www.pwc.

com/ca

School of Mines
Presentation

May 13th 2014

Outline

1. Introduction
2. PwC Deals Overview
3. Mining M&A Overview
4. Debt Financing
5. Streaming, Royalty and Joint Venture Agreements
6. Perception of World
7. Asian Fund Raising Approach
8. What to Watch Out For
9. International Success Factors
10. Sample Case Studies

Slide 2
PwC – An Industry Focused Multi-Disciplinary
Approach PwC Mining Deals – Global Advisors
Corporate Advisory &
Corporate Finance Valuations Transaction Services
Restructuring
• Corporate advisory • Fairness opinions • Financial due diligence • Corporate advisory
• M&A advisory • Financial modelling • Bid and bid defence • Debt advisory
• Capital raise advisory • Mine plan modelling support • Distressed corporate
• Joint venture partner • Purchase price • IPO support finance
advisory allocation • Structuring services • Restructuring
• Off-take advisory • Asset price impairments • Post merger integration • Corporate insolvency
• Project finance • Forensic due diligence
• Debt advisory

Select Recent Canadian Deals Experience

Tamerlane Government of Procon Mining Gujarat State Starfield
Ventures the Kyrgyz Rep. and Tunneling Fertilizers & Resources
Lead financial valuation and Chemicals
sale of 60% interest
advisor in regards to restructuring of their in the Company to $60m investment and Acted as the lead
company’s sale 32.75% investment $6b off-take financial advisor in the
process interest in agreement with sale of certain mining
China CAMC claims and assets to
Centerra Engineering Karnalyte
Pending
Gold Inc. Resources Crown Gold

advised by advised by advised by advised by advised by

PwC offers a comprehensive mining industry focused advisory service offering to Companies and Boards

Slide 3
Corporate Finance M&A Deal Record
Top 10 Global Advisors
We advise on more than 350 global sales mandates at any one time (by volume) Year ended December 2013
We have completed over 3,400 deals globally in the last 10 years
No.
Rank
Ran of
Advisor value
k deal
($m)
s

107 deals 1 PwC 400 10,830

$7.34bn 2 KPGM 341 10,475

CEE 3 E&Y 253 10,000
1,728 deals Goldman
4 228 34,357
$216.84bn Sachs
Western 5 BDO 214 1,696
Europe 6 Rothschild 212 14,183
7 Lazard 198 17,668
275 deals Morgan
8 182 21,670
$41.97bn Stanley
43 deals 830 deals
Americas 9 IMAP 182 1,458
$4.61bn $96.59bn
10 Deloitte 171 6,151
Asia,
Middle
including 476 deals 1st
East &
Africa
Japan $21.73bn 1st
Australasia

by volume of
Global deals
In the last 10 years, we provided financial advice on 3,459 deals globally,
valued at more than $389 billion, of which over 39% were cross-border deals
Source: Thomson Financial January 2014
Slide 4
 Unrivalled Global PwC Network
PwC is the largest global professional services firm with 165,000 employees across 153 countries PwC Mining Leaders
John Gravelle, Global
No other firm can match our global reach of clients and contacts Leonardo Viglione, Argentina
Jock O’Callaghan, Australia
We have dedicated Mergers & Acquisitions (+1,700) and Mining (+1,500) teams Ronaldo Valino, Brazil
worldwide Colin Becker, Chile
Ken Su, China
Detroit Toronto Carold Miguel Chaparro, Colombia
Chicago Copenhagen Kameswara Rao, India
Sacha Winzenried, Indonesia
Jose Almodovar, Mexico
Berlin Stockholm Fernando Gaveglio, Peru
Frankfurt Simon Venables, South Africa
Jason Burkitt, UK
Amsterdam John Campbell, Ukraine
Helsinki Asia
Paris Steve Ralobvsky, U.S.A
Vancouver Edinburgh Pacific
Dublin Manchester Moscow
Birmingham Budapest Network PwC Corporate Finance Leaders
Beijing Seoul
San Francisco Boston London Vienna
San Jose David Denny, Australia
Los Angeles New York Madrid Istanbul Shanghai Rogerio Gollo, Brazil
Houston Tokyo Bojidar Neytchev, Bulgaria
Washington Tel Aviv Taipei
Milan Delhi Hong Kong Julian Brown, Canada
Zurich Prague Colin Becker, Chile
Rome Mumbai Bangkok Manila Gabriel Wong, China
Ho Chi Min City Yousef Bazian, U.A.E.
Kuala Lumpur
Werner Suhl, Denmark
Singapore David Eatlake, Hong Kong
Jakarta Sumit Khanna, India
Akihiko Matsunaga, Japan
Brisbane Hwang young Ki, Korea
Sao Paulo Auckland
Johannesburg Perth Sydney Raul Lozano, Mexico
Buenos Aires Melbourne Mark Averill, New Zealand
Cape Town
Mark Hannye, Russia
Benjamin Kan, Singapore
Wellington Simon Venables, South Africa
Peter Yu, Taiwan
Chris Hemmings, UK

