historical opportunities for growth of mining companies, pan guocheng, ceo, china hanking

Presenter

Pan, Guocheng

PhD

Chief Executive Officer and President

Over 25 years of experience in mine development, mine

operations, and business Management.

Presentation to Mines and Money Australia 2013

Chinese Investments in Australia and the

Iron Ore Industry

GuochengGuochengGuochengGuocheng PanPanPanPan

October 30th 2013

DISCLAIMER This material contains certain forecasts and forward-looking information,including regarding possible or assumed future performance, costs, productionlevels or rates, prices, resources, or potential growth of China HankingHoldings Limited (“Hanking”) , industry growth, or other trend projections.Such forecasts and information are not a guarantee of future performance andinvolve unknown risks and uncertainties, as well as other factors, many ofwhich are beyond the control of Hanking. Actual results and developmentsmay differ materially from those expressed or implied by these forward-looking statements depending on a variety of factors.

No representation or warranty, expressed or implied, is made or given by or onbehalf of Hanking, any of Hanking directors, or any other person as to theaccuracy or completeness or fairness of the information or opinions containedin this presentation and no responsibility or liability is accepted by any of themfor such information or opinions or for any errors, omissions, misstatements,negligent or otherwise, or for any communication written or otherwise,contained or referred to in this presentation.

Accordingly, neither Hanking nor any of the Hanking directors, officers,employees, advisers, associated persons or subsidiary undertakings shall beliable for any direct, indirect or consequential loss or damage suffered by anyperson as a result of relying upon the statement or as a result of any admissionin, or any document supplied with, this presentation or by any futurecommunications in connection with such documents and any such liabilitiesare expressly disclaimed.

Nothing in this material should be construed as either an offer to sell or asolicitation of an offer to buy or sell securities.

Chinese ODI in Australia

Iron Ore & Steel Industry

Hanking Business Strategies

2013-10-30 P1

Hanking Project Development

2.7 2.9 5.5 12.3

21.2 26.5

55.9 56.5

68.8 74.7

87.8

0

10

20

30

40

50

60

70

80

90

100

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


Ch

ine

seF

DI G

row

th (b

nU

SD

)

Chinese FDI Outflows

� Outward FDI by Chinese companies

has increased 40 times in the past

decade.

� Chinese outbound investors are

active in manufacturing, energy &

resource sectors, although the

industry profile is increasingly

diversified.

� Chinese investment in Europe has

been aimed at enhancing market

access, while manufacturing

investment has been in developing

economies, ex., Asia.

� Most outbound direct investment

to Australia focuses on energy and

resource areas.

75.6%

50.4%

22.1%

13.3%

1.3%-5.3%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

0

5

10

15

20

25

30

35

40

45

50

Oceania Africa Europe L.America Asia N.America

2011

2010

Change

Ch

ine

seF

DI D

istrib

ution (b

nU

SD

)

Source: Chinese Bureau of Statistics

2013-10-30 P2

Chinese Outbound Direct InvestmentsChinese Outbound Direct Investments

� Australia is a significant

recipient of the Chinese

outbound investment, large-

scale investment began in

2005.

� By 2012, total accumulated

investment reached USD50.8

billion in Australia, just ahead

of the USA at USD50.7 billion

and USD36.7 billion in Canada.

0

10000

20000

30000

40000

50000

60000

0

2

4

6

8

10

12

14ODI Accumulated btw 2005-2012

Global ODI %

Chinese ODI Diversifying…Chinese ODI Diversifying…� Chinese investment is geographically diversifying, and other major

recipients included Brazil and Russia. The largest investment destinations in

Europe and Africa are UK and Nigeria respectively.

Inve

stme

nt in

US

D m

illion

Source: KPMG


2013-10-30 P3

Chinese ODI in Different States in 2012Chinese ODI in Different States in 2012

� In 2012, WA attracted 56% of the Chinese total ODI, and QLD 33%.

Companies officially incorporated in these two states together accounted for

90% of the 2012 investment capital.

� New South wales and Victoria have captured relatively less Chinese capital

compared to their historical shares.

� Investment in WA and QLD was concentrated in mining and resource sectors;

NSW & Victoria’s engagement with Chinese companies was more diversified.

