ing. isac burstein
TRANSCRIPT
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Otra forma de ver la geologia
Yacimientos y $$$$
Como hacemos como geologos paracapitalizar de la fiebre de commodities?
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2
Size Matters
Size is a useful but imperfect proxy for projecteconomics
For any NPV threshold there is usually a minimum sizethreshold below this size it is unlikely that a deposit
will achieve this threshold
14% of total number of deposits
32% of contained metal
67% of total NPV created
carry
and account for
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3
Environments Of AuFormation
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Deposit Economics Are DefinedBy Geological Environment
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Size Distribution Per DepositType
0% 20% 40% 60% 80% 100%
Porphiry Cu (Au)
Low Sulphidation
Intrusive Related
High Sulphidation
Sediment Hosted
Porphyry Au
IntermediateSulphidation
Under 1 M oz Au Eq
1 - 2 M oz Au Eq
2 - 3 M oz Au Eq
> 3 M oz Au Eq
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More on size
# Deposits >
10 M oz Au
Average Au
Content (M oz) of
Giant Deposits
Average Au
Content (All)
Orogenic 25 22 3Instrusive Related 13 33 3
Porphyry 27 27 9
High Sulphidation 9 28 4
LS Alkalic 3 37 19
LS Epithermal 7 13 2
Carlin 10 25 4
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A spectrum of entry points for
new opportunities
Exploration Zombie projects
Projects do notexist
Operatingbusinesses
Low entry cost High entry cost
Highrisk
lowrisk
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The Tax Myth Taxes in Latin
America are not lowTax Ranges
0%
10%
20%
30%
40%
50%
60%
Canada
USA
Argentina
Bolivia
Brazil
Chile
Colombia
Ecuador
DominicanRepublic
Guatemala
Guyana
Honduras
Mexico
Panama
Peru
Suriname
%Maximum
tax burden
Minimum
Ernst & Young Global Tax GuideRoyalties factored in assuming 100% margins
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Mineral Policy as perceived by
InvestorsMineral Policy Index
0%
10%20%
30%
40%
50%
60%
70%80%
90%
Canada
USA
Argentina
Bolivia
Brazil
Chile
Colombia
Ecuador
Dominican
Republic
Guatemala
Guyana
Honduras
Mexico
Panama
Peru
Suriname
%M
aximum
Points
Frasier Institute 2012
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Latin America How is the region evolving
compared to North America?15 years ago
Lower Capex andoperating costs
Lower taxes Shorter time to permit
mines & explorationprograms
Region was adopting
free market practiceslow risk of govermentinterference
Today Escalation of Capex and
Opex due to dollar
weakness Taxes are higher Permitting times
increasing dramatically Several countries have
adopted policies thatconstraint privateproperty of naturalresources
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So how competitive is the region
really? Not very competitive
Permitting becoming an issue
Taxes are not lower
Taking into account efficiencies andexchange rates costs are quickly rising
even though labor in theory is cheaper
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That explains where the
exploration dollars are going
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So far Peru has higher taxes than even canada
and the US
Peru has times to permit of projectsthat begin to approach North America
Social issues and local opposition to
mining scares investments
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Perus Production is dropping
01234567
8
M
ozAu
USA
Peru
Canada
Mexico
Brazil
Chile
Yearly Au Production
2,007
2,008
2,009
2,010
2,011
USGS country data 2012
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Peru has a low resource / reservebase
Known ounces in all projects
0
100
200
300
400
500
600
700
USA
Peru
Ca
nada
Mexico
B
razil
Chile
M
ozAu
Resources
Reserves
Data extracted from Intierra
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Peru has aging mines
Gold contained in producing
assets
0
50
100
150
200
250
USA
Peru
C
anada
M
exico
Brazil
Chile
M
ozAu
Resource tail
Reserves
Data extracted from Intierra
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With a poor pipeline of newresource projects
Gold ounces in non producing
assets
0
100200
300
400
500600
USA
Peru
C
anada
M
exico
Brazil
Chile
M
ozAu
Resource tail
Reserves
Data extracted from Intierra
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Limited number of early stageprojects
Number of active projects per
country
0
1
2
3
4
5
67
USA
Peru
C
anada
M
exico
Brazil
Chile
Thousa
ndsofprojects
Early Stage Projects
Resource Projects
Data extracted from Intierra
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Unless the situation isreversed
Gold production and hence taxes willdrop steadily in the next decade
We have not analyzed other metals butthe situation may well be similar
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What is causing the drop indiscovery in Peru?
The easier to discover projects have beenfound
Increasing delays in permitting explorationprograms due to increased regulation andsocial unrest
Uncertainty over permitting of new minessomewhat mitigated but unless exploration
jumpstarts at a faster pace the situation willbe hard to revert Due to regulation and social unrest an
increasing % of exploration dollars does notgo to the ground hence exacerbating theissue
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Other jurisdictions attract morecompanies
Active companies per country
0
500
1000
1500
2000
2500
USA
Peru
C
anada
M
exico
Brazil
Chile
#companies
Data extracted from Intierra
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Lower Metal Production but
Market Capitalization versus
Metal Production
050
100
150200250300350
Peru
C
anada
BillionUSD$
Value of metals
Market capitalization
Data extracted from Intierra
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The difference
The capital markets related to metalmining in Canada probably represent a
tax revenue even greater than miningitself
A lot of good paying white collar jobs
are created into the mining relatedfinance sector
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What has Canada done toachieve this?
Well regulated yet open capital markets
A private equity culture used to invest in riskyventures
A pool of enetepreneurial minded geologists involvedin forming juniors
Flow through financing: The exemption of taxes offunds that are invested in Juniors for exploration in
Canada Provincial funding of exploration projects (1 dollar for
every dollar invested in Quebec for example)
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Can Peru become the Canadaof Latin America?
YES, but Need to deregulate exploration and speed up permits Need to provide tax incentives to local private equity funds and
individuals to fund risky investments in exploration
Provide a mechanism similar to flow through financing tocompanies primaryly listed in the Lima exchange Allow AFPs to invest in risky ventures locally on companies
primarily listed in the Lima exchange MILA is an important key to provide investors in Chile and
Colombia an oportunity to invest in mining Improve the level of Peruvian geologists via better funding to
geology programs in state universities Foster a culture of risk taking and angel financing to allow for the
creation of local exploration companies that eventually will alsoexplore outside Peru creating more wealth for Peruvian investors