REPUBLIC REPUBLIC OF OF TURKEY TURKEY PRIME PRIME MIN MINISTR ISTRY Invest In estmen ment S t Sup uppo port t an and Pr d Promo omotion tion Agen Agency of y of Tur urkey ey ISP ISPAT Tur urkish kish Mi Mining ning Ind Indust ustry 0
Contents Overview of Turkish Mining Industry Deep Dive on Priority Minerals of Turkish Mining Industry Incentives Investment Support and Promotion Agency of Turkey
Turkish Mining Industry 0,03% Iron 0,29% Copper 0,57% Phosphate 0,67% Gold 1,06% Silver Turkey’s Potential is: 1,44% Chromium 4,73% Barite 2.5% of the World Reserves 4,81% Diatomite of Industrial Raw Materials 8,70% Perlite 9,74% Pumice 0.6% of the World Reserves 13,40% Bentonite of Metallic Minerals 19,14% Na-Feldspar 40,00% Marble 72,00% Boron Salts SOURCE: USGS, MTA Number of Companies with Foreign Capital in Mining 687 627 537 478 409 318 236 188 138 2004 2005 2006 2007 2008 2009 2010 2011 2012 Investment Support and 2 Promotion Agency of Turkey
Turkish Mining Industry Mining Sector Imports* Mining Sector Exports* U.S $ Million U.S $ Million 4,904 4,784 4,471 3,324 2,965 3,528 2,612 2,314 2,732 2,004 2,181 1,468 2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010 2011, U.S. $ billions + Turkey strong in exports of ▪ Gold jewelry ▪ Natural stones and cement Major trade imbalances in ▪ Coal ▪ Copper ▪ Aluminum SOURCE: UN Comtrade; EtiBor; McKinsey&Company +Includes all products in the value chain in addition to ores and concentrates *Raw Materials ,Ores and Concentrates Investment Support and Promotion Agency of Turkey
Turkish Mining Industry Growth of Output in Mining Sector % 2005 2006 2007 2008 2009 2010 Current Global Market Size (U.S $Billion) 9,0 8,1 5,2 5,4 4,7 -6,9 Global Crisis Mining Sector Income U.S $ Million 10,250 10,172 9,210 8,105 6,214 5,166 2005 2006 2007 2008 2009 2010 SOURCE: McKinsey&Company, State Planning Organization Investment Support and 4 Promotion Agency of Turkey
T urkey is an investment friendly destination for mining companies Score out of 100 67 66 70 ▪ New mining legislation, dated 60 53 December 2010, to further 46 44 50 encourage professional 39 40 mining; 27 26 ▪ Legislation links the licence 30 15 acquisition with actual mining 20 activity within a certain time 10 frame. 0 ▪ License traders with no real investment plans be eliminated from the market. ▪ The process to obtain operation license and permit Policy potential Index is fairly structured and can ▪ PPI is a composite index that measures the effects of take from 3 months to a year (depending on the government policies on the investment attractiveness. geographical and specific ▪ The score is calculated as a normalized average of score localisation). based on set of questions asked to mining companies on administration efficiency, labour issues, infrastructure, regulations. SOURCE: Fraser Institute Investment Support and Promotion Agency of Turkey
Mining companies continue to consider Turkey an investment friendly destination Policy Potential Index by country Notice Score out of 100 ▪ PPI is a composite 2009 2010 2008 2011 index that measures the effects of W. Australia 61 63 67 71 government policies on the investment attractively in mining Ontario 69 75 66 69 industry ▪ Brazil 45 47 46 43 The score is calculated as a normalized average of score based 35 Turkey 36 40 53 on set of questions asked to mining Kazakhstan 26 33 39 30 companies on administration South-Africa 35 40 26 efficiency, labour 23 issues, infrastructure, regulations Russia 36 38 44 23 ▪ Historically, Turkey Zimbabwe 3 19 15 22 generally scored better than other main chromite producing India 12 16 27 11 countries SOURCE: Nithia Capital Resources Investment Support and Promotion Agency of Turkey
In 2010, lower transport costs key reason for competitiveness in Turkish costs Comparison of Turkish and South African CIF China cost base for comparable mines 1 2010 cost comparison 2020 cost comparison USD per metric tonne (real 2011) USD per metric tonne (real 2011) 241 Other 2 Sea freight 52 194 Other 2 172 158 4 Sea freight 47 3 Inland transport 66 34 31 Inland transport 55 Royalties 10 41 34 Processing costs 36 Royalties 5 6 4 18 21 25 Processing costs 75 Mining costs 70 64 59 Mining costs ▪ Low sea freight rates in Turkey supported due to availability of excess container capacity on the Turkey – China route ▪ Overall processing cost increase in SA driven by power tariffs 1 Underground mines with ~1 million metric tonne Investment Support and Promotion Agency of Turkey
