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¶DJULFXOWXUDOELRWHFKQRORJ\·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·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• :KDW LQIOXHQFHV WKH G\QDPLFV RI SROLF\ PDNLQJ LQ GLIIHUHQW ORFDO DQG QDWLRQDO FRQWH[WV DQG ZLWK ZKDWLPSOLFDWLRQVIRUWKHUXUDOSRRU" • :KDW UROH FDQ PHFKDQLVPV RI LQWHUQDWLRQDO JRYHUQDQFH SOD\ LQ VXSSRUWLQJ WKH QDWLRQDO HIIRUWV RI GHYHORSLQJFRXQWULHVWRDGGUHVVIRRGVHFXULW\FRQFHUQV" • +RZ FDQ SROLF\ SURFHVVHV EHFRPH PRUH LQFOXVLYH DQG UHVSRQVLYH WR SRRU SHRSOH·V SHUVSHFWLYHV" :KDWPHWKRGVSURFHVVHVDQGSURFHGXUHVDUHUHTXLUHGWR¶GHPRFUDWLVH·ELRWHFKQRORJ\" 7KHZRUNLVIXQGHGE\WKH8.'HSDUWPHQWIRU,QWHUQDWLRQDO'HYHORSPHQW'I,'¶%LRWHFKQRORJ\DQG WKH 3ROLF\ 3URFHVV LQ 'HYHORSLQJ &RXQWULHV· DQG ¶*OREDOLVDWLRQ DQG WKH ,QWHUQDWLRQDO *RYHUQDQFH RI 0RGHUQ%LRWHFKQRORJ\·DQGWKH5RFNHIHOOHU)RXQGDWLRQ¶'HPRFUDWLVLQJ%LRWHFKQRORJ\· YLL 7KLVSDSHULVDSURGXFWRIWKH¶*OREDOLVDWLRQDQGWKH,QWHUQDWLRQDO*RYHUQDQFHRI0RGHUQ%LRWHFKQRORJ\·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¶DJULFXOWXUDOELRWHFKQRORJ\·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¶DJULFXOWXUDO ELRWHFKQRORJ\·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¶JOREDO SXEOLF JRRG· IRU VLJQLILFDQW ELRWHFKQRORJ\ LQYHVWPHQWV WKH RQO\ URXWH IRUZDUG" $QG LI DJULFXOWXUDO ELRWHFKQRORJ\LVDWOHDVWLQSDUWDQDQVZHUWRIRRGVHFXULW\LVVXHVZKDWVKRXOGEHWKHSULRULWLHVIRU5DQG 'LQYHVWPHQW" 7KHVHDUHRIFRXUVHELJTXHVWLRQVZKLFKWKLVSDSHUZLOOEHXQDEOHWRDQVZHULQIXOO²VXFKDQVZHUV ZLOOLQHYLWDEO\EHFRQWH[WVSHFLILFDQGFRPSOH[+RZHYHULQRUGHUWRVNHWFKWKHEURDGSDUDPHWHUVRIWKH GHEDWHZHQHHGWRQRZWXUQWRH[SORULQJWKHIRRGVHFXULW\GHEDWHDQGDVNZKDWDUHWKHNH\GLPHQVLRQVRI IRRGVHFXULW\" )RRGVHFXULW\DFKDQJLQJGHEDWH ¶)RRG VHFXULW\· LV D VOLSSHU\ WHUP 7KHUH DUH PXOWLSOH GHILQLWLRQV RI IRRG VHFXULW\ ² RYHU ZHUH LGHQWLILHG E\ 0D[ZHOO DQG %XFKDQDQ6PLWK HDFK FDUU\LQJ GLIIHUHQW HPSKDVHV DQG FRQQRWDWLRQV VHHDOVR6PLWKHWDO7KHVHKDYHFKDQJHGRYHUWLPHDVWKHGHEDWHKDVEHHQIUDPHGLQGLIIHUHQWZD\V $WWKH:RUOG)RRG&RQIHUHQFHRIIRUH[DPSOHWKHHPSKDVLVZDVRQIRRGDYDLODELOLW\DQGVXSSO\DW DJOREDOOHYHO+HUHIRRGVHFXULW\ZDVGHILQHGDV $YDLODELOLW\ DW DOO WLPHV RI DGHTXDWH ZRUOG VXSSOLHV RI EDVLF IRRGVWXIIV « WR VXVWDLQ D VWHDG\ H[SDQVLRQRIIRRGFRQVXPSWLRQ«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¶SROLF\QDUUDWLYH·KDVEHHQDVVRFLDWHGZLWKWKHSRWHQWLDOEHQHILWV RIVRFDOOHG¶*UHHQ5HYROXWLRQ·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¶*UHHQ 5HYROXWLRQ· KDG D QXPEHU RI HIIHFWV )RRG SURGXFWLRQ LQFUHDVHG VLJQLILFDQWO\ DQG ZLWK SURGXFWLRQ LQFUHDVHV ULVLQJ IDVWHU WKDQ IRRG SULFHV VXUSOXVHV IURP VDOHV UHVXOWHG LQ RSSRUWXQLWLHV IRU HPSOR\PHQW IRU WKH SRRU 2YHUDOO WKRXJK IRRG SULFHV GHFOLQHG UHVXOWLQJ LQ EHQHILWV IRU SRRU IRRG SXUFKDVLQJFRQVXPHUVLQFOXGLQJWKHJURZLQJQXPEHURIIRRGLQVHFXUHSRRULQXUEDQDUHDV $V KDV EHHQ ZLGHO\ GRFXPHQWHG WKH LPSDFWV RI WKH *UHHQ 5HYROXWLRQ ZHUH XQHYHQ 7KH QHZ YDULHWLHV UHTXLUHG UHJXODU ZDWHU VXSSOLHV DQG SXUFKDVHG LQSXWV WKXV WKH RSSRUWXQLWLHV RIWHQ E\SDVVHG GULHU VHPLDULG DUHDV DQG SRRUHUIDUPHUV +D]HOO DQG 5DPDVZDP\ 3HUNLQV 5HIOHFWLRQV RQ WKH *UHHQ 5HYROXWLRQ H[SHULHQFH LQ WKH V IRU H[DPSOH SURPSWHG VHDUFKHV IRU ZLGHU VHWV RI WHFKQRORJLFDOVROXWLRQVSDUWLFXODUO\IRUWKHGULHUULVNSURQHHQYLURQPHQWVVHHEHORZ+RZHYHU*UHHQ 5HYROXWLRQ DGYRFDWHV DUJXH LQ VLJQLILFDQW SDUWV RI WKH ZRUOG SUHYLRXVO\ SODJXHG E\ UHJXODU IDPLQH DQG FKURQLF KXQJHU WKHUH ZHUH WDQJLEOH EHQHILWV HYHQ IRU WKH SRRU DQG ODQGOHVV ZKRVH HPSOR\PHQW RSSRUWXQLWLHV DQG SXUFKDVLQJ SRZHU LQFUHDVHG /LSWRQ 7KXV IRU PDQ\ LQ ODUJH SDUWV RI $VLD WKH VSHFWUH RI UHJXODU IDPLQH DQG HQGHPLF KXQJHU KDG EHHQ HIIHFWLYHO\ HOLPLQDWHG ,Q WKRVH DUHDV QRWDEO\ PXFK RI VXE6DKDUDQ $IULFD ZKLFK KDG EHHQ OHIW ODUJHO\ XQWRXFKHG E\ WKH *UHHQ 5HYROXWLRQ WKH FKDOOHQJH ZDV VHHQ WR EH WUDQVIHUULQJ WKH VDPH WHFKQRORJLHV LQWR WKHVH HQYLURQPHQWV ZLWK HIIHFWLYH H[WHQVLRQV\VWHPVDQGFUHGLWVXSSRUW%RUODXJDQG'RZVZHOO ,QUHFHQW\HDUVWKRXJKWKHLPSUHVVLYH\LHOGJURZWKVHHQLQWKHVDQGVKDVWDLOHGRIIHYHQ LQWKHKLJKSURGXFLQJ]RQHVVXFKDVWKH3XQMDELQ,QGLD%\HUOHH*OREDOO\SURGXFWLRQJURZWKLQ FHUHDOVGHFOLQHGIURPSHUFHQWSHUDQQXPLQWKHVWRSHUFHQWLQWKHGHFDGHWR3URMHFWHG JURZWK LV RQO\ SHU FHQW LQ WKH SHULRG WR 3LQVWUXS$QGHUVHQ HW DO 6XFK LQFUHDVHV DUH LQVXIILFLHQW WR FRPSHQVDWH IRU JURZLQJ SRSXODWLRQV LQ PRVW SDUWV RI WKH ZRUOG 2SSRUWXQLWLHV IRU DQ H[SDQVLRQRIFXOWLYDWHGDUHDDUHOLPLWHGDQGWKHFRVWVRILPSRUWDWLRQDUHJURZLQJ$YDULHW\RIUHDVRQVIRU WKH GURSRII LQ \LHOG LQFUHDVHV KDYH EHHQ LGHQWLILHG LQFOXGLQJ GHFOLQLQJ JURXQGZDWHU DYDLODELOLW\ SHVW EXLOGXSV DQG VRLO IHUWLOLW\ GHFOLQH 7KXV LW LV DUJXHG WKHUH H[LVW LQFUHDVHG LPSHUDWLYHV WR LQYHVW LQ WHFKQRORJLFDO VROXWLRQV LQYROYLQJ LUULJDWLRQ LQFUHDVHG IHUWLOLVHU DQG SHVWLFLGH XVH DQG LQQRYDWLYH FURS EUHHGLQJ $OWKRXJKUHFHQWHYLGHQFHVXJJHVWVVLJQLILFDQWODWHUDOVSUHDG.HUUDQG.RODYDOOL 6XVWDLQDEOHDJULFXOWXUHUHWXUQVWRKLJKH[WHUQDOLQSXWWHFKQRORJLHVDUHOLPLWHG SDUWLFXODUO\IRUPDUJLQDODUHDVDQGSRRUHUSHRSOHWKHUHIRUHDPRUHLQWHJUDWHG VXVWDLQDEOHDJULFXOWXUHLVUHTXLUHGWRDGGUHVVLVVXHVRIIRRGLQVHFXULW\LQWKHORQJHUWHUP )URPWKHODWHVWKHUHZDVDQLQFUHDVLQJUHFRJQLWLRQRIWKH¶VHFRQGJHQHUDWLRQ·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¶VXVWDLQDEOH