Presentation was delivered at MENA MINING 2011 CONGRESS, Dubai, October 26, 2011

1. Investment Attraction of MENA Mining
Vladimir F. Kuznetsov
Director
Earthstone Holdings, Ltd.
Conference Day Two: 26 October 2011
13:10 Mining investment opportunities

2. AS A GENERAL RULE, THE
MOST SUCCESSFUL MAN IN
LIFE IS THE MAN WHO HAS
THE BEST INFORMATION
Benjamin Disraeli,
British Prime Minster & Novelist

3. Disclaimer
The information contained in this presentation is given without any liability whatsoever to myself, any persons, institutions or
organizations that I may or may not be related with, for any loss whatsoever arising from any use of this presentation or its
contents or otherwise.
No representation or warranty, expressed or implied, is made or given by myself as to the accuracy, completeness or fairness
of the information or opinions contained in this presentation. In particular, no representation or warranty is made that any
projection, forecast, calculation, forward-looking statement, assumption or estimate contained in this presentation should or
will be achieved. There is a substantial likelihood that at least some, if not all, of the forward-looking statements included in
this presentation will prove to be inaccurate, possibly to a significant degree.
The information contained in this presentation does not constitute investment, legal, tax or accounting advice. Recipients of
this presentation should conduct their own due diligence and other enquiries in relation to such information and consult with
their own professional advisors as to the accuracy and application of the information contained in this presentation and for
advice relating to any legal, tax or accounting issues relating to a potential investment in the MENA region. This presentation
does not constitute a recommendation to invest in the MENA region.
Certain information contained in this presentation concerning economic trends and performance is based on or derived from
information provided by independent third party sources, believed to be reliable. I cannot guarantee the accuracy of such
information and have not independently verified the assumptions on which such information is based. I disclaim any
responsibility for any errors or omissions in such information, including any financial calculations, projections, and forecasts
in this presentation.
The views and opinions expressed herein represent my own and not those of the people, institutions or organizations that I
may or may not be related with, unless stated explicitly. This is not research and is not intended as such. This presentation has
absolutely no intention of complete and comprehensive coverage of the enclosed problems, rather offers a general outline.
This presentation is intended for discussion purposes only and is solely for your information and may not be reproduced or
further distributed to any other person or published, in whole or in part, for any purpose.

4. Global Mining: Changed Picture
Profound economy transformations, revolution in commodities’
weight substantially changed the global mining picture
4

5. Goals & Perceptions: Investor vs. Recipient
Industry Attractiveness
Magnitude and ease of
making profit, in
comparison with the risks
involved, that an industrial
sector offers. It is based on
 the number of competitors,
 their relative strength,
 width of margins,
 and rate of growth in
demand for its goods or
services
5

6. Investing Essence
Over the years, a number of salient points for
investment attraction factors
were developed by economists:
 Natural and human resources;
 Price, quality and productivity of inputs;
 International transportation and
communication cost;
 Investment favor or discrimination;
 Man-made barriers to trade;
 Fundamental facilities;
 Cross-national values, language, culture,
commercial practice and politics;
 Research and development;
 Concentration of production and sales;
 Economic system and political strategy;
 Resource allocation system
Dunning, J. (1977), “The location of economic activity and the multinational
enterprise: search for an eclectic approach”, in Ohlin, B., Hesselborn, P. and
Wiskman, P. (Eds), The International Allocation of Economic Activity, Macmillan,
London, pp. 395-418
6

7. MENA: Investor’s Eyeball
MENA region is one of the most
geopolitically sensitive areas: it is
at the crossroad between Eastern
and Western commerce
This region faces geopolitical risks, is considerably dependent on energy
exports and suffers from infrastructural bottlenecks. Moreover, it also has a
way to go before it can overcome challenges in the form of bureaucracy, lack
of transparency and limited availability of information. Finally, it lacks high-
quality research to aid investment decisions and has an underdeveloped
secondary market because of which the financial market is still at a nascent
stage.
Investment Opportunities in the Middle East and North Africa (MENA) Region
© 2009 Evalueserve, Ltd. All Rights Reserved
7

