Slide 1: Glencore Preliminary Results 2011
Glencore Preliminary Results 2011 5 March 2012
Slide 2: Ivan Glasenberg, Chief Executive Officer
Ivan Glasenberg Chief Executive Officer I 1
Slide 3: 2011 highlights
2011 highlights Solid underlying profit highlighting the diversity and growth in Glencore’s businesses – Adjusted EBIT(1) up 2% to $5.4bn (Industrial up 18%, Marketing up >10% excluding Agricultural Products) – Glencore net income(1) up 7% to $4.1bn Strong operating cash flow of $3.5bn(2) up 6%
Slide 4: 2011 operating performance – Marketing activities
2011 operating performance – Marketing activities Marketing activities delivered consistent results over 2011, generating Adjusted EBIT of $1.2bn, 11% lower Metals & than 2010 Minerals Marketed volumes were 5,652k MT Cu equivalent, 4% lower than 2010 Decline in performance partly due to lower
Slide 5: 2011 operating performance – Industrial activities
2011 operating performance – Industrial activities Performance improved during 2011, driven by higher average prices compared to 2010 and increased Metals & production rates at many operations; particularly Kazzinc, Katanga and Mutanda as they continued to deliver Minerals expansionary plans Produ
Slide 6: Organic growth – Glencore’s own production
Organic growth – Glencore’s own production Cu equivalent production volume (1) (in tonnes, 100% basis) 2,000,000 1,800,000 2011A – 2015E CAGR: 20.0% 1,600,000 1,400,000 1,200,000 1,000,000 800,000 2011A – 2013E 2013E – 2015E 600,000 CAGR: 30.6% CAGR: 10.3% 400,000 200,000 0 2011A 2013E 2015E Mopani
Slide 7: Key growth assets – continued progressive ramp-up
Key growth assets – continued progressive ramp-up Own production (kt) Kazzinc Zinc production using feed from own mining sources up 3% 2.9% 246 239 Near completion of new Metallurgy Project at estimated cost of $926m 123 H2 120 H2 (new 70kt copper smelter now in operation) 116 H1 126 H1 Gold p
Slide 8: Key growth assets – continued progressive ramp-up
Key growth assets – continued progressive ramp-up Mutanda Completion of additional SX/EW circuits in Q2 2011, bringing capacity to 60kt copper cathode per annum Copper production in 2011 of 64kt, exceeding the initial plan by 50% Own production (kt) Expansion plan 64 – Installed annualised cap
Slide 9: Steven Kalmin, Chief Financial Officer
Steven Kalmin Chief Financial Officer I 8
Slide 10: Key financial highlights
Key financial highlights US$ m 2011 2010 % Change Revenue 186,152 144,978 28% (1) Adjusted EBITDA 6,464 6,201 4% (2) Adjusted EBIT 5,398 5,290 2% (3) Glencore net income 4,060 3,799 7% (4) Funds from operations (FFO) 3,522 3,333 6% Net debt 12,938 14,756 (12%) FFO to Net debt 27.2% 22.6% 20% Notes:
Slide 11: 2011 financial performance – Marketing activities
2011 financial performance – Marketing activities Adjusted EBIT 2011 vs 2010 Strong underlying profitability in marketing business against a (US$ m) generally challenging market backdrop (1) 3,200 Metals and Minerals 2,337 Delivered consistent results over the course of 2011 2,400 -18% 659 1,911
Slide 12: 2011 financial performance – Industrial activities
2011 financial performance – Industrial activities Adjusted EBIT 2011 vs 2010 Key industrial growth products remain overall on track and (US$ m) within budget 4,000 3,487 Metals and Minerals +18% 2,953 3,200 EBIT performance increased by 17% compared to 2010 1,893 driven by: 2,400 1,729 - Higher
Slide 13: 2011 Adjusted EBIT bridge for industrial activities
2011 Adjusted EBIT bridge for industrial activities (US$ m) 5,000 272 4,000 774 143 3,487 (471) (42) (142) 2,953 3,000 2,000 1,000 0 2010 Adj. EBIT Price Volume Cost FX D&A Associate 2011 Adj. EBIT Income I 12
Slide 14: Robust balance sheet
Robust balance sheet(1) 2011 2010 Robust balance sheet with close to $7 billion of committed liquidity headroom as at 31 December 2011 Total assets $86.2bn $79.8bn 12% fall in net debt over the year to $12.9bn Glencore $29.3bn $19.6bn Strong and improving cashflow coverage ratios with sharehol
Slide 15: Ivan Glasenberg, Chief Executive Officer
Ivan Glasenberg Chief Executive Officer I 14
Slide 16: Concluding remarks and outlook
Concluding remarks and outlook Marketing Performance expected to benefit from: Production ramp-up at Glencore's own industrial assets to drive up marketing volumes Market weaknesses seen in Q4 2011 have reversed showing signs of tighter supply conditions across key commodities Continued reco
Slide 17: Q&A
Q&A GLENCORE | 16
Slide 18: Glencore and the proposed MoE with Xstrata
Glencore and the proposed MoE with Xstrata March 2012 I 0
Slide 19: Glencore investment highlights
