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Acquisition of a controlling stake in MRI Trading AG

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<strong>Acquisition</strong> <strong>of</strong> a<br />

<strong>controll<strong>in</strong>g</strong> <strong>stake</strong> <strong>in</strong><br />

<strong>MRI</strong> Trad<strong>in</strong>g <strong>AG</strong><br />

30 June 2011 – S<strong>in</strong>gapore<br />

connect<strong>in</strong>g world trade<br />

Connect<strong>in</strong>g World Trade


Cautionary note on forward-look<strong>in</strong>g statements<br />

• This presentation may conta<strong>in</strong> statements regard<strong>in</strong>g the bus<strong>in</strong>ess <strong>of</strong> CWT Limited (‘CWT’) and its<br />

subsidiaries (‘Group’) that are <strong>of</strong> a forward look<strong>in</strong>g nature and are therefore based on<br />

management’s assumptions about future developments.<br />

• Such forward look<strong>in</strong>g statements are <strong>in</strong>tended to be identified by words such as ‘believe’,<br />

‘estimate’, ‘<strong>in</strong>tend’, ‘may’, ‘will’, ‘expect’, and ‘project’ and similar expressions as they relate to the<br />

Group.<br />

• Forward-look<strong>in</strong>g statements <strong>in</strong>volve certa<strong>in</strong> risks and uncerta<strong>in</strong>ties because they relate to future<br />

events. Actual results may vary materially from those targeted, expected or projected due to<br />

several factors.<br />

• Potential risks and uncerta<strong>in</strong>ties <strong>in</strong>cludes such factors as general economic conditions, foreign<br />

exchange fluctuations, <strong>in</strong>terest rate changes, commodity price fluctuations and regulatory<br />

developments.<br />

• The reader and/or listener is cautioned to not unduly rely on these forward look<strong>in</strong>g statements.<br />

We do not undertake any duty to publish any update or revision <strong>of</strong> any forward look<strong>in</strong>g<br />

statements.<br />

connect<strong>in</strong>g world trade


• Transaction Overview<br />

• Target Overview<br />

• Investment Rationale<br />

• Management Team<br />

• Summary<br />

• Next Steps<br />

connect<strong>in</strong>g world trade<br />

Presentation Outl<strong>in</strong>e


• Transaction Overview<br />

• Target Overview<br />

• Investment Rationale<br />

• Management Team<br />

• Summary<br />

• Next Steps<br />

connect<strong>in</strong>g world trade<br />

Presentation Outl<strong>in</strong>e


Transaction Overview<br />

• CWT (through its wholly-owed subsidiary Capsolon Pte Ltd) has agreed to<br />

acquire 73.8 % <strong>of</strong> the capital <strong>of</strong> <strong>MRI</strong> Trad<strong>in</strong>g <strong>AG</strong> (‘<strong>MRI</strong>’) from its<br />

owners / management team for a consideration <strong>of</strong> approximately USD<br />

94.0m<br />

• CWT will <strong>in</strong>itially pay upon clos<strong>in</strong>g USD 60.8m be<strong>in</strong>g 73.8% <strong>of</strong> the<br />

estimated net asset value <strong>of</strong> <strong>MRI</strong> as <strong>of</strong> 30th June 2011, subject to<br />

adjustments <strong>in</strong> the purchase price based on f<strong>in</strong>alised completion accounts<br />

– Initial consideration is USD 60.8m <strong>in</strong> cash from CWT’s own funds/borrow<strong>in</strong>gs and through<br />

the issuance <strong>of</strong> 10m new shares <strong>in</strong> CWT Ltd<br />

• CWT will pay an additional USD 33.2m <strong>in</strong> three equal annual cash<br />