8. MENA: Investor’s Eyeball
Deficiency of adequate information on MENA mining
Search news results on MENA MINING : 16
Search news results on AFRICAN MINING : 1,720
Solutions:  Establishment of
MENA Mining Information Agency
 Develop ArabStat initiative to remedy
information & data gap
8

9. MENA Country Risks
Region is a heterogeneous mix of countries that vary in size, social and political structure,
economic and regulatory framework, and the degree of economic diversification
9

10. Economic Freedom
Based on data from: Economic Freedom of the World – 2010 Annual Report, by Fraser Institute
10

11. Ease of Doing Business
11

12. Investment Incentives
 State contribution to certain investment expenses through:
Investment Promotion Fund
 State contribution to certain expenses in specific industrial sectors,
development of modern technologies: the Hassan II Fund for
Morocco Economic and Social Development
 Exemption from customs duties
 Exemption from import VAT
 Regime of convertibility for foreign investment: investors to carry
out their investment in Morocco, directly transfer revenues generated
/proceeds of their sale or liquidation
 16 Regional Investment Centers ensure speedy company
registration
 Customs duty and tax exemptions on imported equipment.
50% reduction on company tax or income tax for mining companies
that directly or indirectly export their mining products
 Mining company may set up a tax-exempt reserve fund for
exploration/ development investment equal to as much as 50% of
fiscal profits, with a ceiling of 30% of turnover
12

13. Investment Incentives
 Provision of soft loans for investment projects (3% interest rate)
 Free transfer of capital and profits, and access and departure of expatriate
workers to and from abroad
Oman  Duty-free import of machinery, equipment and spare parts for industrial
investment
 Tax exemption to foreign investors for five years (renewable) from inception of
company
 Minerals City being established to serve as a hub for a number of minerals-based
processing projects
 No taxation of personal income
 Projects exempted from income & social services taxes by 25%, 50%, or 75% for
10 years, depending on the location and sector of project
Foreigners can invest in mineral resources under special agreements and own up
to 100% of mining projects
 Imported fixed assets are exempted from customs duties/taxes
Jordan  Free repatriation of capital, profits and salaries
 Exemptions in Free Zones
 Industrial Estates
13

14. Investment Incentives
SIDF:
Short term loans to investors, technical, administrative, financial and marketing
advice.
Saudi Arabia Loans: medium; long-term - up to 50% project’s total cost
Payback: up to 15 years (2-year grace period)
Low prices for electricity, water, and other fuels for industrial projects
Flat corporate tax rate of 20%
 Absence of mineral royalties
 Highly competitive energy costs
 Import duties exemptions for approved mining equipment - 5% on other
imported equipment
 Foreign individuals pay tax at a flat rate of 20% on income sourced in
Saudi Arabia
14

15. Technology & Infrastructure
 New plans for upgrading infrastructure: e.g. Plan Azur
envisions construction of new roads and airports
 Industrial development zones
 The MED zones: Special zones around the Tangier Med port
project to serve the European Union based on optimal logistic
Morocco conditions and an integrated multimodal platform (airport,
highway network, rail network, seaport) offering attractive factor
costs (freight charges reduced by 40% to 50%)
 Expansion of railway system and development of rural inroads
with World Bank funded projects
15

16. Technology & Infrastructure
 Suitable for mining: roads, power gird, availability of water,
deep-sea port
 Industrial land planned for industrial investors are being
Oman provided and being equipped with the necessary services and
facilities required for construction of projects: roads, water,
electricity, gas, telecommunication and facilities for solid waste
collection and disposal.
 Focusing on heavy infrastructure spending and the development of
Saudi Economic Cities valued at over $80b
 Available land in different industrial cities at nominal charges. Land for
Saudi Arabia other uses is available on lease or sale
 Advanced, state-of-the-art engineering supply and
construction/contracting companies
 Extensive rail network that benefits mining projects
 High quality infrastructure: 3 airports,1 port; 8,000 km of modern
highway system; railway master plan to develop an extensive rail
Jordan network
16