GHYHORSPHQW· 6XVWDLQDEOH GHYHORSPHQWSHUVSHFWLYHVDUJXHGIRUDQLQWHJUDWHGDSSURDFKZKLFKWRRNHQYLURQPHQWDOFRQFHUQVWRWKH KHDUW RI GHYHORSPHQW WKLQNLQJ $ SURGXFWLRQ DW DOO FRVWV DSSURDFK ZDV UHSODFHG E\ FRQFHUQV DERXW HQYLURQPHQWDOFRVWVDQGULVNVDQGDZLGHUFRQVLGHUDWLRQRIWKHEHQHILWVRIDOWHUQDWLYHDSSURDFKHV 7KHOLPLWVRIWKHVWDQGDUG*UHHQ5HYROXWLRQDSSURDFKZDVSRLQWHGWRE\WKRVHZKRREVHUYHGKRZ \LHOGVRQIDUPHUV·ILHOGVSDUWLFXODUO\LQPRUHPDUJLQDOULVNSURQHDUHDVZHUHIDUORZHUWKDQWKHSRWHQWLDO \LHOGVDFKLHYHGLQFRQWUROOHGUHVHDUFKVWDWLRQFRQGLWLRQV7KXVLWZDVDUJXHGDQHPSKDVLVRQLQYHVWPHQW LQHYHULQFUHDVLQJ\LHOGSRWHQWLDOZDVPLVSODFHGDQGLQVWHDGOLPLWHGUHVHDUFKDQGH[WHQVLRQHIIRUWVVKRXOG EH IRFXVHG RQ LQFUHDVLQJ DFWXDO \LHOGV WKURXJK LPSURYLQJ DJURQRPLF SUDFWLFHV DQG PDQDJHPHQW RQ IDUPHUV·ILHOGV )URPWKHVWKHUDQJHRIIDUPHUVRZQ¶LQGLJHQRXV·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¶IDUPHUILUVW·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² DQG ²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² VL]H DJH JHQGHU DFWLYLW\ GLIIHUHQFHV GHWHUPLQH KRZ PXFK IRRG LV QHHGHG $QG ZKDW LV ¶QHHG·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¶IRRG ILUVW·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² ERWK ZLWKLQGHYHORSLQJFRXQWULHVDQGEHWZHHQ¶QRUWK·DQG¶VRXWK·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¶IRRWORRVH·DVLVVRPHWLPHV PDGHRXWDVPDQ\VXFKLQGXVWULHVUHWDLQDORFDWHGQDWLRQDOFKDUDFWHUHYHQLIFRQQHFWHGWRODUJHJOREDO FRUSRUDWLRQV8QGHUVXFKFRQGLWLRQVQDWLRQDOSROLWLFDODQGUHJXODWRU\LQVWLWXWLRQVGRKDYHVRPHSXUFKDVH (YHQZKHUHWKH\GRQRWRWKHUVDOVRDUJXHWKDWEHFDXVHRIJURZLQJFRQFHUQVLQFRQVXPLQJFRXQWULHVIRU HQYLURQPHQWDO VWDQGDUGV ODERXU ULJKWV DQG VR RQ WKHUH LV D SUHVVXUH IURP VKDUHKROGHUV DQG ZLWKLQ EXVLQHVVHVWKHPVHOYHVWRDSSO\D¶WULSOHERWWRPOLQH·WRWKHLURSHUDWLRQVWRLQFUHDVHVWDQGDUGVLQRYHUVHDV RSHUDWLRQV .ORSSHQEXUJ DJUHHV WKDW WKH UHSURGXFLELOLW\ RI VHHG FUHDWHV EDUULHUV WR WKH FDSLWDOLVW WUDQVIRUPDWLRQ RI DJULFXOWXUHEXWDUJXHVWKDWWKHVHPHUHO\VORZUDWKHUWKDQ SUHYHQWWKHSHQHWUDWLRQRIFDSLWDO EH\RQGWKHIDUP JDWH +H DUJXHV WKDW FDSLWDO LV XVLQJ D FRPELQDWLRQ RI WHFKQRORJ\ DQG VRFLDO UXOHV DV YHFWRUV WR IDFLOLWDWH WKH IXUWKHUFRPPRGLILFDWLRQRIWKHVHFWRU 1HYHUWKHOHVV DV 6DXULQ UHPLQGV XV ¶JOREDOLVDWLRQ· DQG ¶QHROLEHUDOLVP· DUH QRW WKH VDPH WKLQJ 7KH SRZHURIWUDQVQDWLRQDOFDSLWDOLVFKDUDFWHULVHGQRWRQO\E\PRELOLW\EXWDOVRE\LWVDELOLW\WRFRQWUROUHVRXUFHVDW DGLVWDQFH¶7KHFUXFLDOGLVWLQFWLYHQHVVRIWKHJOREDORUJDQLVDWLRQRIWKHVRFLDORUGHULVWREHIRXQGLQWKHXVH DQGGLVSRVDORIPDWHULDODQGLGHDWLRQDOUHVRXUFHVDQGDXWKRULW\ZKLFKDUHQRWWHUULWRULDOO\GHOLPLWHGRUUHVWULFWHG DQGIROORZLQJ*LGGHQVWKHUHLVDSURQRXQFHGRUJDQLVDWLRQRIGLVWDQWLDWHGORFDOHVWKURXJKWKHVRSKLVWLFDWHG JOREDOFRRUGLQDWLRQRIWLPHDQGVSDFH·LELG7KLVHPSKDVLVHVRQFHPRUHWKHLPSRUWDQFHRIWKHWHFKQRORJ\ DQGUHJXODWLRQZKLFKPDNHWKLVFRQWURODWDGLVWDQFHSRVVLEOH $QDO\VHV RI WKH FRQVHTXHQFHV RI JOREDOLVDWLRQ RWKHUV SRLQW RXW VKRXOG QRW REOLWHUDWH IURP YLHZ SDUDOOHOSURFHVVHVRIORFDOLVDWLRQ$SSDGXUDL$QLGHDOLVHGYLHZWKDWFRPPRGLWLVDWLRQLVQHFHVVDULO\ EDG UHVXOWLQJ LQ WKH GHVWUXFWLRQ RI VRPHKRZ ¶JRRG· ORFDO FXVWRPDU\ SUDFWLFHV QHHGV WR EH TXHVWLRQHG 3RWWLHU /RFDO SURFHVVHV RI QHJRWLDWLRQ DFFRPPRGDWLRQ DQG UHVLVWDQFH DUH DOO SDUW RI HYHU\GD\ VWUXJJOHV ZKLFK PHDQ WKDW ORFDO DFWRUV GRKDYH VRPH DJHQF\ $UFH DQG/RQJ DQG DUH QRW VLPSO\ ¶SDVVLYHSDZQVDWWKHPHUF\RIJOREDOLVLQJIRUFHV·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¶IRRG DYDLODELOLW\GHFOLQH·K\SRWKHVLVDVDQH[SODQDWLRQ6HQDUJXHGWKDW¶VFDUFLW\LVWKHFKDUDFWHULVWLFRISHRSOH QRWKDYLQJHQRXJK«LWLVQRWWKHFKDUDFWHULVWLFRIWKHUHQRWEHLQJHQRXJK:KLOHWKHODWWHUFDQEHWKH FDXVHRIWKHIRUPHULWLVRQHRIPDQ\FDXVHV·6HQ7KXVHQWLWOHPHQWIDLOXUHV²ZKHUHWKHUHLVD FROODSVHLQWKHPHDQVRIFRPPDQGRYHUIRRG²DUHVHHQWREHRQHRIWKHPDLQFDXVHVRIIDPLQHDQGIRRG LQVHFXULW\ 6XEVHTXHQWIDPLQHHSLVRGHVGXULQJWKHPLGV²QRWDEO\LQWKH+RUQRI$IULFD²DJDLQSXWWKH VSRWOLJKWRQWKHLVVXH RI HQWLWOHPHQW IDLOXUH LQ WKH PLGVWRIIRRGSOHQW\ DW OHDVW DW WKH DJJUHJDWH OHYHO 7KXVGXULQJWKHVDQGLQWRWKHVPRVWFRPPHQWDWRUVDSSURDFKHGIRRGVHFXULW\LVVXHVWKURXJK DQ ¶HQWLWOHPHQWV· OHQV 7KHUH ZHUH D UDQJH RI FULWLTXHV DGDSWDWLRQV DQG H[WHQVLRQV RI 6HQ·V RULJLQDO DUJXPHQW HJ 'UH]H DQG 6HQ YRQ %UDXQ HW DO :DWWV 'HYHUHX[ EXW WKH EDVLF DUJXPHQWWKDWLWZDVLVVXHVRIDFFHVVDQGFRQWUROUDWKHUWKDQSURGXFWLRQDQGDYDLODELOLW\ZKLFKZHUHWKH PRVWFULWLFDOUHPDLQHGODUJHO\XQGLVSXWHG 7KH UHWUHDW RI WKH ¶IRRG DYDLODELOLW\SURGXFWLRQ·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¶HQWLWOHPHQW SURPRWLRQ· HJ LQIUDVWUXFWXUH GHYHORSPHQW PDUNHW UHIRUP ODQGDVVHW UHGLVWULEXWLRQ DQG ¶HQWLWOHPHQWSURWHFWLRQ·HJYDULRXVVDIHW\QHWSURJUDPPHVHJ'Uq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¶VOLYHOLKRRGVLV LPSRUWDQW 8QGHUVWDQGLQJIRRGVHFXULW\LQDEURDGHUFRQWH[WEHFDPHDIRFXVIRUUHVHDUFKDQDO\VLVSDUWLFXODUO\IURP WKHV%XLOGLQJRQDORQJWUDGLWLRQRIGHWDLOHGYLOODJHEDVHGHWKQRJUDSK\YLOODJHVXUYH\VDQGIDUPLQJ V\VWHPVUHVHDUFKQHZZRUNIRFXVHGLQGHWDLORQKRZSRRUSHRSOHFRSHZLWKDQGDGDSWWRIRRGLQVHFXUH VLWXDWLRQV HJ GH :DDO 6ZLIW 'DYLHV 6FRRQHV HW DO $ IRFXV RQ VHTXHQFHV RI ¶FRSLQJ VWUDWHJLHV· &RUEHWW KLJKOLJKWHG KRZ D UDQJH RI WDFWLFV ZDV XVHG E\ GLIIHUHQW SHRSOH RYHU GURXJKWSHULRGV $V'H :DDO