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The New Iron Age of the Next Decade - Presentation by Sandy C.K. Chim, President and Chief Executive Officer, Century Iron Mines Corporation at the Global Mining Summit March 17-18 in Las Vegas, NV
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11The Next Decade: A New Iron Age
Sandy ChimPresident & CEO, Century Iron Mines 11A New Iron Age
A New Economic ParadigmRed Rock Resort & Spa, Las Vegas, NVMarch 17, 2014
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Macau Is 'Vegas On Steroids'. . [Macau of China] reported gambling revenue of . . $45 billion for 2013, an increase of almost 20% over the previous year . .
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archMacau Is Vegas On Steroids
Las Vegas will always be Las Vegas. There’s no place in the world like it. f l h l h bl d h f
f % p y
. . Las Vegas . . to make $6.5 billion, or 15% of Macau's total
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Las VeBut for people who love the bling and the sin of a casino city, Vegas is a
has‐been. On a truly global stage, the casino money is flowing to one place and that’s Macau in China. Billions in fact. Macau is now officially Las Vegas on steroids.Las Vegas on steroids.China’s weaker than expected economy has kept away some of the mainland’s high rollers who tend to blow six figures a pop during a night out on the island. But overall economic weakness has failed to slow tourist traffic to Macau. The island is part of China’s overall southern rim tourist hub, from Hong Kong Disney Land to tropical Hainan Island. And Macau is weathering the slowdown as well as analysts expected Market consensus was for July revenue growth to come in
22
expected. Market consensus was for July revenue growth to come in between 18% and 21%.Macau might just be getting started.8/01/2013 @ 9:40PM 228/01/2013 @ 9:40PMKenneth Rapoza, Forbes
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China emerges as a major economy, creating a new IronAge of steel consumptionand kicking
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archnew Iron Age of steel consumption and kicking
off the Super Cycle . . .720Mt100 years GG
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102MtWorld(without
720Mt(2013:803Mt)
7328Mt
100 years
1927 1996 20122000Baby
(China)
World
73 years
1978Western d i li i
1900
28Mt
World World W II1927
Boom
Chi
War II
16 years
Industrialization1900
~30Mt
War I War II Chinese Industrialization
33
Economic Reform in Chinabegan
101Mt709Mt(2013:779Mt)
China
I Milli T (Mt)
30Mt
33g
Source: World Steel Association, CRU, CISA, Century
Century Iron Mines Corporation
779Mt)In Million Tonnes (Mt) per year
34 years
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How did it all happen?Rapid industrialization and urbanization
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archRapid industrialization and urbanization
600$7,000
China's GDP
kg China’s industrialization and urbanization took GG
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400
500
$5,000
$6,000China s GDP (US$)/Capita (LHS)
China'S Steel Consumption (kg)/capita (RHS)
place in less than a generation with a very large population; the equivalent development
300
$3,000
$4,000
(kg)/capita (RHS) q pin the advanced economies took a couple of centuries
Rising per‐capita income
100
200
$1,000
$2,000
Rising per capita income of a very large population is driving large‐scale steel demand
China was a poor country
44
0$0
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
China was a poor country with poor people; now collectively rich, but people are still poor
44Source: World Steel Association, World Bank
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Rapid Urbanization in China
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100%
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70%
80%
90%
Rural
50%
60%
70%
20%
30%
40%
Urban
551982 1990 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20120%
10%
20%
55Rural 79.1% 73.6% 63.8% 62.3% 60.9% 59.5% 58.2% 57.0% 56.1% 55.1% 54.3% 53.4% 50.3% 48.7% 47.4%
Urban 20.9% 26.4% 36.2% 37.7% 39.1% 40.5% 41.8% 43.0% 43.9% 44.9% 45.7% 46.6% 49.7% 51.3% 52.6%
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US data suggest peak per‐capita consumption comes at 65 70%urbanization
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archconsumption comes at 65‐70% urbanization
where China aims to achieveSouth Korea
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700
800Per capita consumption kg/head
today is at ~1,400kg/head
400
500
600China’s urbanization is at ~50%
100
200
300
66
0
100
30% 40% 50% 60% 70% 80% 90%Urbanization 66Urbanization
Data: CRU
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Even at 709Mtpa (2012, 2013:779Mt) , China’s per‐capita steel consumption still lags behind its smaller neighbor, South Korea
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arch. . . Inevitably, as it catches up with South Korea, China will need
more steel! Other BRIC countries are coming too!1,600$25,000 GDP/Capita ( US dollar) Kg crude steel /capita GG
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1,200
1,400
,
$20,000
, GDP/Capita ( US dollar) Kg crude steel /capita
When Chinese per‐capita income and steel consumption catch up with Korea’s, it will need more than its
800
1,000$15,000
,current production of 700Mtpa—but will still remain an emerging economy
400
600
$5 000
$10,000
770
200
$0
$5,000
2012 2012 2012 2012 2012 Kg/capita 772012 2012 2012 2012 2012
S Korea Russia Brazil China India
US$/capitag/ p
Source: WSA, CRU, World Bank
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China has a long way to catch up with advanced economies in termsof auto ownership in the country . .
