21.04.2016 issues and solutions for natural resources investment in mongolia
TRANSCRIPT
ASIA PACIFIC INVESTMENT ADVISORY GROUP
ISSUES and SOLUTIONS for NATURAL RESOURCES INVESTMENT IN MONGOLIA
2015April
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BCM Summit 2016Apr
APIAG is an independent investment banking firm providing financial advisory services, including merger and acquisition and capital raising assistance, exclusively to clients in the energy and natural resources sector.
Strategic Technical Commercial M&A and divestment
Sector and Country reviews Strategic assessment of Corporate and BU plans for private and listed companies Privitization of government-owned mining companies Development and restructuring of national mining laws
• Development of corporate, operating, engineering, and human resource policies, procedures, and organizational structures
Advisory to mining and business associations
Leadership and review of conceptual, scoping, pre-feasibility and feasibility studies Planning and monitoring of mineral exploration programs Evaluations and consulting for: • Resource and reserve reports • Mine plans, including equipment
selection • Metallurgical and mineral processing flow sheets and equipment selection • Chemical facilities • Environmental and sustainability
program Optimization reviews for productivity improvements and cost reductions
Risk assessments, including political, financial, and technical Strategy formulation for negotiation of contractual agreements, such as mergers, acquisitions, and mineral sales contracts Business and financial cash flow modelling Market surveys for mineral products Expert witness testimony for technical and commercial issues
Independent and owners’ engineer services Valuations of mineral properties, reserves, mines, mineral processing facilities, and chemical plants Due diligence reviews in support of financings, investment decisions, acquisitions, dispositions, and mergers
Preparation of technical documents required for listings on the various global stock exchanges
Statement of Qualifications APIAGPte.LtdO;ffice06-00,SingaporeLandTower50RafflesPlaceSingapore,048623
ManagingPartner
andC.E.O.
DavidRohanna
EnergyFuels IndustrialMineralsMetallurgicalCoals DiamondsIronOre RareEarthsSteelmaking OilandconventionalgasBaseMetals UnconventionalgasPreciousMetals CTLandCTGMinorMetals Experiencecoversallcontinents
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“…a careful owner, before buying shares, should visit the mine, and carefully examine the nature of the vein, as it is very important that he be on his guard to avoid being victim of dishonest sellers of shares seeking to defraud him” “De Re Metallica”-Georgius Agricola, 1556
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Exploring the Investment Criteria
Is it about the investor’s risk appetite or all about relationships?
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“Never have people been more the masters of their environment. Yet never has a people felt more deceived and disappointed. For never has a people expected so much more than the world could offer.” Daniel Boorstin, The Image (1961)
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In brief, lower growth means less room for error
Deflation, Divergence and Deleveraging
Reflation, Realignment and Re-levering
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Four Issues Which are Driving the Current Global Investment Paradigm
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I. Return to Fundamentals
u Geology and Resources
u Grade
u Exploitation and Beneficiation
u OPEX
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I. Return to Fundamentals u Margins
u CAPEX
u Infrastructure
u Management
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Key Omissions and Misrepresentations
Ø Nearology
Ø Stage-gating
Ø Risk analysis
Ø Benchmarking
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“Of all those expensive and uncertain projects, however, which bring bankruptcy upon the greater part of the people who engage in them, there is none perhaps more perfectly ruinous than mining and the search after new … mines … Projects of mining, instead of replacing the capital employed in them, …. commonly absorb both capital and profit.”
“The Wealth of Nations”, Adam Smith, 1776
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II. Productivity Declines u Embedding effective management-
operating systems at mines; u Prioritizing operational excellence; u Focusing on technology.
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III. KEYS TO SUCCESS
u Stability
u Innovation
u Partnering
u Patience and stamina
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CHALLENGES FOR INVESTORS
Ø Up front cost of capital investment Ø Difficulty of discovery processes Ø Increased lead time to advance Ø Increased global competition
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IV. Disruptive Technologies
u Base Metal Substitution
u Batteries & Energy Storage
u Fuel Cells
u Solar and Silver
u Unconventional Oil & Gas
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“We shall not cease from exploration, and the end of all our exploring will be to arrive where we started and know the place for the first time.” T.S. Elliot
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POTENTIAL SOLUTIONS “KEY TOPICS”
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The COURAGE to INVEST
v Establish attractive environment v Probability it will be both the
driver and accelerator of growth
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The CONVICTION to CHANGE
v STABILITY v INSTITUTIONAL STRENGTH v GOVERNANCE v TRANSPARENCY v RULE OF LAW
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CAUTIONARY TALE
u THE IMMUTABLE PRINCIPLES OF RESOURCES
u DISREGARDING STAGE-GATING
u IMPACTS OF CHINESE LOWER GROWTH
u IMPORTANCE OF INFRASTRUCTURE
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REBUILDING u POSITIVE RE-ENGAGEMENT & DIALOGUE u RECOGNITION AND CORRECTION
u PROACTIVE AND CO-OPERATIVE ENVIRONMENT
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ATTENUATING THE IMPACT
u BUILD A VISION TO THE FUTURE u LESSEN DIRECT GOVERNMENT INTERFERENCE
u RE-THINK OF PRIOR ECONOMIC MODELS
u IMPROVE COMMUNICATIONS
u IMPROVE LEGAL STRUCTURE AND FRAMEWORK
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CLOSING THOUGHTS
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LOST OPPORTUNITY COST
Lost Opportunity
Cost Consumption
Production
Explicit Costs Implicit Costs
Non-monetary
Evaluation
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RISK ASSESSMENT
EngageStakeholders
Risk Characterization
Options Definition
Option Selection
Actions Strategy
Stewardship and
Achievement
Stage 1: Risk based review of options Stage 2: Specific Stakeholder input & feasibility assessment Stage 3: Refined set of options
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“PLAN FOR SUCCESS” Current Situation Goal Implementation Measure
Assessment
Baseline
Components
Specifics
Evaluate
u Situational Analysis/SWOT u Options Study
u Major Issues u Align with
Capabilities
u Major Goals u Specific
Objectives u Values & Guiding
Principles
u Action Plans u Initiatives/Projects
u Performance Mgt u Review Progress/
Corrective Actions
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THANK YOU FOR YOUR KIND ATTENTION
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