Drawing on the experience of our extensive global network maximises the likelihood of a successful transaction

Slide 5
 Deal Activity since 2000

Volume:
• 1,437 deals in 2013
• Down 20% from 2012

Value:
• $36B in 2013
• Down 65% from 2012

Source – S&P Capital IQ, PwC Analysis

Slide 6
 Deal Activity Over Last 5 Quarters

Volume:
• 212 deals in Q1 2014
• Down 43% from Q1
2013

Value:
• $7 B in Q1 2014
• Down 43% from Q1
2013
• However driven
by a select few
transactions

Source – S&P Capital IQ, PwC Analysis

Slide 7
 Deal Activity By Geography Q1 2014

Q1 2014 Deal Value by Q1 2014 Deal Volume by

Geography Geography

% %

Source – S&P Capital IQ, PwC Analysis

Slide 8
 Deal Activity By Resource Q1 2014

Q1 2014 Deal Value by Q1 2014 Deal Volume by

Resource Resource

% %

Source – S&P Capital IQ, PwC Analysis

Slide 9
 Deal Activity By Geography 2013 vs 2012

2013 Deal Value by Geography 2013 Deal Volume by Geography

% %

2012 Deal Value by Geography 2012 Deal Volume by Geography

% %

Source – S&P Capital IQ, PwC Analysis

Slide 10
 Deal Activity By Resource 2013 vs 2012

2013 Deal Value by Resource 2013 Deal Volume by Resource

% %

2012 Deal Value by Resource 2012 Deal Volume by Resource

% %

Source – S&P Capital IQ, PwC Analysis

Slide 11
Top 10 Transactions from 2013
February 22, 2013: Zelimkhan Mustoev and Gavril Yushvaev– Polyus Gold
• Zelimkhan and Gavril makes an offer of $3.6B
October 28, 2013: Murray Energy– Consolidation Coal
• Murray makes an offer of $3.5 B
May 17, 2013: Samruk-Kazyna National Welfare Fund, Alexander Machkevitch, Alijan
Ibragimov, Patokh Chodiev; Ministry of Finance of the Republic of Kazakhstan–
Eurasian Natural Resources
• Group makes an offer of $2.3 B
February 7, 2013: Samruk-Kazyna National Welfare Fund– Kazzinc (Verny Capital Stake)
• Samruk makes an offer of $1.7B
June 21, 2013: ITOCHU and Mitsui & Co. – BHP Iron ore
• ITOCHU and Mitsui makes an offer of $1.5 B
January 14, 2013: ARMZ Uranium Holding– Uranium One
• ARMZ makes an offer of $1.4 B

Slide 12
Top 10 Transactions from 2013 (Cont.)
February 2, 2013: Ural Mining and Metallurgical Company – Kuzbassrazrezugol
• Ural Mining makes an offer of $1.1 B
October 25, 2013: Sumitomo and Glencore Xstrata – Rio Tinto (Clermont Copper Mine)
• Sumitomo and Glencore makes an offer of $1 B
July 28, 2013: Westmoreland and Altius Minerals – Sherritt International (Coal
Operations)
• Westmoreland and Altus makes an offer of $946 M
March 4, 2013: CMOC Mining – RioTinto (Northparkes Copper Mine)
• CMOC makes and offer of $820 M

Slide 13
Notable Q1 2014 Deals
January 13, 2014: Goldcorp – Osisko
• Goldcorp makes a hostile offer for Osisko valued at $3.3B
• Osisko urged shareholders to not accept the hostile offer
• April 16, 2014 Yamana and Agnico Eagle make an offer to purchase Osisko for $3.9B

February 9, 2014 HudBay – Augusta:

• Hubay makes a hostile offer for Augusta valued at $419 M
• Augusta urged shareholders to not accept the hostile offer
• Currently searching for a rival bidder, the British Columbia Securities Commission has implemented
a rights plan which has become known as the “poison pill”

April 14, 2014 Minmentals – Glencore (Las Bambas):

• Minmetals acquires Las Bambas from Glencore for $5.85 B
• Not in Q1 but is one of the largest deals in the last two years

Slide 14
 Senior Secured Financing
Senior Debt
Sm all T ier Mid T ier Large T ier • Small and Mid Tier Producers
Percentage
7 1% 21 % 7%
have a lot more restrictions in
Breakdown their financing facilities
Restrictions
Acquisitions 90% 50% NA • Covenants are also usually a lot
Hedging 40% 0% NA tighter for Small and Mid Tier
Capital Expenditures 60% 0% NA Producers
Additional Secured • A lot of Large Tier issuers have
90% 1 00% NA
Indebtedness
Additional
undrawn credit facilities which
Unsecured 50% 1 00% NA are used to support credit ratings
Indebtedness
Ordinary Course
30% 0% NA
Indebtedness
Additional Capital
90% 50% NA
Lease Indebtedness
Sale Leaseback
50% 0% NA
Transactions

