Mining and metals sector - EY

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Africa

Mining and metals sector

“This is an exciting time for Africa. The world is taking a stronger interest in the potential we have to offer. Our vision is to actively participate in accelerating the opportunities to build and grow with our people and clients. We are already operating as one integrated business across the continent. We are a truly African business.” Ajen Sita, CEO, EY Africa

Inside A sector poised for growth

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EY in Africa

2

EY’s passion for the mining and metals sector

5

Our service offerings to the mining and metals sector

6

Key contacts

7

A sector poised for growth Known for its generous endowment of minerals and natural resources, the African continent accounts for nearly two thirds of the world’s mineral reserves, and more than half of the world’s mineral reserves for gold, platinum group metals, cobalt and diamonds.

Key resource

Units

Platinum

Africa produces more than 60 minerals, and is a major producer of gold, platinum group metals, diamonds, uranium, manganese, nickel, bauxite, cobalt and chromium. Furthermore, Africa also has among the largest reserves of uranium, manganese and chromium in the world. The table below summarises the top 10 resources in Africa.

African reserves

World reserves

% of world reserves

million oz

2,026

2,283

89

Diamonds

million ct

385

580

66

Cobalt

million t

3.7

6.6

56

Chromium

million t

130

350

37

Manganese

million t

182

540

34

Gold

million oz

257

1,511

16

Gas

trillion cubic feet

467

6,254

8

Crude oil

billion barrels

127

1,33

9

Coal

billion t

35

645

5

Copper

million t

27

540

4

Source: US Geological Survey Mineral Yearbook 2010; Edelweiss, BP

In terms of production, Africa produces more than 60 minerals, and is a major producer of gold, platinum group metals, diamonds, uranium, manganese, nickel, bauxite, cobalt and chromium. In contrast, Africa currently produces less than 7% of the world’s copper, lead and zinc, and less than 3% of the world’s iron ore and silver.

Wickus Botha Africa Mining and Metals Leader

During the past few years, exploration activities across the African continent have significantly increased, more than tripling since 2009.1

In 2012, more than 17% of global exploration costs were incurred in Africa. Of particular interest are the recent significant findings of copper, cobalt, thermal coal, metallurgical coal, iron ore, uranium, bauxite, gold and nickel deposits . Many of these findings have resulted in the development of new large-scale mining operations and the creation of many new jobs. Despite the recent slowdown in global economic growth and the stagnancy of infrastructure projects in developed markets, the continued demand for natural resources, particularly to support the development, urbanisation and industrialisation of emerging markets, has significantly intensified the focus and global importance of Africa’s mineral wealth.

Emerging markets, such as China and India, are investing heavily in Africa to secure supply of minerals, whereas mining companies from developed markets are investing in Africa in pursuit of diversifying their production portfolio and growth. These have resulted in significant amounts of foreign direct investment (FDI) and several mergers and acquisitions (M&A) in recent years. Doing business in Africa continues to be challenging, and careful consideration, robust planning, broad stakeholder engagement, strong leadership, and effective execution is required. Consistent with the results of EY’s Business risks facing mining and metals the most notable challenges facing the mining sector across Africa continues to be capital allocation and access to capital, margin protection and productivity improvement, resource nationalism, social license to operate, shortages of skilled resources, sharing the benefits and access to transport and utility infrastructure.2 At EY, we are passionate about the mining and metals industry, and optimistic about the abundance of opportunities presented across the African continent. Whether you are considering entering the African market, expanding or optimising your existing operations, or improving your governance, compliance or control environment, EY has the right people in the right places with the energy, enthusiasm, skills and experience to assist you in unlocking value.

1 “Worldwide exploration trends 2013: A Special Report from SNL Metals Economics Group for the PDAC International Convention,” Metals Economics Group, 2013. 2 “Business risks facing mining and metals 2013-2014,” EY, June 2013.