SRLQWHG RXW IRU 'DUIXU LQ 6XGDQ SHRSOH ZHUH SUHSDUHG WR IRUHJR IRRG LQ RUGHU WR SURWHFW NH\ DVVHWV 'XULQJ GURXJKW SHULRGV ZKHQ FURSV KDG IDLOHG RIIIDUP LQFRPHV VDYLQJVDQGDVVHWGLVSRVDOZHUHDOOVHHQWREHNH\6ZLIW ,QRWKHUZRUGVDJULFXOWXUDORUSDVWRUDOSURGXFWLRQZDVRQO\RQHHOHPHQWRIDEURDGHUSRUWIROLRRI OLYHOLKRRG VWUDWHJLHV 7KXV UDWKHU WKDQ WDONLQJ RI ¶IRRG VHFXULW\· D PRUH DSSURSULDWH WHUP ² ¶OLYHOLKRRG VHFXULW\·²HPHUJHG)RRGSURGXFWLRQDQGDYDLODELOLW\ZHUHVHHQDJDLQWREHRQO\RQHLIVLJQLILFDQWSDUW RIWKHHTXDWLRQ)RUXQGHUVWDQGLQJYXOQHUDELOLW\DQGFRSLQJVWUDWHJLHVDZLGHUUDQJHRILVVXHVKDGWREH ORRNHGDW %XLOGLQJ RQ WKHVH GHEDWHV D IRFXV RQ ¶VXVWDLQDEOH OLYHOLKRRGV·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¶*UHHQ5HYROXWLRQ·SRVLWLRQLQLWVYDULRXVJXLVHVLVWKHPRVWH[SOLFLWDERXW WKH UROH RI \LHOG HQKDQFLQJ WHFKQRORJLHV IRU IRRG VHFXULW\ 7KLV KDV EHHQ GULYHQ E\ WHFKQRORJLVWV DJURQRPLVWV EUHHGHUV DQG HFRQRPLVWV LQWHUHVWHG LQ DJJUHJDWH SDWWHUQV RI GHPDQG DQG VXSSO\ 7KH ¶VXVWDLQDEOH DJULFXOWXUH· SHUVSHFWLYH LV DOVR RIWHQ WHFKQRORJ\ IRFXVHG EXW UHFRJQLVHV VRPH RI WKH OLPLWDWLRQV RI KLJK LQSXW RSWLRQV VHWWLQJ D WHFKQRORJ\ GHYHORSPHQW DJHQGD ZLWKLQ D EURDGHU XQGHUVWDQGLQJ RI DJURHFRORJ\ DQG IDUPLQJ V\VWHPV 7KH ¶QXWULWLRQ· SHUVSHFWLYH GULYHQ E\ QXWULWLRQLVWV DQG KHDOWK SUDFWLWLRQHUV LQ SDUWLFXODU SDUDOOHOV PXFK RI WKH SURGXFWLRQ JDS GHEDWH EXW HPSKDVLVHV WKH LPSRUWDQFHRIWKHUDQJHRIQXWULWLRQDOLQSXWVUDWKHUWKDQDJJUHJDWHSURGXFWLRQ 7KH¶WUDGH·¶DJULIRRGLQGXVWU\UHVWUXFWXULQJ·¶DFFHVVDQGHQWLWOHPHQWV·DQG¶OLYHOLKRRGV·SHUVSHFWLYHV E\FRQWUDVWPDNHOHVVRIWKHSRWHQWLDOVRID¶IRRGJDS·EXWHPSKDVLVHPRUHWKHVRFLDOHFRQRPLFSROLWLFDO DQGLQVWLWXWLRQDOIDFWRUVWKDWHQFRXUDJHRULPSHGHDFFHVVWRIRRGE\SRRUSHRSOH7KH¶WUDGH·SHUVSHFWLYH KDV EHHQ GRPLQDWHG E\ GLVFXVVLRQV E\ WUDGH HFRQRPLVWV RIWHQ ZRUNLQJ DW D TXLWH PDFUROHYHO ZLWK DQ LQFUHDVLQJIRFXVRQJOREDOWUDGLQJV\VWHPV7KH¶DJULIRRGLQGXVWU\UHVWUXFWXULQJ·FRPPHQWDWRUVDJDLQORRN DWWKHELJJHUSLFWXUHEXWIURPDPRUHVWUXFWXUDOLVWSROLWLFDOHFRQRP\DQJOH%\FRQWUDVWWKRVHHPSKDVLVLQJ ¶DFFHVVDQGHQWLWOHPHQWV·DQG¶OLYHOLKRRGV·KDYHXVXDOO\GHYHORSHGWKHLULQVLJKWVIURPGHWDLOHGPLFUROHYHO HFRQRPLFDQWKURSRORJLFDODQGLQVWLWXWLRQDOVWXGLHV $OOWKHVHSHUVSHFWLYHVKDYHLQIRUPHGSROLF\WKLQNLQJWRYDU\LQJGHJUHHVRYHUWKHODVWGHFDGHV)DOFRQ HW DO 0D[ZHOO 0D[ZHOO LGHQWLILHV GLIIHUHQW SKDVHV PRYLQJ IURP WKH FRQFHUQV RYHU JOREDOIRRGVHFXULW\LQWKHODWWHUKDOIRIWKHVIROORZLQJRQIURPWKH6DKHOLDQIDPLQHVRI²DQG WKH:RUOG)RRG&RQIHUHQFHRI:LWKWKHKLJKOLJKWLQJRIWKHLVVXHRIHQWLWOHPHQWVE\6HQLQ DQGUHIOHFWLQJRQWKH$IULFDQGURXJKWVRIWKHPLGVDVKLIWLQHPSKDVLVFRXOGEHGLVFHUQHGWRZDUG LVVXHVRIDFFHVVDQGHQWLWOHPHQW:KLOH0D[ZHOOREVHUYHVDUHGXFWLRQLQLQWHUHVWLQLVVXHVRISRYHUW\DQG IRRG VHFXULW\ GXULQJ SDUW RI WKH V GXH WR WKH HPSKDVLV RQ PDFURHFRQRPLF UHIRUP DQG VWUXFWXUDO DGMXVWPHQWWKHODWWHUSDUWRIWKHVKHGHVFULEHVDVWKH¶JROGHQDJH·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¶H[WUHPH0DOWKXVLDQVZHUHVHHQRII·DQG¶DUHPDUNDEO\ZHOOEDODQFHG· GHFODUDWLRQ HPHUJHG +RZHYHU WR RWKHUV WKLV ¶EDODQFH· ZDV D IXGJHG FRPSURPLVH EHWZHHQ RIWHQ VLJQLILFDQWO\GLYHUJHQWYLHZSRLQWVZLWKOLWWOHFRQVHQVXVRQVWUDWHJLFGLUHFWLRQGHYHORSHGDQGSUDFWLFDOO\QR FRPPLWPHQWVDVVRFLDWHGZLWKWKH3ODQRI$FWLRQ )RRGVHFXULW\LQWKHQHZPLOOHQQLXPQHZFRQWH[WV" ,Q WKH ILYH \HDUV VLQFH WKH :RUOG )RRG 6XPPLW KRZ KDYH WKH GHEDWHV PRYHG RQ" :KDW LV WKH IRRG VHFXULW\VLWXDWLRQLQGLIIHUHQWSDUWVRIWKHZRUOGDWWKHWXUQRIWKHFHQWXU\":KDWDUHWKHSURVSHFWVIRUWKH IXWXUH" $UH WKHUH QHZ FRQWH[WV H[LVWLQJ RU HPHUJLQJ ZKLFK LQIOXHQFH WKH GHEDWH DERXW WKH UROH RI WHFKQRORJ\LQWKHIXWXUHRIGHYHORSLQJZRUOGDJULFXOWXUH" 7RGD\DOPRVWPLOOLRQSHRSOHDUHHVWLPDWHGWREH¶IRRGLQVHFXUH·)$2ZLWKVRPH PLOOLRQ OLYLQJ EHORZ WKH GROODUDGD\ SRYHUW\ OLQH :RUOG %DQN )RRG LQVHFXULW\ DQG SRYHUW\ LV LQFUHDVLQJO\FRQFHQWUDWHGSDUWLFXODUO\LQ$IULFDDQG6RXWK$VLD)$2ZKHUHE\VRPHSHU FHQWRIWKHZRUOG·V¶IRRGLQVHFXUH·SHRSOHZLOOOLYH)$2$WDJOREDOOHYHOWKHUHLVFOHDUO\HQRXJK IRRGWRJRURXQGDQGGHSHQGLQJRQWKHSURMHFWLRQVWKLVLVOLNHO\WREHWKHFDVHIRUVRPHWLPH'\VRQ ,IWKHZRUOG·VIRRGVXSSO\KDGEHHQHTXDOO\GLVWULEXWHGLQIRUH[DPSOHLWZRXOGKDYHEHHQ HQRXJK WRIHHG ELOOLRQSHRSOH 1XIILHOG %XW DV )6* REVHUYH ¶7KH PDLQ GHEDWHV FRQFHUQQRWZKHWKHUWKHZRUOGFDQVXSSO\JURZLQJGHPDQGEXWZKHWKHULWFDQVXSSO\LWLQDVXVWDLQDEOH PDQQHUDWDQDIIRUGDEOHSULFH· :KLOHPXFKFXUUHQWGLVFXVVLRQIRFXVHVRQWKHQHHGWRIHHGDJURZLQJZRUOGSRSXODWLRQWKHPRUH H[WUHPH YHUVLRQV RI 0DOWKXVLDQVW\OH DSRFDO\SVH DUH QRW HYLGHQW ,QVWHDG VRPH WDON RI D ¶GHPRJUDSKLF ZLQGRZRIRSSRUWXQLW\·/LSWRQFUHDWHGE\WKHVORZLQJRIJURZWKLQZRUOGSRSXODWLRQV 4XLWH ZKR WKLV ZDV WKH ¶JROGHQ DJH· IRU LV QRW FOHDU EXW , DVVXPH WKDW KH LV UHIHUULQJ WR WKH JURZLQJ ¶IRRG VHFXULW\·LQGXVWU\LQWKHDLGDJHQFLHVUDWKHUWKDQWKHSHRSOHRIWKH+RUQRI$IULFD 86SHUGD\DW333 $QXPEHURIIRUHFDVWLQJPRGHOVKDYHEHHQGHYHORSHGWRORRNDWJOREDOIRRGGHPDQGDQGVXSSO\HJ,)35,·V JOREDOIRRGPRGHO,QWHUQDWLRQDO)RRG3ROLF\DQG 7UDGH 6LPXODWLRQ 0RGHO >,)376,0@ $V ZLWK DQ\ PRGHOV WKH\DUHEDVHGRQDQXPEHURIDVVXPSWLRQVNH\DPRQJWKHVHDUHRQWKHVXSSO\VLGHSURMHFWLRQVRIIXWXUHFURS \LHOGJURZWKDQGGHPDQGIRUJUDLQVWKURXJKFKDQJLQJFRQVXPSWLRQSDWWHUQV 1HYHUWKHOHVVWKH¶IHHGLQJDKXQJU\ZRUOG·QDUUDWLYHUHPDLQVDFRUHSROLF\FRQFHUQDQGLVUHIOHFWHGLQWKH MXVWLILFDWLRQV IRU PRVW SROLF\ SRVLWLRQV RI PRVW LQWHUQDWLRQDO