Perm itted Additional Secured Debt

Maximum Limit (M) $ 1 50.00 $ 1 00.00 NA
Minimum Limit (M) $ - $ 50.00 NA

Perm itted Additional Capital Leases

Maximum Limit (M) $ 250.00 $ 500.00 NA
Minimum Limit (M) $ 1 .00 $ 500.00 NA
Source – S&P Capital IQ, PwC Analysis and company disclosures
*Analysis based on a sample size of 67 companies in the mining space
Slide 15
 Junior Debt Financing
Junior Debt
Sm all T ier Mid T ier Large T ier • Junior debt has been issued by a
Percentage
17 % 25% 58%
lot of miners over the past 5 years
Breakdown
Restrictions • Junior debt was predominantly
Acquisitions 7 8% 69% 83% used for mine development or
Hedging 56% 46% 1 0% mine expansions
Capital Expenditures 0% 0% 0%
• Small, Mid and Large Tier Miners
Additional Secured all have restrictive covenants in
7 8% 1 00% 57 %
Indebtedness
Additional
their debt facilities
Unsecured 7 8% 77% 43%
Indebtedness
Ordinary Course
33% 54% 3%
Indebtedness
Additional Capital
7 8% 1 00% 43%
Lease Indebtedness
Sale Leaseback
33% 1 5% 23%
Transactions

Perm itted Additional Secured Debt

Maximum Limit (M) $ 2,600.00 $ 7 50.00 $ 1 ,547 .00
Minimum Limit (M) $ 25.00 $ 1 00.00 $ 350.00

Perm itted Additional Capital Leases

Maximum Limit (M) $ 37 5.00 $ 7 50.00 $ 1 ,547 .00
Minimum Limit (M) $ 25.00 $ 7 5.00 $ 7 5.00
Source – S&P Capital IQ, PwC Analysis and company disclosures
*Analysis based on a sample size of 67 companies in the mining space
Slide 16
 Convertible Debt Financing
Conv ertible Debt
Sm all T ier Mid T ier Large T ier • Small, Mid and Large Tier
Percentage Producers have all issued
33% 47 % 20%
Breakdown convertible debentures
Restrictions
Acquisitions 1 00% 43% 67 % • Small and Mid Tier Producers
Hedging 40% 0% 33% issued the majority of convertible
Capital Expenditures 20% 0% 0% debt over the past 5 years
Additional Secured
60% 0% 33% • Convertible Debt typically has the
Indebtedness
Additional
lowest coupon
Unsecured 20% 0% 0%
Indebtedness
Ordinary Course
20% 0% 0%
Indebtedness
Additional Capital
40% 0% 33%
Lease Indebtedness
Sale Leaseback
0% 0% 0%
Transactions

Perm itted Additional Secured Debt

Maximum Limit (M) $ 200.00 $ - $ 1 00.00
Minimum Limit (M) $ - $ - $ 1 00.00
$ - $ -
Perm itted Additional Capital Leases $ - $ -
Maximum Limit (M) $ 200.00 $ - $ 1 50.00
Minimum Limit (M) $ 7 0.00 $ - $ 1 50.00
Source – S&P Capital IQ, PwC Analysis and company disclosures
*Analysis based on a sample size of 67 companies in the mining space
Slide 17
 Streaming Agreements
Streaming agreements
• Streaming agreements are more common around precious metal producers than non-precious metal
producers
• Terms would be to receive an upfront payment in exchange for a certain percentage of ore from
production (percentages vary by project) over the life of the mine

Benefits vs Equity Benefits vs Debt

• Avoids equity dilution • Less risky
• More accretive to NAV per share • No covenants
• Full valuation of Projects • Increases financing capabilities
• No dilution of other assets and future properties • Usually subordinated to senior lenders
• Maintains flexibility to issue equity and debt

Source – S&P Capital IQ, PwC Analysis and company disclosures

*Analysis based on a sample size of 67 companies in the mining space
Slide 18
 Royalty Agreements
Royalty agreements with other companies
• The granting of a royalty usually arises as a result of:
• Paying part of the consideration payable to prospectors or junior mining companies for the
purchase of their property interests;
• Providing capital in exchange for granting the royalty; or
• Converting a participating interest in a joint venture relationship into a royalty
• These agreements take on various forms, the most common being a Net Smelter Royalty (NSR)
typically ranging from 1% to 4%
• Other types of royalty arrangements include Gross Smelter Returns (GSR), Net Value (NV), and Net
Profits Interest (NPI) royalties, which may or may not be based on a sliding scale depending upon
product price levels
• Benefits are similar to those of streaming agreements

