acquisitions of Canadian miners • CVRD - INCO, Xtstrata - Falconbridge, Norilsk/Xstrata – LionOre • 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

  5. Key Trends continued… • Diamond production – 17.5 million carats/year • Ekati, Diavik, Jericho in production • Snap Lake, Victor, Gahcho Kue planned • Ontario Bill 187 – Diamond Royalty Bill • 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

  6. Analyzing the High Risk Culture of Investment in Canada’sJunior Mining Sector • 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 – Toronto-based and global

  7. TSX – TSX Venture • 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

  8. Global Mining Financing Trend1999-2006 There was a dramatic increase in equity financing for mining companies in 2006 Percentage of worldwide total raised through TSX and TSX Venture Equity raised (US$ Billions) 38% 41% 43% 47% 26% 52% 36% 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

  9. TSX Group is the leading exchangegroup for mining financing Value of Equity Financings 5-Year (2002 to 2006) Total = US$64.9 Billion Number of Equity Financings 5-Year (2002 to 2006) Total = 10,261 Deals Source: Gamah International, 2002- 2006 Compiled by TSX Group

  10. LSE - AIM • 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

  11. JSE – ALT-X • 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 advanced-stage companies not exploration • Lower liquidity for mining stocks

  12. CNQ • 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

  13. Canadians in Africa • Canadians are in Africa in a big way in mining and infrastructure - $30 billion • 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

  14. Canadians in Africa continued… • 150 TSX listed mining companies in Africa active in 37 African countries • 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, SouthernEra Diamonds, SXR Uranium One, Teal Exploration and Mining

  15. Canadians in Africa continued… • A total of $45 billion of new mining investments planned for next five years • 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

  16. Mining Companies by Origin Total = 83

  17. Canada - a Global Player:Equity Financing 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

  18. More than $1 billion $500 M to $1 billion No identifiable assets Stock of Canadian Capital Mining Assets in Africa 2006 $7 billion 2010 $16-17 billion $100 M to $500 M $10 M to $100 M Less than $10M Sources: Natural Resources Canada

  19. Case Study – First Uranium • 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

  20. Case Study continued… • 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

  21. Case Study continued… • 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

  22. Case Study continued… • 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.

  23. Case Study continued… • Underwriting syndicate: • 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: • Fasken Martineau

  24. Useful Websites • MineAfrica- www.mineafrica.com • Canada-South Africa Chamber of Business www.canadasachamber.com • Prospectors and Developers Association of Canada www.pdac.ca • Toronto Stock Exchange - www.tsx.com • Natural Resources Canada - www.nrcan.gc.ca • Ontario Ministry of Northern Development & Mines www.mndm.gov.on.ca

  25. Special thanks to David Kaiser of TSX, Michel Miron of Natural Resources Canada, Darryl Levitt of Fasken Martineau, and Wayne Floreani, MineAfrica for inputs into this presentation Bruce Shapiro President Canada-South Africa Chamber of Business and Principal MineAfrica Tel: 416-588-7749 Fax: 416-588-7504 Email: bruce@mineafrica.com Web: www.mineafrica.com Web: www.canadasachamber.com

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