0

1000

2000

3000

4000

5000

6000

7000

WA QLD SA VIC TAS NSW

0

10

20

30

40

50

60ODI Total in Different State

ODI% in Different State

Source: KPMG

Tota

l OD

I in U

SD

Millio

n

OD

I% in

Diffe

ren

t Sta

te


2013-10-30 P4

Chinese ODI Diversifying…Chinese ODI Diversifying…

� The 2012 growth rate of Chinese investment into

Australia was twice as high as that of global

Chinese outbound investment, as the 9th largest

FDI in Australia.

� Chinese investment trends in Australia in 2012

show a diversification towards energy, agriculture,

and other sectors, although mining still dominates.

� Of the total USD11.4 billion invested in 2012, 48%

was recorded in mining, 42% in gas, 3% in

agriculture and, 2% in renewable energy.

Accumulated ODI btw 2006-2012 being USD50.79bnAccumulated ODI btw 2006-2012 being USD50.79bn

Source: KPMG

48% Mining

USD5471.46mm

42% Gas

USD4785.20mm

2% Ren Energy

USD182.60mm

8% Others

USD944.20mm

73% Mining

USD36875mm

18% Gas

USD8867mm

4% Ren Energy

USD2213mm

5% Others

USD2837mm


2013-10-30 P5

Chinese ODI Size and OwnershipChinese ODI Size and Ownership

� In 2012, the average size of the completed deals in Australia remained large

compared with those of other countries. Over 50% had a transaction value

over USD200 million.

� The 30% of mega investments (over USD500 million) was relatively higher in

2012 than historical averages (19%).

� Investments by private Chinese companies in 2012 increased to 26% of total,

with SOE investment reduced to 74% by number of deals, and 87% by value.

Source: KPMG

Ownership Investment Value Investment Deals in 2012

USD million % Number %

SOE 9927.04 87% 20 74%

Private 1456.42 13% 7 26%

Total 11383.46 27


2013-10-30 P6




2013-10-30 P7



China - only driver for the world steel industry …

� World crude steel production reached 1.548 billion tons in 2012, a new historical high

level. The CAGR of world crude steel production was 5.6% over the past decade.

� Chinese crude steel production was 717 million tons in 2012, accounting for 47.2% of

the world total. Almost all growth of steel production worldwide came from China.

� China has become a net exporter since 2005. As the global economic progressively

recovers, Chinese net exports of steel rebounded to 42 million tons last year.

World Steel Prod by Region 2001-2012(mt) Chinese Steel Net Exports 2001-2012 (mt)

Source: Hatch, UNCTAD

2013-10-30 P8


Largest Iron Ore Producers in the World

� As the largest iron ore producer, Vale produced 323 million tons of iron ore

and gained a market share of 16.3% in 2011.

� The “Big 3”, Vale, Rio Tinto and BHP Billiton, together controlled 35.6% of

world production in 2011.

� The top ten producers controlled 995 million tons iron ore and 50.3% of the

world total production.

2013-10-30 P9


Iron Ore Production (mt) in 2011

487.9

391.0

321.9

196.0

103.1

78.6

53.6

52.9

37.1

35.5

0 100 200 300 4 00 500 600

Australia

Brazil

China

India

Russia

Ukraine

South Arica

USA

Canada

Iran

2000

1500

1000

500

02001 2003 2005 2007 2009 2011

Americas

Oceania

China

Asia ex China

CIS

Africa

Europe ex CISWo

rld Iro

n O

re P

rod

uctio

n (m

t)


Global Iron Ore Production Continues to Grow…

� World iron ore production increased from 934 million tons in 2001 to 1.923 billion

tons in 2011 at CAGR of 7.5%.

� Asia, Americas and Oceania are the major iron ore producing regions which accounted

for 84.1% of world total in 2011; China emerged as a country with the fastest growth of

iron ore production during 2001-2011 at a CAGR of 12.2%.

� The top five producing countries are Australia, Brazil, China, India and Russia, which

produced 488, 391, 322, 196 and 103 mt of iron in 2011, accounting for 78% of the

world total.

2013-10-30 P10



Chinese Iron Ore Production

� Chinese crude iron ore output increased to 1.31 billion tons in 2012 from 218

million tons in 2001 with a CAGR of 17.7%.

� The Chinese iron ore concentrate production peaked in 2007 at 369mt, then

declined in 2008 and 2009, and resumed to 307mt in 2012.

� Northern, Northeastern and Southwestern China are the major iron ore

producing regions in China which collectively accounted for 81.9% of the

national total in 2012.