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Africa mining and metals sector

Resource sector (coal, oil and natural gas, metals and minerals) Breakdown by % contribution of economic activity as a proportional of total fDi new projects

78 projects

168 projects

19%

19%

103 projects

28%

80 projects

100 projects

31%

32%

60 projects

978 projects

22%

50% 26% 37%

26%

23% 29%

30%

27%

55% 49%

44%

52% 40%

38%

Services

23%

Manufacturing

Extraction

2007

2008

2009

2010

2011

2012

Sum 2003-12

Source: fDi Markets; EY analysis

EY in Africa Although the risks in investing in Africa may appear high, risks can be managed, and the rewards can be great. That is why we are investing in growing our integrated Africa presence and capacity to serve our clients who are also investing in and across the continent. EY currently operates seamlessly across Africa, with a physical presence in 33 countries. We operate under the direction of a single pan-African leadership. Our integrated representation across Africa has been described in the media as “one of the biggest changes in the accounting profession in more than 100 years.” We are able to navigate successfully through the complexity that our clients are experiencing across the geographies and the diversity of market sizes and sophistication. We do this through our Africa Business Center: its sole purpose is to assist clients in making their investment and expansion decisions in Africa. The Africa Business Center is supported by a network of professionals across Africa and in key investor markets such as Australia, Brazil, Canada, China, Europe,

India, the Middle East, the United Kingdom and United States. This network includes experienced sector professionals who are intimately familiar with opportunities and trends in their sector across the continent, as well as knowledge professionals whose research insights are invaluable in considering new markets.

Why we are excited about Africa? Africa is receiving unparalleled attention from large global companies, including substantial opportunities in mining. Africa is becoming increasingly more attractive to international investors and perceptions are becoming distinctly more positive over the medium to long term. Business leaders are planning new developments and expanding the existing investments that they have, supporting higher levels of foreign investment projected into the future. Most importantly, Africans themselves are leading the growth across the continent, and are displaying an overwhelming optimism about the growth prospects and investment potential of the continent.

Africa mining and metals sector

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Over the next twenty years, one third of the total global population growth of 1,5bn people will take place in Africa, and more than seventy cities of over one million people will exist in the next ten years as a result of rapid urbanisation. The opportunities in Africa as an emerging market are unparalleled.

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billion Africa’s population

17

54

11

sovereign states

African countries ahead of India on the World Bank’s Ease of Doing Business Index

$400

$2

36

trillion Africa’s collective GDP

African countries ahead of Russia on Transparency International’s Corruption Perception Index

billion South Africa’s Government proposed infrastructure program

71%

of all new FDI projects (3,848) attracted by Africa’s top 10 destinations since 2003

of the world’s fastest 20 growing economies through 2017 will be African

38 800+

60%

China-Africa proportion of BRICS trade (totalling $340 billion in 2012) with Africa

African countries ahead of China on the EIU’s Democracy Index

active infrastructure projects across different sectors in Africa, with a combined value in excess of $700 billion

22.3%

compound growth for Sub-Saharan Africa, and 12.8% for Africa in new FDI projects 2007-2012

Source: “Africa Attractiveness Survey 2013”, EY; “World Bank Ease of Doing Index 2013”, World Bank; “Corruption Perception Index 2013”, World Bank; “Economist Intelligence Unit Democracy Index 2013”.

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Africa mining and metals sector

An integrated African business We believe these are significant enhancers of the quality of service and speed of response that you will receive from us.

EY is an integrated organization across Africa, with a single leadership and a single set of goals, objectives and performance criteria. The significance for our clients is that we manage our business by service line, sectors and functions rather than by country, which means that our clients receive:

Geographically we have representation in most African countries, and our footprint across Africa helps ensure that communication is responsive to the needs of our clients, thereby stimulating trade and enhancing business relationships.

