Chamber of Mines in Zambia 24 November 2008

 Source of capital for:  Exploration  Pre-development activities  Mine Development  Investment/Expansion  Play a major role in M & A Activity  Influence Investment Flows  Determine (to some extent) commodity prices

3 1. Exploration, discovery, drilling, resource estimation 2. Metallurgical and mining method testwork 3. Mining and process method selection and optimisation 4. Operating and capital cost estimates 5. Economic Optimisation of economic resource (sub-economic remains behind) 6. Detailed engineering design of economic optimisation 7. Development of mining and processing schedules 8. Inclusion of the above as well as other relevant economic data (eg: fiscal measures) into a financial model. 9. Project decision and if positive, funding 10. Development

4 Development Schedule for a typical large copper project

Major ProducersMid – Tier ProducersJuniors Explorers (Type I) Entrants (“Lottery Tickets”) Adapted from Resource Stock Guide (RSG) Risks, No. of Players Rewards, No. of Winners

Investor (n) “One who commits capital in order to gain a financial return”  Individuals  Pension Funds  Mutual Funds  Hedge Funds  Companies  Sovereign Wealth Funds  Banks

 General Weakening in global demand  Slow down in economic activity  Depressed economic output  Weak demand for durable goods, housing units  Slow down in construction activity  Marked reduction in investor confidence  Reduced availability of investible funds

 Investors have become risk averse  In the current situation, investors see little “upside” in long term risky investments  The few investible funds available will only go to high quality “safe” investments  The few investors remaining will be very rigorous in evaluating their portfolios

 Exploration is the major source of growth in the mining industry  At present, more than half of exploration activity is carried out by mid-tiers, juniors and exploration companies (US$11bn – US$15bn)  With restricted funds availability, only quality projects with the right parameters will continue  Recent reports indicate approx. US$50bn of investment is likely to be deferred between 2008/9

10 Geological potential for target mineral Profitability of potential operations Security of tenure & permitting Ability to repatriate profits Consistency of mineral policies Realistic foreign exchange controls Stability of exploration terms/conditions Ability to predetermine environmental obligations Ability to predetermine tax liability Stability of fiscal regime United Nations Survey of 45 companies Source: James Otto Top 10 ranked Company Decision Criteria for exploration (out of 62 factors)

Major ProducersMid – Tier ProducersJuniors Explorers Entrants (“Lottery Tickets”) No Major Structural Effect – Focus on Efficiency/Acquisition Focus switch from exploration to efficiency or M & A Take over, barely survive or close down Marked reduction leaving very few players

Central African Copper/Cobalt86% BHP Billiton57.8% Freeport McMoran82.2%

 Pre-2008, Zambia had just started to emerge as a prime destination for investment, much more work is still ahead  In the Zambian mining sector a considerable number of assets are running old technology, this has implications on costs  The current global crisis will impact on recapitalisation and investment programmes

 Mineral Exports still account for majority of foreign earnings  Mining activity accounts for a very large part of GDP:  Tourist enterprises (hotels, lodges, car hire)  Support industries (drilling, suppliers, construction, banks, others)  “Spin-off” industries (business services, local entrepreneurship)

 The international financial markets are good sources of capital, but they are very sensitive  With increasing globalisation developments in one part of the world can bring far reaching consequences  In times of crisis, the winners will always be the investments and countries that pose the least risk to investors in the international markets