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economies in terms of auto ownership in the country . .“Car sales surged in the U.S. last year (2013), as the automotive industry came roaring back from the dark days of the recession. But the 15.6 million vehicles sold in America last year still lags behind China which in 2013 reportedly GG
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Motor Vehicles Ownership per 1,000 People from 2004 to 2010
sold in America last year still lags behind China, which in 2013 reportedly became the first country to sell more than 20 million.”
CBS Money Watch, Jan 31, 2014
800900
Motor Vehicles Ownership per 1,000 People from 2004 to 2010
China Japan Korea, Rep. United StatesSource: World Bank
500600700
88100200300400
880
100
2004 2005 2006 2007 2008 2009 2010
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The Next Decade: world production will exceed 2Btpa almost 50%of it in China
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2500 ROW China IndiaMtpa
exceed 2Btpa, almost 50% of it in China
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21652 129 2000
558 2017
290
527
925 48 77 1500
685 1,512
110 182
527 709
29 1000
904
99
693 726 1,016
0
500
9902002 2002‐2012 Growth 2012 2012‐2022 Growth
(CRU)2022 (CRU)
Source: World Steel Association, CRU, Century
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China’s Growing Reliance on ImportsBuying70%of seaborne ironore, reaching1+Btpaby2017 ..
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I O S t P i Chi d ti & i t d i
Buying 70% of seaborne iron ore, reaching 1+Btpa by 2017 ..
Huge opportunities for mining & resource companies & their host countries
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281
308160
180
200
1000
1200USD
Iron Ore Spot Price vs Chinese domestic & imported iron ore demand 2000 – 2013
356400 321
231344
322
100
120
140
600
800
Chinese domestic iron ore production adjusted to 63% Fe (in Mt)
Imported iron ore (in Mt)
628 619 686 744 820
208216
285
356
60
80
100
400
600
101070 92 112 148 208
275 326 383 444 154 156 177
208
0
20
40
0
200
1010
Sources: UNCTAD The Iron Ore Market 2012‐2014, General Administration of Customs of the PRC, GFI Iron Ore and Steel Derivatives, Index Mundi, Century
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Not just iron . . China’s industrialization and urbanization drive global demand for other
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BillionUSD I f Mi l P d Chi W ld
urbanization drive global demand for other minerals across the board to new heights . .
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$1,400
$1,600 USD Imports of Mineral Products – China v.s. World
(in Billion USD from 1995 to 2012)
$800
$1,000
$1,200 China Imports Total World Imports Total
$400
$600
$800
1111$0
$200
$400
1111
Source: UNCTADSTAT
Note: Mineral products reflected in this chart include SITC 273, 274,277,278,281,283,284,285,286,287,288,289
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China now buys the majority of the ld’ l f i l d
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57%Shares of China in Total World Imports of Mineral Products
world’s supply of most mineral products . .
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55%
56%
p(from 2000 to 2012)
54%
55%
52%
53%
1212
51%2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
1212
Source: UNCTADSTATNote: Mineral products reflected in this chart include SITC 273, 274,277,278,281,283,284,285,286,287,288,289
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Is China positioned to continue to b i ll ?
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$700Billion
grow substantially?
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$600
$700
China’s Real Annual GDP Growth
$400
$500 in Billions of US$ From 1978 to 2013
$200
$300
1313
$100
$200
1313$0
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012
Source: IMF, World Bank, Century
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Banking Reform in China:
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Vega
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14141414
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Chinese Bank IPOs 2003‐5: US$66B
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15151515
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China now has the largest banks in the world, a product of
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g , p fChina’s Economic Reform: a sign of economic advancement
Largest Banks in the World by Market Capitalization GGLas Ve
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Rank’
Bank nameMarket cap( $ b ll )
Rank
(These 4 Chinese banks have total assets of US$9.2Tn)
Apr ’13Bank name
(US$ billion) 2012
1 Industrial and Commercial Bank of China (Also the largest by assets, US$2.8Tn)
233.6 1
2 China Construction Bank 207 6 22 China Construction Bank 207.6 23 HSBC 202.4 44 Wells Fargo 200.2 35 JPMorgan Chase 187.6 66 Agricultural Bank of China 142 9 5
The People’s Bank of China
1616
6 Agricultural Bank of China 142.9 57 Citigroup 141.8 98 Bank of America 133.2 129 Bank of China 130.0 710 C lth B k 122 3 10 1616
Beijing Financial Street
10 Commonwealth Bank 122.3 10
Source: Relbanks 2013 statistics
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Educational Reform:Building a knowledge‐based economy
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Number of University and College Admissions
Building a knowledge based economyLifted 627M people out of poverty in ~30 years of Reform
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2008
2011
in China from 1978 to 2012 (in ’000s students)
1999
2002
2005
1987
1990
1993
1996
17171978
1981
1984
1987
1717
‐ 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000
1978
Source: National Bureau of Statistics of China, Ministry of Education of China
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China's extreme poverty rate falls by nearly three‐fourths (or ~260Mpeople) Since 2007 . .