• Consistent quality standards everywhere • Utilization of a ‘single point of contact’ service

EY Africa by numbers

5,100

M or oc co

Tunisia

Algeria

Libya

1

East Region

North Africa Region

Ethiopia

South Sudan

staff

Egypt

integrated operating model

Uganda Kenya

Tanzania

33

163

countries

years in Africa

Tunisia

M or oc co

Central Region

Algeria

Malawi

Mauritania

Zimbabwe

Mali

Niger

Guinea

Djibouti

Sierra Leone Sao Tome Liberia Gabon Côte d’Ivoire Congo

Cameroon Democratic Republic of Congo

Eritrea

Nigeria South Benin Central African Sudan Cameroon Republic Togo

Equatorial Guinea

Chad

Sudan

Burkina Faso

Ghana

Senegal Gambia Guinea Bissau

Guinea Côte d’Ivoire

Chad

Democratic Republic of Congo Burundi

Uganda

Angola Mauritius

Mozambique Namibia

Tanzania

Botswana

Madagascar

Comoros Malawi

Zimbabwe

West Region

Seychelles

Seychelles

Rwanda

Zambia

Ghana

Somalia

Kenya

Angola

Nigeria

Southern Region

Ethiopia

Mad agas car

Cape Verde

Senegal

Gabon Congo

Egypt Zambia

FSSA Region

inea Equatorial Guinea

Libya

Namibia Botswana

South Africa

Mauritius

Reunion

Mozabique

263

5 regions

Swaziland South Africa

Lesotho

partners

1 African executive

Africa mining and metals sector

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EY’s passion for the mining and metals sector A truly globally connected professional services organization For many years, the mining and metals industry has been operating almost borderless, with executive management and the providers of capital often finding themselves far away from the actual mining operations. Furthermore, the mining industry is defined by unique and complex issues, and continuously evolving regulatory requirements. In recognizing the global nature of the industry, EY established the Global Mining and Metals Center, located in Sydney Australia, making it the hub of our mining knowledge and expertise. The Center is dedicated to offering industry insights and coordinating a network of more than 2,200 mining and metals professionals in 82 countries and 220 offices, who provide leading industry insights, develop practical alternatives and provide tailored solutions to the issues our clients face. The Center brings together a worldwide team of professionals with deep technical experience in providing assurance, tax, transaction and advisory services – its where people and ideas come together to help mining and metals companies meet the issues of today and anticipate those of tomorrow. Ultimately it enables us to help our clients meet their goals and compete more effectively. It’s how EY makes a difference.

Whether you are already active in multiple geographies or planning to expand your business into other countries, you can trust us to assemble a multinational team that combines deep industry knowledge, experience in the issues you face and strong local connections. Why choose EY’s Africa mining and metals team? EY is known for its deep mining and metals sector knowledge, relationships with the industry’s key stakeholders, and strong global capabilities. Clients see us as the most globally connected professional services organization, which, together with our industry focus and integrated leadership, truly set us apart. Across Africa, we provide our mining and metals clients with service teams that understand the challenges and complexities of their businesses, including the industry operating processes, growth drivers, regulatory considerations and market dynamics. We have an impressive footprint across Africa, with skilled and experienced professionals that really understand the jurisdictions and operating environments.

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It’s our experience that makes a difference to your business With a strong but volatile outlook for the sector, the global mining and metals industry is focused on future growth through expanded production, without losing sight of operational efficiency and cost optimization. The sector is also faced with the increased challenges of changing expectations in the maintenance of its social license to operate, skills shortages, effectively executing capital projects and meeting government revenue expectations. At EY we understand the key business drivers and challenges facing the mining and metals sector and believe our significant industry credentials set us apart. Our experience working with companies within the mining and metals sector means that we understand the issues, challenges and opportunities of your business and can provide you with deep insight into leading practices in assurance, tax, transactions and advisory services. You will also experience our interactive and collaborative working style as we provide you with a unique perspective – insights, observations and advice. Our people have a passion for serving the industry and the specific experience and knowledge to recognize, respond and work with our clients in delivering exceptional client service. We are committed to “building a better working world” across Africa • Working with our clients. Our 167,000 people are the foundation of our success. We assemble the right multi-disciplinary team for your business, drawing on our global network of professionals. Working with you in a collaborative style, we gain a clear understanding of your organization and strive to identify issues before they become problems. You get the people you need, wherever in the world you need them, backed up by leading practices, methodologies and tools. • Developing people. We attract talented people from diverse backgrounds. Our emphasis on inclusiveness matters more than ever today. As business challenges become more complex, we need to call upon the widest spectrum of views and opinions to address them. Our open culture offers continuous personal and professional development. Because when our people grow and succeed, your company benefits. • Strengthening communities. We help to improve regulatory regimes and company reporting models. We promote transparency in financial reporting and use our influence to strengthen global corporate governance. We encourage entrepreneurship, which leads to growth, jobs and prosperous communities. And our people share their business skills and knowledge with others in their communities.

