China and Australias Virtuous Circle of Economic Growth and Mutual - PowerPoint PPT Presentation

China and Australia’s Virtuous Circle of Economic Growth and Mutual Prosperity Owen Hegarty Vice Chairman G-Resources Group HKEX 1051 Vice Chairman CST Mining Group HKEX 985 Chairman Tigers Realm Minerals Ltd. Non Executive Director FMG Director AUSIMM Australian Resources Chinese Investment Congress Adelaide, July 2011

Introduction Multi – Decade Minerals Demand Growth Focus on China Mine Supply Under Pressure Growing the China – Australia Relationship Virtuous Circle of Growth & Prosperity Thank You Page 1

Multi-Decade Minerals Demand Growth China’s GQ – Growth Quintella ► World to continue in a long period of economic ► Accelerating consumption from growing middle class expansion ► A metal intensive stage of economic development ► China still the main game ► Largest urban migration in world history ► Traditional markets of US, Japan, Europe still ► Massive infrastructure development important ► Social imperative ► But emerging markets are the future Large-scale infrastructure plans of China ► BRICs → MIST → N11 → CIVETS Source: CEC, MOR, NDRC, JP Morgan Page 2

China Focus  China’s GDP will double within 5 years, and quadruple with in 10 years  The west and central region’s growth will replicate the growth of the east China GDP by Provinces in 2020 Source: CIA World Fact Book, KPMG  Substantial new infrastructure investments  Higher living standards and the focus on higher value-added industry will support the outlook for commodities Source: HSBC, KPMG Page 3

China Focus Chinese Gold Demand (Tons)  Accelerating household income growth  Less need for money set side for rainy days  Greater disposable / investable income  Gold is a good example of alternative investment with demand growing dramatically  Demand for securities investments is growing  All points to demand for resource stocks by China The Consumption Jigsaw in China Source: GFMS, LBMA, WGC, J.P. Morgan Outward investment in energy and raw materials deals (USD billion) Source: J.P. Morgan Source: Bloomberg, J.P. Morgan Page 4

China’s 12 th Five Year Plan  The focus of the plan is to ensure long-term prosperity, sustainable growth and social harmony Guidelines of Government Main themes in the plan New policy to encourage ODI support on ODI • • • Driving up domestic demand Better coordination for investment Loosening limits on overseas • • Enhancing basic position of Strengthening macro for investments from NDRC implementing “Going Out” strategy agriculture, improving core - No approval required for •  Resource-related overseas competitiveness of manufacturing Improved regulations on overseas investments ≦ $300 million industry, developing new strategic investment activities •  Non resource-related industries and speeding up Establishing systems to promote overseas investments ≦ $100 development of service sector overseas investment • • Promoting urbanization Simplifying overseas investment million • • Easing RMB settlement (PBOC) Energy efficiency procedures • Reducing income disparity, more - Use CNY in overseas equitable wealth distribution investment Page 5

Minerals Supply – Under Pressure  Supply will be running to catch up  FMG - a great example  More of them required  Exploration needs to be encouraged  Asia is uniquely positioned  Geopolitically  Technically  Financially  Some structural challenges  Physical infrastructure  Regulatory infrastructure  Sovereign risk issues  Some current supply uncertainties Page 6

Supply Opportunities – Australia and Asia Global discovery rates are declining, but the opportunities are in Australia and Asia Recent examples of discoveries in Australia and Asia  Solomon Hub, FMG – WA, Australia (Iron ore)  Marillana, Brockman Resources – WA, Australia (Iron ore)  Calavingina & Wealthunduthaluna, Rio Tinto – WA, Australia (Iron ore)  Beutong, TRM – Aceh, Indonesia (Cu-Au)  Tujuh Bukit, Intrepid Mines – Java, Indonesia (Cu-Au) Hillside, Rex Minerals – SA, Australia (Au-Cu)   DeGrussa, Sandfire Resources – WA, Australia (Cu- Au)  Middlemount coal project, Macarthur Coal and Gloucester Coal – QLD, Australia  The Alpha coal project, Hancock Coal – QLD, Australia Oaklands, Coalworks – NSW, Australia   South Galilee coal project, Bandanna Energy – QLD, Australia  East Kutai coal project, Churchill Mining - Indonesia  Tuhup project, PT Borneo Lumbung – Kalimantan, Indonesia Page 7

Expanding the Relationship Country Trade with China as % of GDP  Australia has the 3 rd highest trade with 2010 1992 China  Potential for significant growth in investment and trade across different sectors Source: KPMG Foreign Investment in Australia AUD bn 99.1 2009 2006 100  Chinese investment 86.6 90 in Australia is just 80 70 63.1 beginning 55.8 60 50 45.0  Potential for 40 33.6 30 24.6 23.8 investment growth is 17.5 16.6 16.4 15.8 20 12.9 12.6 11.7 10.9 10.6 9.2 7.7 5.6 5.5 10 4.8 significant 0.6 np 0 US UK Japan Netherlands Switzerland Germany Singapore BVI France Canada PRC China Hong Kong Source: KPMG Page 8

China and Australia’s Virtuous Circle of Growth and Prosperity Adelaide Page 9

Supply Side Industry Zealot Thank You Page 10