IFC Africa Mining Division

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IFC Africa Mining Division

• A Partnership For Finance Local Economic
  Development

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IFC is a Member of the World Bank Group
Overview of IFC
MIGA Multilateral Investment and Guarantee Agency
IBRD International Bank for Reconstruction and
Development
IDA International Development Association
IFC International Finance Corporation
Est. 1945
Est. 1960
Est. 1956
Est. 1988
Role
To promote institutional, legal and regulatory
reform Governments of poorest countries with per
capita income of less than 1,025 - Technical
assistance - Interest Free Loans - Policy Advice
To promote private sector development Private
companies in member countries -
Equity/Quasi-Equity - Long-term Loans - Risk
Management - Advisory Services
To reduce political investment risk Foreign
investors in member countries - Political Risk
Insurance
To promote institutional, legal and regulatory
reform Governments of member countries with per
capita income between 1,025 and 6,055. -
Technical assistance - Loans - Policy Advice
Clients
Products
Shared Mission To Promote Economic Development
and Reduce Poverty
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IFC has a comprehensive set of products and
services
IFC Products Services
Senior Debt
Structured Finance
Mezzanine Finance
Private Equity

• Partial credit guarantees
• Securitization
• Bond underwriting
• Credit Enhancement

• Convertible debt
• Subordinated debt
• Other Tier II instruments

• On-lending
• Liquidity management
• Acquisition financing
• Warehousing facilities
• Syndicated loans

• Common shares
• Preferred shares

Global Trade Finance Program
Advisory Services
Sustainable Finance

• 1 billion program
• Guarantees to issuing banks
• 46 issuing banks in 24 countries
• 92 confirming banks in 62 countries
• 579 million of issued guarantees in first 12
  months

• Corporate governance
• Risk management
• Small and medium business banking
• Energy efficiency finance
• Local supplier development
• Community development

• Carbon finance
• Renewable energy
• Supply chain financing
• Corporate governance financing

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IFC over 73 billion Invested in Emerging
Markets since 1956
IFC Investment Activity

• Largest multilateral source of loan/equity
  financing for the emerging markets private sector
• Founded in 1956 with 179 member countries
• AAA rated by SP and Moodys
• Equity, quasi-equity, loans, risk management and
  local currency products
• Takes market risk with no sovereign guarantees
• Promoter of environmental, social, and corporate
  governance standards
• Resources and know-how of a global development
  bank flexibility of a merchant bank
• Holds equity in over 800 companies worldwide

IFC FY07 Highlights
Portfolio 25.4 billion Committed 10
billion Syndicated 1.8 billion of
companies 1,400 of countries 69
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World Bank / IFC Global Mining Group
The IBRD (World Bank) and IFC Work Togetherto
Promote Sustainable Mining in Developing Countries
Global Mining Group

• World Bank Mining Policy Division
• Works with Governments to facilitate -
• Investor-friendly policies
• Reform and modernization of Mining Sector
• Privatization of State-owned Assets
• Community Relations Equitable Rent Sharing

• IFC Mining Investment Division
• Works with Private Companies to ensure-
• Sound Economic fundamentals
• Sufficient Financial Strength
• Environmental Rigor
• Sensitivity to the Community

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IFC has a strong mining portfolio in Africa
IFCs Current Mining Portfolio (as at 31 March
2008)

• US592 million for IFCs account
• US50 million held by participants

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IFCs Mining Team
IFCs Package Deal Cost Synergies for Clients
We combine world-class talent, a global outlook
and a social/environmental mandate to deliver
sustainable business solutions

• Our team consists of
• Financial professionals
• Mining engineers
• Environmental specialists
• Development experts
• Communications specialists

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IFC Value Proposition Funding
Financial Products - From Equity to Debt

• Corporate/UJV
• Typically 5-15 shareholding
• Long-term investor, typically 6-8 year holding
  period
• Not just financial investor, adding to
  shareholder value
• Usually no seat on board

Equity

• Subordinated loans
• Income participating loans
• Convertibles
• Other hybrid instruments

Mezzanine / Quasi Equity

• Senior Debt (reserve, base lending. corporate
  finance, project finance)
• Fixed/floating rates, US, Euro and local
  currencies available
• Commercial rates, repayment tailored to
  project/company needs
• Long maturities 7-12 years, appropriate grace
  periods
• Range of security packages suited to
  project/country
• Mobilization of funds from other lenders and
  investors, through
• financings, syndications, underwritings and
  guarantees

Senior Debt Equivalents
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IFC financing is complemented by the design and
implementation of advisory services to enhance
local economic and social benefits
IFC Value Proposition Advisory Services
Advisory Services
Benefits

• Community Development
• Supply-Chain Development
• Gender
• HIV/AIDS

Effective stakeholder dialogue and engagement
leading to sustainable economic
initiatives Lower cost and higher quality local
suppliers and related economic development Increa
sed female participation rates across operations
and stakeholder groups An effective HIV/Aids
prevention program and treatment
IFC would co-fund the costs of programs aimed at
enhancing the development impact of the project
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IFC is a leader in enhancing the development
impact of investment projects on local communities
IFC Value Proposition Advisory Services
Community Development

