AFRICA IRON & STEEL CONFIDENTIALITY 22 - 25 June 2015 - Franco D'Arrigo Presentation

Franco D’Arrigo
    Presentation
AFRICA IRON & STEEL
  CONFIDENTIALITY
  22 – 25 June 2015

• BENEFICATION AND MINERAL WEALTH FOR AFRICA’S IRON
                      AND STEEL INDUSTRIES
There is an abundance of minerals in the African Continent which is largely not explored and
Taped Into.

RISK:
However the challenges facing Africa’s Mineral sector is numerous and to name a few:

CORRUPTION:
The tree of corruption is from The Tribal Brother Hood, Local Chiefs, Local Government right up to
National Government.

I must stress that it is not always the case, but gets encountered often.
It is possible to mitigate this risk.

The Biggest risk which is normally not taken into account is the inexperience or overseas Investors, in
doing Business in Africa, the African way.

This is the biggest cause of failure of Mini to Medium Business Investments in Africa.
It is a case where the investors come to Africa with a purely western or eastern business mind set,
then encounter an unscrupulous “partners” and get eaten alive.

This then has a negative connotation about business in Africa, and is also the case where the foreign
investors underestimate the intelligence of us Africans.

INFRASTRUCTURE:

Infrastructure is one of the other major Concerns facing the growth of African Economies, which
in turn, stunts Industrialization in Africa, and is keeping the continent hostage in a Third World
Status.

Decent roads or rail is sparse. It is one thing to extract the mineral, however the lack of Logistical
Infrastructure, adds heavily to the cost, by reaching the final point, of a decent and efficient point
of export.

Sustainable Power Supply, and Power Generation, and the Power grid or lack there off, in my
opinion or is one of the most important challenges which adversely affects the industrialization
future and economies of African countries.

It is so seriously under estimated, with a far reaching domino effect. From big business right
down to basic employment, and adds to the cost of manufacturing and adversely affect returns.

MOST DAMAGING COMPONENT:

The Third and most Damaging Component apposing Growth and Development in Africa, is the
Embedment of Large Corporations which feeds the Corruption and Bribery chain from The Top
levels in Government. It amounts high level of un Regulated fraud.

These companies and their “ in the bag Government Cronies”, come up with big social plans and
promises, just to basically Rape the Community and the very people they promised the moon,
stars, sun, hospitals, clinics, schools and housing to, with no regard to the very environment they
destroy in the process.

Government to Government and Financial Institutions

This is one the most necessary deal making or tools, to balance Government Economies in normal
National Governance.

The requirements from the Lender or Donor come with largely distorted one sided conditions.

This comes at the expense of the local population and the bartening of minerals at ridiculous low
rates with often no control.

I call this the Raping of Government and their minerals and adds nothing to the beneficiation of
minerals, or adding value to exports, the economy or socially.

What it does is Exporting Jobs to the Importing Country.

While Africa staves and struggles with rife unemployment.

This is a brief indication pertaining to the challenges that the Continent of Africa faces.

SOLUTIONS:

One of the solutions is that a certain amount of minerals could be regulated and exported, especially to
balance any deficits in foreign debt, Suggestions by some Government Leaders Minerals or companies
should have a local majority, “this does not work”, “Yes” an amicable shareholding.

Taxation on the different stages of beneficiation will a more realistic approach, which will have a benefit
to both the investor, knowing his actual costs and a benefit to the adding of revenue to the countries
coffers and creating skills and employment to African workforce.

Some politicians refer to nationalization. It simply does not work!

Politicians are good at politics, and normally not good at exploration, mining or beneficiation, so it is
best be left to the professionals in their fields.

Majority shareholding of Locals, Firstly creates the “RISK” Factor which I already referred to, which in
turn leads exploitation by the majority “Partner”, and has a negative effect on Returns, which in turn
puts companies under pressure to perform.

IRON AND STEEL

With the Competiveness of Iron and Steel in the world, Africa with its wealth of resources
has to look at it self‐good and hard.

This is the continent which needs to develop, USA, China, Europe has already developed.

This is the Continent to be at!

STEEL INDUSTRY IS IN SERIOUS TROUBLE GLOBALY:

The Eastern basin of Steel Manufactures is in real trouble, with the effects of the devaluation of the
rouble, and the lowering of Russian Steel Prices; the Chinese were faced with double trouble, by
having to cut prices to under the $370 per Ton and also faced an oversupply, and a shrinking world
demand.
With China selling of steel at marginal levels below cost, the other areas of steel production in the
world is under thread. This leaves the steel producers, to look for Government protection, against
“dumping”.
To put things into perspective and comparative to China’s production and sales cost at port ($333),
steel on average is more than 44% ($480) more expensive in India,
($520) 56% more expensive than USA,
($540) 62% more expensive than Africa.

Because there is a 42.5% off over capacity and oversupply of 28.5% (160m/t). It is forcing the
collapse of material prices, and forcing the Steel industry into a crisis.

I predict that the next 36 months 2015 – 2017 will be a disaster which will lead to a net capacity
reduction, and a collapse of Older Technology Steel Mills with a high production cost.

This is especially related to Old Second Hand African Mills.

Africa can survive:

We have the Minerals and demand for Steel in the general 25 to 50 year blue print Infrastructural
context.

Old Second Hand Mills, is not our answer, Nationasation, neither, joint ventures with Governments will
ensure the survivability of our Steel Manufacturing Mills, Mini Mills, and Nano Mills, with advanced
technology to Lower Production cost and because of the relatively low cost it will be the future of
African Steel Manufacturing Industry with the 25 – 50 year blue print development agenda by African
Countries, This continent will eclipse the current dominant players in the World.

I could force an inter Country Exchange of Steel Produced products, which once again, adds to skills
Development, Job creation and a new type of Steel swop trade between African Countries, which will
make it reliant, on Tonnage produced, with an beneficiation program and not purely Dollar based.

CEO

FRANCO D’ARRIGO