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

1400

1000

200

400

0

1200

800

600

Iron Ore Concentratescrude Iron Ore


2013-10-30 P11

Ch

ine

se Iro

n O

re P

rod

uctio

n (m

t)


Chinese Iron Ore Producers

� Privately-owned small/medium sized mining enterprises have undergone a

significant growth in China at a CAGR of 24% from 2003 to 2012, while key-

producers at only a CAGR of 9.8%.

� Chinese crude iron ore productions from key and small/medium producers

were 224mt (17.1%) and 1.086bt (82.9%) last year, respectively.

2013-10-30 P12


Ch

ine

se C

rud

e Iro

n O

re P

rod

uctio

n (m

t)


Chinese Iron Ore Imports

� Chinese iron ore imports in 2012 increased to 747mt from 687mt a year ago,

up by 8.3%; the imports increased at a CAGR of 20.9% during 2001 to 2012.

� Chinese iron ore imports from Australia were 352mt in 2012, accounting for

47.2% of Chinese total iron ore imports. Brazil ranked the second exporting

164mt or 22.1% to China. The two accounted for 69.3% last year.

� The top five countries, including Australia, Brazil, South Africa, India and

Ukraine, represented 81.4% of Chinese total iron ore imports.

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Chinese Shares of World Total (%)

Chinese Iron Ore Imports (LHS)800

600

200

300

100

700

500

400

0

70%

50%

10%

20%

60%

40%

30%

0

2013-10-30 P13



Global Iron Ore

Consumption

� World apparent iron

ore consumption

increased from 923mt

in 2001 to 1.886 billion

tons in 2011 at a CAGR

of 7.4%.

� Chinese consumption

was 1.05 billion tons in

2012, accounting for

53.5% of the world

total; it grew at a CAGR

of 16.6% in the past

decade.

2013-10-30 P14

Iron Ore & Steel IndustryGlobal Iron Ore Consumption (mt)


Cash Costs for Chinese Iron Ore Producers

� The cash operating cost of Chinese iron ore concentrate in 2012 ranges from

RMB200 to 900/t with an average of RMB580/t.

� 26 key Chinese iron ore companies produced 96mt of concentrate in 2012,

accounting for 31.4% of national total. The average cash operating cost of

these companies was RMB457/t.

Ca

sh

Op

era

ting C

ost (R

MB

/t)

Accumulated Concentrate Production (mt)Accumulated Concentrate Production (mt)

2013-10-30 P15


Cash Cost Curve for China (RMB/t) Cash Cost Curve for key Procedures (RMB/t)

Source: Hatch, Platts

Imported Iron Ore Prices

� Annual average imported iron ore

(62% Fe content) CFR price to

China for 2009, 2010, 2011 and

2012 were $79.8, $146.5, $168.7

and $131.0/t, respectively.

� Chinese average imported iron

ore prices reached a historical

high in Q2 of 2011. The price

started declining and fell below

$100/t by Q3 of 2012. The import

price climbed back to around

$140/t in Q3 of 2013.

� Due to restriction on iron ore

export, Indian export of iron ore

to China has been quickly

diminishing.

2013-10-30 P16


Source: Hatch, Platts

Domestic Iron Ore Prices

� Hebei, the largest iron ore

producing and consuming

province, is usually viewed as a

key reference of domestic spot

market.

� Chinese domestic concentrate

prices peaked at RMB1,570/t in

July 2008, and then dropped

sharply due to the financial crisis

in late 2008.

� Since Q2 of 2009, Chinese

domestic prices have been moving

out of the haze and remained at a

mid-high level.

� The domestic iron ore price is

currently at around RMB1000/t.

2013-10-30 P17


On the Supply Side - New Iron Ore Production Capacity

� From 2013 to 2016, the new annual iron ore capacity introduced from

announced projects would surpass 800mt.

� “Big 3” accounts for around 27%.

� Emerging iron ore producers led by FMG would accounts for 43% of the total

newly added capacity.

� Remaining new capacity consists of Chinese domestic and overseas investments.


2013-10-30 P18


Ne

w Iro

n O

re P

rod

Ca

pa

city (mt)

On the Demand Side – Pig Iron Production Projection

� On demand side, the pig iron production of China is estimated to rise from 658mt in

2012 to 750mt in 2016 at a CAGR of 3.3%.

� Global pig iron production would increase from 1.163 billion tons in 2012 to 1.26 billion

tons in 2016, at a CAGR of around 2.0%. Most of the increase would come from China.

