What lies beneath: Risks and rewards in West African Mining Control Risks’ Perspective

Optimism for 2011 and beyond “Big Banks Cash in on Commodities” June 2011 (WSJ.COM) “Buoyant mining sector lifts European indices” (THE IRISH TIMES) January 2011 “ Economic optimism spurs copper ” January 2011 ( Copper Investing News ) “Turmoil fails to dent growth expectations” (Financial Times) March 2011 “2010: a year of strength for commodities” January 2011 ( CBC.com )

West Africa: diverse risk landscape for mining NIGER, MALI, MAURITANIA Upsurge in terrorist activity NIGER, MALI, MAURITANIA Upsurge in terrorist activity GUINEA Ongoing uncertainty surrounding contracts GUINEA Ongoing uncertainty surrounding contracts CÔTE D’IVOIRE Post-election political, security crisis CÔTE D’IVOIRE Post-election political, security crisis GHANA Artisanal mining problems persist in gold-mining areas GHANA Artisanal mining problems persist in gold-mining areas GABON Personalised politics, institutional weakness GABON Personalised politics, institutional weakness LIBERIA Upcoming elections amid concerns over impact of Ivorian crisis LIBERIA Upcoming elections amid concerns over impact of Ivorian crisis NIGERIA Shifting security dynamics NIGERIA Shifting security dynamics CAMEROON Corruption, governance challenges CAMEROON Corruption, governance challenges

Political risk National stability remains unpredictable Weak institutions, erratic policy making, political interference Security-sector reform is often slow or non-existent Socio-economic conditions are challenging

Risk 2: Reform, red tape and regulation Sub-Saharan Africa is the most complicated region in the world for doing business; and West Africa is no exception. This pattern will not change in The mining sector will remain a favoured target for ‘special treatment’ in regulatory and fiscal contexts Further political interference into the mining business cycle, populist social development and tax policy moves can be anticipated Source: Doing Business database

Security risks Headline risks: Low Likelihood, High Impact Civil war in Mano River Union Coup d'états Terrorism: QIM in the Sahel Election-unrest At project level it is often: High Likelihood, Low(er) Impact Product and equipment theft Violent crime Workforce and labour unrest Local community discontent Supply chain disruptions due to unrest, road blockages Sabotage

Operational risks: Infrastructure Roads Telecommunications Power and water Health infrastructure Pressure on key infrastructure (shared railways, ports etc) Pressure on operators to build infrastructure  These problems will only increase as mining expands into ever more remote regions

Local environment: contractors, staff, communities Contractors: influence of own staff and sub-contractor behaviour on theft and community relations Workforce: if not managed carefully, labour disputes are most regular cause for site- specific unrest and security incidents Communities: Competition for jobs and other benefits from mining projects need to be managed carefully as disputes can have severe impact on operations and social license to operate.

What to do Step 1 Do your homework Step 2 Plan, prepare, practice Step 3 Engagement Step 4 Monitor and adapt Anticipate problems Threat assessment Vulnerability study Due diligence into counter- parties Map stakeholders Research legal and bureaucratic framework Anticipate problems Threat assessment Vulnerability study Due diligence into counter- parties Map stakeholders Research legal and bureaucratic framework Political scenarios Community strategy Factor possible delays into project timeline assumptions Security risk management strategy / policies Integrity programme Training and awareness Contingency planning (crisis management) Political scenarios Community strategy Factor possible delays into project timeline assumptions Security risk management strategy / policies Integrity programme Training and awareness Contingency planning (crisis management) Zero tolerance on corruption Community development ‘Soft security’ Focused infrastructure development Close supervision of staff and sub-contractors Building relationships, not fences and walls ‘Long-term view’ Zero tolerance on corruption Community development ‘Soft security’ Focused infrastructure development Close supervision of staff and sub-contractors Building relationships, not fences and walls ‘Long-term view’

Control Risks and the Mining Industry More than 35 years of experience in consulting clients in the mining sector. In the last five years we have undertaken more than 500 consulting engagements for clients in the industry. Recent mining consultancy has included locations as diverse as Gabon, Cote d’Ivoire, Ghana, Guinea, Liberia, Mali, Burkina Faso, Sierra Leone, Eritrea, Niger, Burundi, Madagascar, Mongolia, Pakistan, Samoa and East Timor. Our client list includes the majority of the largest mining companies by market capitalisation from across the world Consulting engagements have ranged across metallurgical groups: gold, silver, diamonds and gemstones, copper and cobalt, uranium, iron ore, PGM, potash, phosphate, tantalum, coal, rare earth…