RUJDQLVDWLRQV FRQFHUQHG ZLWK IRRG DQG DJULFXOWXUDO LVVXHV VHH EHORZ $ UHFHQW IOXUU\ RI LQFUHDVLQJO\ VRSKLVWLFDWHG ² EXW LQHYLWDEO\ DVVXPSWLRQ ODGHQ²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¶:RUOG)RRG3URVSHFWV·SURGXFHGE\,)35,3LQVWUXS$QGHUVHQHWDO DUJXHVWKDWGXHWRLQFUHDVLQJSRSXODWLRQVJURZLQJXUEDQLVDWLRQDQGULVLQJLQFRPHVWKHUHZLOOEHDSHU FHQWHVFDODWLRQRIGHPDQGIRUFHUHDOVRYHUWKHQH[W\HDUV$JURZLQJGHPDQGIRUPHDWLVUHVXOWLQJLQD ¶OLYHVWRFNUHYROXWLRQ·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¶IRRG JDS· EDVHG RQ SURMHFWLRQV RI SRSXODWLRQ LQFUHDVH XUEDQLVDWLRQ DQG FKDQJLQJ IRRG FRQVXPSWLRQ SDWWHUQV 7KH ,)35, PRGHO GDWD IRU H[DPSOH LV UHJXODUO\ TXRWHG DV D NH\ MXVWLILFDWLRQRIWKHQHHGIRUPRUHLQYHVWPHQWLQ\LHOGJURZWK3HU3LQVWUXS$QGHUVHQWKHQWKH'LUHFWRU *HQHUDORI,)35,DQGFROOHDJXHVDUJXH $ERXWPLOOLRQSHRSOHZLOOEHDGGHGWRWKHZRUOG·VSRSXODWLRQHYHU\\HDUEHWZHHQDQG « 3HU FDSLWD LQFRPHV DUH H[SHFWHG WR LQFUHDVH LQ DOO PDMRU GHYHORSLQJ UHJLRQV RYHU WKLV SHULRG 0HHWLQJWKHQHHGVRIDJURZLQJDQGXUEDQLVLQJSRSXODWLRQZLWKULVLQJLQFRPHVZLOOKDYHSURIRXQG LPSOLFDWLRQVIRUWKHZRUOG·VDJULFXOWXUDOSURGXFWLRQDQGWUDGLQJV\VWHPVLQFRPLQJGHFDGHV 3LQVWUXS$QGHUVHQHWDO ,QDFRPPHQWDU\RQWKH&*,$5SRVLWLRQRQELRWHFKQRORJ\PRUHEURDGO\DQHWKLFDOVWDQFHLVWDNHQRQ WKHQHHGWRDGGUHVVWKH¶SURGXFWLYLW\JDS·WKURXJKWHFKQRORJLFDOGHYHORSPHQW 7KHELRWHFKQRORJ\GHEDWHFOHDUO\H[WHQGVIDUEH\RQGTXHVWLRQVRIFRQWULEXWLRQVWRIRRGVHFXULW\²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¶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«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« )$2DSDUD 6LPLODUOLQHVRIDUJXPHQWDUHSXWIRUZDUGE\RIILFLDOVIURPGHYHORSLQJFRXQWULHVSDUWLFXODUO\IURP&KLQD DQG,QGLDZKHUHSRSXODWLRQJURZWKLVH[SHFWHGWREHODUJHVW)RUH[DPSOH=KDQJDUJXHVIRUWKHIXWXUH UROHRIELRWHFKQRORJ\LQ&KLQDLQWKHVHWHUPVDWDPDMRU&*,$5FRQIHUHQFH ,W LV SURMHFWHG WKDW WKH &KLQHVH SRSXODWLRQ ZLOO UHDFK LWV SHDN RI ELOOLRQ E\ WKH \HDU &RQVHTXHQWO\GHPDQGIRUIRRGSURGXFWLRQLVDOVRSURMHFWHGWREHLQFUHDVHGE\DWOHDVWSHUFHQWLQ RUGHU WR NHHS XS ZLWK WKH SDFH RI SRSXODWLRQ JURZWK 0RUHRYHU « YDVW XUEDQLVDWLRQ ZLOO FRQWLQXRXVO\UHVXOWLQWKHORVVHVRIIDUPODQGDQGRWKHUQDWXUDOUHVRXUFHV7KHUHIRUHWKHRQO\YLDEOH DSSURDFK WR LQFUHDVLQJ IRRG SURGXFWLRQ LV WR LQFUHDVH WKH SURGXFWLYLW\ RI XQLW DUHD RI IDUPODQG +RZHYHUVWDWLVWLFVVKRZWKDWWKHWRWDOSURGXFWLRQVRIWKHPDMRUJUDLQFURSVKDYHVKRZQGHFUHDVHG UDWHVRIJURZWKLQWKHODVWGHFDGH«7KHUHLVDOVRDKXJHGHPDQGIRUTXDOLW\LPSURYHPHQWRIIRRG SURGXFW«>$@OPRVWDOOWKHZLGHO\XVHGFXOWLYDWRUVDQGK\EULGVKDYHYHU\SRRUFRRNLQJDQGHDWLQJ TXDOLWLHV«$QRWKHUPDMRUSUREOHPLVGHJUDGDWLRQRIWKHHQYLURQPHQW =KDQJ $QXPEHURIYRFDODGYRFDWHVRIELRWHFKQRORJ\VROXWLRQVPDNHXVHRIWKLVVW\OHRIDUJXPHQWWRSURPRWH ZKDW PLJKW EH WHUPHG DQ H[WUHPH ¶WHFKQRRSWLPLVW· DJHQGD 1RUPDQ %RUODXJ IRU H[DPSOH WKH 1REHO ODXUHDWHZLWKDSDVVLRQDWHEHOLHILQWKHSRWHQWLDOVRIWHFKQRORJLFDOWUDQVIRUPDWLRQEDVHGRQKLVH[SHULHQFHV DV D EUHHGHU LQ WKH ILUVW *UHHQ 5HYROXWLRQ LV D ILUP DGYRFDWH RI WKH IXWXUH SRWHQWLDOV RI DJULFXOWXUDO ELRWHFKQRORJ\ (YHQLIFXUUHQWSHUFDSLWDIRRGFRQVXPSWLRQVWD\VFRQVWDQWSRSXODWLRQJURZWKZRXOGUHTXLUHWKDW ZRUOGIRRGSURGXFWLRQLQFUHDVHVE\ELOOLRQJURVVWRQV²RUSHUFHQW²EHWZHHQDQG +RZHYHULIGLHWVLPSURYHDPRQJWKHGHVWLWXWHZKROLYHLQKXQJHUHVWLPDWHGWREHELOOLRQSHRSOH OLYLQJPDLQO\LQ$VLDDQG$IULFD ZRUOG IRRG GHPDQG FRXOGLQFUHDVH E\ SHU FHQW ² WR DERYH ELOOLRQJURVVWRQV²RYHUWKLV\HDUSHULRG«7RPHHWWKHSURMHFWHGIRRGGHPDQGV«WKHDYHUDJH \LHOGRIDOOFHUHDOVPXVWEHLQFUHDVHGE\SHUFHQWEHWZHHQDQGWKH\HDU«>*@HQHWLF HQJLQHHULQJZLOOSHUPLWDQRWKHUSHUFHQWLQFUHDVHLQ\LHOGVRYHUWKHQH[W\HDUV %RUODXJ 6LPLODUO\&63UDNDVKIURP7XVNDJHH8QLYHUVLW\LQWKH86LVDELRWHFKQRORJLVWRULJLQDOO\IURP,QGLDZLWK VLPLODUO\ ILUP YLHZV RQ WKH WUDQVIRUPDWRU\ WHFKQRORJLFDO SRWHQWLDOV +H LQLWLDWHG D SHWLWLRQ RI VFLHQWLVWV VXSSRUWLYHRIELRWHFKQRORJ\GUDIWHGLQWKHIROORZLQJWHUPV :H WKH XQGHUVLJQHG PHPEHUV RI WKH VFLHQWLILF FRPPXQLW\ EHOLHYH WKDW UHFRPELQDQW '1$ WHFKQLTXHVFRQVWLWXWHSRZHUIXODQGVDIHPHDQVIRUWKHPRGLILFDWLRQRIRUJDQLVPVDQGFDQFRQWULEXWH VXEVWDQWLDOO\LQHQKDQFLQJTXDOLW\RIOLIHE\LPSURYLQJDJULFXOWXUHKHDOWKFDUHDQGWKHHQYLURQPHQW «7KHUHVSRQVLEOHJHQHWLFPRGLILFDWLRQRISODQWVLVQHLWKHUQHZQRUGDQJHURXV«7KHDGGLWLRQRI QHZRUGLIIHUHQWJHQHVLQWRDQRUJDQLVPE\UHFRPELQDQW'1$WHFKQLTXHVGRHVQRWLQKHUHQWO\SRVH QHZ RU KHLJKWHQHGULVNV UHODWLYHWR WKHPRGLILFDWLRQ RIRUJDQLVPV E\ PRUH WUDGLWLRQDO PHWKRGV « 7KHQRYHOJHQHWLFWRROVRIIHUJUHDWHUIOH[LELOLW\DQGSUHFLVLRQLQWKHPRGLILFDWLRQRIFURSSODQWV« 7KURXJKMXGLFLRXVGHSOR\PHQWELRWHFKQRORJ\FDQDOVRDGGUHVVHQYLURQPHQWDOGHJUDGDWLRQKXQJHU DQG SRYHUW\ LQ WKH GHYHORSLQJ ZRUOG E\ SURYLGLQJ LPSURYHG DJULFXOWXUDO SURGXFWLYLW\ DQG JUHDWHU QXWULWLRQDOVHFXULW\ $J%LR:RUOG ,QGXVWU\SXEOLFUHODWLRQVPDWHULDOYHU\RIWHQSLFNVXSWKLVOLQHRIDUJXPHQWLQDGYRFDWLQJWKHLUSRVLWLRQ :KLOH0RQVDQWR·VJUDQGFODLPVPDGHLQQHZVSDSHUDGYHUWVLQ(XURSHWKDWELRWHFKQRORJ\FRXOG¶IHHGWKH ZRUOG·ZHUHVHHQE\VRPHDVVRPHZKDWRYHUEORZQDVLPLODUUKHWRULFFDQEHGHWHFWHGLQPRVWLQGXVWU\ EDVHGFRPPHQWDULHV $SSOLFDWLRQVRIELRWHFKQRORJ\LQDJULFXOWXUHDUHLQWKHLULQIDQF\«7KHUDSLGSURJUHVVEHLQJPDGHLQ JHQRPLFVPD\HQKDQFHSODQWEUHHGLQJWRKHOSVHFXUHEHWWHUDQGPRUHFRQVLVWHQW\LHOGV7KLVZRXOG EHRIJUHDWEHQHILWWRWKRVHIDUPLQJPDUJLQDOODQGVZRUOGZLGH$UDEOHODQGLVGLVDSSHDULQJDQGHYHQ LIHYHU\DFUHLVPD[LPLVHG XVLQJ FRQYHQWLRQDO DJULFXOWXUH ZHVWDUW WR FRPH XSVKRUW LI ZH KDYH WR IHHGELOOLRQSHRSOHLQDQGEH\RQG« $FFRUGLQJ WR WKH 8QLWHG 1DWLRQV PLOOLRQ SHRSOH ZRUOGZLGH DUH DOUHDG\ FKURQLFDOO\ PDOQRXULVKHG7KH81)RRGDQG$JULFXOWXUH2UJDQLVDWLRQHVWLPDWHVWKDWWZRRXWRIILYHFKLOGUHQLQ WKH GHYHORSLQJ ZRUOG DUH VWXQWHG RQH LQ WKUHH LV XQGHUZHLJKW DQG RQH LQ WHQ LV ¶ZDVWHG· GXH WR XQGHUQRXULVKPHQW%LRWHFKQRORJ\DORQHZRQ·WVROYHWKHSUREOHPVRIKXQJHUDQGPDOQXWULWLRQEXWLW FDQSOD\DQLPSRUWDQWUROHLQDOOHYLDWLQJWKHPE\PDNLQJLWSRVVLEOHWRJURZPRUHIRRGZLWKDGGHG QXWULWLRQRQOHVVODQGDQGXQGHUWRXJKFRQGLWLRQV 'X3RQWDQG:LOOLDP 7KHUH DUH PDQ\ KRZHYHU ZKR GLVSXWH WKHVH FODLPV RI D WHFKQRORJ\EDVHG UHYROXWLRQ SRLQWLQJ WR WKH OLPLWVRIWKHHDUOLHU¶*UHHQ5HYROXWLRQ·GLVFXVVHGDERYH,VVXHVRIGLVWULEXWLRQDQGDFFHVVDUHKLJKOLJKWHG LQSDUWLFXODUE\DFDGHPLFV1*2VDQGRWKHUDFWLYLVWV7KHUHLVHQRXJKIRRGWRWKHIHHGWKHZRUOGWKH\ DUJXHDGGUHVVLQJIRRGLQVHFXULW\LVDPDWWHURIWDFNOLQJLQHTXDOLW\ :KLOH FRPSDQLHV FODLP *0 FURSV ZLOO IHHG WKH ZRUOG LQ IDFW WKH\ DUH ODUJHO\ LUUHOHYDQW WR HQGLQJ KXQJHUDURXQGWKHZRUOGWKH\DUHGULYHQE\FRPPHUFLDOLQWHUHVWVQRWDFRQFHUQWR¶IHHGWKHZRUOG· RUUDLVHSURGXFWLYLW\7KHUHDOFKDOOHQJHLVSRYHUW\HUDGLFDWLRQODQGUHIRUPZDWHUFRQVHUYDWLRQDQG LQFUHDVLQJ SURGXFWLRQ E\ SURPRWLQJ PL[HG ORZ FKHPLFDOXVH IDUPLQJ ZKLFK IDYRXUV QDWXUDOO\ LPSURYHGDQGORFDOO\DGDSWHGSODQWV«3HRSOHJRKXQJU\EHFDXVHWKH\DUHSRRUDQGFDQQRWDIIRUG IRRGRUEHFDXVHWKH\GRQRWKDYHODQGRQZKLFKWRJURZLW« &KULVWLDQ$LG 6LPLODUO\ 3HWHU 5RVVHW FR'LUHFWRU RI WKH 86EDVHG 1*2 )RRG )LUVW7KH ,QVWLWXWH IRU )RRG DQG 'HYHORSPHQW 3ROLF\ DQG 0LJXHO $OWLHUL 3URIHVVRU RI (QYLURQPHQWDO 6FLHQFH DW WKH 8QLYHUVLW\ RI &DOLIRUQLDDW%HUNHOH\ZULWH %LRWHFKQRORJ\ FRPSDQLHV RIWHQ FODLP WKDW JHQHWLFDOO\ PRGLILHG RUJDQLVPV *02V ² VSHFLILFDOO\ JHQHWLFDOO\DOWHUHGVHHGV²DUHHVVHQWLDOVFLHQWLILFEUHDNWKURXJKVQHHGHGWRIHHGWKHZRUOGSURWHFWWKH HQYLURQPHQW DQG UHGXFH SRYHUW\ LQ GHYHORSLQJ FRXQWULHV 7KLV YLHZ UHVWV RQ WZR FULWLFDO DVVXPSWLRQV ERWK RI ZKLFK ZH TXHVWLRQ 7KH ILUVW LV WKDW KXQJHU LV GXH WR D JDS EHWZHHQ IRRG SURGXFWLRQDQGKXPDQSRSXODWLRQGHQVLW\RUJURZWKUDWH7KHVHFRQGLVWKDWJHQHWLFHQJLQHHULQJLV WKHRQO\RUEHVWZD\WRLQFUHDVHDJULFXOWXUDOSURGXFWLRQDQGWKXVPHHWIXWXUHIRRGQHHGV«7KHUHLV QRUHODWLRQVKLSEHWZHHQWKHSUHYDOHQFHRIKXQJHULQDJLYHQFRXQWU\DQGLWVSRSXODWLRQ«7KHZRUOG WRGD\SURGXFHVPRUHIRRGSHULQKDELWDQWWKDQHYHUEHIRUH«7KHUHDOFDXVHVRIKXQJHUDUHSRYHUW\ LQHTXDOLW\DQGODFNRIDFFHVV« $OWLHULDQG5RVVHW *OREDOWUDGHUHJLPHVDUHWKHVXEMHFWRIFULWLTXHE\VRPH)RUH[DPSOH 7KHVH WUDGH DJUHHPHQWV >:72 $JULFXOWXUH $JUHHPHQW $3(& IUHH WUDGH ]RQH@ LPSRVH IXUWKHU FRQVWUDLQWV RQ WKH DELOLW\ RI GHYHORSLQJ FRXQWULHV WR SURPRWH IRRG VHFXULW\ E\ ZD\ RI LPSRUW UHVWULFWLRQV DQG JXDUDQWHHG SULFH VXSSRUWV IRU IDUPHUV « 'HVSLWH WKH VRFDOOHG OHYHO SOD\LQJ ILHOG XQGHUWKH:72WKHVHGHYHORSHGFRXQWULHVFRQWLQXHWRVHOOVXEVLGLVHGDJULFXOWXUHSURGXFWVRQWRWKH ZRUOGPDUNHWWKHUHE\GHSUHVVLQJSULFHV«:LWKWKHLQIOX[RIFKHDSJUDLQVRQWRWKHZRUOGPDUNHW DQGWKHUHVWULFWLRQVLPSRVHGRQGHYHORSLQJFRXQWULHVWRSURWHFWWKHLUGRPHVWLFSURGXFHUVWKHWKUHDW WRIRRGVHFXULW\LVYHU\UHDODQGJURZLQJ %,27+$,HWDO²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«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¶JROGHQ ULFH·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« GLYHUWV UHVRXUFHV ZKLFK ZRXOGEHEHWWHUVSHQWWDFNOLQJSRYHUW\GLUHFWO\RUIURPH[LVWLQJLQWHUYHQWLRQVWUDWHJLHV«*0FURSV ZRXOGKDYHDQHWGHWULPHQWDOHIIHFW 'LEEDQG0D\HU 2WKHUVPHDQZKLOHDFFHSWWKHSRWHQWLDOUROHRIELRWHFKQRORJ\VROXWLRQVEXWUHFRJQLVHWKHLPSRUWDQFHRI FRPELQLQJWKHVHZLWKRWKHUWHFKQRORJLHVLQZKDW*RUGRQ&RQZD\KDVGXEEHG D ¶'RXEO\*UHHQ 5HYROXWLRQ· , EHOLHYH ZH QHHG D « 'RXEO\ *UHHQ 5HYROXWLRQ WKDW UHSHDWV WKH VXFFHVVHV RI WKH ROG EXW LQ D PDQQHU WKDW LV HQYLURQPHQWDOO\ IULHQGO\ DQG PXFK PRUH HTXLWDEOH 7KLV LV JRLQJ WR WDNH WKH DSSOLFDWLRQRIPRGHUQHFRORJ\LQVXFKDUHDVDVLQWHJUDWHGSHVWPDQDJHPHQWDQGWKHGHYHORSPHQWRI VXVWDLQDEOH DJULFXOWXUDO V\VWHPV ,W LV DOVR JRLQJ WR QHHG PXFK JUHDWHU SDUWLFLSDWLRQ LQ WKH GHYHORSPHQWSURFHVVE\IDUPHUVWKHPVHOYHV%XW,DOVREHOLHYHLWLVJRLQJWRQHHGWKHDSSOLFDWLRQRI PRGHUQELRWHFKQRORJ\²WRKHOSUDLVH\LHOGFHLOLQJVWRSURGXFHFURSVUHVLVWDQWWRGURXJKWVDOLQLW\ SHVWVDQGGLVHDVHVDQGWRSURGXFHQHZFURSSURGXFWVRIJUHDWHUQXWULWLRQDOYDOXH« &RQZD\ 06 6ZDPLQDWKDQ IRUPHU 'LUHFWRU *HQHUDO RI ,55, DQG PRUH UHFHQWO\ WKH IRXQGHU RI WKH 06 6ZDPLQDWKDQ)RXQGDWLRQLQ&KHQQDL,QGLDWDNHVDVLPLODUOLQHWDONLQJRIWKH¶HYHUJUHHQUHYROXWLRQ· %HFDXVHODQGDQGZDWHUIRUDJULFXOWXUHDUHGLPLQLVKLQJUHVRXUFHVWKHUHLVQRRSWLRQEXWWRSURGXFH PRUH IRRG DQG RWKHU DJULFXOWXUDO FRPPRGLWLHV IURP OHVV DUDEOH ODQG DQG LUULJDWLRQ ZDWHU ,Q RWKHU ZRUGVWKHQHHGIRUPRUHIRRGKDVWREHPHWWKURXJKKLJKHU\LHOGVSHUXQLWVRIODQGZDWHUHQHUJ\ DQG WLPH :H QHHG WR H[DPLQH KRZ VFLHQFH FDQ EH PRELOLVHG WR UDLVH IXUWKHU WKH ELRORJLFDO SURGXFWLYLW\ FHLOLQJ ZLWKRXW DVVRFLDWHG KDUP 6FLHQWLILF SURJUHVV RQ WKH IDUPV DV DQ ¶HYHUJUHHQ UHYROXWLRQ·PXVWHPSKDVLVHWKDWWKHSURGXFWLYLW\DGYDQFHLVVXVWDLQDEOH«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¶VXVWDLQDELOLW\· DQG ¶DJURHFRORJ\· EHLQJ XVHG WR PDVN DQ XQGHUO\LQJ FRPPLWPHQW WR D KLJKWHFK ELRWHFKQRORJ\ DSSURDFK ,QVWHDG WKH\ DUJXH FKRLFHV KDYH WR EH PDGH :LWK OLPLWHG SXEOLF IXQGV