Glencore investment highlights 1. Highly capital efficient business model Best-in-class near term free cash flow potential Mining capex efficiency best in sector Marketing is a capital efficient business that has a strong track record of delivering high ROE 2. Opportunity to co-invest alongsid
Slide 20: Highly capital efficient business model
Highly capital efficient business model I 2
Slide 21: Best positioned to capture the benefits of growth
Best positioned to capture the benefits of growth Capital efficient model allows shareholders to benefit from robust FCF generation 2012E-2014E Capex as percentage of aggregate value(1) 35% 33% 29% 30% 26% 26% 25% 24% 23% 20% 15% 10% 9% 5% 0% Glencore Xstrata Rio Tinto BHP Billiton Vale Anglo Americ
Slide 22: Glencore's high quality industrial assets
Glencore's high quality industrial assets In 2011, Kazzinc, Katanga, Mopani and Prodeco contributed 70% to the 2011 Industrial Adjusted EBIT Contribution to Asset Ownership Commodity 2011A production (1) 2015E production (1) 2011A-2015E CAGR LoM (2) Industrial EBIT (3) Zn / Cu / Au / 246k MT / 51k M
Slide 23: Organic growth – Glencore’s own production
Organic growth – Glencore’s own production Cu equivalent production volume (1) (in tonnes, 100% basis) 2,000,000 1,800,000 2011A – 2015E CAGR: 20.0% 1,600,000 1,400,000 1,200,000 1,000,000 800,000 2011A – 2013E 2013E – 2015E 600,000 CAGR: 30.6% CAGR: 10.3% 400,000 200,000 0 2011A 2013E 2015E Note: C
Slide 24: Copper projects: capex intensity vs peers
($m) Total 5 10 15 20 25 (‘000) Cu eq prod’n Capex 900 40 Konkola North 5,200 232 Galore Creek USD (‘000) / tonne Cu eq. 5,300 240 Freida River production ramp-up until 2015E. 16,000 741 Olympic Dam 900 50 Coroccohuayco 1,350 80 Antucoya 1,750 104 Aktogay Notes: (1) Includes own mines’ production on
Slide 25: Marketing - high returns
Marketing - high returns Based on unaudited Segmental key P&L and balance sheet items allocated to marketing activities figures as of 31 Dec 2011 Average Current Capital Employed (1) $16.6 bn Low level of fixed assets (< $1 bn) (2) $0.5 bn Debt allocated to Marketing Activities $(13.2) bn Book Value
Slide 26: Marketing has been a consistently profitable business
Marketing has been a consistently profitable business Marketing has made a profit every year since completion of the management buyout in 1994 Historical Adjusted EBIT development at marketing activities $ bn H2 2008 – H1 2010: • Rapid fall in commodity prices from the mid-2008 4.0 H2 2011: peaks
Slide 27: Marketing growth prospects underpinned by GDP growth and ramp-up of industrial assets
Marketing growth prospects underpinned by GDP growth and ramp- up of industrial assets Opportunity to optimise organic growth options for higher returns Impressive growth track-record Marketing Adjusted EBIT ($bn) Real GDP growth (%) 3.6 12% 2.7 9% Volumes to be driven by GDP growth 1.8 6% (1) 0.9 3
Slide 28: Opportunity to co-invest alongside management with strongest value creation track record
Opportunity to co-invest alongside management with strongest value creation track record in the sector I 10
Slide 29: Proven history of industry-leading returns
Proven history of industry-leading returns Last 10 years RoE range (1) % 61% 58% 50% 51% 45% 38% 36% 34% 26% 21% 21% 19% 18% 15% 15% 15% 15% 11% 13% 6% 5% 6% 4% Averages Miners Marketers 28% compound annual value creation from like for like equity value of less than $1 bn MBO in 1994 to c.$50 bn e
Slide 30: Prodeco: a case study in value creation
Prodeco: a case study in value creation Glencore has built Prodeco into a fully integrated, world class operation with significant growth and has made a cumulative investment of approximately $2 bn since it first acquired a stake in 1995, to create an asset with a significant consensus NAV valuation
Slide 31: Prodeco: a case study in value creation (cont’d)
Prodeco: a case study in value creation (cont’d) Combining contiguous assets to unlock value The true value of the Prodeco asset to Glencore has been through the pairing of the Calenturitas and La Jagua mines Blending opportunities from combining the quality standard cv, low sulphur Calenturitas
Slide 32: Katanga: a case study in value creation
Katanga: a case study in value creation Track record of value creation achieved by world class management team Since Glencore’s initial 2007 investment in Nikanor, Glencore has accumulated a 75.2% interest in Katanga Before Glencore’s initial investment The asset today The asset in the future Nika
Slide 33: Kazzinc: a case study in value creation