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China's Per‐Capita GDP Growth Has Led to a Dramatic Reduction in Poverty (Gallup)
fourths (or 260M people) Since 2007 . .
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$6,798 $7,569
$8,408 $9,233 26%
21%$7,000
$8,000
$9,000
$10,000
20%
25%
30%y ( p)
$5,564 $6,202
14% 14% 13%$4,000
$5,000
$6,000
$7,000
10%
15%
20%
6%
$0
$1,000
$2,000
$3,000
0%
5%
10%
1818
$00%
2007 2008 2009 2010 2011 2012Per‐capita GDP (PPP) Percentage living on less than $1.25 per day Source: Gallup
H K (CNN) D b 24 2013 M th i fi 1818Hong Kong (CNN), December 24, 2013 ‐‐More than one in five people live in extreme poverty globally, according to a new report, though China's continued economic growth has improved the lives of millions.
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transition of leadership, operating a market economy
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archbranded as Socialism by the “Communist” party
Jimmy CarterRonald Reagan GG
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Ronald ReaganGeorge H. W.
BushBill Clinton
George W. BushGeorge W. BushBarack Obama
$2.2Tn $17Tn (7.7X)1979 1980 1981 1982 1988 1989 1992 1993 1994 2000 2001 2002 2003 2008 2009 2012 2013 2016
$0.15Tn $9.4Tn (62X)$0.15Tn $9.4Tn (62X)
Deng XiaopingJiang Zemin
Hu Jintao
1919
Hu JintaoXi Jinping
Major Challenges during these years . . . .
GlobalAsianMostEarly stage reform 1919
Mineral Exploration Roundup
Global Financial Crisis
SARSEpidemic
Asian Financial Crisis
Most Favored Nation
Early stage reformNo capital No market
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Conditions For Further Growth:
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resources for development
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management: consistent policy‐setting and execution
Top leaders with track records of governing are selected rather thanTop leaders with track records of governing are selected rather than elected (Central Politburo)
Credible five‐year plans are designed and executed with specific targets under leaders with 10 year tenuretargets under leaders with 10‐year tenure
Leadership transition system ensures policy consistency
Experimentation approach of trial and error
2020
Experimentation approach of trial and error
Multiplicity and sheer scale of the Chinese economy
Many economies running in different stages of different cycles 2020Many economies running in different stages of different cycles
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Paradigm of Effective Economic Development
C i t t li tti d ti
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Guided by 5‐year plans and targetsStable 10‐year leadership mandates
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Actual2005‐2010plan target
2010 Actual2011‐2015plan target
10 year target
2005 2010Growth Rate
2010 Growth Rate 2015 2020Rate
GDP (Billion RMB) 18,494 7.50% 39,798 11.20% 55,800 7% 80,000
GDP (Billion USD) (1) 2,257 7.50% 5,931 11.20% 9,300 7% 12,500( ) , , , ,
GDP / Capita (USD) 1,731 4,433 6,210 8,866
Urbanization 43 47 4% 47.5 4.50% 51.5 4%
2121
% % %
Pension coverage for urban population in millions 174 223 5.10% 257 8.10% 357 1%
2121
Source: PRC government published plans and reports with interpretation by Century; 2020 policy target is based on the 18th Party Congress Report by the Chairman in November 2012.
(1) Exchange rate @USD1=RMB6.4, current FX
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Urbanizing the largest country in the world will bring prosperity to the world at large:
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“If history is a guide, for every new urban citizen migration from the countryside
prosperity to the world at large:US$ 400‐500Bn a year spent in the ground
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f y g , f y g f yinvestment of at least RMB100,000 (US$16,000) in urban infrastructure is needed.”
China Development and Research Foundation
“If we assume that an average of 15‐20m people a year settle in cities . . . like the last 10 years . . . will require annual investments of RMB2‐3trn (US$ 400‐500Bn) in the next decade”
“Chi ’ Bi B ” b HSBC N 2012“China’s Big Bang” by HSBC, Nov 2012
22222222
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23232323
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The New Iron Age is a New Economic Paradigm
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Vega
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archThe global Super Cycle is a result of massive structural
economic change due to the re‐emergence of China
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Industrialization & urbanization& urbanization
24242424Note: The graph above is an economic history of the world, after 1 AD, from a research letter written by Michael Cembalest, Chairman of market and investment strategy at JP Morgan Asset Management.
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What does this mega trend mean to
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BHP earns about 30% of its revenue (US$20B in FY
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f ( $2013) from China, from an asset base predominantly outside China
Ri Ti t b t 35% f it (~US$20B iRio Tinto earns about 35% of its revenue (~US$20B in FY 2013) from China, from an asset base predominantly outside China
FMG earns almost all, 98%, of its revenue (A$ 7.9B in FY 2013) from China, from an Australian asset base
25252525
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Th k !2626
Thank you!2626