Africa mining and metals sector

Our service offerings to the mining and metals sector Today, the origination of capital for mining activities flow from all over the world, including Africa, to acquire or fund the development of operations across Africa. Our collective expertise enable us to advise our clients in delivering value from its investments as well as managing the risks, reputation and performance of mining operations across Africa.

Services offered by EY

Advisory

Performance improvement

Tax

Business Tax Advisory

International Tax Services

• Finance

• Finance

• International Tax Services

• Customer

• Customer

• Transfer pricing

• IT Advisory

• IT Advisory

• Supply Chain

• Supply Chain

Risk • Actuarial services • Internal audit • Internal controls • Risk management

Compliance and Reporting • Accounting compliance and reporting • Global compliance and

• Payroll

management • IT programme advisory

Transaction Tax • Pre-deal structuring • Tax modelling and documentation

The above are packaged to deliver the following solutions

Infrastructure Advisory

Accounting Compliance and Reporting

Project Finance Financial Statement Audit

Indirect Tax • Value added tax (VAT)

Valuation and business modelling

Fraud Investigation and Dispute Services

• Customs and international trade

Financial Accounting and Advisory Services

Transaction integration

Human Capital Transaction real estate

Climate Change and Sustainability Services

• Global employment tax services

M&A Advisory

• Expatriate tax compliance

• IT transformation • IT assurance and risk

Assurance

Transaction support

reporting • Business Tax Compliance

IT risk and Assurance

Transactions

• Tax due diligence • Post deal implementation

services

Restructuring

• Business immigration services • Performance and Reward • Africa Tax Coordination Services (ATCS) • Relocation

• Governance, risk and compliance • Strategic program management • Financial administration reform • Infrastructure delivery management • Building the Engine Room of Growth in Africa • IT led transformation

Africa mining and metals sector

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Key contacts At EY, we know that mining and metals industry credentials are critically important to our clients. We are proud of our local and global industry credentials and believe that the real power of a credential is the way that we leverage on our credentials to the benefit of the client. If you are interested in discussing our credentials in your region, please contact any of the representatives listed below.

Our mining and metals people At EY Africa our extensive base of experienced partners that operating within the mining and metals space provide us with the edge that our clients are looking for. Our mining and metals group operate across the continent as one, lead by our mining and metals sector leader Wickus Botha. Our team has deep industry experience and insights that we lever to provide real benefit to our clients. Whether you are already active in multiple geographies or planning to expand your business into other countries, you can trust us to assemble a multinational team that combines deep industry knowledge, experience in the issues you face and strong local connections.

Regional and in-country sector residents Region

Central

East

North

South

West

7

Country

Primary contact

Email

Telephone

Malawi

Shiraz Yusuf

[email protected]

+265 187 6476

Zambia

Henry Nondo

[email protected]

+260 211 232297

Zimbabwe

Nqaba Mkwananzi

[email protected]

+263 475 0979

Ethiopia

Amaha Bekele

[email protected]

+251 11 550 4933

Kenya

Joseph Cheboror

[email protected]

+254 20 271 5300

Uganda

Michael Kimoni

[email protected]

+256 414 343 520

Rwanda

Herbert Gatsinzi

[email protected]

+250 571 058

South Sudan

Patrick Kamau

[email protected]

+254 20 271 5300

Tanzania

Joseph Sheffu

[email protected]

+255 788 681 900

Egypt

Christian Mion

[email protected]

+33 6 86 42 25 77

Algeria

Philippe Ausseur

[email protected]

+ 33 146 93 77 30

Morocco

Patrick Montlahuc

[email protected]

+212 22 95 79 00

Libya

Christian Mion

[email protected]

+33 6 86 42 25 77

Tunisia

Christian Mion

[email protected]

+33 6 86 42 25 77

Angola

Luis Marques

[email protected]

