REVIEW OF THE NEW ZEALAND MINING SECTOR 2017/18 · GOLD PRODUCTION RISES. Source: NZP&M 2017 Gold production 331,000 oz. Led by Macraes, with smaller increases at Waihi and across

AusIMM New Zealand Branch ConferenceTauranga

September 2018

Tony Haworth, Director, Campbell MacPherson LimitedRichard Barker, Consulting Geologist

REVIEW OF THE NEW ZEALAND MINING SECTOR 2017/18

DISCLAIMER

The information contained in this presentation is provided by the authors for informational purposes only. The informationcontained herein is not investment or financial product advice and has been prepared without taking into account theinvestment objectives, financial situation or particular needs of any particular person.

The views, opinions provided in this presentation reflect those of the individual presenters only and do not necessarily reflectthe views of any organisation with which the presenters have a business relationship.

No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of theinformation, opinions and conclusion contained in this presentation.

To the maximum extent permitted by law, none of the authors accepts any liability, including, without limitation, any liabilityarising out of fault or negligence, for any loss arising from the use of the information contained in this presentation.

SOME HEADLINES….

KEY TOPICS

1. GLOBAL MINING TRENDS

2. NEW ZEALAND MINING SECTOR

3. MINING TO DRIVE PRODUCTIVITY

4. MINERALS FOR THE NEW ECONOMY

GLOBAL MINING TRENDS

MINING SECTOR REBOUND CONTINUES

Indices in current USD, 1 January 2012 = 100

Source: World Bank, IHS Markit

Commodity prices and mining company share prices continue to rebound.

Metals and Minerals Price index up 57% since Jan-16.

Global Mining Shares Index up 122% since Jan-16.

Global Mining Equities and Commodity Prices

20

30

40

50

60

70

80

90

100

110

Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18

World Bank Metals & Minerals IndexEMIX Global Mining Index (Equities)

EXPLORATION ACTIVITY IS SOLID

Source: S & P Global Market Intelligence

Upward trend in Pipeline Activity Index continues.

Some softening from Dec-17 quarter highs.

JUNIORS ACCESS TO FUNDING IMPROVES

Source: S & P Global Market Intelligence

Junior financings up 46% by value over the last 2 quarters.

Overall funds raised across the sector declined 60% over the same period.

NEW ZEALAND MINING SECTOR

EXPLORATION SPENDING REMAINS LOW

Source: NZP&M, S&P Global

Total spending on Prospecting and Exploration permits dropped to below $15M.

Global spending also low at US$8B but beginning to recover?

Near-mine exploration expenditure up 16%.

New Zealand Exploration Spending 2004 - 2017

$0

$5

$10

$15

$20

$25

$0

$10

$20

$30

$40

$50

Glob

al ex

plora

tion s

pend

ing (U

S$B)

NZ ex

plora

tion s

pend

ing (N

Z$M)

Exploration Permit Expenditure Prospecting Permit ExpenditureGlobal exploration spending (US$B)

$0

$5

$10

$15

$20

$25

$0

$10

$20

$30

$40

$50

Glob

al ex

plora

tion s

pend

ing (U

S$B)

NZ ex

plora

tion s

pend

ing (N

Z$M)

Exploration Permit Expenditure Prospecting Permit ExpenditureNear-mine expenditure Global exploration spending (US$B)

GOLD PRODUCTION RISES

Source: NZP&M

2017 Gold production 331,000 oz.

Led by Macraes, with smaller increases at Waihi and across the Alluvial gold sector.

Average gold price received increased 4% to NZ$1753/oz

New Zealand Gold Production 2004 - 2017

$0

$500

$1,000

$1,500

$2,000

$2,500

0

100

200

300

400

500

2004 2006 2008 2010 2012 2014 2016

Gold

price

rece

ived (

NZ$/o

z)

Gold

(thou

sand

s oz)

Macraes WaihiOther Hard Rock AlluvialAverage annual gold price received

BUT DON’T ASK ME TO FORECAST GOLD PRICE!

Source: ANZ Bank

Gold is a correlation conundrum.

Huge swings though positive, zero and negative correlation with

USD Bonds

Crude Oil

and the US Stock Market!Gold’s correlation with other Asset Classes

2018 YTD

AGGREGATE PRODUCTION ALSO RISES

Source: NZP&M

Aggregate Production increased to circa 30Mt in 2017.

Broadly tracks Real GDP growth

Real GDP is forecast to remain steady over the next 2 years.