Source – S&P Capital IQ, PwC Analysis and company disclosures

*Analysis based on a sample size of 67 companies in the mining space
Slide 19
 Streaming and Royalty Agreements Examples
Royalty agreements
• Franco Nevada – Goldstrike owned by Barrick
• Holds a NSR (2-4%) and NPI (2.4% - 6%) covering the majority, but not all of the reported
mineral reserves and resources
• In return Franco Nevada pays 2$ per ounce for shipping and smelting
• Franco Nevada – Brucejack owned by Pretium Resources
• Holds an NSR 1.2% which becomes payable once the project has produced 500,000 ounces
• Acquired in 2013 for $45 M in cash
Streaming agreements
• Franco Nevada – Cobre Panama Property owned by Inment (now First Quantum)
• Entered into an agreement in 2012 to receive 86% of First Quantum’s share of the precious
metals produced from Cobre Panama
• In return Franco Nevada will provide a $1 B deposit to fund a portion of the capital costs at
Cobre Panama, the deposit will be available after First Quantum’s funding reaches $1 B

Source – S&P Capital IQ, PwC Analysis and company disclosures

Slide 20
 Joint Ventures
Why more significance?:
• In recent years, JVs have taken on special significance due to:
• Lack of available equity capital and debt finance;
• Increased capital costs for projects; and
• Greater complexity of mining projects in an environment of heightened commodity price
volatility
Reasons to seek out a JV include:
• Mega projects where a number of parties share the financial and development risk
• Transactions being undertaken between companies with existing cash and funding capacity and
those with quality development projects or existing production with growth potential; and
• Investors (particularly in Asia) seeking to secure off-take agreements as part of their funding of an
investment into a resources project

Major terms in a JV agreement

• Ownership;
• Proportion of capital to be committed and timing of capital injections;
• Board representation and decision making process;
• Operator agreement;
• Anti-dilution and buy-back terms for failure to make capital injections.

Source – S&P Capital IQ, PwC Analysis and company disclosures

Slide 21
World Map – North America

Slide 22
World Map - Asia

Slide 23
A Staged Approach Is Required To Attract The
Appropriate International Investor Interest
“Go” / “No “Go” / “No
Month 1 Go” Go” Month 3-4

Business Preparation & Initial marketing (including Focused Indicative offer(s)

initial buyer list road shows) marketing

Eliminate buyers who will not pay a full and fair price
Indicative
NDA signal offer signal

Selected
Initial buyers list (to be expanded / refined)
buyers

We work closely We use our

We establish the
with management relationships to test We build the We identify and
precise sales
to prepare them market appetite strategic story for articulate the deal
approach for each
and the business WITHOUT each key buyer rationale
key buyer
for sale revealing the target

Slide 24
A Staged Approach Is Required To Attract The
Appropriate International Investor Interest

Month 4-5 Month 9-10 (1)

Management Dataroom & Execution of Legal

Indicative offer(s)
presentations Final bids Documents

Indicative Process focused on strategic buyers only

offer signal

Target - 4-6 companies Target - 3 companies

1 company
in 2-3 countries in 2 countries

Note: 1. Timeframes are indicative and do not take into account conditions precedent such as regulatory approval which depending on the transaction could be
in addition to the above.

Slide 25
What Are Overseas Companies Looking For?
Asian companies are strict when it comes to project selection; some key considerations below:

Development stage • The more advanced the better (ie: earlier to production)

Metallurgy • Easily understood metallurgy

• Traditionally, larger scale projects preferred as Asian

Size companies have a lot of capital to deploy. Starting to see a
trend towards smaller executable projects.

Opex and capex • Has to be cost competitive with other Projects

Offtake • Long-term contracts are important, as they ensure security

of supply
Control • Preference for acquisitions of majority interests or clear
paths to control
• Historically predisposed to invest in Africa and Australia,
however:
• Australia no longer as attractive due to high costs and
Jurisdiction introduction of new taxes
• Investments in Africa are facing logistical issues and
political instability
• As a result, Asian companies have expressed interest in
good projects located in the Americas
Slide 26
International Execution – Things To Be Cognizant
Of?
The following needs to be considered when approaching international investors:

• Translation: It is critical that translation is accurate, business translation vs. literal translation.
Someone will know English, no side conversations.

• Sophistication: Need to consider the level of sophistication on the other side, are they familiar with
Western terms and structures?

• Due Diligence: It will more than likely be a bottom-up vs. a top-down approach. Usually much
more rigorous, a lot of focus on geology and technical process

• Negotiation: There is often a need for negotiations to take place on their soil and in their language,
usually between senior individuals

• Decision Making Approach: All final decisions come from the top

• Time Period: It is typically longer a long process

• Process: Typically do not like competitive processes

Slide 27
International Execution – Success Factors

• The following guidelines should be incorporated when designing an approach to the Asian market:

