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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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