+222 371 390

Botswana

Bakani Ndwapi

[email protected]

+267 397 4078

Madagascar

Yann Rasamoely

[email protected]

+248 20 22 217 96

Mauritius

Yann Rasmoely

[email protected]

+248 20 22 217 96

Mozambique

Gildo Come

[email protected]

+258 21 353 000

Namibia

Gerhard Fourie

[email protected]

+264 61 289 1100

Seychelles

Yann Rasmoely

[email protected]

+248 20 22 217 96

South Africa

Wickus Botha

[email protected]

+27 11 772 3386

Cameroon

Joseph Pagop Noupoue

[email protected]

+237 334 251 09

Chad

Erik Watremez

[email protected]

+241 74 21 68

Congo

Ludovic Ngatse

[email protected]

+242 05 530 03 50

Côte d’Ivoire

Jean-Francois Albrecht

[email protected]

+225 20 21 11 15

DR Congo

Lindsey Domingo

[email protected]

+243 999 306 869

Equatorial Guinea

Erik Watremez

[email protected]

+241 74 21 68

Gabon

Erik Watremez

[email protected]

+241 74 21 68

Ghana

Victor Gborglah

[email protected]

+233 302 77 42 75

Guinea

Joseph Pagop Noupoue

[email protected]

+237 334 251 09

Nigeria

Henry Egbiki

[email protected]

+234 1 269 5827

Senegal

Jean-Francois Albrecht

[email protected]

+225 20 21 11 15

Africa mining and metals sector

Africa mining and metals sector

8

EY’s Global Mining & Metals Center With a strong but volatile outlook for the sector, the global mining and metals sector is focused on future growth through expanded production, without losing sight of operational efficiency and cost optimization. The sector is also faced with the increased challenges of changing expectations in the maintenance of its social license to operate, skills shortages, effectively executing capital projects and meeting government revenue expectations. EY’s Global Mining & Metals Center brings together a worldwide team of professionals to help you succeed — a team with deep technical experience in providing assurance, tax, transactions and advisory services to the mining and metals sector. The Center is where people and ideas come together to help mining and metals companies meet the issues of today and anticipate those of tomorrow. Ultimately it enables us to help you meet your goals and compete more effectively.

Area contacts Global Mining & Metals Leader Mike Elliott Tel: +61 2 9248 4588 [email protected]

Commonwealth of Independent States Evgeni Khrustalev Tel: +7 495 648 9624 [email protected]

South America and Brazil Leader Carlos Assis Tel: +55 21 3263 7212 [email protected]

France and Luxemburg Christian Mion Tel: +33 1 46 93 65 47 [email protected]

Service line contacts Global Advisory Leader Paul Mitchell Tel: +86 21 2228 2300 [email protected]

India Anjani Agrawal Tel: +91 982 061 4141 [email protected]

Global Assurance Leader Tom Whelan Tel: +1 604 891 8381 [email protected]

United Kingdom & Ireland Lee Downham Tel: +44 20 7951 2178 [email protected]

Global IFRS Leader Tracey Waring Tel: +61 3 9288 8638 [email protected]

Europe, Middle East, India and Africa Leader Mick Bardella Tel: +44 20 7951 6486 [email protected]

Americas and United States Leader Andy Miller Tel: +1 314 290 1205 [email protected]

Global Tax Leader Andy Miller Tel: +1 314 290 1205 [email protected]

Africa Wickus Botha Tel: +27 11 772 3386 [email protected]

Canada Bruce Sprague Tel: +1 604 891 8415 [email protected]

Global Transactions Leader Lee Downham Tel: +44 20 7951 2178 [email protected]

Oceania Scott Grimley Tel: +61 3 9655 2509 [email protected] China and Mongolia Peter Markey Tel: +86 21 2228 2616 [email protected] Japan Andrew Cowell Tel: +81 3 3503 3435 [email protected]

EY | Assurance | Tax | Transactions | Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization and may refer to one or more of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com. © 2013 EYGM Limited. All Rights Reserved Creative Services Ref. 121218. Artwork by Sewpersadh. EYG no. ER0089 ED no. 0114 This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.

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