China and Australias Virtuous Circle of Economic Growth and Mutual - - PowerPoint PPT Presentation

Owen Hegarty

Vice Chairman G-Resources Group HKEX 1051 Vice Chairman CST Mining Group HKEX 985 Chairman Tigers Realm Minerals Ltd. Non Executive Director FMG Director AUSIMM

Australian Resources Chinese Investment Congress Adelaide, July 2011

China and Australia’s Virtuous Circle of Economic Growth and Mutual Prosperity

Page 1

Introduction

Multi – Decade Minerals Demand Growth Focus on China Virtuous Circle of Growth & Prosperity Thank You Mine Supply Under Pressure Growing the China – Australia Relationship

Page 2

Multi-Decade Minerals Demand Growth

China’s GQ – Growth Quintella

► Accelerating consumption from growing middle class ► A metal intensive stage of economic development ► Largest urban migration in world history ► Massive infrastructure development ► Social imperative ► World to continue in a long period of economic expansion ► China still the main game ► Traditional markets of US, Japan, Europe still important ► But emerging markets are the future ► BRICs → MIST → N11 → CIVETS

Source: CEC, MOR, NDRC, JP Morgan

Large-scale infrastructure plans of China

Page 3

China Focus

• China’s GDP will double within 5 years,

and quadruple with in 10 years

• The west and central region’s growth will

replicate the growth of the east China GDP by Provinces in 2020

Source: HSBC, KPMG Source: CIA World Fact Book, KPMG

• Substantial new infrastructure investments
• Higher living standards and the focus on higher

value-added industry will support the outlook for commodities

Page 4

China Focus

• Accelerating household income growth
• Less need for money set side for rainy days
• Greater disposable / investable income
• Gold is a good example of alternative investment with

demand growing dramatically

• Demand for securities investments is growing
• All points to demand for resource stocks by China

Source: GFMS, LBMA, WGC, J.P. Morgan

Source: J.P. Morgan

The Consumption Jigsaw in China Chinese Gold Demand (Tons)

Source: Bloomberg, J.P. Morgan

Outward investment in energy and raw materials deals (USD billion)

Page 5

China’s 12th Five Year Plan

• The focus of the plan is to ensure long-term prosperity, sustainable growth and social

harmony

Main themes in the plan

• Driving up domestic demand
• Enhancing basic position of

agriculture, improving core competitiveness of manufacturing industry, developing new strategic industries and speeding up development of service sector

• Promoting urbanization
• Energy efficiency
• Reducing income disparity, more

equitable wealth distribution

Guidelines of Government support on ODI New policy to encourage ODI

• Better coordination for investment
• Strengthening macro for

implementing “Going Out” strategy

• Improved regulations on overseas

investment activities

• Establishing systems to promote
• verseas investment
• Simplifying overseas investment

procedures

• Loosening limits on overseas

investments from NDRC

• No approval required for

 Resource-related overseas investments ≦ $300 million  Non resource-related

• verseas investments≦$100

million

• Easing RMB settlement (PBOC)
• Use CNY in overseas

investment

Page 6

Minerals Supply – Under Pressure

• Supply will be running to catch up
• FMG - a great example
• More of them required
• Exploration needs to be encouraged
• Asia is uniquely positioned
• Geopolitically
• Technically
• Financially
• Some structural challenges
• Physical infrastructure
• Regulatory infrastructure
• Sovereign risk issues
• Some current supply uncertainties

Page 7

Supply Opportunities – Australia and Asia

Recent examples of discoveries in Australia and Asia

• Solomon Hub, FMG – WA, Australia (Iron ore)
• Marillana, Brockman Resources – WA, Australia (Iron
• re)
• Calavingina & Wealthunduthaluna, Rio Tinto – WA,

Australia (Iron ore)

• Beutong, TRM – Aceh, Indonesia (Cu-Au)
• Tujuh Bukit, Intrepid Mines – Java, Indonesia (Cu-Au)
• Hillside, Rex Minerals – SA, Australia (Au-Cu)
• DeGrussa, Sandfire Resources – WA, Australia (Cu-

Au)

• Middlemount coal project, Macarthur Coal and

Gloucester Coal – QLD, Australia

• The Alpha coal project, Hancock Coal – QLD,

Australia

• Oaklands, Coalworks – NSW, Australia
• South Galilee coal project, Bandanna Energy – QLD,

Australia

• East Kutai coal project, Churchill Mining - Indonesia
• Tuhup project, PT Borneo Lumbung –

Kalimantan, Indonesia

Global discovery rates are declining, but the opportunities are in Australia and Asia

Page 8

Expanding the Relationship

Country Trade with China as % of GDP

Source: KPMG

• Australia has the 3rd

highest trade with China

• Potential for significant

growth in investment and trade across different sectors

• Chinese investment

in Australia is just beginning

• Potential for

investment growth is significant Foreign Investment in Australia

2010 1992

Source: KPMG 99.1 63.1 45.0 33.6 17.5 16.4 15.8 12.9 12.6 10.9 9.2 5.5 86.6 55.8 23.8 24.6 16.6 10.6 5.6 np 11.7 7.7 0.6 4.8

10 20 30 40 50 60 70 80 90 100

US UK Japan Netherlands Switzerland Germany Singapore BVI France Canada PRC China Hong Kong

2009 2006 AUD bn

Page 9

China and Australia’s Virtuous Circle

• f Growth and Prosperity

Adelaide

Page 10

Supply Side Industry Zealot

Thank You