Objective Capital's West Africa Investment Conference 2012 Moevenpick Ambassador Hotel in Accra, Ghana 7-9 May 2012 Speaker: Dr Toni Aubynn, The Ghana Chamber of Mines

1. WEST AFRICA
INVESTMENT CONFERENCE
Gold Prices Soar but Africa Loses Out
Dr Toni Aubynn – CEO, The Ghana Chamber of Mines
MOEVENPICK AMBASSADOR HOTEL IN ACCRA, GHANA MONDAY-WEDNESDAY, 7-9 MAY 2012
www.ObjectiveCapitalConferences.com

2. ‘Gold Prices Soar but Africa Loses
Out’
A Reality or Exaggeration: The Case
of Ghana
Dr. Toni Aubynn
Chief Executive Officer
The Ghana Chamber of Mines

3. Basis of a ‘Losing out’
Perception

4. Price of Gold From 2000-2012

5.  Africa is home to most of the worlds mineral
resources/reserves
 Over half global gold reserves
 Over 90% of Chrome
 Over 80% of Platinum
 Increasing discovery/production of oil; etc

6. Some leading African mineral resources
(2005)
Mineral Production Rank Reserves Rank
PGMs* 54% 1 60+% 1
Phosphate 27% 1 66% 1
Gold 20% 1 42% 1
Chromium 40% 1 44% 1
Manganese 28% 2 82% 1
Vanadium 51% 1 95% 1
Cobalt 18% 1 55+% 1
Diamonds 78% 1 88% 1
Aluminium 4% 7 45% 1
Also Ti (20%), U (20%), Fe (17%), Cu (13%), etc.
*PGMs: Platinum Group Minerals

7. Basis of a ‘Losing out’ Perception
 Persistence of poverty, inequality and unemployment
 Dominance of multinationals companies in the mining
industry
 Inadequate visible local content
 Africa’s resilience to the recent global economic crises
and descent economic growth providing it a new
confidence
 Mining Industry, ‘a bad story teller’
 Positive commodity price particularly au and oil in the
last two decades: More than quintupled in 10 years
 Perception of Revenue equating profit

8. Reaction to these perceptions
 Attempt at ‘Resource Nationalism’ in South
Africa—increases in fiscal regime in other
countries
 Zimbabwe: increase in royalty on gold from
4.5% to 7%
 Zambia attempted introduction of Windfall
profit tax
 DR Congo to increase taxes
 Ghana

9. Nature of mining business
 High sunk cost, long-term focused
 The prospects of substantial rents
 Uncertainty
 International Consideration
 Exhaustibility
 Project Basis
 Tax Revenues are substantial and primary benefit
 Price volatility

10. Some realities from Ghana:
Contribution of the Mining
sector in Ghana

11. Traditional Minerals in Ghana
 Traditional minerals
• Gold
• Manganese
• Bauxite and
• Diamonds.
 Others not fully exploited include
• Kaolin
• Salt
• Clay
• Marble
• Mica
• Limestone etc.
 Location : Western, Ashanti, Eastern, Brong–Ahafo,
Volta and the Northern parts of Ghana.

12. Fiscal Contribution of Mining to
Economic Development of Ghana
Fiscal Revenues
Two kinds of fiscal revenues are provided by mining.
 Direct revenues
 Indirect revenues
 Direct Revenue
 Mineral royalties
 Taxes
 Dividends
 Levies.
 Indirect Revenue - Taxes and levies through the supply chain and Support
to General Public and Host Community

13. Contribution of the Mining Sector
 Mining companies were not insulated from the adverse impact of the global
economic turmoil.
 In spite of the challenges, Ghana’s mining sector performed quite creditably
in 2011.
 According to the Ghana Statistical Service and Ministry of Finance and
Economic Planning, the mining sub–sector grew at a remarkable rate of
14.3%. This compares favorably with the 8.6% recorded in 2010.
 The total merchandise export earnings by the traditional minerals
represented is about 48% of gross merchandise exports.