Turkey ’ s new regulation favours professional mining investors … 2 ▪ Obtaining mining rights in Russia is generally a long complicated by several internal factors Russia ▪ From Jun-Nov 2007, success rate of mining rights application was 5 out of 453 ▪ Broad Based Black Economic Empowerment (BBBEE) legislation and by the South-Africa legal uncertainties complicates mining rights process in South Africa ▪ More than 90% of the mining right licenses take more than a year and even up to 5 years India ▪ The process is complicated by the amount of administrative issues and bureaucracy involved ▪ New Turkish legislation was passed to enable professional mining; it links the licence acquisition with actual mining activity within a certain time frame. License traders with no real investment plans should, therefore, be eliminated from the Turkey market ▪ The process to obtain operation license and permit is fairly structured and can take from 3 to 12 months depending on the geographical and specific localisation but is generally considered reliable for genuine mining companies SOURCE: Nithia Capital Resources Investment Support and Promotion Agency of Turkey
Contents Overview of Turkish Mining Industry Deep Dive on Priority Minerals of Turkish Mining Industry Gold Incentives Investment Support and Promotion Agency of Turkey
Gold Overview Turkish gold reserves are around 700 tons (increased from 600 tons over the last 5 years, MTA alone discovered 45 tons in 2009). Probable reserves estimated around 1,700-6,500 tons 1 making up for as high as 1/8th of globally proven reserves. Tons Gold Production of Turkey Tons Import Export 275 242 24 +30% 203 180 17 165 15 142 118 11 10 8 77 64 5 53 56 49 38 10 2005 2006 2007 2008 2009 2010 2011 2005 2006 2007 2008 2009 2010 2011 Gold production in Turkey gained momentum following the legislation change facilitating exportation of unrefined gold. 1 ODTU metallurgical engineer Ayhan Erler and MTA’s cooperative study concluded 1,700 -6,500 tons of gold potential in 580 different locations in Turkey SOURCE: MTA, Istanbul Gold Exchange, McKinsey&Company Investment Support and 10 Promotion Agency of Turkey
Gold reserves Gold Potential gold-silver reserves Koza Gold mine Turkish Gold Reserves Eldorado Gold Anatolia Minerals Turkey has 700 Tons of proven reserves concentrated in Aegean and Black Sea regions Reserve Reserves Production Company Possible Production Sites 2010 Tons 2010 Tons Name 10 Kışladağ 415 332 0 Efemçukuru 53 0 Çukuralan… 47 28 89 31 15 34 27 18 24 11 4 12 Masra Ovacık 5 3 SOURCE: MTA, Istanbul Gold Exchange, McKinsey&Company Investment Support and 11 Promotion Agency of Turkey
Contents Overview of Turkish Mining Industry Deep Dive on Priority Minerals of Turkish Mining Industry Phosphate Incentives Investment Support and Promotion Agency of Turkey
Turkish Phosphates Reserves Phosphate • Turkey has around 493 Million Tons of Phosphates reserves as of 2009 with an average grade* of %30,5 P 2 O 5. • (*After enrichment process.) • Turkey ’s phosphates export is extremely low around $15.000 a year. • Turkey ’ s Phosphates rock production is extremely low around 1,000 tons per annum. Import(U.S $ Million) Import (Thousand Tons) Global Phosphate rock grade evaluation 1975-2010 U.S $ Million Average P 2 O 5 grade Percent 746 782 33 744 610 741 707 496 32 CAGR 291 -0.3% 31 30,8 24,6 159,9 30 13,8 29,4 37,3 45,7 76,2 2002 2003 2004 2005 29 2006 2007 2008 2009 28 1995 2000 1975 1985 2005 2010 SOURCE: MTA, USGS Investment Support and 13 Promotion Agency of Turkey
Contents Overview of Turkish Mining Industry Deep Dive on Priority Minerals of Turkish Mining Industry Copper Incentives Investment Support and Promotion Agency of Turkey
Copper Operable Mines Turkish Copper Reserves Operational Mines Downstream industries such as; Automotive(Expected to grow %11 average and reach up to 23 $ Billion in 2015) Construction(Expected to grow %7 average and reach up to 79 $ Billion in 2015) will boost Copper Imports. Copper Imports 379 2010,thousand metric tons Thousand Tons +5% Primary Production 386 +5% 332 312 289 Given small 272 332 refining 168 capacity most of the copper 126 sold as 42 concentrate. 5 2008 2009 2010 2011 2015 Exported as Refined in Secondary Refined Total domestic Concentrate concentrate domestic production Copper refined Copper production facilities from scrap import consumption SOURCE: MTA,McKinsey&Company Investment Support and 15 Promotion Agency of Turkey
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