� The annual increase in pig iron production would be around 23mt from 2013 to 2016

and the annual demand for new iron ore would be 37mt.


2013-10-30 P19


Pig

Iron

Pro

du

ction

(mt)

Hanking Forecast

Chinese Iron Ore Shortage

� Chinese iron ore shortage is expected to continue with dependence on import to

grow from 71% in 2012 to 75% in 2016.

� Chinese total demand of iron ores by 2016 would grow to 1.2 billion tons; Chinese

iron ore imports forecast to grow from 747mt in 2012 to around 900mt by 2016.

Source: Hanking, Hatch, UNCTAD

2013-10-30 P20


102 109208 204

266328 369

301 251310 328 307 300 300 300 30092 112

148 208

275

326383

444628

619687 744

820 860 890 900

0

200

400

600

800

1000

1200

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E 2016E

Import Forecast

Import Actual

Domestic Forecast

Domestic Actual

Ch

ine

se Iro

n O

re D

em

an

d (m

t)

Where Would the Iron Ore Price Go?

� Combining the forecasts from several organisations and in-house analysis, it

would be difficult for iron ore price to go back to 2008-2011 level.

� Hanking forecasts that the global iron ore price (CFR China) fluctuate within a

range of US$120-140/t for the period of 2014-2016.

� Possibility of witnessing an iron ore price below US$120/t still exists in a short

term within the next three years.


2013-10-30 P21


Forecast Platts 62% Fe Index

Hatch

Hanking

Sea

bo

rne

Iron

Ore

Price

(USD

/t)




2013-10-30 P22



Iron Ore

Business

Gold

Business

Nickel

Business

� Hanking acquired a world class

nickel mine in Indonesia and plan

to mine 2 mt nickel ore in 2014 and

a smelter is under construction.

� Hanking is one of the

largest iron ore producers

in China. All of its iron ore

mines are located in the

famous An-Ben Belt, which

hosts about 1/3 of the

Chinese iron ore reserves.

� Hanking acquired a 2.4

moz gold property in

Western Australia and is

now under development

planning.

Hanking’s Core Asset Portfolio:

Iron Ore, Nickel, Gold

2013-10-30 P23

Liaoning,

China

Sulawesi,

Indonesia

Western Australia

Location SE Sulawesi, Indonesia

Mining Method Open pit

JORC Resources 351 Mt ore, 4.80 Mt Ni

JORC Resources 90.54 Mt (high Fe low Ni)

Australia Gold Mines

China Iron Ore Mines

Location Southern Cross, WA

Mining Method Open pit + UG

JORC Resources 2.4 moz Au (75 ton)

Location Liaoning, China

MinesAoniu, Maogong, Xingzhou, Mengjia, Shangma

Mining Method Open pit + Underground

Total Resources 220 Mt

Indonesia Nickel Mines

Hanking Project Summary

2013-10-30 P24


Low Cash Operating Cost Advantage

Current Production Capacity

� Low stripping ratio, simple magnetic processing� Proximity to steel mills (75 km radius)

� Employment of new technologies� Sharp cost control on daily basis

One of the lowest cash costs

0

200

400

600

800

1,000

0 50 100 150 200

人人币

/ 吨

精精精铁铁（百百吨）

Hanking: RMB320/t

Average in China: RMB580/t

RM

B/t

Iron concentration Volume (Mt)

Attractive cost position relative to global seaborn e exportersGlobal seaborne iron ore cash cost curve (CRF China) (US$/t)

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

Hanking (2012): US$52/t

China average (2012): US$95/t

200 Mt 1000 Mt400 Mt 600 Mt 800 Mt

Global average (2012E): US$77/t

2013-10-30 P25


� Cash cost RMB320/t, 55% of national average� Operating margin over 60%

� 220mt JORC resources, 175mt JORC reserves� Five operating mines in NE China� 10mt crude ore, 3mt concentrate capacities

169

594

840

1584

2435

2592

2730

3120

3294

4155

4752

4797

5657

0 1000 2000 3000 4000 5000 6000

Cycloops

Gebe Island

S.E. Kalimantan

Obi

Koniambo

La Sampala

Buli

Gag Island

VNC

Halmahera/Weda Bay

Soroako

Hanking - N. Konawe

PT Aneka-Pomalaa

World Class Nickel Resource

The Hanking Nickel Mine in North Konawe, Southeastern Sulawesi Province, Indonesia ranks

in the second largest in the world by metal contents, .