14. Contribution of the Mining Sector
 Number One Tax Payer and highest contributor to GRA:
 Contributed about GH¢1 billion to GRA representing 27.61% of total
GRA collections in 2011.
 paid GH¢ 645 million, in corporate tax to the GRA, representing 38.26%
of the total company tax collected in 2011.
 The sector voluntary contributed an amount of about GH₵43
million to their communities and the general public
 Contributed about 42% of gross merchandise exports earnings
 companies returned about USD 3.1 billion representing 75% of their
mineral revenue through the BOG and the Commercial Banks in 2011
against statutory requirement of 25%.
 Industry grew by 14.3% in 2011 as compared to 8.3% in 2010
 Continues as the leading attractor of FDI

15. Royalties Paid to Government (GH¢) From 2003-2011
Government revenue increases with rise in Gold Prices
250,000,000
218,922,903
200,000,000
150,000,000
133,278,248
104,244,553
100,000,000
68,358,429
50,000,000 43,226,713
35,107,983
19,054,625 18,585,970 21,655,540
-
2003 2004 2005 2006 2007 2008 2009 2010 2011

16. Government revenue increased with rise in gold price
Corporate Tax (GH¢)
700,000,000
649,902,536
600,000,000
500,000,000
400,000,000
300,000,000 Corporate Tax (GH¢)
200,000,000
100,000,000
70,002,249
22,877,347
6,604,989 26,939,694.64
- 3,309,517 30,169,771
18,137,127
2004 2005 2006 2007 2008 2009 2010 2011

17. CONTRIBUTIONS TO IRS 2009-2010
CONTRIBUTION 2011 CONTRIBUTION 2010
SECTOR GH¢ % to total Ghana GH¢ % to total Ghana
Agriculture, hunting and 10,926,086,.25 0.45
forestry 13,175,279 0.35
Fishing 5,296,392 0.14 3,214,272.21 0.13
Mining and Quarrying 1,034,221,712 27.61 519,682,174.41 21.29
Oil & Gas 16,214,971 0.43
Manufacturing 266,228,347 7.11 169,500,714.63 6.94
Electric Gas and water 62,397,848 1.67 49,507,359.17 2.03
55,921,205.73 2.29
Construction and
Construction equipment 95,451,523 2.55
Wholesale and retail 263,111,198 7.02 206,659,420.84 8.47
Hotel and Restaurant 18,589,133 0.5 14,051,092.18 0.58
Transport 59,397,218 1.59 26,170,901.76 1.07
Storage 98,392,534 2.63 101,771,112.21 4.17
Communication 183,518,522 4.9 168,131,679.54 6.89
Fin. Intermediation 532,967,730 14.23 317,177,340.40 12.99
Real Estate and renting 25,087,038.20 1.03
activities 35,301,340 0.94
Computer, Reg. and 16,161,635.67 0.66
Development 19,939,629 0.53
Other Professions and 79,473,583.27 3.26
business activities 127,585,391 3.41
Public Administration 375,729,558.10 15.39
and Defence 505,792,297 13.5
Education 68,640,771 1.83 59,591,481.81 2.44
18,798,635.78 0.77
Health and Social work 25,771,085 0.69
76,521,855.65 3.13
Other Social and
personal service activities 74,566,123 1.99
Private Household 1,519,356.97 0.06
Employment 453,306 0.01
Extra Territorial Org. and 8,497,422.83 0.35
Bodies 9,767,808 0.26

18. TREND IN TOTAL INVESTMENT INFLOW INTO THE MINING INDUSTRY
2000-2011
900
799.5
765.3 762.26 770 780
800
661.98 670.22
700
556.44
In Million US Dollars
600
500
400 INVESTMENT
313.72 330.43
275.53
300
231.78
200
100
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Years

19. Value Creation
 As all the mineral producing companies are transnational, they are able to attract world
class service providers into the country.
 They also transfer knowledge, skills and technologies through their staff and other
customers.
 Notable sectors that have benefited from the mining industry in this way include:
― Banking & Financial Services,
― Transport & Logistics,
― Hospitality and Catering,
― Consulting-Environmental &Engineering Services
― Manufacturing & Fabrication

20. Commitment to local Content
 Activated Carbon  Conveyor Rollers, Idlers & Pulleys
 Yelomine Pipe  Steel Products, including fabrication
 Rock-bolts and Split-sets  Tyre-retreading
 Caustic Soda  Heavy Duty Electric Cables
 Explosives Manufacturing, including  Metal or PVC Core Trays
Ammonium Nitrate  Chain Link Fencing, Wire
 Ventilation Ducting Mwetting, Barbed Wire, Welded
 Ammonium Sulphate Mesh, Expanded Mesh, Concrete
 Mill Liners Mesh, Razor wire and Panel Mesh
 Grinding Media  Motor Re-winding
 General and Speciality Lubricants  Plastic Sample Bags
 HDPE & PVC Pipes  Calico Bags
 Overalls & Work Clothes  Bullion Boxes
 Cement and Cement products  Reversed Engineered Speciality
Products
 Quicklime and Hydrated Li
 Cupels & Crucibles
 Wood Products

