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PanAust: Option value through country risk data analysisRichard Taylor IMARC Melbourne 2015

About PanAust• PanAust is a Brisbane, Australia

headquartered copper and gold producer

• 100% owned by Guangdong Rising Asset

Management (GRAM)

• Two successful operations in Laos

• Recognised leader in sustainability:

community development and

environmental management

Production and growth

• Phu Kham and Ban Houayxai providing cash

flow for growth

• Production to progressively lift to annual

output to peak levels of 90,000tpa in 2018

and 2019

• Pre-development opportunities in Laos, Chile

and PNG

• Frieda River Project – one of the world’s

largest undeveloped copper-gold deposits

Traditional country risk measures

• ‘Ease of doing business’ an

increasingly common metric

• Attempts to measure difficulty across

all sectors and rank countries

• Many of the selected metrics are not

applicable or irrelevant to mining

• Only a few metrics have any weight

for resource projects

Starting a business

Dealing withconstruction permits

Getting electricity

Registering property

Getting credit

Protecting investors

Paying taxes

Trading across borders

Enforcing contracts

Resolving insolvency

Myanmar Laos PNG Australia

• Politic science tends towards linear

relationships which do not assist

• “Getting to Denmark” is not a straight

forward process

• Ignores dynamic processes,

discontinuities and is biased towards

some forms of development

• Bias towards negative shocks rather

than the possible positive

Traditional country risk measures

Problems with traditional risk measures What if our ability to predict risk is impaired?

• Philip E Tetlock: Expert Political Judgment

Source: Wikipedia

• Is discovery random & is risk analysis inaccurately limiting opportunity?

Risk is nothing if not matched to return

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Major Copper Producers: Fraser Institute Mineral Geology Score

Impact of limiting exploration jurisdictions under traditional risk measures

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Major Copper Producers: Fraser Institute Geology Score / BBB- credit cutoff

Towards a better approach to mining sector risk and return metrics

Afghanistan

Argentina

Australia

Botswana

BrazilBulgaria

Cambodia

CanadaChile

China

Congo

Eritrea

Indonesia

Iran

Kazakhstan Laos

Malaysia

MexicoMongolia

Mozambique

Myanmar

Pakistan

Panama

PNG

Peru

Philippines

PolandPortugal

Russia

Saudi Arabia

Serbia

Solomon Islands

South Africa

Spain

Sweden

ThailandTurkey

United States

Uzbekistan

Zambia

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Decr

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Increasing Reward

Country Risk vs Prospectivity in Copper Countries Showing Relative Size of Copper Production

• Incorporating risk and return

• Identifies pockets of opportunity

• Historical jurisdictions out perform

emerging markets

• Need to overcome bias towards

lagging data in country risk forecasts

PanAust: unlocking option value through growth projects

Frieda River Project, PNG

125,000t pa

200,000oz pa

Familiar terrain

Strong government and community support

Myanmar: Long history of mining