challenges of mineral exploration and investment in uganda.pdf

7/27/2019 Challenges of Mineral Exploration and Investment in Uganda.pdf

1/19

UGANDA&CHAMBER&OF&MINES&&PETROLEUM&MINERAL&WEALTH&CONFERENCE&

1

st

92

nd

&OCTOBER&2013&


2/19

1&


3/19

2&

East&African&Mining&Ltd,&carrying&out&exploraon&in&

Kaabong&district,&Karamoja&

&

!

A!look!at!the!industry!from!an!investment!

perspec6ve!and!the!prac6cal!challenges!facing!

explora6on!companies!in!Uganda!


4/19

3&

Uganda&has&much&opportunity&for&development&in&the&

minerals&sector&

&&

Very&early&stage&for&the&industry&here&9&relavely&unknown&in&global&terms&&&

No&large&producers&in&Uganda&&yet&&&

We&believe&in&the&future&for&the&industry&in&Uganda&and&are&commiYed&to&spreading&the&word&about&this&

wonderful&country&


5/19

4&

Understanding&the&environment&9&the&wider&economic&picture&

in&the&mining&industry&

&&

Mining&stocks&have&had&a&hard&me&

&& 2013&9&Market&capitalizaon&fell&for&37&of&the&top&40&

companies&losing&over&$200&billion,&or&17%&since&the&end&

of&2012.&(PWC)&

&&

Parcularly&tough&for&gold,&despite&high&prices& Margins&have&been&driven&down&&

Uncertainty&over&future&prices&


6/19

5&

Difficulty&in&raising&capital&for&early&stage&exploraon&

&&

Opportunity&cost&for&investors& Why&buy&early&stage&exploraon&when&you&can&buy&resource&or&even&producon&cheaply?& For&Uganda,&why&invest&here&when&you&can&invest&in&

Ghana&etc?&

Performance&of&share&price&in&Junior&Mining&companies&has&been&dreadful,&many&going&bust&


7/19

6&

What&worries&large&mining&companies?&

&&

Cost!& Labour&cost& Commodity&price&&decreasing&margins&&

Effecve&capital&deployment&&making&each&dollar&work&for&shareholders&

External&factors&&naonalizaon&etc.& Concentrang&on&efficiency&rather&than&expansion&&


8/19

7&

What&makes&for&a&good&project?&What&would&you&invest&in?&

&&

Can&the&project&begin&to&generate&cashflow?&ou&cant&keep&going&back&to&investors&indefinitely&

Reduce&dependence&on&external&factors&such&as&markets,&investor&senment,&short&term&risk&&&&

Can&a&large&resource&be&defined?& Shillings&must&go&in&the&ground&&&

The&right&kind&of&resource:&high&grade,&cheap&to&extract& Larger&margins&create&safety&and&more&predictable&returns&&


9/19

8&

Developing&a&resource&


10/19

&

Quality&of&work&

&&

All&technical&work&to&internaonal&standards&&NI&439101,&JORC&


11/19

10&

Developing&a&resource&

&&

Reaching&milestones&&linked&to&capital&requirements&


12/19

11&

Corporate&Social&Responsibility&

Important&to&address&social,&environmental&issues&&involve&the&community&

Companies&with&good&CSR&and&transparency&tend&to&aYract&investment&


13/19

12&

Geng&to&producon&

How&long&will&that&take?& Typically&10&years&or&more&&no&income&for&company&

unl&that&point&


14/19

13&

Why&do&early&stage&exploraon?&

&&

The&upside&

&

Potenal&for&a&good&return&on&investment&&&

The&downside&

&

Risky&&might&not&be&an&economic&resource,&ownership,&government,&local&partners&

Takes&a&long&me,&many&years& Expensive& No&exit&/&return&on&investment&


15/19

14&

The&exit?&Who&is&buying&early&stage&projects?&

&&

Few&acquisions&are&being&made&at&the&moment&9&major&companies&have&cut&back&on&exploraon&and&acquisions&

Normally&exploraon&companies&develop&resources&to&a&certain&level&and&sell&to&majors&&this&cycle&is&currently&

broken&

With&junior&companies&having&no&funding,&who&will&make&the&discoveries?&

Producon&needs&large&capital&investment&&


16/19

Infrastructure&&helps&aYract&investors&for&the&next&stage&

&&

Power&&massive&part&of&the&cost&for&producon,&heavily&affects&margin&9&diesel&generators&much&more&

expensive&than&grid&power&

Transportaon:&Roads&&makes&exploraon&cheaper&and&quicker,&less&work&lost&in&rainy&season&

Railways&&route&to&market&for&bulk&commodies&

Human&resources&&well&trained,&movated&workers,&from&technical&to&manual&labour&

15&


17/19

Expectaon&

&&

Expectaon&of&license&holders& The&value&of&the&project&

Expectaon&of&communies& Communicaon&and&educaon&

Expectaon&of&officials& It&takes&me&and&large&amounts&of&money&to&develop&a&

resource&&and&10&years&or&more&to&producon&

16&


18/19

17&

The&future&

&&

For&EAG&&moving&on&to&the&next&stage&in&a&project&that&we&

believe&in,&both&in&terms&of&its&technical&merit&and&the&

people&and&region&

&&

For&the&Ugandan&mining&industry,&it&will&take&me&

&&

To&understand&the&parcular&requirements&in&the&sector,&

especially&in&these&hard&mes&for&the&industry&

&&


19/19

18&

Look&at&things&from&the&investors&point&of&view&to&aYract&

good&investment&

&

Be&flexible&in&the&face&of&economic&uncertainty&

Transparent&processes&and&well&considered&regulaon& Paence&and&educaon&&take&the&long&view& AYract&the&right&kind&of&investor&

&&

Work&together&to&help&to&make&it&work&for&everyone,&the&

country,&the&company&and&the&community&

&&

challenges of mineral exploration and investment in uganda.pdf

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