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Kevin Bortz CERBA International Mining Conference Toronto – 4 March 2008

An Expanded Role for EBRD in Mining Finance: Exploration Stage Equity. Kevin Bortz CERBA International Mining Conference Toronto – 4 March 2008. Agenda. Introduction to the EBRD EBRD in the Natural Resources Sector EBRD and Health, Safety and the Environment EBRD in the Mining Sector

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Kevin Bortz CERBA International Mining Conference Toronto – 4 March 2008

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  1. An Expanded Role for EBRD in Mining Finance: Exploration Stage Equity Kevin Bortz CERBA International Mining Conference Toronto – 4 March 2008

  2. Agenda • Introduction to the EBRD • EBRD in the Natural Resources Sector • EBRD and Health, Safety and the Environment • EBRD in the Mining Sector • EBRD Equity Investments • Case Studies

  3. Agenda • Introduction to the EBRD • EBRD in the Natural Resources Sector • EBRD and Health, Safety and the Environment • EBRD in the Mining Sector • EBRD Equity Investments • Case Studies

  4. What is the EBRD? • International financial institution, promotes transition to market economies in 29 countries from central Europe to central Asia • Owned by 61 countries and two inter-governmental institutions • Capital base of €20 billion Cumulative commitments €35 billion Unaudited September 2007

  5. What are the EBRD’s objectives? • To promote transition to market economies by investing mainly in the private sector • To mobilise significant foreign direct investment • To support privatisation, restructuring and better municipal services to improve people’s lives • To encourage environmentally sound and sustainable development

  6. Foundations of EBRD operations 1 Apply sound banking principles to every project 2 Support but not replace private investors 3 Advance the transition to a full market economy

  7. Sound banking principles Each project requires: • careful assessment of risk / rewards for all parties • commercial viability • good prospect of returns

  8. Complementary to the private sector • Innovative and flexible financial structures • Extending boundaries / breaking new ground (maturity, equity, political risks) • Opportunity for commercial partners

  9. IFI with investment banking skills • Specialised knowledge of central and eastern Europe and the CIS • Multi-national staff from our member countries • In-depth legal know-how • Dedicated teams with expertise in a variety of sectors

  10. Agenda • Introduction to the EBRD • EBRD in the Natural Resources Sector • EBRD and Health, Safety and the Environment • EBRD in the Mining Sector • EBRD Equity Investments • Case Studies

  11. As of today €2.3 billion have been lent to projects worth €14.3 billion of investment EBRD, a major natural resources player Metal ore mining 11% Petroleum refineries 14% Gasoline stations 1% Pipeline transportation 20% Oil and gas extraction 52%

  12. Natural Resource sector objectives • Increase private sector participation and promote direct foreign investment • Reduce bottlenecks and ensure competitive market access • Improve regulatory and institutional frameworks • Set high standards of business conduct, transparency, corporate governance and environmental protection

  13. Some EBRD resource partners

  14. Agenda • Introduction to the EBRD • EBRD in the Natural Resources Sector • EBRD and Health, Safety and the Environment • EBRD in the Mining Sector • EBRD Equity Investments • Case Studies

  15. Every project is screened for environmental impact Around 17% of total commitments are designed to make environmental improvements Environmental mandate EBRD takes account of the environment in all its operations

  16. Environmental standards for EBRD projects • Local, national, EU and World Bank standards and regulations • Where standards cannot be met initially, project will include programme for achieving compliance Environmental Action Plan

  17. EBRD environmental policy and procedures • Ensure environmental soundness of all EBRD operations • Invest in projects with specific environmental and energy efficiency benefits • Disclosure of environmental information

  18. Environmental appraisal • Helps the Bank decide if an activity should be financed and how to address environmental issues • Helps identify ways in which operations can be designed to provide environmental benefits

  19. Environmental, Health & Safety Loans(EHS) • Purpose: protect the environment, cut emissions and prevent accidents by investing in: • Pollution clean-up • Pipeline replacement • Gas flaring and emission safety measures • Energy efficiency • But NOT production related investments that do not have an overriding environmental benefit • Attractive Credit Profile: A loans from €3 million to €450 million with long tenors available (10 years+) • Client-driven programme with straightforward funding procedure and simple monitoring

