Transcript Title – Times New Roman 36pt Title 2 – 36pt

Plenary Panel Discussion 2
Diversifying the
Economic through
Beneficiation
Facilitator:
Thabo Masombuka
Key Note Panellist: Ebrahim Takolia
Panellist:
Neale Baartjies
Assessing the potential
for beneficiation:
Diversifying the Economy
through Beneficiation
Transformation Indaba
14 November 2012
Preface
• Mineral beneficiation is a priority for governments of resource rich
countries
• Resource nationalism is on the rise
• In this session we will cover:
• Developing a strategic rationale for beneficiation
• How can beneficiation assist with the diversification of the economy
• The risks and opportunities of setting up a beneficiation venture
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© 2012 Deloitte Touche Tohmatsu Limited
Introduction – Beneficiation
Some thought leadership
DeBeers relocated its London
based sorting facilities and site
holder meetings to Botswana
following government pressure
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Introduction – Beneficiation
Some media comments
Beneficiation:
All talk, no action
Tue, 21 Feb 2012 17:19 -- Minister of Mineral Resources Susan
Shabangu is under pressure to ensure her beneficiation policy and
its dual promise of wealth and job creation not only silences calls
to nationalise South Africa’s mines, but also works in favour of
securing President Jacob Zuma a second term.
Mining Advisory Leader at Deloitte, Ebrahim Takolia, says that
although the beneficiation of minerals to finished consumer goods
will increase the revenue gained from the exploitation of the
mineral resource, as well as increase the industry’s ability to
absorb labour, the beneficiation strategy isn’t going to create as
many jobs as Government is promising. Troye Lund
Deloitte Consulting’s executive lead of mining, Ebrahim
Takolia, believes a lack of co-ordination has slowed down
the beneficiation strategy.
“Beneficiation is beyond the ordinary scope of activities of
mining companies — the margins are not as high and the
mining houses don’t have the skills. It becomes onerous for
them to move, for example, into the business of making
catalytic converters. That’s why we need co-ordination,
combined with incentives.”
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The Beneficiation Value Chain
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The Beneficiation Value Chain
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Why has value creation traditionally occurred outside of
resource rich countries?
• Market access
• Large scale commercialisation in industrialised countries
• End-user demand was spurred by many innovations in developed
countries
• Comparatively lower oil prices (to today) – lower logistics costs
• 70s-80s – Manufacturing Moved to Japan
• 90s – South Korea, Hong Kong
• 2000s - China
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What about the future?
In future, even
China will be
displaced as
its labour and
input costs
rise
*BRIC – countries
defined by Jim O'Neill
at Goldman Sachs in 2001
CIVETS – countries defined
by Robert Ward of the
Economist in 2009
**Breakout Nations –
countries defined by Ruchir
Sharma at Morgan Stanley in
2012
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NEWLY INDUSTRIALISED COUNTRIES (South Africa,
Mexico, Brazil*, China*, India*, Malaysia, Philippines**,
Thailand, Turkey**)
CIVETS (Cambodia, Indonesia**, Vietnam, Egypt, Turkey**, South Africa)
POTENTIAL Nigeria**, Tanzania, DRC, Zambia, Mozambique, Botswana,
Angola, Saudi Arabia, Poland**, Czech Republic**, Russia*, Mongolia,
South Korea, Thailand**
© 2012 Deloitte Touche Tohmatsu Limited
Labour Costs - Average Hourly Wages in Developing
Economies
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Africa has significant untapped resources as well as a
population of more than one billion people
Guinea
• New rail link from Guinea to the
Liberian coast
• Trans-Guinea Railway upgrade
Tanzania
• Power: Australia IEC investing in
private coal mines and developing
new coal power stations to supply
power in Tanzania
Ivory Coast
New Rail link (2014) to carry carry
iron-ore and nickel but also coffee
and cocoa to San Pedro
Botswana / Namibia
• Transkalahri coal export line to
connect Botswana coal fields to
Walvis Bay in Namibia. Due to
start construction by 2013.