Define the value proposal

Absolute and relative value

considerations are essential
ingredients in a process

Set an adequate and realistic Senior management

transaction timeframe commitment

Changing deadlines will erode goodwill Building relationships is a crucial

and reduce competitive tension element of Asian business culture

Access to middle management

Geologists and other specialists need to

be available for due diligence meetings
and calls

Slide 28
Case Study: India’s Strategic Investment In
Canadian Potash
• In January 2013, Karnalyte Resources Inc. (“Karnalyte”,
Gujarat State Fertilizers &
Chemicals
Strategic investment of $60M and
off-take agreement with Karnalyte
Resources.
PwC acted as the lead advisor to GSFC
TSX:KRN) and Gujarat State Fertilizers & Chemicals
Ltd. (“GSFC”, BSE:500690), a publicly-traded Indian
agribusiness company completed a $60.0 million
strategic investment and $6.0 billion off-take
agreement:
• GSFC will make a $45.0M investment in Karnalyte,
at a price of $8.15 per common share of KRN in
exchange for a 19.98% ownership stake
• In the off-take agreement, GSFC has agreed to
purchase 350,000 tonnes per year (TPY) in phase
one, increasing to 600,000 TPY in phase 2. The off-
take agreement will continue for approximately 20
years from the commencement of commercial
production of Phase 1.
Slide 29
Case Study: Procon’s Investment In Fortune
Minerals
• In June 2013, Fortune Minerals (“Fortune”, TSX:FT)
and Procon Resources (“Procon”), a large Chinese SOE
Procon Resources backed mining services company, completed an $11.7
million strategic investment.
• Procon bought 29.25 million newly issued shares at
$0.40 apiece and stated that the private placement
would be completed in two tranches of $5.85-million
Private placement of $11.7M in and would result in Procon holding a 19.4% stake in
Fortune on a nondiluted basis.
Fortune Minerals
• The Common Share issue price of $0.40 was based on a
14% premium over Fortune’s prior day close and FT’s
stock currently trades at the issued price.

PwC acted as the lead advisor to Procon

Slide 30
Case Study: Takeover of Australian Copper miner
Inova Resources
Shanxi Donghui Coal Coking
& Chemicals Co. Ltd.
Takeover of Inova Resources
Limited
PwC acted as the joint lead advisor to
Shanxi Donghui
• A$161.0 million off-market takeover for the ASX listed
Inova Resources Limited.
• The offer of A$0.22/share represented:
• 29% premium to closing price;
• 23% premium to the 1-month VWAP;
55% premium to the 3-month VWAP.
•
• PwC Corporate Finance, advised Shanxi Donghui on
financial and regulatory matters in regards to the
takeover that allows Shanxi Donghui to diversify its
operations internationally and into metals.
Slide 31
Case Study: Takeover of Australian Lead-Zinc
explorer Abra Mining
Hunan Non Ferrous Metals
Corporation (HNC)
Takeover of Abra Mining Limited
PwC acted as the joint lead advisor to
HNC
• Off-market takeover for the ASX listed Abra Mining
Limited, valuing the target at A$57.7m.
• The offer price of A$0.40 per share represented:
• 100% premium to closing price;
• 90% premium to the 1-month VWAP;
54% premium to the 3-month VWAP.
•
• PwC Corporate Finance, advised HNC on the takeover
of the remaining minority stake it did not already own.
Slide 32
Thank you

This content is for general information purposes only, and should not be used as a
substitute for consultation with professional advisors.

© 2012 PricewaterhouseCoopers LLP, an Ontario limited liability partnership. All rights

reserved.

PwC refers to the Canadian member firm, and may sometimes refer to the PwC network.
Each member firm is a separate legal entity. Please see www.pwc.com/structure for further
details.
Slide 33
Financial Decisions and
Analysis in Mining
Americas School of Mines

Denver, Colorado
May 13, 2014
Items to be covered

 Background to Financial Decisions and Analysis (FD&A)

 Mining Solutions

 Model Features

 Case Studies

 Closing

35
Introduction to FD&A Canada

Who we are and what we do Enabling sophisticated mining decisions

 A dedicated and commercial team
of financial modelling specialists
 Diverse backgrounds:
 CA/CFA/CBV
 Mining sector
 Investment banking
 Feasibility study support
 Exporting critical data from
feasibility studies
 Sense checking of feasibility
assumptions
 Commercial in approach
 Able to flex reserves, grade,
recovery, pricing, cash costs
 Expanded capital
scenarios, higher
mining &
processing rates

 PwC modelling globally:

 Collaborative independent teams
 15 years of ‘know-how’ FD&A
 Develop?  Banks need
 Investing in Americas mining  Expand? models to be
industry due to team capabilities:  Close? of a certain
 Complicated modelling  Funding structure? standard
requirements of finite life projects  Proving covenant
 Able to deliver commercial Broad skills enables compliance
decisions to be made which  Real value through sculpting
decision-enabling models
are grounded in reality and debt repayments to optimize
 Standard of models in industry made with confidence funding structure
below that of other sectors

Dedicated financial modelling team with commercial experience

36
Provision of value over the full mining life

Exploration & Feasibility Planning & Construction Operations & Closure

• Preparation of driver based • Financing overlays for • CFO Office.

Deliverables

operational forecasts and forecast
financial statements in connection
with Pre-Feasibility Studies,
Feasibility Study and/or
Business Plans.
• Flexibility to allow for overlays for
later stage analysis (e.g. financing).
negotiations with capital providers. • M&A and divestment modelling.
• Analysis of financing • Refinancing.
offerings (e.g. build in covenants,
• Further project development.
off-takes, etc…).
• Expansion feasibility
• Model diligence.