  20. Projects totalling €530 million signed to date Mittal Steel Temirtau LUKOIL CGI MOL Rosneft SMNG EHS Loans track record Loans in € millions €75 m €75 m €223 m €33 m €150 m €52 m

  21. Agenda • Introduction to the EBRD • EBRD in the Natural Resources Sector • EBRD and Health, Safety and the Environment • EBRD in the Mining Sector • EBRD Equity Investments • Case Studies

  22. EBRD Mining Investments (EUR, 000) Gold 169,277 Coal 30,375 Bauxite 10,125 Iron Ore 24,234 Other 7,300 Total 241,311 Mining Sector Investments • Total EBRD debt and equity investment of EUR 240 million in • support of EUR 1.2 billion in mining capital investments.

  23. Mining Sector Equity Investments Total Natural Resource Equity Portfolio of EUR 194.7 Million; Mining Equity Investments of EUR 44.8 million (23%); Five equity investments with an average size of just under EUR 10 million; Four out of five equity investments have been in the precious metals sector; Pipeline of more than a dozen equity investments in the mining sector.     

  24. Selected EBRD mining partners

  25. Agenda • Introduction to the EBRD • EBRD in the Natural Resources Sector • EBRD and Health, Safety and the Environment • EBRD in the Mining Sector • EBRD Equity Investments • Case Studies

  26. Exploration Prospecting Operation Development Mine Closure Equity Investments - Previously • Maximum 20% stake • USD 5 million – USD 20 million • Board Representation • Proven Reserves • Bankable Development Plan EBRD Appetite

  27. Exploration Prospecting Operation Development Mine Closure Equity Investments - Today • Maximum 20% stake • USD 1 million – USD 20 million • Board Representation • Positive Exploration Results • Reasonable Exploration Program EBRD Appetite

  28. Early Stage Equity Criteria • Experienced sponsor with proven track record and financial capacity, or in parallel with a seasoned sector investor; • Typical 4 – 6 year investment period, with exit strategies identified up-front (put option, IPO, sale to strategic investor, etc.); • Positive mineralogy / metallurgy– confirmed by our own consulting geologist; • Very rigorous analytical methodology.

  29. Agenda • Introduction to the EBRD • EBRD in the Natural Resources Sector • EBRD and Health, Safety and the Environment • EBRD in the Mining Sector • EBRD Equity Investments • Case Studies

  30. Case Studies • Bulgaria – Chelopech EADS • Kyrgyzstan – Kumtor Gold Company • Armenia – Deno Gold Mining Company

  31. Chelopech EADS (Bulgaria/2006) • Signed in April 2006 • USD 10 million direct loan, guaranteed by Dundee Precious Metals • Mine produces copper/gold concentrate which is processed off-shore • Financing of environmental remediation, resource definition and ore mining and concentrate production capacity

  32. Kumtor Gold CompanyKyrgyzstan • Kumtor Gold Company is 100% owned by Centerra Gold • EBRD and IFC made debt and quasi-equity investments into Kumtor Gold in 1995 • EBRD and IFC converted some of their investments into equity investments in Centerra • EBRD continues to be an investor in Centerra

  33. Deno Gold Mining Company Armenia • Loan of USD 4.5 million signed December 2005 • DGMC acquired by Dundee Precious Metals in August, 2006 • DGMC produces copper, gold, silver and zinc concentrate • Original financing of equipment purchases for expansion and environmental improvements • Currently considering USD 25 million for further expansion and delineation drilling program.

  34. Contacts Kevin Bortz Director, Natural Resources Tel: +44 20 7338 7119 Email: bortzk@ebrd.com Raymond Conway Senior Banker, Natural Resources Tel: +44 20 7338 7675 Email: conwayr@ebrd.com European Bank for Reconstruction and Development One Exchange Square, London EC2A 2JN Fax: +44 20 7338 6101

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