South Africa
• Expansion of Richard Bay Coal Terminal
recently completed
• Planned Transnet Coal rail freight capacity
increase from 63Mt to 81Mt by 2015
• Feasibility study in progress for new rail
link from Waterberg to Richards Bay
through Swaziland
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Mozambique
• Power plants: two thermal coal plants will
be constructed to supply power to mines and
a hydropower plant with a capacity of more
than 200 megawatts will also be constructed
in Tete province
• Power distribution: $2-billion investment in
a new power distribution and transmission
line from Cahora Bassa hydroelectric dam
• Port: Maputo Matola coal Terminal handling
capacity to increase from 8.7Mt to 12Mt in
2011, with further plans to increase to 16Mt
by 2016/17 and to 48Mt by 2033
• Rail: Sena Railway construction ($200M), to
be complete in 2013
© 2012 Deloitte Touche Tohmatsu Limited
Beneficiation – the South African context, value chains
SELECTED VALUE CHAINS
SELECTED COMMODITIES
(SOUTH AFRICA SHARE OF WORLD PRODUCTION (2005))
ENERGY
STEEL/STAINLESS STEEL
PIGMENT AND TITANIUM METAL
PRODUCTION
AUTOCATALYST AND DIESEL
PARTICULATE
DIAMOND PROCESSING AND
JEWELLERY
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Beneficiation – the South African context, strategic actions
STRATEGIC ACTIONS
Infrastructure Development
Investment Promotion and
Facilitation
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KEY ACTION PLANS
Government
Business
Investment in rail, ports, pipelines
and capacity and maintenance
Align production plans with national
programs
Facilitate security of energy supply
Embrace energy efficiency
Explore co-generation prospects
Partner private sector in
beneficiation projects (through
State Owned Enterprises (SOEs))
Re-evaluate Internal Rates of
Return (IRRs) on new projects to
identify investment hurdles
preventing SA development
Facilitation of international trade
agreements (new) to enhance
mineral beneficiation in SA
(investment in SA and access to
international markets
Commitment to establishment and
support of beneficiation projects in
SA to develop export markets for
beneficiated projects
Investment Promotion
Commitment to ensuring the supply
of raw material
© 2012 Deloitte Touche Tohmatsu Limited
Beneficiation – the South African context, strategic actions
STRATEGIC
ACTIONS
Skills Development
Enabling Regulatory
Environment
KEY ACTION PLANS
Government
Business
Promote skills development and partner with the relevant
SETAs for training and labour development
Investment in Human
Capital Investment
Leverage on Joint Initiative on Priority Skills Acquisition
(JIPSA) for required skills
Cooperate with government
to leverage on JIPSA for
required skills
Mineral and Petroleum Resources Development Act
(MPRDA) amendments to strengthen beneficiation
Evaluate prospects of establishing favourable trading
conditions (such as export duties) on ores/concentrates
where appropriate, in line with the trade policy currently
being developed by the Department of Trade and Industry
(DTI) and Economic Development Department (EDD)
Anti-Import Parity Pricing strategies that actively encourage
competition, strengthen competition policy and intermediate
feed socks
Research and
Development and
Technology
Partner private sector in beneficiation R&D (Mintek,
Council for Scientiific and Industrial Research (CSIR))
Support and develop
globally competitive
technologies
Supporting policy for clean and efficient use of coal
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Beneficiation – the African context, value chains
SELECTED VALUE
CHAINS
SELECTED COMMODITIES
(AFRICA SHARE OF WORLD PRODUCTION (2005))
ENERGY
STEEL/STAINLESS
STEEL
ALUMINIUM
COPPER AND COBALT
AUTOCATALYST AND
DIESEL PARTICULATE
DIAMOND PROCESSING
AND JEWELLERY
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Strategic considerations – Why Beneficiate?
• Why beneficiate?
• Availability of raw materials
• Business vs Resource Nationalism paradigm
• Access to markets for beneficiated products
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Regional Trade Agreements Snapshots - 6 countries
Supply chain integration and
the exploiting of regional and
local trade agreements is key
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Global Manufacturing Competitiveness Framework
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Disaggregated Supply Chain: The Boeing 787 Dreamliner
287 Suppliers Across 22 Countries
The figures illustrate the Boeing’s
787 Dreamliner concept of
disaggregation, showing that the
many activities required to bring a
product to the consumer are now
being performed in different
countries. The Dreamliner is
manufactured with components
from 287 suppliers across 22
countries, creating a complex
global network that would not
have been possible or desirable
several decades ago.