D FRPPLWPHQW WR D SURSRRU IRRG VHFXULW\ RULHQWHG DJULFXOWXUH PXVW VWDUW ZLWK H[LVWLQJ WHFKQRORJLHV DQG LQWHJUDWHG DJURHFRORJLFDO VROXWLRQV >7@KH DJURHFRORJLFDO DSSURDFK «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¶ELRWHFKQRORJ\ IRU WKH SRRU· VFHQDULR JLYHQ WKH VWUXFWXUH RI WKH ELRWHFKQRORJ\LQGXVWU\WKHFRVWVRIELRWHFKQRORJ\5DQG'DQGWKHOLPLWHGSXEOLFUHVHDUFKFDSDFLW\LQ GHYHORSLQJFRXQWULHV&RQZD\SRLQWVRXW 0RUHLPSRUWDQWWKDQWKHSRWHQWLDOKD]DUGVDWOHDVWWRP\PLQGLVWKHTXHVWLRQRIZKREHQHILWVIURP ELRWHFKQRORJ\«6RIDUWKHIRFXVRI>WKH¶ELJVL[·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·V QHHGV ² VWDSOH FURSV GURXJKW UHVLVWDQFH VDOLQH WROHUDQFHGLVHDVHLQVHFWUHVLVWDQFHDQGVRRQ²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¶ELW RI ERWK· FRPSURPLVHV ² ELRWHFKQRORJ\ DSSOLFDWLRQV KDYH SRWHQWLDOV IRU DGGUHVVLQJ VRPH HOHPHQWVRIIRRGVHFXULW\SUREOHPVLQGHYHORSLQJFRXQWULHVEXWVXFKSRWHQWLDOVFDQEHDFKLHYHGRQO\ZLWK VRPH VLJQLILFDQW SURYLVRV )$2 IRU H[DPSOH LQ WKHLU PRVW UHFHQW VWDWHPHQW IRU H[DPSOH DUJXH IRU ¶LQFUHDVHGSXEOLFIXQGLQJDQGGLDORJXHEHWZHHQWKHSXEOLFDQGSULYDWHVHFWRUV·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¶FRQVHQVXV· VWDWHPHQWV HPDQDWLQJ IURP WKH LQWHUQDWLRQDO DJHQFLHV GR QRW JHW XV YHU\ IDU +RZ FDQ DQ DSSURDFK WR WHFKQRORJ\DVVHVVPHQWDQGSXEOLFSROLF\EHGHYHORSHGWKDWDOORZVDIXOOHUGHEDWHWRRFFXUZKHUHDOOWKH SURYLVRV DQG DVVXPSWLRQV DUH H[DPLQHG LQ GHSWK" $ ¶RQH VL]H ILWV DOO·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¶SURSRRU·ELRWHFKQRORJ\LVFOHDUO\QHHGHGWRHQFRXUDJHVXFKDGLVFXVVLRQ&RKHQ0RUULVDQG +RLVLQJWRQ 6SLOODQH -DQVVHQ HW DO (OHPHQWV ZRXOG SHUKDSV LQFOXGH WKH LQVWLWXWLRQDOLVDWLRQ RI D SUHFDXWLRQDU\ VW\OH ZKLFK GRHV QRW IRUHFORVH RSWLRQV HQFRXUDJHV D EURDG DQG LQFOXVLYH GHEDWH DERXW LPSOLFDWLRQV DQG GHYHORSV VROXWLRQV DSSURSULDWH WR GLIIHUHQW QDWLRQDO DQG ORFDO VHWWLQJV 5HIHUHQFHV $GPLQLVWUDWLYH&RPPLWWHHRQ&RRUGLQDWLRQ6XE&RPPLWWHHRQ1XWULWLRQ$&&6&1WK5HSRUWRQ WKH:RUOG1XWULWLRQ6LWXDWLRQ*HQHYD8QLWHG1DWLRQV$&&6XE&RPPLWWHHRQ1XWULWLRQ-DQXDU\ $J%LR:RUOG 6FLHQWLVWV LQ 6XSSRUW RI $JULFXOWXUDO %LRWHFKQRORJ\ WH[W RI D SHWLWLRQ DYDLODEOH IURP ZZZ$J%LR:RUOGRUJSHWLWLRQKWPO $OWLHUL0$JURHFRORJ\7KH6FLHQFHRI6XVWDLQDEOH$JULFXOWXUH%RXOGHU:HVWYLHZ3UHVV $OWLHUL 0 DQG 5RVVHW 3 7HQ 5HDVRQV :K\ %LRWHFKQRORJ\ ZLOO QRW (QVXUH )RRG 6HFXULW\ 3URWHFW WKH (QYLURQPHQW DQG 5HGXFH 3RYHUW\ LQ WKH 'HYHORSLQJ :RUOG DYDLODEOH IURP ZZZIRRGILUVWRUJSURJV JOREDOELRWHFK $OWLHUL 05RVVHW3 DQG7KUXSS /$ ¶7KH SRWHQWLDO RI DJURHFRORJ\ WR FRPEDW KXQJHU LQ WKH GHYHORSLQJ ZRUOG· %ULHI :DVKLQJWRQ ,)35, DYDLODEOH DW ZZZWZQVLGHRUJWLWOH WZUJKWP $SSDGXUDL$0RGHUQLW\DW/DUJH&XOWXUDO'LPHQVLRQVRI*OREDOLVDWLRQ2[IRUG2[IRUG8QLYHUVLW\3UHVV $UFH $ DQG /RQJ 1 HGV $QWKURSRORJ\ 'HYHORSPHQW DQG 0RGHUQLWLHV ([SORULQJ 'LVFRXUVHV &RXQWHU WHQGHQFLHVDQG9LROHQFH/RQGRQ5RXWOHGJH $VKE\ - DQG 6SHUOLQJ / ¶,QVWLWXWLRQDOLVLQJ SDUWLFLSDWRU\ FOLHQWGULYHQ UHVHDUFK DQG WHFKQRORJ\ GHYHORSPHQWLQDJULFXOWXUH·'HYHORSPHQWDQG&KDQJH %,27+$,*5$,10$6,3$*DQG3$1,QGRQHVLD:KRVH$JHQGD"7KH&RUSRUDWH7DNHRYHURI&RUQ LQ6($VLDZZZJUDLQRUJSXEOLFDWLRQVUHSRUWVWDNHRYHUKWP %RQDQQR$%XVFK/)ULHGODQG:*RXYHLD/0LQJLRQH(HGV)URP&ROXPEXVWR&RQ$JUD WKH*OREDOLVDWLRQRI$JULFXOWXUHDQG)RRG/DXUHQFH8QLYHUVLW\RI.DQVDV3UHVV %RUODXJ 1 )HHGLQJ D :RUOG RI %LOOLRQ 3HRSOH 7KH 0LUDFOH $KHDG ZZZELRWHFKNQRZOHGJHFRP VKRZOLEBXVSKS" %RUODXJ 1 DQG 'RZVZHOO & ¶0RELOLVLQJ VFLHQFH DQG WHFKQRORJ\ WR JHW DJULFXOWXUH PRYLQJ LQ $IULFD·'HYHORSPHQW3ROLF\5HYLHZ² %UHQQHU & ¶%LRWHFKQRORJ\ SROLF\ IRU GHYHORSLQJ FRXQWU\ DJULFXOWXUH· 2(&' 'HYHORSPHQW &HQWUH3ROLF\%ULHI %URFN.DQG&RXOLEDO\1¶6XVWDLQDEOHUXUDOOLYHOLKRRGVLQ0DOL·,'65HVHDUFK5HSRUW%ULJKWRQ ,QVWLWXWHRI'HYHORSPHQW6WXGLHV %URNHQVKD'HWDOHGV,QGLJHQRXV.QRZOHGJH6\VWHPVDQG'HYHORSPHQW1HZ<RUN8QLYHUVLW\3UHVVRI $PHULFD %URZQ / DQG .DQH + )XOO +RXVH 5HDVVHVVLQJ WKH :RUOG·V 3RSXODWLRQ &DUU\LQJ &DSDFLW\ /RQGRQ (DUWKVFDQ %XFKDQDQ6PLWK 0 DQG 'DYLHV 6 )DPLQH (DUO\ :DUQLQJ 6\VWHPV 7KH 0LVVLQJ /LQN /RQGRQ ,7 3XEOLFDWLRQV %XUFK ' 5LFNVRQ 5 DQG /DZUHQFH * HGV *OREDOLVDWLRQ DQG $JULIRRG 5HVWUXFWXULQJ $YHEXU\ $OGHUVKRW %XWWHO)¶$JULFXOWXUDOELRWHFKQRORJ\LWVUHFHQWHYROXWLRQDQGLPSOLFDWLRQVIRUDJURIRRGSROLWLFDO HFRQRP\·6RFLRORJLFDO5HVHDUFK2QOLQH9RO1R88 %\HUOHH ' ¶0RGHUQ YDULHWLHV SURGXFWLYLW\ DQG VXVWDLQDELOLW\ UHFHQW H[SHULHQFH DQG HPHUJLQJ FKDOOHQJHV·:RUOG'HYHORSPHQW9RO1R %\HUOHH ' DQG )LVFKHU . ¶$FFHVVLQJ PRGHUQ VFLHQFH SROLF\ DQG LQVWLWXWLRQDO RSWLRQV IRU DJULFXOWXUDOELRWHFKQRORJ\LQGHYHORSLQJFRXQWULHV·,36WUDWHJ\7RGD\ZZZELRGHYHORSPHQWVRUJ &DUVZHOOHWDO6XVWDLQDEOH/LYHOLKRRGVLQ(WKLRSLD%ULJKWRQ,QVWLWXWHRI'HYHORSPHQW6WXGLHV &KDPEHUVHWDO)DUPHU)LUVW)DUPHU,QQRYDWLRQDQG$JULFXOWXUDO5HVHDUFK/RQGRQ,73XEOLFDWLRQV &KDPEHUV5DQG&RQZD\*¶6XVWDLQDEOHUXUDOOLYHOLKRRGVSUDFWLFDOFRQFHSWVIRUWKHVWFHQWXU\· ,'6'LVFXVVLRQ3DSHU%ULJKWRQ,QVWLWXWHRI'HYHORSPHQW6WXGLHV &KULVWLDQ $LG 6HOOLQJ 6XLFLGH )DUPLQJ )DOVH 3URPLVHV DQG *HQHWLF (QJLQHHULQJ LQ 'HYHORSLQJ &RXQWULHV /RQGRQ&KULVWLDQ$LGZZZFKULVWLDQDLGRUJXNIBUHSRUWVKWP &RKHQ - HG ¶0DQDJLQJ DJULFXOWXUDO ELRWHFKQRORJ\ $GGUHVVLQJ UHVHDUFK SURJUDPPH QHHGV DQG SROLF\LPSOLFDWLRQV·%LRWHFKQRORJ\LQ$JULFXOWXUH6HULHV:DOOLQJIRUG&$%, &RQZD\*¶$JURHFRV\VWHPVDQDO\VLV·$JULFXOWXUDO$GPLQLVWUDWLRQ BBBB7KH'RXEO\*UHHQ5HYROXWLRQ)RRGIRUDOOLQWKHVW&HQWXU\/RQGRQ3HQJXLQ BBBB *0 )RRGV &DQ %HQHILW WKH 'HYHORSLQJ &RXQWULHV ZZZELRWHFKNQRZOHGJHFRP VKRZOLEBXVSKS" BBBB ¶*HQHWLFDOO\ PRGLILHG FURSV ULVNV DQG SURPLVH· &RQVHUYDWLRQ (FRORJ\ 9RO 1R ZZZFRQVHFRORUJMRXUQDOYROLVV &RQZD\*DQG%DUELHU($IWHUWKH*UHHQ5HYROXWLRQ6XVWDLQDEOH$JULFXOWXUHIRU'HYHORSPHQW/RQGRQ (DUWKVFDQ &RQZD\*DQG3UHWW\-8QZHOFRPH+DUYHVW$JULFXOWXUHDQG3ROOXWLRQ/RQGRQ(DUWKVFDQ &RUEHWW-(0¶)DPLQHDQGKRXVHKROGFRSLQJVWUDWHJLHV·:RUOG'HYHORSPHQW9RO1R 'DYLHV6¶$GDSWDEOHOLYHOLKRRGVFRSLQJZLWKIRRGLQVHFXULW\LQWKH0DOLDQ6DKHO·6FLHQFH7HFKQRORJ\ DQG'HYHORSPHQW7KLUG:RUOG6FLHQWLILFDQG7HFKQRORJLFDO'HYHORSPHQW)RUXP9RO1R 'H +DDQ $ ¶0LJUDWLRQ DQG OLYHOLKRRGV FDVH VWXGLHV LQ %DQJODGHVK (WKLRSLD DQG 0DOL· ,'6 5HVHDUFK5HSRUW%ULJKWRQ,QVWLWXWHRI'HYHORSPHQW6WXGLHV 'H:DDO$)DPLQHWKDW.LOOV'DUIXU6XGDQ²2[IRUG&ODUHQGRQ3UHVV 'HOJDGR&HWDO¶$JULFXOWXUDOJURZWKOLQNDJHVLQ66$·5HVHDUFK5HSRUW:DVKLQJWRQ'&,)35, 'HYHUHX[67KHRULHVRI)DPLQH+HPHO+HPSVWHDG+DUYHVWHU:KHDWVKHDI BBBB¶)X]]\HQWLWOHPHQWVDQGFRPPRQSURSHUW\UHVRXUFHVVWUXJJOHVRYHUULJKWVWRFRPPXQDOODQG LQ1DPLELD·,'6:RUNLQJ3DSHU%ULJKWRQ,QVWLWXWHRI'HYHORSPHQW6WXGLHV 'HYHUHX[6DQG0D[ZHOO6HGV)RRG6HFXULW\LQ$IULFD/RQGRQ,73XEOLFDWLRQV 'LEE6DQG0D\HU6%LRWHFK7KH1H[W*HQHUDWLRQ*RRGIRU:KRVH+HDOWK8.*HQHZDWFK 'Uq]H-DQG6HQ$+XQJHUDQG3XEOLF$FWLRQ2[IRUG&ODUHQGRQ3UHVV 'X3RQW . DQG :LOOLDP ) ¶7KH VW FHQWXU\ ² DQ DJULEXVLQHVV RG\VVH\· ': %URRNV /HFWXUH 8QLYHUVLW\RI*HRUJLD&ROOHJHRI$JULFXOWXUDODQG(QYLURQPHQWDO6FLHQFHV2FWREHUDYDLODEOHDW ZZZGXSRQWFRPZKDWVQHZVSHHFKHVNLUNGZEURRNVKWP '\VRQ73RSXODWLRQDQG)RRG*OREDO7UHQGVDQG)XWXUH3URVSHFWV/RQGRQ5RXWOHGJH (LGH :% +ROPERH2WWHVHQ * 2VKDXJ $ :DQGHO 0 3HUHUD ' DQG 7LODNDUDWQD 6 ¶,QWURGXFLQJ QXWULWLRQDO FRQVLGHUDWLRQV LQWR UXUDO GHYHORSPHQW SURJUDPPHV ZLWK IRFXV RQ DJULFXOWXUHDWKHRUHWLFDOFRQWULEXWLRQ·'HYHORSPHQWRI0HWKRGRORJ\IRUWKH(YDOXDWLRQRI1XWULWLRQDO,PSDFWRI 'HYHORSPHQW3URJUDPPHV5HVHDUFK5HSRUW8QLYHUVLW\RI2VOR,QVWLWXWHIRU1XWULWLRQ5HVHDUFK (OOLV)5XUDO/LYHOLKRRGVDQG'LYHUVLW\LQ'HYHORSLQJ&RXQWULHV2[IRUG2[IRUG8QLYHUVLW\3UHVV )DOFRQ:3.XULHQ&70RQFNHEHUJ)2NH\R$32OD\LGH62DQG7LPV:¶7KH:RUOG )RRG DQG +XQJHU 3UREOHP FKDQJLQJ SHUVSHFWLYHV DQG SRVVLELOLWLHV ²· LQ -3 *LWWLQJHU -/HVOLHDQG&+RLVLQJWRQHGV)RRG3ROLF\,QWHJUDWLQJ6XSSO\'LVWULEXWLRQDQG&RQVXPSWLRQ%DOWLPRUH DQG/RQGRQ-RKQV+RSNLQV8QLYHUVLW\3UHVV )$2D5RPH'HFODUDWLRQRQ:RUOG)RRG6HFXULW\DQG:RUOG)RRG6XPPLW3ODQRI$FWLRQ1RYHPEHU5RPH )$2 BBBBE:RUOG)RRG6XPPLW6\QWKHVLVRIWKH7HFKQLFDO%DFNJURXQG'RFXPHQWV5RPH)$2 BBBB5HSRUWRIWKH:RUOG)RRG6XPPLW1RYHPEHU5RPH)$2 BBBB7KH6WDWHRI)RRG,QVHFXULW\LQWKH:RUOG5RPH)$2 BBBBD)$26WDWHPHQWRQ%LRWHFKQRORJ\DYDLODEOHDWZZZIDRRUJELRWHFKVWDWHKWP )LQH % ¶7RZDUGV D SROLWLFDO HFRQRP\ RI IRRG· 5HYLHZ RI ,QWHUQDWLRQDO 3ROLWLFDO (FRQRP\ 9RO 1R )UDQNHQEHUJHU 75 ¶,QGLFDWRUV DQG 'DWD &ROOHFWLRQ 0HWKRGV IRU $VVHVVLQJ +RXVHKROG )RRG 6HFXULW\· LQ 6 0D[ZHOO DQG 75 )UDQNHQEXUJHU HGV +RXVHKROG )RRG 6HFXULW\ &RQFHSWV ,QGLFDWRUV 0HDVXUHPHQWV$7HFKQLFDO5HYLHZ1HZ<RUNDQG5RPH81,&()DQG,)$' )ULHGODQG : ¶7KH 1HZ *OREDOLVDWLRQ WKH FDVH RI IUHVK SURGXFH· LQ $ %RQDQQR HW DO )URP &ROXPEXVWR&RQ$JUD/DZUHQFH.DQVDV8QLYHUVLW\3UHVV )ULHGPDQQ+DQG0F0LFKDHO3¶$JULFXOWXUHDQGWKHVWDWHV\VWHPWKHULVHDQGGHFOLQHRIQDWLRQDO DJULFXOWXUHVWRWKHSUHVHQW·6RFLRORJLD5XUDOLV² )6* *OREDO &HUHDO 0DUNHWV DQG )RRG 6HFXULW\ 2[IRUG 8. 4XHHQ (OL]DEHWK +RXVH 8QLYHUVLW\ RI 2[IRUG)RRG6WXGLHV*URXS *LOEHUW ( 1RUPDQ ' DQG :LQFK ) ¶)DUPLQJ V\VWHPV UHVHDUFK D FULWLFDO DSSUDLVDO· 068 2FFDVLRQDO3DSHU(DVW/DQVLQJ068 *LOOHVSLH 6 DQG 0DVRQ - ¶1XWULWLRQUHOHYDQW DFWLRQV VRPH H[SHULHQFH IURP WKH HLJKWLHV DQG OHVVRQVIRUWKHQLQHWLHV·1XWULWLRQ3ROLF\'LVFXVVLRQ3DSHU*HQHYD$&&6&1 *RRGPDQ'¶:RUOGVFDOHSURFHVVHV DQG DJURIRRG V\VWHPV FULWLTXH DQG DJHQGD· :RUNLQJ3DSHU 6DQWD&UX]&HQWUHIRUWKH6WXG\RI6RFLDO7UDQVIRUPDWLRQV8QLYHUVLW\RI&DOLIRUQLD BBBB ¶:RUOGVFDOH SURFHVVHV DQG DJURIRRG V\VWHPV FULWLTXH DQG UHVHDUFK QHHGV· 5HYLHZ RI ,QWHUQDWLRQDO3ROLWLFDO(FRQRP\9RO1R *RRGPDQ'DQG5HGFOLIW05HIDVKLRQLQJ1DWXUH)RRG(FRORJ\DQG&XOWXUH/RQGRQ5RXWOHGJH *RRGPDQ'DQG:DWWV0¶5HFRQILJXULQJWKHUXUDORUIRUGLQJWKHGLYLGH"&DSLWDOLVWUHVWUXFWXULQJ DQGWKHJOREDODJURIRRGV\VWHP·-RXUQDORI3HDVDQW6WXGLHV *RRGPDQ ' 6RUM % DQG :LONLQVRQ - )URP )DUPLQJ WR %LRWHFKQRORJ\ $ 7KHRU\ RI $JUR,QGXVWULDO 'HYHORSPHQW2[IRUG%ODFNZHOO *UDKDP5DQG:HOFK5¶%UHHGLQJIRUVWDSOHFURSVZLWKKLJKPLFURQXWULHQWGHQVLW\$JULFXOWXUDO VWUDWHJLHVIRUPLFURQXWULHQWV·,)35,:RUNLQJ3DSHU:DVKLQJWRQ'&,)35$ +D]HOO 3 DQG *DUUHWW - ¶5HGXFLQJ SRYHUW\ DQG SURWHFWLQJ WKH HQYLURQPHQW WKH RYHUORRNHG SRWHQWLDORIOHVVIDYRXUHGODQGV·9LVLRQ%ULHI:DVKLQJWRQ'&,)35, +D]HOO 3 DQG 5DPDVZDP\ & HGV 7KH *UHHQ 5HYROXWLRQ 5HFRQVLGHUHG %DOWLPRUH -RKQV +RSNLQV 8QLYHUVLW\3UHVV +HIIHUQDQ:DQG&RQVWDQFH'¶7UDQVQDWLRQDOFRUSRUDWLRQVDQGWKHJOREDOIRRGV\VWHP· LQ $ %RQDQQRHWDOHGV)URP&ROXPEXVWR&RQ$JUD/DZUHQFH8QLYHUVLW\3UHVVRI.DQVDV ,)35,¶%LRWHFKQRORJ\IRUGHYHORSLQJFRXQWU\DJULFXOWXUHSUREOHPVDQGRSSRUWXQLWLHV·)RFXV %ULHIV:DVKLQJWRQ'&,)35, -DPHV&¶*OREDOUHYLHZRIFRPPHUFLDOLVHGWUDQVJHQLFFURSV·,6$$$%ULHIV1HZ<RUN ,6$$$ BBBB ¶*OREDO UHYLHZ RI FRPPHUFLDOLVHG WUDQVJHQLF FURSV 3UHYLHZ· ,6$$$ %ULHIV 1HZ <RUN,6$$$ -DQVVHQ:)DOFRQL&DQG.RPHQ-¶7KHUROHRI1$56VLQSURYLGLQJELRWHFKQRORJ\DFFHVVWR