New Zealand Aggregate Production 2004 - 2017

-2%

0%

2%

4%

6%

-10

0

10

20

30

40

2004 2006 2008 2010 2012 2014 2016 2018F

GDP

annu

al %

chan

ge

Aggr

egate

Pro

ducti

on (M

t)

Rock, sand and gravel for roading Rock, sand and gravel for buildingRock for reclamation & protection Sand for industryReal GDP y/y% change

COAL PRODUCTION - WHERE TO NEXT?New Zealand Coal Production. Exports & imports by

Volume. 2004 - 2017

0.0

1.5

3.0

4.5

6.0

2004 2006 2008 2010 2012 2014 2016

Coal

(milli

on to

nnes

)

Coal Exports Coal Domestic Coal Imports

Volatile benchmark HCC spot prices and NZ regulatory risk will be a focus for NZ coal market players.

Source: MBIE

Overview of Spot Coking Coal Prices

NZ Coal production shows signs of bottoming out.

2017 Total production 2.92Mt.

Domestic production up 2%.

Source: NAB Economics

MINING TO DRIVE PRODUCTIVITY

NZ LABOUR PRODUCTIVITY IS POOR

1. Population-weighted average for the top 17 OECD countries for labour productivity, calculated using 2010 purchasing power parity exchange rates.Source: OECD (2017), Productivity database; OECD (2017), Economic Policy Reforms: Going for Growth 2017.

Many reasons offered:

High interest rates

Weak capital investment

Low R&D rates

High labour growth rates

Etc – take your pick!

BUT LOOK AT THE MINING SECTOR

Productivity and Annual Income Graphs for Mining includes oil and gas.Sources: Straterra Minerals Briefing Paper 2014, Infometrics, 2017, Statistics NZ.

Highest Labour Productivity in NZ.

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

Lab

our P

rod

uctiv

ity $

/fille

d jo

b

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

$80,000

$90,000

$100,000

Ann

ual E

arn

ings

per

Em

plo

yee

Exploration & Development is 100% R&D !

Highest Earnings per Employee in NZ.

Regional Economic Driver.

Tiny Land Area.

MINERALS FOR THE NEW ECONOMY

A GLOBAL SHIFT IN RISK FOCUS

Source: Ernst & Young

New focus on technology gains and risks.

Minerals for the “new economy”

Sourcing competitive advantage.

Mitigating regulatory risk.

Global Mining Sector - Top 10 Business Risks, 2017/18

Source: http://metals.visualcapitalist.com/the-raw-materials-that-fuel-the-green-revolution/

GREEN ENERGY – NEEDS MINERALS!

“a transition to a low carbon society, [is] a change that will require vast amounts of metals and minerals” Ali et al, 2017, Nature

MINERAL DEMAND IN A LOW CARBON FUTURE

Source: The Growing Role of Minerals & Metals for a Low Carbon Future, World Bank 2017

According to the World Bank, metals which could see a growing global market include…

manganese

aluminium

Iron ore steel

leadlithium

nickel cobalt

zincREE’s

silver copper

PGM’stitanium

Lithium

Nickel

Cobalt

REE’s

manganese

Iron sand Steel

lead zinc

Silver

copper

PGM’stitanium

Aluminium*

NZ MINERAL OPPORTUNITIES IN LOW CARBON FUTURE

“There is sky-rocketing demand around the world for minerals which are used in clean-tech and which can aid our transition to a low carbon economy. That demand represents a real economic opportunity for New Zealand.” Hon Dr Megan Woods, Energy and Resource Minister

Source: Public Announcements, NZP&M, Author Estimates

Total current export revenues

$0 million

Combined $433m

$1100m

Coking Coal

$0m

$0m

$0m

$0m

Total current export revenues

over $1.7 billion

* Manufactured in NZ from imported Alumina

$6m

>$200m

$50+ BILLION OF MINERAL POTENTIAL AT RISK

1. Barker, 2006

2. Walton et al., 2002

0%

20%

40%

60%

80%

100%

% of NZ’s land area % of NZ’s assessed mineral potential by value

DoC administered land

Private, Maori, Crown leasehold

Excluded (lakes, urban)

NZ’s potential metallic mineral resources are estimated to be worth more than $NZ140 billion1.

Over 70% of these potential resources are located within DOC Land2.

More than a third already effectively sterilised.

Ban on new mining on DOC land would sterilise another third.

Wishing you a productive conference!