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Strategic considerations – Basic considerations in
beneficiation
Our experience with the strategy, process, and implementation of MultiLane delivery models for global manufacturing clients provides
applicable knowledge, methodology, and tools for an initiative like this
Logistics
Security of Supply
Availability
• This may influence the location of • Supply of raw materials for a
• Availability of raw materials
the business
duration that enables ROI, e.g 1020 years
• Significant logistics cost could
drive up costs
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Introduction – Ebrahim Takolia
Professional Background
Functional Expertise:
Ebrahim is the leader of the Mining Advisory Service practice at Deloitte
Consulting.
He has advised executives and management at most of the leading global
mining companies, tier 1 global financial institutions and fund managers on
various aspects related to mining companies, specifically: management and
operational strategy, transaction advice; financial analysis and modelling;
valuations; mineral economics; stock exchange related compliance
documentation, and bond covenants related to debt financing.
To date Ebrahim has opined on transactions in excess of US$90 billion
globally in the mining industry.
His experience includes working on projects located in, amongst others:
South Africa; Greece, Namibia; Botswana; Zimbabwe; Mozambique;
Guinea; Ethiopia; Egypt; Senegal; the DRC, Zambia; CIS (Russia and
Kazakhstan); Brazil; Guyana; Jamaica; Australia; India; Korea; Canada; and
China.
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Industry Expertise:
Mining and Resources
Extractive Industries
Education:
Bachelor of Economic Science , (University of the Witwatersrand, RSA)
MBA (Henley Business School, University of Reading , UK)
Executive Leadership Programme (INSEAD, French Republic)
Management Certification Courses (Harvard Business School, USA)
Professional Memberships:
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Chartered Institute of Securities and Investment (UK) MCISI [No. 61086]
Southern African Institute of Mining and Metallurgy [No.703945]
The Institute of Materials, Minerals and Mining (UK) [ Affiliate No. 450808]
The Investment Analysts Society of Southern Africa [No. IAS06364]
A Competent Valuator for mining companies and minerals properties in
terms of the SAMVAL Code
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Mining and Resources
Executive Management
Corporate and Business Strategy
Corporate Governance
Project Management
 Financial Analysis, Modelling and
Business Analysis
 Corporate Finance and Valuations
 Mineral Economics
 Compliance Documentation
Selected Relevant Experience:
Ebrahim has significant experience advising senior executives, tier 1 global
financial institutions and fund managers
 2005 - Listing (Gold, Platinum, Manganese, Iron Ore, Nickel, Copper,
Cobalt): African Rainbow Minerals.
 2005/6 – Competent Persons’ Report (Iron Ore, Coal, Heavy Minerals,
Industrial Minerals, Base Metals): Project managed the CPR and valuation
for the transaction which led to the unbundling of Kumba Resources
Limited into Exxaro Resources Limited and Kumba Iron Ore Limited
(Transaction Value: US$6 billion).
 2007 – Minerals Experts’ Report and Valuation (Chrome, Ferroalloys, Iron
Ore, Alumina, Aluminium, Coal, Energy): Project managed the MER and
valuation of Eurasian Natural Resources Company for an IPO on the
London Stock Exchange (Listing Value: US$15 billion).
 2007 - Valuation (Bauxite, Alumina, Aluminium): Valuation of the mining
assets of United Company Rusal (Value: US$30 billion).
 2009 - Competent Persons’ Report (Coal): Project managed the CPR and
valuation for the transaction which led to the listing of Optimum Coal
Holdings on the JSE (Transaction Value: US$1 billion).
 2010 - Competent Persons’ Report (Ferrochrome): Project managed the
CPR and valuation for a large chrome producer (Value: US$3.5 billion).
© 2012 Deloitte Touche Tohmatsu Limited
Ebrahim Takolia
Mining Advisory Leader
Deloitte Consulting (Pty) Ltd
Building 33, The Woodlands Office Park, Woodmead, Johannesburg, South
Africa
Mobile: +27 (0)82 304 3133 I Main: +27 (0)11 806 5400 I Direct: +27 (0)11
209 6493 | Fax: +27 (0) 11 806 5465
[email protected] I www.deloitteconsulting.co.za
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Plenary Panel Discussion 2
Diversifying the
Economic through
Beneficiation
Facilitator:
Thabo Masombuka
Key Note Panellist: Ebrahim Takolia
Panellist:
Neale Baartjies