• Robust analysis, including key • Robust tools and analysis • Better management reporting
performance indicators and provide credibility when and tracking of operational and
Sensitivity/scenario analysis to dealing with capital providers. financial data.
Value

highlight key project risks.
• Flexible inputs (i.e. fixed, variable
costs, price sensitivity) allow for
enhanced analysis versus standard
engineering reports.
• Dealings with banks allow
models to either reflect several
potential debt structures or build
in received term sheets
• Robust forecasts designed with
accountability in mind.
• Client can control the model
and analysis (as opposed to relying
on investment bankers).

• Accounting advisory
Pull through

• Tax (including royalty analysis)

• Corporate Finance
• Strategy Consulting
• Business Planning
• Transaction Services
Mining Solutions

38
Modelling Solutions
CFO Office
Strategic forecasts
• Driver based forecasts
aligned to your strategic
plan
Management reporting
• Providing insightful &
easy-to-use reporting
Cash management
• Increasing the accuracy of
cash forecasting
Decision Support
Investment appraisal
• Support management’s
decision making process
Strategic options
analysis
• Providing financial rigour
for tough decisions
Deal Modelling
Buy-side
• M&A and improving
positioning with finance
providers
Sell-side
• Add credibility to the
business growth story
Restructuring
• Supporting creditor and
bank negotiations
Model diligence
• Increasing confidence in
forecasts
CFO Office
Decision Support
Deal Modelling
Model Features

43
Dynamic dashboards
 Allow the user to view various cuts of data in one centralized location, which allows the user to
spend more time on analysis and less time on research

44
Best in class data visualization
 Highlights and summarizes key model analysis in a format that quickly and most effectively
conveys underlying message
 Clear and comprehensive presentation of key information

45
Sensitivity and scenario analysis at your fingertips
 Quickly understand the impact on your business of changes in key value drivers

46
Fully integrated 3-way financial statements and
automated roll-forward functionality
 Provides a comprehensive financial projection for the business including P&L, Cash Flow,
and Balance Sheet forecasts
 Model built for multi-year usage; a model you can own and benefit from over a prolonged
period as opposed to one-time use
 More efficient use of model which reduces risk of error, and no need to re-enter
information more than once

47
Logical lay-out and easily comprehendible
 Less time to understand the model, easier to trace outputs and calculations back to source
 Fewer errors and better understanding of model projections

Group Level P&L, BS, CF

Dashboard Covenants
Outputs Q(uarterly)

Cash
Financing Input Liquidity repatriation
assumptions

Group Level P&L, BS, CF

Financing Calcs Input Other
Outputs M(onthly)
Group P&L, BS and CF
Mar 11 - Sept 11

CAPEX
Sensitivity
Depreciation
Assumptions

Consolidated P&L October 2011 - March 2015

BU1 BU2 BU3 BU4 BU5 BU6 BU7 BU8 BU9 BU10 BU11 BU12 BU13 BU14

CALCULATIONS - P&L, BS and CF items; KPIs by business unit - £'000

BU1 BU2 BU3 BU4 BU5 BU6 BU7 BU8 BU9 BU10 BU11 BU12 BU13 BU14

INPUT TEMPLATES - Operating data and historic P&L and KPIs by business unit. Local currency '000
48
Embedded user guidance and automated importing
 Reduces user error and makes model easier to use; ensures model can be used by more
than just one person with inside knowledge
 Significant time savings to import data along with significant decrease in user input error

49
Data validation and built-in error checks
 Information integrity
 Embedded data validation acts as a guide to model user, directing them to entering appropriate /
error-free input data, thereby leading to more relevant model outputs
 Instant alerts mitigate risk of errors in model

Cost allocation inputs

Serice level cost allocation inputs

Service Cost Type Value W X Y Z

Service A Audit Fee £11,178 17% 31% 28% 24% 100%
Service B General Office £11,592 20% 12% 14% 54% 100%
Service B Utilities £9,647 18% 30% 20% 32% 100%
Service C Insurance £11,240 15% 25% 24% 34% 98%
Service C Hospitality £13,891 4% 16% 28% 52% 100%
Audit Fee
General Office
Utilities
Insurance
Hospitality

50
Case Studies

51
Canadian Iron Ore Miner

Background
 Asset rich TSX Venture
Exchange listed iron ore
junior

 Seeking financing to
develop mine

 Senior commercial team in

place, limited number of
day to day personnel

Value Delivered
 An operational model that
allows the assessment of
multiple mining
configurations

 A clear, concise and dynamic

dashboard for executive
use

 Commercial analytical
outputs

 Ability to see bankability of

project, and toggle
between multiple
financing proposals

52
Listed US Miner
Silver Ounces (000s) Produced, Sold and Price Gold Ounces (000s) Produced, Sold and Price

Background 2500 35 35 1800

33
30 1700
 Current management 2000 31

reporting outdated,
1600
29 25

Silver Ounces (000s)

