Helping Mining Companies Address Industry

Challenges and Risks

Industry Overview
Mining companies worldwide are being forced to incorporate more complex scenarios into their strategic
planning due to escalating social, economic and political factors affecting the industry. Demand continues
to increase because of strong growth in emerging markets, while supply is increasingly constrained as
development projects become more complex and are typically in more remote, unfamiliar territory. The cost
base of the industry has changed permanently as lower grades and shortages of labor take effect.

In 2011, the financial results for the top 40 mining companies scaled new heights. Consider:

• Revenues increased 26 percent to more than US$700 billion.

• Net profit was up 21 percent to US$133 billion.
• Operating cash flows grew 34 percent to US$174 billion.
• Investing cash flows grew 92 percent.
• The top 40 mining companies returned 156 percent more to shareholders than in 2010.
• Total assets remained above US$1 trillion and grew a further 13 percent.

However, these increases were still below the highs of 2006 and 2007, and issues faced by the mining industry
now remain largely unchanged. These include, but certainly are not limited to:

• Cost management – increased scrutiny from stakeholders, labor talent gap

• Capital project dilemmas – business operations improvement, cost escalations and overruns, financial
controls
• Business continuity planning – reputational risk, disaster planning (including media relations)

The Deutsche Bank Metals and Mining team recently noted that “the sector is hitting an inflection point
where routine operating cost and capital spending overruns are no longer being tolerated by boards or
investors” (Source: Deutsche Bank, 10/2/2012). Mining companies must continue to seek ways to rein in costs,
enhance capital project management, improve scenario planning, strengthen internal controls and engage in
more focused workforce planning. As they do so, Protiviti has the deep expertise and experience to help.

How We Help Organizations in the Mining Industry

Our industry experts have years of experience working across the mining sector and involving many metals and
industrial minerals, including non-ferrous metals, minor metals, precious metals and coal. Our professionals
have specialized experience in areas such as capital projects, strategic sourcing, enterprisewide risk

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management, internal audit, commodity trading, shipping, and IT applications and security. We have delivered
services for mining organizations in more than 150 cities and 60 countries worldwide, providing resources and
subject-matter experts. Our mining and minerals-related services include:

• Capital projects budgeting and forecasting • Credit and cash flow management solutions
assistance • Governance assessment and risk policy
• Working capital optimization and cost reduction development
• Procurement process improvement • IT security
• Capital project effectiveness and reporting • Treasury risk
transparency • Physical assets
• Internal audit • Risk system selection and implementation
• Risk assessment

Our Proven Methodologies

Six Elements of Infrastructure
This model categorizes observations and findings along these six components of infrastructure. Based upon
our experience in using this tool, we have come to determine that it is a highly effective way to isolate specific
weaknesses in the internal control structure and provide targeted solutions.

Business Business People & Management Systems &

Methodologies
Policies Processes Organization Reports Data

Process does not People cannot Reports do not Methodologies do Inf ormation is
achieve strategy perf orm process provide inf ormation not adequately not available f or
needed analyze analysis
inf ormation

Assessing Project Lifecycle Effectiveness

Assessing the effectiveness of a project depends on the phase of the project in the capital project lifecycle. Each
phase of the lifecycle presents unique objectives, challenges and risks. Protiviti can assess the effectiveness
of various phases of a project using the lifecycle below. We also outline the risks and considerations for each
phase of the lifecycle that we can assess through various projects to determine project effectiveness.

Pre -Feasibility/Feasibility Execution Post -Completion

-
Pre-Feasibility/ Resource
Feasibility & Contractor Contract Commission
Allocation & Maintenance
Planning Selection Management & Turnover
Commitment

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Our Credentials
We have worked with some of the largest international mining companies in the world to improve efficiency
and productivity while also mitigating risk.

Large North American Gold, Copper and Molybdenum Miner

Protiviti performed multiple engagements to assist with two large construction projects, including diagnostic
reviews of the processes and controls in place for the construction of two large mines. The diagnostic involved
reviews of the controls related to project budget monitoring, vendor bidding and contractor selection, contract
issuance and approval, change management, payment application processing, project execution and verification
of completion, Sarbanes-Oxley controls, and special focus on the procurement and accounts payable processes.
Other projects involved assisting with the review and analysis of budget monitoring and forecasting reports
provided by the construction management firms, as well as the internal owner’s team.

International Rare Earths Miner

Protiviti performed a diagnostic review of the capital project contracting processes and procedures related to a
US$1 billion construction project. The review included an analysis of risks and controls around capital project
planning, project budget monitoring, procurement, vendor bidding and contractor selection, contract issuance
and approval, change management, payment application processing, and project execution and verification of
completion. Protiviti also performed a vendor audit to determine whether invoices submitted by engineering
and construction vendors were done in accordance with established contractual terms and conditions as well
as agreed upon rates. Additionally, we completed a full invoice and site audit of the retained engineering
procurement and construction management (EPCM) firm to verify compliance with contractual terms, with
specific attention to allowable and unallowable expenses charged to the client.

Large International Mining Company

Protiviti was engaged by this company to help develop and execute its internal audit plan and Sarbanes-
Oxley compliance program. Our services included recommending a SOX approach and IA plan for senior
management and audit committee approval, and providing the tools, approach and resources to execute the
plans. Protiviti also assumed the role of internal audit director while the company began a search to place
a new director, who upon placement, assisted with assimilation and integration. Protiviti has continued
to support the company in providing internal audit and SOX compliance co-source resources, and is also
executing other projects for the risk management, corporate accounting and IT organizations. Such projects
include capital project/construction diagnostics, A/P recovery, accounting policy application assistance,
enterprise risk assessment, regulatory compliance reviews, and business continuity management.

About Protiviti
Protiviti (www.protiviti.com) is a global consulting firm that helps companies solve problems in finance,
technology, operations, governance, risk and internal audit. Through our network of more than 70 offices in
over 20 countries, we have served more than 35 percent of FORTUNE® 1000 and Global 500 companies. We
also work with smaller, growing companies, including those looking to go public, as well as with government
agencies.

Protiviti is a wholly owned subsidiary of Robert Half International Inc. (NYSE: RHI). Founded in 1948,
Robert Half International is a member of the S&P 500 index.

Contacts
Marcus Delouche Garran Duncan (Australia) Randall Coxworth
+1.713.314.4982 +61.03.9948.1200 +1.213.327.1324
marcus.delouche@protiviti.com garran.duncan@protiviti.com.au randall.coxworth@protiviti.com

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