UGANDA&CHAMBER&OF&MINES&&&PETROLEUM&

MINERAL&WEALTH&CONFERENCE& 1st92nd&OCTOBER&2013&

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East&African&Mining&Ltd,&carrying&out&exploraMon&in& Kaabong&district,&Karamoja& & ! A!look!at!the!industry!from!an!investment! perspec6ve!and!the!prac6cal!challenges!facing! explora6on!companies!in!Uganda!

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Uganda&has&much&opportunity&for&development&in&the& minerals&sector& && •  Very&early&stage&for&the&industry&here&9&relaMvely& 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&
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Understanding&the&environment&9&the&wider&economic&picture& in&the&mining&industry& && Mining&stocks&have&had&a&hard&Mme& && •  2013&9&Market&capitalizaMon&fell&for&37&of&the&top&40& companies&—losing&over&$200&billion,&or&17%&since&the&end& of&2012.&(PWC)& && •  ParMcularly&tough&for&gold,&despite&high&prices& •  Margins&have&been&driven&down& & •  Uncertainty&over&future&prices&

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Difficulty&in&raising&capital&for&early&stage&exploraMon& && •  Opportunity&cost&for&investors& •  Why&buy&early&stage&exploraMon&when&you&can&buy& resource&or&even&producMon&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&
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What&worries&large&mining&companies?& && •  Cost!& •  Labour&cost& •  Commodity&price&–&decreasing&margins& & •  EffecMve&capital&deployment&–&making&each&dollar&work& for&shareholders& •  External&factors&–&naMonalizaMon&etc.& •  ConcentraMng&on&efficiency&rather&than&expansion&&
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What&makes&for&a&good&project?&What&would&you&invest&in?& && •  Can&the&project&begin&to&generate&cashflow?&You&can’t&keep& going&back&to&investors&indefinitely…& •  Reduce&dependence&on&external&factors&such&as& markets,&investor&senMment,&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&&
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Developing&a&resource&

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Quality&of&work& && •  All&technical&work&to&internaMonal& standards&–&NI&439101,&JORC&

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Developing&a&resource& && •  Reaching&milestones&–&linked&to&capital&requirements&

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Corporate&Social&Responsibility& •  Important&to&address&social,&environmental&issues&–& involve&the&community& •  Companies&with&good&CSR&and&transparency&tend&to& aYract&investment&

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Geung&to&producMon& •  How&long&will&that&take?& •  Typically&10&years&or&more&–&no&income&for&company& unMl&that&point&

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Why&do&early&stage&exploraMon?& && The&upside& & •  PotenMal&for&a&good&return&on&investment& && The&downside& & •  Risky&–&might&not&be&an&economic&resource,& ownership,&government,&local&partners& •  Takes&a&long&Mme,&many&years& •  Expensive& •  No&exit&/&return&on&investment&
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The&exit?&Who&is&buying&early&stage&projects?& && •  Few&acquisiMons&are&being&made&at&the&moment&9&major& companies&have&cut&back&on&exploraMon&and&acquisiMons& •  Normally&exploraMon&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?& •  ProducMon&needs&large&capital&investment&&
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Infrastructure&–&helps&aYract&investors&for&the&next&stage& && •  Power&–&massive&part&of&the&cost&for&producMon,& heavily&affects&margin&9&diesel&generators&much&more& expensive&than&grid&power& •  TransportaMon:&Roads&–&makes&exploraMon&cheaper& and&quicker,&less&work&lost&in&rainy&season& Railways&–&route&to&market&for&bulk&commodiMes& •  Human&resources&–&well&trained,&moMvated&workers,& from&technical&to&manual&labour&
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ExpectaMon& && •  ExpectaMon&of&license&holders&
•  The&value&of&the&project&

•  ExpectaMon&of&communiMes&
•  CommunicaMon&and&educaMon&

•  ExpectaMon&of&officials&
•  It&takes&Mme&and&large&amounts&of&money&to&develop&a& resource&–&and&10&years&or&more&to&producMon&
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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&Mme& && To&understand&the&parMcular&requirements&in&the&sector,& especially&in&these&hard&Mmes&for&the&industry& &&
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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&regulaMon& •  PaMence&and&educaMon&–&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& &&
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