Glencore plc · LSE:GLEN
Glencore — 2015 Global Metals, Mining & Steel Conference
20 slides from Glencore's conference presentation, May 12, 2015
Slide 1: 2015 Global Metals, Mining & Steel Conference
2015 Global Metals, Mining & Steel Conference Barcelona, 12 May 2015
Slide 2: Forward looking statements
Forward looking statements This document contains statements that are, or may be deemed to be, “forward looking statements” which are prospective in nature. These forward looking statements may be identified by the use of forward looking terminology, or the negative thereof such as “plans”, “expects
Slide 3: Summary
Summary The mining sector is suffering a crisis of confidence • Oversupplying markets regardless of demand is damaging the credibility of the industry • Worst performing sector over the last twelve months – Commodity investment flows now $60bn below their 2012 peak – Prices, equities and credit rati
Slide 4: Where are we?
Tintaya concentrator, Peru Where are we ?
Slide 5: 12 months ago the mining sector was looking more positive
12 months ago … the mining sector was looking more positive • Management change across the majors was providing a more disciplined focus • Mining sector underperformance was reducing • Plans for significant capex cuts and shareholder distributions Source: Glencore presentation at 2014 Global Metals,
Slide 6: Today, the worst performing sector
Today, the worst performing sector Last 12 months: indices, mining lagging the market Funds are flowing out of the sector ($bn) (1) 17% 20.0% 110 15.0% 9% 103 10.0% 5% 6% 100 Cumulative 5.0% 1% commodity 0.0% 90 investment flows since 2010 -5.0% 80 80 -10.0% -15.0% 70 -20.0% (17%) 66 (17%) (19%) 60
Slide 7: Today, the worst performing sector
Today, the worst performing sector Significant reduction in earnings forecasts .. .. credit ratings and CDS(1) also impacted 110 200 100 180 Peer 4 90 160 80 Peer 1 140 70 120 60 Peer 1 Peer 2 100 Peer 2 Peer 3 50 GLEN GLEN 2015 forecast Peer 3 80 40 net income 60 30 20 40 May Jun Jul Aug Sep Oct No
Slide 8: Demand favours base over bulks again in 2015
Demand favours base over bulks again in 2015 … Global demand growth 10% Annual average 2011 to 2014 2015F 8% 6% 4% 2% 0% -2% Copper Zinc Aluminium Nickel Thermal Coal Iron Ore Oil Source: Glencore estimates, various broker reports, Wood Mackenzie. 8
Slide 9: … but ignore demand and market balance at your peril
… but ignore demand and market balance at your peril “This is rational, normal economics” “our iron ore strategy makes perfect commercial sense” “We have the opportunity to substantially increase our iron ore production through productivity and getting more out of the existing infrastructure” “You t
Slide 10: Differentiation by commodity is crucial
Wheat crop in Bute, Australia Differentiation by commodity is crucial
Slide 11: Our key commodities
Our key commodities … • Accounted for 95% of EBIT in 2014 • Market balances for many of our commodities are transitioning into deficit Cu Zn Ni Coal Marketing Deficit Deficit Transitioning to deficit Rebalancing Resilient “Consensus” surplus An additional 3-3.5Mt of Balanced 2015 and Some supply shu
Slide 12: … underpinning the maturing growth of emerging economies
… underpining the maturing growth of emerging economies … Significant Glencore exposure to mid and late demand cycle commodities 100% Oil & Gas 90% PGMs Diamonds Thermal Coal 80% 70% 60% 50% 40% 30% 20% Copper Zinc Nickel 10% Aluminium Iron Ore Coking coal Lead Manganese 0% Peer 1 Peer 2 Peer 3 Peer
Slide 13: … provides us with the right commodities mix
… provides us with the right commodities mix 2018F weighted average commodity surplus / (deficit) Commodities in surplus as a % of demand weighted by EBITDA demand weighted by EBITDA Commodities in deficit as a % of Peer 1 Peer 2 Peer 3 Peer 4 Source: UBS, Glencore estimates, company reports, broker
Slide 14: Conclusions
Conclusions The mining sector is suffering a crisis of confidence • Oversupplying markets regardless of demand is damaging the credibility of the industry • Worst performing sector over the last twelve months Supply/Demand fundamentals matter • Critical to understand the evolution of supply and dema
Slide 15: Q&A
Asturiana de Zinc, electrolysis plant, Spain Q&A DVM
Slide 16: Appendix
Alumbrera copper concentrator, Argentina Appendix
Slide 17: Sustainability and governance
Sustainability and governance Safety LTIFR(1) 2009 to 2014 • Regrettably 16 fatalities in 2014 (26 in 2013) 2.96 • Reduction on 2013 reflects ‘SafeWork’ focus on safety 2.74 leadership, culture and implementation of Fatal Hazard 2.49 47% reduction Protocols • 118,000 employees completed “SafeWork” a
Slide 18: Growing risks to long-term copper supply
Growing risks to long-term copper supply Mined copper head grades at twice the reserve grade are not sustainable 1.6 Mined copper head grade 1.4 1.2 1 Reserve grade 0.8 0.6 Forecast 0.4 1980 1985 1990 1995 2000 2005 2006 2009 2010 2013 2015 2020 2025 Source: Wood Mackenzie 18
Slide 19: Chinese GDP growth rate is falling
Chinese GDP growth rate is falling Chinese GDP Growth y-o-y (percent) 15 14 13 12 11 10 9 8 7 6 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: World Bank national accounts data, and OECD National Accounts data files 19
Slide 20: Chinese yearly GDP growth is much larger today in absolute terms
Chinese yearly GDP Growth is much larger today in absolute terms Chinese GDP (current $bn) 2014 vs 2013: 2015 @ 7% $9.2tn x 7.4% 2015 @ 6% 2015 @ 5% 10,000 = $680bn 8,000 6,000 2006 vs 2005: $2.3tn x 20.2% 4,000 = $450bn 2,000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: Bloomber
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