Gold OUnces (0000s)

insufficient and laborious 1500 27
20
1500

Price

Price
25
1400
 Multiple mines, some single 1000 23 15

commodity, some multiple 21

1300

10
1200

Value Delivered
500 19

17 5 1100

 New management reporting 0 15

0 1000

models: Palmarejo Production San Bartolome Production Palmarejo Production Kensington Production
Rochester Production Palmarejo Sales
Rochester Production Palmarejo Sales
San Bartolome Sales Rochester Sales
 Weekly: 6 month Average Market Price Average Realized Price
Kensington Sales
Average Realized Price
Rochester Sales
Average Market Price

operational forecast Summary Consolidated Financial Data (in 000s) Subsidiary EBITDA and Budget

 Monthly: 15 month Actual

YTD
Budget Variance
Forecast
Forecast Budget Variance
40

financial forecast Net Metal Sales

Direct Production Costs
$501,867 $524,221 ($22,353) $698,029 $720,382 ($22,353)
35

Mining Costs $112,139 $109,902 $2,238 $148,827 $146,589 $2,238

 Quick to update Milling Costs
Other Costs
$102,966
$12,846
$116,823 ($13,857)
($11,661) $24,506
$140,853
$12,484
$154,710 ($13,857)
($12,022) $24,506
30

Exploration $14,537 $19,575 ($5,038) $19,140 $24,178 ($5,038) 25

 Easy to digest G&A

EBITDA
$159,196
$100,183
$125,645 $33,551
$163,936 ($63,753)
$197,212
$179,513
$163,662 $33,551
$243,266 ($63,753) 20
Capital Expenditures $63,264 $98,889 ($35,625) $79,966 $115,591 ($35,625)
 Revision of reporting Lost Time and Total Recordable Injury Frequency
15

metrics 3.0
10

5
2.5
 Consolidated view vs single 2.0 0
mine drill down 1.5
Consolidated TRI 12 Month
Rolling Average
Consolidated LTI 12 Month -5
1.0 Rolling Average

0.5

0.0 Palmarejo Kensington Rochester San Bartolome Budget

Oct 12Nov 12
D ec 12Jan 13Feb 13Mar 13Apr 13May 13J un 13Jul 13Aug 13
S ep 13

53
Central Asian Government
Background
 Restructuring of a
Central Asian
government’s
shareholding in one of
Canada’s largest mining
companies
Value Delivered
 Model supported
valuations and corporate
finance advisory work
 Tested initial target project
model to expedite build
process by leveraging asset
model
 Functionality included
operational sensitivities
and transactional
functionality to evaluate
shareholding restructuring
alternatives
Valuation of target projects
and assets to estimate fair
exchange ratio
Estimating exchange ratio and
transaction effect for both
parties with consideration given
to management fees, fixed
payments and other factors
Valuations
FD&A Canada
Built a model with functionality to
output exchange ratios under
multiple scenarios without need to
change set of inputs and assumptions for
each scenario
Built a model with functionality for
valuation of assets, flexibility to include
factors like payments to government,
equipment lease effect and other factors, as
well as charts to show the effect of
transaction for government officials
Corporate
Finance
Advising on:
 fairness of exchange ratio
and ownership restructure
terms; and
 negotiations process,
including on possible
alternative deal terms
54
Services Company

Background
 Services company required
a 3 way financial forecast
model for project planning
purposes.

Value Delivered

 Company able to assess

different scenarios,
operating costs timeline
and forecast cash flow for
10 years. Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast F
Financial Year Total FY13 FY13 FY13 FY13 FY14 FY14 FY14 FY14 FY14 FY14 FY14 FY14 FY14 FY14 FY14
Period From 1 Sep 13 1 Oct 13 1 Nov 13 1 Dec 13 1 Jan 14 1 Feb 14 1 Mar 14 1 Apr 14 1 May 14 1 Jun 14 1 Jul 14 1 Aug 14 1 Sep 14 1 Oct 14 1 Nov 14

 On the spot scenario Period To

ues in $ unless otherwise stated
30 Sep 13 31 Oct 13 30 Nov 13 31 Dec 13 31 Jan 14 28 Feb 14 31 Mar 14 30 Apr 14 31 May 14 30 Jun 14 31 Jul 14 31 Aug 14 30 Sep 14 31 Oct 14 30 Nov 14 3

analysis, with fully Income Statement

integrated financial
Total Services Revenue 29,776,380 - - - - 31,440 105,660 - 834,300 1,261,235 1,220,550 1,261,235 1,261,235 1,333,026 1,529,447 1,480,110 1,
Total Labour Revenues 441,671 - - - - - - - - - 15,989 16,522 16,522 19,591 25,110 24,300
Supply 1 Include 2,966,400 - - - - - - - - - 2,966,400 - - - - -

statements to support Total Revenues

Cost of Material Include

33,184,451

2,472,000
-

-
-

-
-

-
-

-
31,440

-
105,660

-
-

-
834,300

-
1,261,235

-
4,202,939

2,472,000
1,277,757

-
1,277,757

-
1,352,617

-
1,554,557

-
1,504,410

-
1,

analysis of different project Travel

Equipment Maintenance
Other Expenses
2,076,800
1,665,940
-
-
-
-
-
-
-
53,840
-
-
-
-
-
-
-
-
-
-
-
-
-
-
60,000
-
-
98,316
11,904
-
97,080
67,076
-
98,316
67,460
-
98,316
67,460
-
102,436
77,931
-
111,088
93,345
-
109,440
92,126
-

strategy options. Total Expenses

EBITDA
7,264,240

25,920,211
3,750

(3,750)
3,750

(3,750)
57,590

(57,590)
113,750

(113,750)
29,950

1,490
91,800

13,860
3,750

(3,750)
759,000

75,300
113,970

1,147,265
2,641,294

1,561,644
170,914

1,106,842
170,914

1,106,842
185,505

1,167,111
209,571

1,344,986
206,704

1,297,706 1,

Depreciation 1,089,591 - - - - - - - - - 67,345 66,463 65,597 64,746 63,912 63,093

 Financial analysis with Interest Expenses

Income (loss) before Taxes
36,551
24,794,068
-
(3,750)
0
(3,750)
12
(57,602)
25
(113,775)
207
1,283
524
13,336
533
(4,283)
486
74,814
9,173
1,138,092
9,233
1,485,066
9,512
1,030,867
4,931
1,036,314
1,914
1,100,451
-
1,281,074
-
1,234,613 1,

greater accuracy and better Income Tax

Net Income
2,997,267
21,796,801
-
(3,750)
-
(3,750)
-
(57,602)
-
(113,775)
154
1,129
1,600
11,735
-
(4,283)
8,978
65,836
136,571
1,001,521
178,208
1,306,858
123,704
907,163
124,358
911,957
132,054
968,396
153,729
1,127,345
148,154
1,086,460 1,

speed. Balance Sheet

Assets
Current Assets
Cash and cash equivalents - - - - - - - - - - - - 337,544 1,450,776 2,661,224 3,
Accounts Receivable - - - - 30,426 113,207 - 834,300 1,220,550 4,202,939 1,236,539 1,236,539 1,352,617 1,504,410 1,504,410 1,
Inventory - - - - - - - - - 968,056 911,111 854,167 797,222 740,278 683,333
Prepaid Expenses 75 75 1,152 2,275 599 1,836 75 15,180 2,279 52,826 3,418 3,418 3,710 4,191 4,134
Total Current Assets 75 75 1,152 2,275 31,025 115,043 75 849,480 1,222,829 5,223,820 2,151,068 2,094,124 2,491,093 3,699,656 4,853,102 6,

Fixed Assets - - - - - - - 2,950,000 2,950,000 2,882,655 2,816,192 2,750,595 2,685,848 2,621,937 2,558,844 2,

55
Diligence

Diversity of files • Transparent pricing

• Efficient
• Initial view as to
what may need
• Improve
completeness
• Check that the
updates made to
• Independent
confirmation that
the model’s

Value
streamlined set-up correcting in the and accuracy of the model were
Canadian Mining Company process model – can its calculations in made correctly –
calculations can be
relied upon
• Clear results be relied the model can its results be
 Diligenced a model for a understanding upon? relied upon?
• Up-skilling your
gold/silver/zinc mining team and IP
transfer (optional)
project investment

Leading Global Full Model Final

Resources Company Engage Comparison
Diligence Update Report
 Diligenced a model for a
potential potash investment.
Deliverables

Canadian Integrated Mining

Company

 Provided model diligence

services on a takeover of a
copper mining company for a
• Establish scope • Initial full check of • Client review PwC • Comparison check • Final sign-off
client. model; high level & issues raised of updated model
• Open budget report; scope of
process detailed ‘cell by • Provide comments • Using custom tool work performed
Canadian Mining Company cell’ check on issues set to identify
• Finalise & findings
Process

engagement • Utilising PwC • Client update changes efficiently

 Diligenced a PFS model for documents model review model • Report any
company’s gold/ silver/ zinc/ • Team briefing
methodology
• Revert updated outstanding issues
copper development property • Using custom model and issues • Iterate with prior
model review tool
in the Middle East. set to increase
to PwC stage until no
issues outstanding
efficiency
US Mining Company • Initial issues report

 Diligenced a buy-side model of

a non-core mine of a Canadian
miner looking to partially
dispose of its assets. 56
Key Takeaways

 We have dedicated specialists who are focused on helping your decision making

 We can deliver value over the full mining life cycle

 We have a range of financial modelling solutions for mining clients

 We use cutting-edge features in our models

 We have a proven track record with a broad range of mining clients

Contact:
Wayne Scali | +1 (416) 815-5115 | wayne.scali@ca.pwc.com
57
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