WEST AFRICA EXPLORATION POTENTIAL ALFRED BAKU – EVP and Head of West Africa, Gold Fields October 2015
Key Themes Geographical Spread and Footprint Doing Business in West Africa Type and Quality of Deposits West Africa’s Gold Mining Portfolio Exploration Spend Tax Rates of African Mining Countries How Africa Compares SWOT Analysis 2
West Africa – Spread and Footprint 15 countries under the Economic Community of West African States M A L I M A L I NIGER NIGER SENEGAL SENEGAL BURKINA BURKINA GUINEA-B GUINEA-B BENIN BENIN GUINEA GUINEA TOGO TOGO NIGERIA NIGERIA COTE COTE SIERRA SIERRA D’IVOIRE D’IVOIRE LEONE LEONE GHANA GHANA Same currency (FCFA) in 8 states through West Africa Economic and Monetary Union (WAEMU) 3
Doing Business in West Africa Regional Regulatory framework • ECOWAS guidelines serves as guidelines for drafting or updating all regulation pertinent to doing Business in WA. • 8 West Africa countries have subscribed to the Organisation for the Harmonisation of Legal Business in Africa (OHADA). Investment Regime • The Mining Codes of most countries make provisions for the granting of stability agreements, after completing PFS. • Fiscal and custom regimes are included in the stability agreement and are binding for the duration of the agreement. Fiscal Incentives • Write-off of exploration and development costs • Corporate tax: 17.5-35% • Royalty: 3-5%; • Tax holiday for certain jurisdiction 4
West Africa – Type and Quality of Deposits High grade & large deposits Large deposits, but low grade (Heap Leach?) Cluster of high grade modest size deposits – Vein like Senegal Kenieba Niger Burkina Faso Mali Sebba belt Fekola Hounde Belt SE Burkina Natougou Syama Yanfolila Siguiri basin Tengrela Guinea Ghana Cote D’Ivoire King George District Sierra Leone Ashanti & C. Ghana Hire Belt Asankrangwa Liberia 5
West Africa - Producing Gold Assets As at the end of 2014: 44 mines in 8 countries produced 7.2mOz 81.4Moz at 2.34g/t reserves and 255Moz Resources at 2.87 g/t. Yatela-3.2mOz Senegal Inata-6.3mOz Essakan-9mOz Inata-6.3mOz Essakan-9mOz Mali Sadiola-13.3mOz Samira-1mOz Loulo-6.3mOz Kalsaka-1.0mOz Tabakoto-4.8mOz Bissia-5.1mOz Bissia-5.1mOz Sabodala-5.6mOz Morila-6.2mOz Sabodala-5.6mOz Gounkoto-6mOz Mana-6.3mOz Burkina Faso Siguiri-5.2mOz Youga-2.5mOz Lefa-8.2mOz Kiniero-1.2mOz Ghana Tongo-6.5mOz Tongo-6.5mOz Guinea Cote D’Ivoire Sierra Leone Ahafo-23mOz Ayanfuri (8.1mOz) Ayanfuri (8.1mOz) New Liberty – 2.4mOz New Liberty- 2.4mOz Ity-1.3mOz Akyem-7.7mOz Akyem-7.7mOz Bonikro-4.3mOz Bonikro-4.3mOz Obuasi (60mOz) Chirano-2.1mO Liberia Damang-8.4mOz Agbaou-2.1mOz Tarkwa-14.6mOz Nzema-3.2mOz 6 9 world class operations >200Koz pa 17 New mines from 2007 to date 6
West Africa – Exploration Spend Greenfields, Late Stage and Mine Site Gold Exploration Spent (2009-2013). USA – Gold Exploration spent • US$4.4B spent on gold exploration in USA Africa - Gold Exploration spent • Similar amount spent by all of Africa over same period. • West Africa accounting for 62% of Africa’s exploration spend 7 Source: SNL Metals 2015
West Africa - Upside Low maturity exploration terrain that underwent 2 cycles of modern exploration Archean terrain poorly explored and represents a new search space Essakan Inata Sadiola Loulo Bissa Mana Youga Kalana Tongon Ahafo Bonikro Tarkwa 8