• Building stakeholder capacity
• What? Assist local authorities communities
  contribute to / benefit from project
• Why? Partnerships and local involvement a key
  success factor / risk mitigant
• If not? Company usually expected to do
  everything, be responsible for all
• How? Provide awareness-building, training
  support for stakeholders
• Examples
• Setting community development priorities, Lonmin,
  SA, Magadi Soda, Kenya
• Capacity building for civil society Gvt,
  Lonmin, SA, Sual, Russian Federation
• Capacity building for local NGO monitoring of BTC
  Capacity building workshops for local government
  community, Kolwezi Tailings Project, DRC
• Assisting communities to prepare for revenue
  inflows, Lonmin, SA, Yanacocha, Peru

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Through supplier/supply-chain development, IFC
helps to build commercially viable and
sustainable local supplier relations
IFC Value Proposition Advisory Services Supply
Chain Development
Identify opportunities for lower-cost local
sourcing

• GOAL
• maximize the opportunities for local SMEs
• improving company bottom line

Enhance business performance of the local
suppliers
Maximise development impact of the local supplier
structure
Provide access to finance solutions along with
supplier development
Extend local supplier network throughout the
wider area of operation
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IFC can help to address gender issues in mining
by
IFC Value Proposition Advisory Services Gender
Mainstreaming

• Assessing how community and environmental
  consultations are gender balanced so that they do
  not lead to greater impoverishment
• Designing and implementing gender-sensitive
  initiatives for recruitment and training of women
  
• Including women-owned/managed businesses in SME
  linkage and community enterprise development
  programmes
• Resulting in more balanced incomes and healthier
  and more sustainable community development

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IFC can help to better manage the reputational
and business risk of HIV/AIDS
IFC Value Proposition Advisory Services HIV /
AIDS Risk Management
1. Guidance Assist to establish tailored
corporate and community HIV/AIDS programs 2.
Training Provide training programs tailored for
employees, SMEs, and other stakeholders 3.
Development and research Support to low
prevalence regions and special projects
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IFC can also help manage environmental risks
IFC Value Proposition Environmental Support

• Conduct due diligence based on IFC Performance
  Standards (Equator Principles)
• Assist Project to quickly address any gaps in
  existing ESIA process
• Provide access to experienced in-house and
  internationally experienced specialists to deal
  with complex issues
• Focus on enhancing positive outcomes support
  design implementation of stakeholder engagement

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IFCs Performance Standards on Social and
Environmental Sustainability International
Stamp of Approval
IFC Value Proposition Environmental Support

• Equator Principles adopted by 50 of the
  worlds leadinginvestment banks and based on
  IFCs Performance Standards
• Apply to 85 of project financing worldwide

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As part of the World Bank Group, IFC can provide
revenue-management support
IFC Value Proposition Revenue Management
Governance

• Focus
• Splitting taxes/royalties between central and
  local governments
• Building Governments capacity to deliver
• Ensuring tangible benefits to local communities
• Promoting equity and transparency
• Approach
• Provide local government capacity building
• Ensure revenue is used for local development
• Promote public disclosure of revenues

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IFCs Project Cycle
Several of these steps run in parallel
Internal Approvals and Commitment
Early Review
Due Diligence
Negotiation
Disclosure
Disbursement

• Client needs determined
• Contribution of project to development assessed
• Project screened for potential problems
• Site visit
• Mandate letter

• Assessment of business potential, risks,
  opportunities
• Evaluation of financial and economic soundness
• Compliance with IFCs social and environmental
  performance standards reviewed

• Conditions of disbursement and covenants,
  performance and monitoring requirements, and
  action plan agreed

• Loan disbursed on agreed schedule, according to
  negotiated terms and conditions

• Environmental and social information disclosed
• Opportunity for public comment

• Board consideration
• Board approval
• Legal review
• Signing of legal documents

We Agree on a Specific Timeline to Meet Clients
Needs
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Equity Investment Approaching IFC
IFCs Indicative Timeline (Equity Investment)

• Start by submitting brief project description,
  incl. technical feasibility, information on
  company, and environmental studies

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We Agree on a Specific Timeline to Meet Clients
Needs
Practical Example (IFC Equity Investment)

• Kalahari Diamonds IFC equity investment in
  Botswana aerial surveying diamond exploration
  project.

Completed in 5 Months
Nov 2002
Dec02 Feb 03
March 2003
March 2003
Current
Disbursement
Mandate Letter Appraisal Financing
Negotiations Internal Approval
Supervision
Equity Commitment
Initial Discussion
Time line depends on companys support in
providing information
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IFC Africa Mining Team
IFC Mining Contacts
William Bulmer
Stephan Vermaak
Global Sector Head Washington DC
Africa Sector Lead Johannesburg
1 202 473 8750 wbulmer_at_ifc.org
27 11 731 3148 svermaak_at_ifc.org
2121 Pennsylvania Avenue, N.W. Washington, D.C.
20433 U.S.A.
14 Fricker Road (Illovo Boulevard) Illovo,
Johannesburg, 2196 South Africa.
1 [phone] xxxxxxx_at_ifc.org