<strong>in</strong>stalments<br />

• Transaction is expected to be earn<strong>in</strong>gs and value accretive from first full<br />

year post consolidation<br />

connect<strong>in</strong>g world trade


• Transaction Overview<br />

• Target Overview<br />

• Investment Rationale<br />

• Management Team<br />

• Summary<br />

• Next Steps<br />

connect<strong>in</strong>g world trade<br />

Presentation Outl<strong>in</strong>e


Target Overview<br />

• <strong>MRI</strong> TRADING <strong>AG</strong> is a private commodity market<strong>in</strong>g company owned by its<br />

found<strong>in</strong>g shareholders and management follow<strong>in</strong>g a Management-Buy-Out<br />

completed <strong>in</strong> 2003<br />

• <strong>MRI</strong> is focused <strong>in</strong> base metals non-ferrous concentrates physical trad<strong>in</strong>g<br />

(Copper, Z<strong>in</strong>c and Lead predom<strong>in</strong>antly) where it has established a position<br />

as a challenger to the <strong>in</strong>dustry’s two largest players Glencore and Trafigura<br />

• <strong>MRI</strong> has generated over the past years a consolidated turnover <strong>in</strong> excess <strong>of</strong><br />

USD 2bn through the market<strong>in</strong>g <strong>of</strong> base metals non-ferrous concentrates to<br />

a global smelt<strong>in</strong>g and process<strong>in</strong>g customer base<br />

– Established supplier and client relationships across metals and geographies<br />

– Recognised strategic position especially <strong>in</strong> copper market<strong>in</strong>g with approximately 1m dmt <strong>of</strong><br />

copper concentrates traded annually<br />

• <strong>MRI</strong>’s head Office is located <strong>in</strong> Zug, Switzerland; it benefits from a wide<br />

<strong>in</strong>ternational network <strong>in</strong>clud<strong>in</strong>g representative <strong>of</strong>fices or subsidiaries <strong>in</strong><br />

Australia, Chile, Ch<strong>in</strong>a, Mexico, Peru, and South Africa<br />

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In dmt ms<br />

Total market<br />

Addressable<br />

market<br />

<strong>MRI</strong> market<strong>in</strong>g<br />

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Snapshot <strong>of</strong> Market<strong>in</strong>g Operations<br />

Copper concentrates Z<strong>in</strong>c concentrates Lead concentrates<br />

46.9<br />

6.1<br />

0.8-1.0<br />

24.8<br />

20.0<br />

0.2-0.5<br />

6.2<br />

1.4<br />

0.1-0.2<br />

���� Core competence <strong>in</strong> commodity market<strong>in</strong>g and risk management<br />

���� Scale and critical mass <strong>in</strong> base metals concentrates, esp. copper<br />

���� Longstand<strong>in</strong>g supplier and client relationships through spot and frame<br />

agreements


F<strong>in</strong>ancial Summary<br />

• CWT is acquir<strong>in</strong>g <strong>MRI</strong> follow<strong>in</strong>g a sp<strong>in</strong> <strong>of</strong>f <strong>of</strong> <strong>MRI</strong>’s previous <strong>in</strong>vestments <strong>in</strong><br />

m<strong>in</strong><strong>in</strong>g operations, leav<strong>in</strong>g <strong>MRI</strong> to focus on its core base metals trad<strong>in</strong>g<br />

operations<br />

• <strong>MRI</strong>’s estimated net asset value as <strong>of</strong> 30 th June 2011 is approximately USD<br />

82.41m<br />

– Completion accounts are set to confirm net asset value with<strong>in</strong> 3 months<br />

• <strong>MRI</strong> has generated consistently over USD 2bn <strong>in</strong> turnover over the past<br />

years, and due diligence has demonstrated its capability to generate <strong>in</strong><br />

excess <strong>of</strong> USD 40m gross pr<strong>of</strong>it and USD 20m net pr<strong>of</strong>it on a standalone<br />

basis<br />

• On the above basis, the transaction is expected to be earn<strong>in</strong>gs accretive<br />

from the first full year <strong>of</strong> consolidation<br />

• <strong>MRI</strong>’s 78 employees are evenly split between its Zug, Switzerland<br />

headquarters and <strong>in</strong>ternational <strong>of</strong>fices<br />

connect<strong>in</strong>g world trade


• Transaction Overview<br />

• Target Overview<br />

• Investment Rationale<br />

• Management Team<br />

• Summary<br />

• Next Steps<br />

connect<strong>in</strong>g world trade<br />

Presentation Outl<strong>in</strong>e


• <strong>MRI</strong> is an established commodities marketer, br<strong>in</strong>g<strong>in</strong>g strategic competencies<br />

to CWT:<br />

– Critical understand<strong>in</strong>g <strong>of</strong> commodities market<strong>in</strong>g and risk management<br />