Tax Rates of African Mining Countries Burkina Cote South Sierra d’Ivoire Fiscal Payment Faso Tanzania DRC Senegal Africa Mauritania Liberia Zambia * Leone Mali Niger Ghana Guinea Corporate Tax Rate (%) 20% 30% 25% 30% 25% 34% 25% 30% 30% 30% 30% 30% 35% 35% Royalty Rate (%) 5% 4% 3% 2.50% 3% 1.50% 5% 3% 9% 5% 6% 5.50% 5% 5% Govt. free carried (%) 10% - 10% 5% 10% - 10% 10% 0% 10% 10% 10% 10% 15% Effective Tax Rate (%) 34% 35% 36% 36% 36% 36% 38% 40% 41% 42% 43% 43% 47% 49% Source: Ghana Chamber of Mines * Zambia recently announced changes to its mining tax regime, effective 1 July 2015: • Flat 9% royalty rate • CIT for mining operations 30% From Jan 2015, Zambia introduced a mineral royalty tax of 20% for open cast mining and 6% for underground mining and the rate for CIT was reduced to zero. Following public outcry, this has now been reversed 9
Corporate Income Tax Rates – How Africa Compares Top Rate of Corporate Income Tax 45% Germany 15% 40% Canada 16% Chile 19% 35% Kazakhstan 20% 30% Russian Federation 20% Burkina Faso 20% 25% Ukraine 21% 20% Brazil 25% Cote D'Ivoire 25% 15% Ghana - Up to 2012 25% 10% China 25% Indonesia 25% 5% UK 26% 0% South Africa 28% Germany Canada Chile Kazakhstan Russian Federation Burkina Faso Ukraine Cote D'Ivoire Ghana - Up to 2012 China Indonesia Brazil UK South Africa Mali Australia Mexico Peru Philippines Tanzania Zambia * Congo - Rep Argentina Ghana - post 2012 USA India Mali 30% Australia 30% Mexico 30% Peru 30% Philippines 30% Tanzania 30% Zambia * 30% Congo - Rep 34% Argentina 35% With an average of 29% , Africa has the highest Ghana - post 2012 35% USA 35% Corporate Income Tax (CIT ) regime compared India 42% to all the other regions. Average 27% Source: PwC, Ghana Chamber of Mines 10
Royalty Rates – How Africa Compares 16.0% Mineral Royalty Rates (Gold) Comment Levied on revenue less i)taxes levied 14.0% on revenue, ii)insurance and iii)freight 12.0% Brazil 1.0% costs 10.0% India 2.0% 8.0% Australia 2.5% 6.0% Argentina 3.0% 4.0% Ghana - Up to 2012 3.0% 2.0% Indonesia 3.8% 0.0% China 4.0% Tanzania 4.0% Congo - Rep 5.0% Ghana - post 2012 5.0% Kazakhstan 5.0% Philippines 5.0% South Africa 5.0% USA 5.0% Africa has an average royalty rate of 5.6%, Russian Federation 6.0% Lower CIT rate of up to 20% against Asia’s average royalty rate of 4.3%. Zambia 9.0% Flat rate Sliding Scale based on operating profit. Peru Max13.1% Lowest rate is 1% Chile and Canada, who have significantly Chile 14.0% lower CIT rate of up to 19% Canada 16.0% lower CIT rate of up to 16% higher royalty rates (14% and 16% Germany N/A respectively), also have significantly lower CIT Mexico N/A rates (19% and 16% respectively) UK N/A Ukraine Tonnage Source: PwC 11
West Africa - SWOT STRENGTH WEAKNESS Integrated business environment Restricted to French speaking countries Attractive regulatory framework Integrated regulatory framework under implementation Negotiable stability agreement Unlikely to enjoy new favorable terms Open pittable gold deposits Attract potential artisanal miners Free digging from 0-60 m vertical depth Strong bureaucracy from past history Simple metallurgical feature Limited Infrastructures: power, road etc. OPPORTUNITY THREAT Last frontier and search space, worldwide Administrative bureaucracy Large scale deposits yet to be discovered Community, social and environmental issues Low cost discovery rate Tap into regional set-up & expertise In-country limited mining skills force Mining agreement at exploration stage Strong state controls on exchange 12
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