17. Arab Spring & Investment
Period of momentous change, challenges and
opportunity that can lead to a historical shift
in growth and development patterns
MENA Political turmoil leads to economic and financial repercussions;
but largely limited to countries at the epicenter of the political events
Investment climate is blurred
17

18. Arab Spring & Investment
2011 Country Wise Picture
What the population thinks: Estimated cuts in 2011 FDI
Qatar: 92% economy is getting better Egypt – 92%,
Morocco: 68% economy is getting better. Libya – 87%,
Tunisia: 50% economy is doing better; 20% doing
Syria – 65% ,
worse and 27% “staying the same.”
Egypt: 42% see conditions in their country “getting”
Bahrain – 35%,
better, versus 37% who said it is “getting worse” Increase – 7 countries;
Syria: 34% economy getting worse ; 32% getting the biggest – Saudi Arabia and Iraq
better Arab Investment
Yemen: 19% doing better and Export Credit Guarantee Corp.
Iraq: 16% economy looks to be doing better
Gallup poll results – October 10, 2011
Top ranking H1 2011 M&A Deals
Real Estate
As to volumes of M&A deals: Jordan, UAE
Secure and stable markets: Abu Dhabi,
and Oman
Dubai, Qatar, and Saudi Arabia
AS to deals value: Qatar, UAE, Kuwait
Uncertain: Bahrain, Egypt, and Syria
Sectors: banking, education and healthcare,
construction
18

19. Arab Spring & Investment
Hot for Investments
© PwC/INSEAD “The Next Five Years, MENA PE”
19

20. Arab Spring & Investment
Political instability and turmoil, instead of
negative provide positive affect in FDI
Foreign Direct Investment in Africa: What are the Key
Factors of Attraction aside from Natural Resources? By
Bertrand BLANCHETON, Université de Bordeaux, Lambert
OPARA-OPIMBA Université de Bordeaux
At the first HSBC MENA Global Banking and
Markets Leadership Forum, 62% of the
region's most senior business leaders stated
that the impact of the Arab Spring would be
positive, when viewed over a three year
horizon.
October, 2011
20

21. Arab Spring & Investment
Pre-turmoil and Current-turmoil Energy Investment Mapping
© Arab Petroleum Investments Corporation.
Economic Commentary Volume 6 No 4 April 2011
21

22. MENA: What to Expect?
Liberalization of Mining Sectors
Offers of state-held equity in mining companies
Governments are holding stakes
 Introduction of modern contractual schemes: worth $320B in publicly traded firms
 BOT (build-operate-transfer) (directly or through rulers and
 DBOT (design- build-operate-transfer) sovereign funds) Thomson Reuters
 BOO (build-operate-own)
 Joint Venture or Consortium contracts
 Franchise and Leasing contracts
 Applying available investment laws, acceding to international
treaties to protect investments especially the Arab Investment
Guarantee Corporation and the Multilateral Investment
Guarantee Agency (MIGA)
 Examination of similar (e.g. India’s) experience: A flow-through share is a common share of
an oil and gas or mineral exploration
 Extending Tax Breaks for Exploration: company that normally trades on an
Flow-Through Shares (success in Australia, exchange. It is referred to as “flow-through”
because the company enters into an
Canada, USA) to attract investors in mining agreement with investor to flow certain tax
 Institutional Finance Schemes deductions from that company’s capital
expenditure program through to investor
 Exploration & Infrastructure Bonds
22

23. Thank You for Your Attention
23

24. Vladimir F. Kuznetsov
Director, Corporate Communications,
Earthstone Holdings, Ltd
http://buysellmines.blogspot.com
comminucations@earthstonegroup.com
24