21. Electricity and other commodity prices increased dramatically
Electricity
Cumulative electricity price increases (2001 – 2012F)
1000
900
800
700
600
500
400
300
200
100
0
2011F
2012F
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
South Africa Ghana Australia Peru
Note: Cost inflation after 2012 estimated based on historical CAGR 2001-2012; Crude Oil Prices for West Texas Intermediate delivery to Cushing, Texas
Source: Economist Intelligence Unit, International Energy Agency, Eskom website, Government of Western Australia website, press searches, Bloomberg

22. Fiscal regime changes in Ghana
 Imposed the fiscal measures on the mining companies:
– Changed mineral royalty from a range of (3 to 6)% to a flat rate of 5%
– Changed capital allowance from 80% in the first year and 50% on declining
balance to a straight line amortization over 5 years at 20% each year
– Ring-fencing of assets for the purposes of determining tax payable
– Corporate tax increased from 25% to 35%
– Review of Stability Agreements
– Proposed windfall profit tax of 10%

23. Fiscal Regimes of some African Countries
Rank Average
Country Corporate Tax Gold Royalty Carried Interest Operating Cost
# % (%) (%) US$/oz)
1DRC 30% 2.5%NA 347
2Ivory Coast 25.0% 3.0% 10% 509
3Sierra Leone 30.0% 5.0% 10% 439
4Liberia 25.0% 3.0% 10% 533
5Egypt 20.0% 3.0%NA 643
6Burkina Faso 27.5% 5.0% 10% 525
7Tanzania 30.0% 3.0%NA 624
8Senegal 25.0% 3.0% 10% 639
9Mauritania 25.0% 5.0% 10% 666
10Ghana 35.0% 5.0% 10% 751
11Sudan 35.0% 5.0%NA 805
12South Africa 35.0% 1.5%NA 829
13Guinea 35.0% 5.0% 10% 828
14Niger 30.0% 5.0% 10% 872
15Mali 35.0% 3.0% 10% 882

24. Total taxes and levies: Corporate, windfall and royalties - %
Ghana no longer preferred investment territory

25. Drawback of the cash-cow mentality
 Increases in these fiscal regimes has adverse side to business
 Mine lives are planned alongside predictable fiscal regimes to
ensure profitability and sustainability.
 Mining is highly complex and capital intensive: Interruptions
through review of existing fiscal regimes (especially without due
consultations) distorts the free flow of operations which is
detrimental to the mining business.
 Interventions arising from unfair fines and penalties in times of
accidents, pose serious challenges to mining operations.

26. Who Received What of Mineral Revenue?
2009 2010 2011
% share of % share of % share of
Amount mineral Amount mineral Amount mineral
Spent(USD) revenue Spent(USD) revenue Spent(USD) revenue
Amortizing loans,
including interest 192,856,437 8% 230,905,746 7% 283,221,271 6.7%
Imported
Consumables 384,374,253 16% 511,159,912 16%647,485,259 15.3%
Local Purchases 677,106,543 28% 696,036,454 21%771,920,186 18.2%
Electric Power 161,509,199 7% 168,052,032 5%310,164,056 7.3%
Diesel 178,191,623 7% 227,447,069 7%322,163,134 7.6%
Employees 344,592,456 14% 292,303,804 9%303,793,323 7.2%
State 152,689,595 6% 300,556,884 9% 540,469,790 12.7%
CAPEX 511,423,033 21% 696,865,694 21% 821,061,062 19.3%
Host Communities 11,064,564 0.43% 17,590,469 1% 43,732,833 1.0%

27. 120%
0.43%
100%
21% 1% 1.00%
6% 21% 19.30%
80%
14%
9% 12.70%
7%
60% 9%
7.20%
7%
7% 7.60%
5%
7.30%
40%
28%
21%
18.20%
20%
16% 16% 15.30%
8% 7% 6.70%
0%
2009 % share of mineral revenue 2010 % share of mineral revenue 2011 % share of mineral revenue
Amortizing loans, including interest Imported Consumables Local Purchases
Electric Power Diesel Employees
State CAPEX Host Communities

28. Conclusion and Food for Thought
 Mining is a complex business and the industry need
to engage relevant stakeholders, educate and
inform
 Excessive taxation on mining could be disruptive
and kill the hen that lays the golden eggs
 Increase the cash-cows through diversification and
integration
 Mining must be seen properly in its potential as
catalyst for development

29. Thank You