JORC Resource and Reserve Estimation Ranks in Ni Quantity of Nickel Laterite Deposits

Class Resource（（（（103T））））

Grade Metal

Ni/% Ni (T)

Measured 85,818 1.51 1,292,397

Indicated 182,205 1.35 2,460,766

Inferred 83,104 1.26 1,043,744

Total (M+I+I) 351,128 1.37 4,796,907

High Fe Resource 90,540 50.27%Fe & 0.79%Ni

Class Reserve（（（（103T））））

Grade Metal

Ni% Ni (T)

Proven + Probable 74,850 1.4 1,046,537

Possible 171,984 1.31 2,256,590

Total (P+P+P) 246,834 1.34 3,303,128

Resources (Ni Metal in 103T)

2013-10-30 P26


Laterite Nickel Mine Development

� KS and KKU mines are both in

production; Hanking plans to

sell 400,000 tons of laterite

ores this year and 2mt next

year.

� Major infrastructures, including

mine camps, roads, and

temporary wharf, have been

completed.

� The primary design for Energy

Saving Shaft Furnace (ESSF)

completed. Construction of the

facility is under way.

One of the berths of KKU port, which can

serve to move 2 million tons of ores annually.

2013-10-30 P27


Production and Investment Plans for the Nickel Mine

Nickel Project Production Projections

Capital Investment Plan in the Nickel Project

Mining

Smelting

2013 2014 2015 2016 2017

0.4 mt 2.0 mt 3.0 mt 4.0 mt 5.0 mt

10,000 t 20,000 t 30,000 t 40,000 t

0

50

100

150

200

250

2013 2014 2015 2016 2017 Future Total

Investment in SmeltingInvestment in Mining

Total Capital Investment

Mining US$102 mm

Smelting US$145 mm

TOTAL US$247 mm

Ca

pE

xpin

mm

USD

2013-10-30 P28


� SXO, about 360km west of Perth, has

JORC gold resources of 2.4 Moz and a

processing plant of 2.4 mt/a.

� Total 930 km2 coverage of exploration

and mining permits that spans along

the famous 150 km long gold belt.

� Focus on exploration for resource

upgrade & target for new discoveries.

� Mine planning is under way.

The 2.4 mt/a

processing plant

2013-10-30 P29





2013-10-30 P30


STRATEGY


2013-10-30 P31

Low Cost Strategy Diversification Strategy

Value-Chain Strategy Talents Strategy

� Iron ore is the core business, while Ni and Au are developed as parallel. Hanking aims to become an influential iron ore producer.

� Development of Ni and Au businesses helps reduce risks of market fluctuation.

� Low cost is the core competitive edge. This strategy is executed in project acquisition and operations.

� Continue to use the adaptive approach for optimizations of new mining and processing technologies.

� Establish exploration, mining, processing, & smelting value chain, maximizing values to shareholders.

� Create benefits from value-added processes, balance early-staged and advanced projects.

� Senior and special talents are sought globally, while operational teams are built locally.

� Team members must have global visions and experiences of international operations.

1 CLEAR M%A STRATEGY

� Assessment of target strategic fit

� Assessment of benefits from the deal

� Precise valuation of expected synergies

4 SUCCESSFUL POST INTEGRATION

� Process/procedure integration

� Cultural harmonization

� Identification of managerial skills

2 WELL EXECUTED DUE DILIGENCE

� Careful and precise due diligence

� Assessment of potential risks

� Design of negotiation tactics

3 DISCIPLINED DEAL EXECUTION

� Definition of the best method of payment

� Impact on the bidder’s financial situation

� Definition of the premium to be paid

M&A

Source: Company Information, Goldman Sachs


2013-10-30 P32

Regardless of market volatility, low-cost has always been H anking’skey value driver. Hanking remains focused on optimizing itsoperational cost structures, will maintain our low operati ng costadvantage, and will continue to grow as a low-cost producer.

Sustainable Value Creation Model


2013-10-30 P33

Thank You

&

Questions

Guocheng Pan, PhD

President/CEO

China Hanking Holdings, Ltd. (HKSE 03788)

Email: [email protected]

Web: www.hankingmining.com

2013-10-30 P34

historical opportunities for growth of mining companies, pan guocheng, ceo, china hanking

Economy & Finance

australia chinese odi

chinese total odi

chinese companies

chinese investment trends

chinese investments

chinese capital

chinese outbound investors

global odi