– Established, commodity trad<strong>in</strong>g credit l<strong>in</strong>es for asset backed transactions<br />

– Deep market <strong>in</strong>sights<br />

Investment Rationale<br />

– Longstand<strong>in</strong>g market relationships and valuable forward book<br />

– Immediate critical scale <strong>in</strong> base metals market<strong>in</strong>g<br />

• The comb<strong>in</strong>ation <strong>of</strong> <strong>MRI</strong> and CWT creates a platform for growth and<br />

<strong>in</strong>creased pr<strong>of</strong>itability:<br />

– Significant synergy potential between CWT’s core logistics competencies and <strong>MRI</strong>’s trad<strong>in</strong>g<br />

expertise will create opportunities for new, higher marg<strong>in</strong> and resilient base metals orig<strong>in</strong>ation<br />

flows<br />

– Complementarities <strong>in</strong> geographical networks open new bus<strong>in</strong>ess opportunities<br />

– <strong>MRI</strong> provides the platform to accelerate CWT’s development <strong>in</strong> commodities market<strong>in</strong>g<br />

operations <strong>in</strong> base metals and coal <strong>in</strong> particular with a view to create a more diversified<br />

market<strong>in</strong>g player over time<br />

– The <strong>in</strong>tegration <strong>of</strong> <strong>MRI</strong> <strong>in</strong>to CWT creates a potent alternative to the <strong>in</strong>dustry leaders and aims<br />

to attract the best talents, suppliers, clients and service providers<br />

connect<strong>in</strong>g world trade


• Transaction Overview<br />

• Target Overview<br />

• Investment Rationale<br />

• Management Team<br />

• Summary<br />

• Next Steps<br />

connect<strong>in</strong>g world trade<br />

Presentation Outl<strong>in</strong>e


Management Team<br />

Mark Lowe, Chief Executive Officer, Commodities Trad<strong>in</strong>g<br />

• Mark Jo<strong>in</strong>ed CWT <strong>in</strong> February 2011 <strong>in</strong> order to establish and to run its commodities trad<strong>in</strong>g<br />

operations through the newly formed subsidiary Capsolon Pte Ltd. Mark shares his time<br />

between S<strong>in</strong>gapore and Switzerland<br />

• Mark had previously started, developed and managed Louis Dreyfus Commodities’ entrance to<br />

the base metals markets, hav<strong>in</strong>g spent 10 years <strong>in</strong> charge <strong>of</strong> Ref<strong>in</strong>ed Base Metals operations at<br />

Trafigura Beheer BV, work<strong>in</strong>g from its <strong>of</strong>fices <strong>in</strong> Lucerne, London and Melbourne.<br />

Andrew Jarvis, <strong>MRI</strong> COO (s<strong>in</strong>ce 2007)<br />

• Prior to jo<strong>in</strong><strong>in</strong>g <strong>MRI</strong> <strong>in</strong> 2007, Andrew acted two years as consultant for Metallo<strong>in</strong>vest <strong>in</strong> Moscow<br />

and as Director for Deno GmbH <strong>in</strong> 2005. From 2001 to 2004 he was COO for Coalco Trad<strong>in</strong>g <strong>AG</strong><br />

<strong>in</strong> Zug, where he had held senior positions <strong>in</strong> trad<strong>in</strong>g from 1994 onward. Prior to that he<br />

worked <strong>in</strong> London with Marc Rich + Co. Ltd.<br />

Matthieu Demanget, Head <strong>of</strong> Copper (s<strong>in</strong>ce 2000)<br />

• Matthieu jo<strong>in</strong>ed <strong>MRI</strong> <strong>in</strong> 2000 as co-head <strong>of</strong> copper concentrates global trad<strong>in</strong>g and now heads<br />

the Copper and Cobalt desks. He has more than 17 years <strong>in</strong>dustry experience and worked<br />

previously for Pech<strong>in</strong>ey-Brandeis <strong>in</strong> New York and London.<br />