Kazzinc: a case study in value creation World-class polymetallic asset Major fully integrated zinc, copper and gold producer in Kazakhstan, 50.7% owned by Glencore: 7 mines, 2 zinc smelters, 1 lead smelter, 1 copper smelter commencing in 2011, precious metal plant and auxiliary units Production revi
Slide 34: Mutanda: status update
Mutanda: status update Greenfield project with three open pit mines, a Hydrometallurgical Operational plant, an Acid and liquid SO2 plant as well as a DMS plant summary (1) Production Constructed 110kt plant ahead of schedule for $734m – Phased approach allowed for copper production early on (k
Slide 35: South African coal: status update
South African coal: status update 31.2% stake acquired in Optimum Coal in October 2011 which Recent M&A includes two producing assets and 8m tonnes of coal export • The aggregated saleable entitlement through Richards Bay Coal Terminal Production(1) production of the three groups 44% stake and m
Slide 36: E&P portfolio: status update
E&P portfolio: status update Creating a fully integrated oil and gas player Planned expansion & Portfolio overview Status update Additional opportunities production Onshore and offshore Aseng commenced production First condensate expected from Further discoveries in development portfolio in
Slide 37: Glencore: A compelling value proposition
Glencore: A compelling value proposition I 19
Slide 38: Glencore value proposition
Please refer to slide 29 for the Glencore value proposition script accompanying this slide Broker NAV (Enterprise Value) Glencore market cap (as of 2 Mar 2012) $47.9 bn (Data sourced from latest broker research since 1 Dec 2011) Broker Industrial NAV Net funding (as of 31 December 2011) $26.7 bn Ban
Slide 39: Proposed merger of equals with Xstrata
Proposed merger of equals with Xstrata I 21
Slide 40: Uniquely integrated business model
Uniquely integrated business model Unmatched competitive positioning in the commodity space Glencore Xstrata INTEGRATED PRODUCERS AND MARKETERS Noble Group Glencore BHP Billiton Integration along value chain Vale UPSTREAM PRODUCERS Rio Tinto AND DOWNSTREAM Xstrata AAL MARKETERS Diversification (No.
Slide 41: Industry leading production capabilities of combination
Industry leading production capabilities of combination Export thermal coal production Mined copper production (Attributable thermal coal in m MT) (Attributable contained copper in k MT) #1 #1 #3 #3 1,801 1,474 41 1,111 72 34 33 32 686 31 591 1,260 Glencore Bumi SUEK Adara BHPB AAL Codelco Freeport
Slide 42: Merger of equals – key terms
Merger of equals – key terms Merger of All-share offer by Glencore for the remaining 66% of Exchange ratio since Glencore IPO equals Xstrata Glencore shares per Xstrata share since Glencore IPO (x) Xstrata free float shareholders to receive 2.80x new 3.0 Glencore shares for each Xstrata share he
Slide 43: Target price broker consensus
Target price broker consensus As at close 2nd March 2012 Glencore broker consensus Xstrata broker consensus Date Target Price (p) Date Target Price (p) RBC 03 Mar 12 500 RBC 03 Mar 12 1,400 Jefferies 03 Mar 12 1,500 Exane BNP Paribas 29 Feb 12 450 Alpha Value 03 Mar 12 1,065 DMG 28 Feb 12 407 BNP Pa
Slide 44: Appendix - Glencore
Appendix - Glencore GLENCORE | 26
Slide 45: Significant additional pockets of value
Significant additional pockets of value Based on 2011 Book Value, as per 31st December 2011 $ million Property, plant & equipment Book Value Assets Selected core industrial assets 10,257 Kazzinc, Mopani, Katanga, Prodeco, Shanduka/Umcebo and E&P Other core industrial assets 2,195 Sherwin, LQ, PV, Si
Slide 46: Countercyclical cash flow profile
Countercyclical cash flow profile Resilient financial performance of marketing In a scenario of declining commodity prices, the release in working capital more than compensates for drop in earnings The cash inflows preserve liquidity and position Glencore to capitalise on investment opportunitie
Slide 47: Script accompanying slide – Glencore value proposition
Script accompanying slide 20 – “Glencore value proposition” “We would like to use page 20 to provide a framework to help you analyse the equity value and rating of the Glencore marketing operations.” “We are currently in a formal offer period and we are therefore subject to the UK Takeover Code
Slide 48: Disclaimer
Disclaimer This document comprises written materials for a presentation concerning the merger of Glencore International plc (“Glencore”) with Xstrata plc (“Xstrata”) in which Glencore will acquire the entire issued ordinary share capital of Xstrata (not already held by Glencore) in exchange for new