WKHSRRUJUDVVURRWVRULYRU\WRZHU"·LQ04DLP$.UDWWLJHUDQG-YRQ %UDXQ HGV $JULFXOWXUDO %LRWHFKQRORJ\LQ'HYHORSLQJ&RXQWULHV7RZDUGV2SWLPLVLQJWKH%HQHILWVIRUWKH3RRU$PVWHUGDP.OXZHU .HQGDOO+:%HDFK\5(LVQHU7*RXOG)+HUGW55DYHQ3+HWDO7KH%LRHQJLQHHULQJRI &URSV5HSRUWRIWKH:RUOG%DQN3DQHORQ7UDQVJHQLF&URSV:DVKLQJWRQ'&:RUOG%DQN&*,$5 .HUU - DQG .RODYDOOL 6 ¶,PSDFW RI DJULFXOWXUDO UHVHDUFK RQ SRYHUW\ DOOHYLDWLRQ FRQFHSWXDO IUDPHZRUNZLWKLOOXVWUDWLRQVIURPWKHOLWHUDWXUH·(37''LVFXVVLRQ3DSHU:DVKLQJWRQ'&,)35, .ORSSHQEHUJ -5 )LUVW WKH 6HHG 7KH 3ROLWLFDO (FRQRP\ RI 3ODQW %LRWHFKQRORJ\ &DPEULGJH &DPEULGJH 8QLYHUVLW\3UHVV /LSWRQ0¶5HYLYLQJWKHVWDOOHGPRPHQWXPRIJOREDOSRYHUW\UHGXFWLRQZKDWUROHIRUJHQHWLFDOO\ PRGLILHGSODQWV"·&UDZIRUG0HPRULDO/HFWXUHPLPHR /LSWRQ0DQG/RQJKXUVW51HZ6HHGVDQG3RRU3HRSOH/RQGRQ8QZLQ+\PDQ /LWWOH 3 DQG :DWWV 0 /LYLQJ 8QGHU &RQWUDFW &RQWUDFW )DUPLQJ DQG $JUDULDQ 7UDQVIRUPDWLRQ LQ 6XE 6DKDUDQ$IULFD0DGLVRQ8QLYHUVLW\RI:LVFRQVLQ3UHVV /RFNLH 6 DQG .LWWR 6 ¶%H\RQG WKHIDUP JDWH SURGXFWLRQFRQVXPSWLRQQHWZRUNV DQG DJULIRRG UHVHDUFK·6RFLRORJLD5XUDOLV9RO1R² 0DUVGHQ 7 ¶)RRG PDWWHUV DQG WKH PDWWHU RI IRRG WRZDUG D QHZ IRRG JRYHUQDQFH· 6RFLRORJLD 5XUDOLV9RO1R² 0D[ZHOO 6 ¶3HUVSHFWLYHV RQ D QHZ ZRUOG IRRG FULVLV· -RXUQDO RI ,QWHUQDWLRQDO 'HYHORSPHQW 9RO 1R² ³³¶7KH(YROXWLRQRI7KLQNLQJDERXW)RRG6HFXULW\·LQ6'HYHUHX[DQG60D[ZHOOHGV)RRG 6HFXULW\LQ$IULFD/RQGRQ,73XEOLFDWLRQV 0D[ZHOO6DQG%XFKDQDQ6PLWK0¶+RXVHKROGIRRGVHFXULW\DFRQFHSWXDOUHYLHZ·LQ60D[ZHOO DQG7)UDQNHQEXUJHUHGV+RXVHKROG)RRG6HFXULW\&RQFHSWV,QGLFDWRUV0HDVXUHPHQWV$7HFKQLFDO5HYLHZ 1HZ<RUNDQG5RPH81,&()DQG,)$' 0F0LFKDHO3HG7KH*OREDO5HVWUXFWXULQJRI$JUR)RRG6\VWHPV,WKDFD&RUQHOO8QLYHUVLW\3UHVV 0RUULV0DQG+RLVLQJWRQ'¶%ULQJLQJWKHEHQHILWVRIELRWHFKQRORJ\WRWKHSRRUWKHUROHRIWKH &*,$5 FHQWUHV· SDSHU SUHVHQWHG DW WKH &RQIHUHQFH RQ %LRWHFKQRORJ\ LQ 'HYHORSLQJ &RXQWULHV 7RZDUGV2SWLPLVLQJWKH%HQHILWVIRUWKH3RRU%RQQ1RYHPEHU 1XIILHOG &RXQFLO RQ %LRHWKLFV *HQHWLFDOO\ 0RGLILHG &URSV 7KH (WKLFDO DQG 6RFLDO ,VVXHV /RQGRQ 1XIILHOG 3DFH\$DQG3D\QH3$JULFXOWXUDO'HYHORSPHQWDQG1XWULWLRQ/RQGRQ+XWFKLQVRQE\DUUDQJHPHQW ZLWK)$2DQG81,&() 3DUGH\3DQG$OVWRQ-¶5HYDPSLQJDJULFXOWXUDO5DQG'·%ULHI:DVKLQJWRQ'&,)35, 3DUGH\35RVHERRP-DQG%HLQWHPD1¶,QYHVWPHQWVLQ$IULFDQ$JULFXOWXUDO5HVHDUFK·(37' 'LVFXVVLRQ3DSHU:DVKLQJWRQ'&,)35, 3D\QH 3 DQG /LSWRQ0 ZLWK /RQJKXUVW5 1RUWK - DQG 7UHDJXVW 6 ¶+RZ WKLUG ZRUOG UXUDO KRXVHKROGV DGDSW WR GLHWDU\ HQHUJ\ VWUHVV WKH HYLGHQFH DQG WKH LVVXHV· ,)35, )RRG 3ROLF\ 5HYLHZ :DVKLQJWRQ'&,)35, 3HQGHU-DQG+D]HOO3¶3URPRWLQJVXVWDLQDEOHGHYHORSPHQWLQOHVVIDYRXUHGDUHDV·9LVLRQ )RFXV%ULHI:DVKLQJWRQ'&,)35, 3HUNLQV -+ *HRSROLWLFV DQG WKH *UHHQ 5HYROXWLRQ :KHDW *HQHV DQG WKH &ROG :DU 2[IRUG 2[IRUG 8QLYHUVLW\3UHVV 3HUVOH\ * DQG /DQWLQ 0 HGV ¶$JULFXOWXUDO ELRWHFKQRORJ\ DQG WKH SRRU· SURFHHGLQJV RI DQ LQWHUQDWLRQDOFRQIHUHQFH:DVKLQJWRQ'&&*,$5 3LQVWUXS$QGHUVHQ 3 DQG &RKHQ 0 ¶%LRWHFKQRORJ\ DQG WKH &*,$5· SDSHU IRU FRQIHUHQFH RQ ¶6XVWDLQDEOH$JULFXOWXUHLQWKH0LOOHQQLXP 7KH,PSDFW RI 0RGHUQ%LRWHFKQRORJ\ RQ 'HYHORSLQJ &RXQWULHV·0D\%UXVVHOV 3LQVWUXS$QGHUVHQ33DQG\D/RUFK5DQG5RVHJUDQW0:¶:RUOGIRRGSURVSHFWVFULWLFDOLVVXHV IRUWKHHDUO\WZHQW\ILUVWFHQWXU\·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¶2UJDQLVLQJ+XQJHUWKHJOREDORUJDQLVDWLRQRIIDPLQHVDQGIHDVWV·LQ&7KRPDVDQG3 :LONLQHGV*OREDOLVDWLRQDQGWKH6RXWK/RQGRQ0DFPLOODQ 6FRRQHV,¶6XVWDLQDEOHUXUDOOLYHOLKRRGVDIUDPHZRUNIRUDQDO\VLV·,'6:RUNLQJ3DSHU%ULJKWRQ ,QVWLWXWHRI'HYHORSPHQW6WXGLHV 6FRRQHVHWDO+D]DUGVDQG2SSRUWXQLWLHV )DUPLQJ /LYHOLKRRGV LQ 'U\ODQG $IULFD /HVVRQV IURP =LPEDEZH /RQGRQ=HG3UHVV 6HQ$.3RYHUW\DQG)DPLQHVDQ(VVD\RQ(QWLWOHPHQWDQG'HSULYDWLRQ2[IRUG&ODUHQGRQ3UHVV 6HUDJHOGLQ,DQG3HUVOH\*3URPHWKHDQ6FLHQFH$JULFXOWXUDO%LRWHFKQRORJ\WKH(QYLURQPHQWDQGWKH3RRU :DVKLQJWRQ'&&*,$5 6PLWK 0 3RLQWLQJ - DQG 0D[ZHOO 6 ¶+RXVHKROG IRRG VHFXULW\ FRQFHSWV DQG GHILQLWLRQV DQ DQQRWDWHGELEOLRJUDSK\·'HYHORSPHQW%LEOLRJUDSK\%ULJKWRQ,QVWLWXWHRI'HYHORSPHQW6WXGLHV 6SHUOLQJ / 6FKHLGHJJHU 8 DQG %XUXFKDUD 5 ¶'HVLJQLQJ VHHG V\VWHP ZLWK VPDOO IDUPHUV SULQFLSOHVGHULYHGIURPEHDQUHVHDUFKLQWKH*UHDW/DNHV5HJLRQRI$IULFD·$J5(11HWZRUN3DSHU /RQGRQ2', 6SLOODQH & ¶&RXOG DJULFXOWXUDO ELRWHFKQRORJ\ FRQWULEXWH WR SRYHUW\ DOOHYLDWLRQ"· $J%LRWHFK1HW ² 6WHYHQV&DQG.HQQDQ-¶)RRG$LGDQG7UDGH·LQ6'HYHUHX[DQG60D[ZHOOHGV)RRG6HFXULW\ LQ$IULFD/RQGRQ,73XEOLFDWLRQV 6WHYHQV&*UHHQKLOO5.HQQDQ-DQG'HYHUHX[67KH:72$JUHHPHQWRQ$JULFXOWXUHDQG)RRG 6HFXULW\/RQGRQ&RPPRQZHDOWK6HFUHWDULDW 6ZDPLQDWKDQ 06 ¶*HQHWLF HQJLQHHULQJ DQG IRRG VHFXULW\ HFRORJLFDO DQG OLYHOLKRRG LVVXHV· &*,$5&RQIHUHQFH:DVKLQJWRQ'& 6ZLIW--¶:K\DUHUXUDOSHRSOHYXOQHUDEOHWRIDPLQH"·,'6%XOOHWLQ9RO1R²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¶(QWLWOHPHQWV RU HPSRZHUPHQW" )DPLQH DQG VWDUYDWLRQ LQ $IULFD· 5HYLHZ RI $IULFDQ 3ROLWLFDO(FRQRP\ :RUOG %DQN ¶3RYHUW\ DQG KXQJHU LVVXHV DQG RSWLRQV IRU IRRG VHFXULW\ LQ GHYHORSLQJ FRXQWULHV· :RUOG%DQN3ROLF\6WXG\:DVKLQJWRQ'&:RUOG%DQN ³³$WWDFNLQJ3RYHUW\:RUOG'HYHORSPHQW5HSRUW:DVKLQJWRQ'&:RUOG%DQN =KDQJ 4 ¶0HHWLQJ WKH FKDOOHQJHV RI IRRG SURGXFWLRQ WKH RSSRUWXQLWLHV RI DJULFXOWXUDO ELRWHFKQRORJ\ LQ &KLQD· %LRWHFKQRORJ\ .QRZOHGJH &HQWUH DYDLODEOH DW ZZZELRWHFKNQRZOHGJHFRP VKRZOLEBXVSKS"
© Copyright 2026 Paperzz