Outgo<strong>in</strong>g CEO Ashwath Mehra reta<strong>in</strong>s a close relationship with CWT<br />

connect<strong>in</strong>g world trade


• Transaction Overview<br />

• Target Overview<br />

• Investment Rationale<br />

• Management Team<br />

• Summary<br />

• Next Steps<br />

connect<strong>in</strong>g world trade<br />

Presentation Outl<strong>in</strong>e


Summary<br />

CWT <strong>in</strong>stantly becomes a potent force <strong>in</strong> base metals and commodities<br />

market<strong>in</strong>g:<br />

• Key challenger to established <strong>in</strong>dustry leaders <strong>in</strong> base metals…<br />

• …comb<strong>in</strong><strong>in</strong>g potential for outstand<strong>in</strong>g return on equity and accelerated growth by capitalis<strong>in</strong>g on<br />

strategic fit…<br />

• …benefitt<strong>in</strong>g from strong momentum…<br />

• ..and with a clear vision to become a more diversified commodities market<strong>in</strong>g platform supported<br />

by ‘deep bench’ at CWT and <strong>MRI</strong> management level<br />

Cont<strong>in</strong>uation, and acceleration <strong>of</strong> CWT’s focus on the strategic commodities<br />

sector:<br />

• Recognised logistics and warehous<strong>in</strong>g expertise <strong>in</strong>clud<strong>in</strong>g LME<br />

• Development <strong>of</strong> new trad<strong>in</strong>g flows s<strong>in</strong>ce early 2011, <strong>in</strong> particular <strong>in</strong> coal orig<strong>in</strong>ation<br />

• Strategy to develop Asian trad<strong>in</strong>g flows with S<strong>in</strong>gapore as a hub<br />

Compell<strong>in</strong>g f<strong>in</strong>ancial outlook:<br />

• Transaction is expected to be earn<strong>in</strong>gs enhanc<strong>in</strong>g from first full year <strong>of</strong> consolidation<br />

• Potential for fast growth and <strong>in</strong>creased marg<strong>in</strong>s <strong>in</strong> commodities trad<strong>in</strong>g operations <strong>in</strong> the medium<br />

term<br />

connect<strong>in</strong>g world trade


• Transaction Overview<br />

• Target Overview<br />

• Investment Rationale<br />

• Management Team<br />

• Summary<br />

• Next Steps<br />

connect<strong>in</strong>g world trade<br />

Presentation Outl<strong>in</strong>e


Next Steps<br />

• The acquisition <strong>of</strong> a 73.8% <strong>stake</strong> <strong>in</strong> <strong>MRI</strong> is expected to close <strong>in</strong> July 2011<br />

with payment <strong>of</strong> USD 60.8m cash and stock consideration; the latter<br />

consist<strong>in</strong>g <strong>of</strong> 10m newly issued shares <strong>in</strong> CWT Ltd<br />

• Completion accounts will be produced with<strong>in</strong> three months <strong>of</strong> clos<strong>in</strong>g,<br />

result<strong>in</strong>g <strong>in</strong> an adjustment to the purchase price reflect<strong>in</strong>g <strong>MRI</strong>’s audited net<br />

asset value as <strong>of</strong> 30 th June 2011<br />

• CWT will pay <strong>MRI</strong>’s exit<strong>in</strong>g shareholders an additional USD 11.1m <strong>in</strong> cash<br />

on each 30 th June 2012, 2013 and 2014<br />

connect<strong>in</strong>g world trade


<strong>Acquisition</strong> <strong>of</strong> a<br />

<strong>controll<strong>in</strong>g</strong> <strong>stake</strong> <strong>in</strong><br />

<strong>MRI</strong> Trad<strong>in</strong>g <strong>AG</strong><br />

30 June 2011 – S<strong>in</strong>gapore<br />

connect<strong>in</strong>g world trade<br />

Connect<strong>in</strong>g World Trade

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