Glencore plc · LSE:GLEN
Glencore — Corporate Update (September 2014)
40 slides from Glencore's corporate update, Sep 29, 2014
Slide 1: Sell-side analyst visit: Coal
Sell-side analyst visit Coal 29 September 2014 Analyst Visit, Ravensworth North 29 September 2014
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: Agenda
Agenda • Welcome – Senior Management Team • Tor Peterson – Head of Coal Marketing • Thermal coal market outlook • Peter Freyberg – Head of Coal Assets • Global asset overview • Questions 3
Slide 4: Leading Coal Portfolio
Leading Coal Portfolio #1 in high energy export thermal coal 22 operating coal complexes Significant position in export Exporting equity coal through 9 ports metallurgical coal 40Mtpa, low cost rail business Diversified global footprint COLOMBIA SOUTH AFRICA AUSTRALIA Glencore Glencore G
Slide 5: Supportive thermal coal seaborne market outlook
Supportive thermal coal seaborne market outlook • Attractive long-term thermal coal market fundamentals remain in place based on economics and availability • Seaborne thermal coal is more than a China story • energy key to emerging market growth / industrialisation • thermal coal central to this for
Slide 6: China re-balances supply and demand
China re-balances supply and demand Net imports have grown by 350Mt in the last 10 years Long term impact on coal demand driven by Chinese economic growth • A sustained GDP growth rate of around 7% pa would see the Chinese economy double in 10 years • Elasticity of electricity with respect to GDP in
Slide 7: India has emerged as the dominant growth market
India has emerged as the dominant growth market • 12th 5yr plan Indian thermal coal imports (Mt) • $36bn invested in generation capacity 350 • $61bn invested in transmission capacity 300 Forecast range • Coal fired capacity 250 • Currently 145GW installed 200 • Target 214GW installed by 2020 150 • 6
Slide 8: Market update – thermal coal supply and demand
Market update – thermal coal supply and demand Seaborne thermal coal demand (Mt) Supply growth exceeded demand 1'200 • Chinese repositioning creating uncertainty 1,114 1,063 Demand growth forecast at +5% pa 1,019 (+50Mtpa) over next 3 years 1'000 960 931 • Supply growth expected to lag 880 792 Therm
Slide 9: Market update – metallurgical coal supply and demand
Market update – metallurgical coal supply and demand Seaborne metallurgical coal demand (Mt) 400 Demand reduction yoy from 2013 / 2014 • Supply growth is being constrained due to demand growth and lower prices during 2013 / 2014 350 317 322 324 312 308 Constrained demand growth forecast 300 • < 2% o
Slide 10: Glencore best positioned for current and future markets
Glencore best positioned for current and future markets FOB thermal coal cash margins at current market prices ($/t) Glencore Major 1 Major 2 Major 3 Major 4 Major 5 Major 6 Major 7 Major 8 Other Mt Seaborne thermal coal supply Source: Glencore 10
Slide 11: Best in Class Operator
Best in Class Operator
Slide 12: Leader in safe operations
Leader in safe operations • Visible leadership a key management Group coal safety performance approach 15 • Strong focus on management of catastrophic risks and risk controls • SafeCoal initiative established 12 Fatal Hazard Protocols now rolled out across Injuries per million hours worked Glencore
Slide 13: Leader in operational performance
Leader in operational performance Undergrounds Glencore Coal - Tier 1 All T & S Loading Units • Blakefield South best performing longwall in Fleet Performance Australia for FY 13/14 • 3 of top 4 longwalls in Australia (Blakefield South, Oaky North and Ulan West1) • Glencore has had the highest produ
Slide 14: Open cut mining efficiency
Open cut mining efficiency • PwC provided an independent assessment of Australian and Global mining equipment performance over the period 2002-2013 • Glencore performance across the board compares very favourably • Glencore equipment performance is higher than the industry medium and best practices
Slide 15: Hydraulic Excavator Performance Summary 2009
2009 Actual Hydraulic Excavator Performance Summary 2009 Glencore–-–Hydraulic Glencore Glencore ‘Tier ‘Tier1’ Excavators 1’HydraulicQ2-2014 Excavators Hydraulic -Excavators Tier 1 Operational Best Practice Liebherr Liebherr Liebherr Liebherr Liebherr Liebherr Hitachi Hitachi Hitachi O&K Liebherr Hit
Slide 16: Hydraulic Excavator Performance Summary 2014
2009 Actual Hydraulic Excavator Performance Summary 2014 Glencore–-–Hydraulic Glencore Glencore ‘Tier ‘Tier1’ Excavators 1’HydraulicQ2-2014 Excavators Hydraulic -Excavators Tier 1 Operational Best Practice Liebherr Liebherr Liebherr Liebherr Liebherr Liebherr Hitachi Hitachi Hitachi O&K Liebherr Hit
Slide 17: US $1.8bn cost improvement since 2012
US $1.8bn cost improvement since 2012 Focus shift from growth to margin…. Sustained reduction in FOB cash costs US $/t Chart Title since 2012, achieved through: 75 Uncontrollable Controllable • Reduced overheads • Optimisation of underground rosters • 20% improvement in reliability of underground de
Slide 18: Significantly lower 2015 take-or-pay exposure than other exporters
Significantly lower 2015 take-or-pay exposure than other exporters Glencore maintains a strategic advantage over other coal exporters in Australia through a significantly lower 2015 take-or-pay exposure 2015 Surplus port contracted capacity as a percentage of contract1 100% 90% 80% Contracted Surplu
Slide 19: Coal assets totaling 196 Mtpa (installed)
Coal assets totaling 196 Mtpa (installed) Managed Production (Mt)* Managed Production (Mt)* South Africa Interest 2012 2013 2014 ** Installed Australia Interest 2012 2013 2014** Installed Tweefontein 79.8% 7.2 7.2 7.4 7.2 Mt Owen / 100% 9.1 8.8 8.8 9.0 Glendell Impunzi 79.8% 6.3 5.1 5.6 6.7 Mangoola
Slide 20: Growth and optionality
Growth and optionality
Slide 21: Growth and optionality: organic and acquisition growth
Growth and optionality Organic and acquisition growth • Synergistic and targeted acquisition strategy • Successful delivery of high returning projects • Early cashflow to improve returns • High margin assets positioned favourable on the cost curve Production growth history 180 Colombia* 160 South Af
Slide 22: History of creating value through acquisitions and brownfield expansions
History of creating value through acquisitions of adjacent resources and brownfield expansions Australia • Mt Owen Complex: Mt Owen (BHP), Glendell/Liddell (Savage Resources), Rav East (Rio Tinto) • Ravensworth North: Cumnock (listed co.), Narama (50% Rio Tinto; 50% Iluka), Rav West (Rio Tinto), RCT
Slide 23: Clermont coal mine acquisition
Clermont coal mine acquisition • Recently developed open cut thermal coal mine • Minimal future capital requirements • Product coal transported 13.5km by conveyor to rail loadout • Truck & shovel fleet feed In-Pit Crushing and Conveying system (IPCC); now ex-pit • Low cost operation (1st quartile ma
Slide 24: Clermont: optimisation under Glencore management
Clermont: optimisation under Glencore management • Acquisition price of US$1,015m for Glencore post acquisition initiatives Rio Tinto’s 50.1% stake, through GS Coal (owned 50:50 by Glencore & Changed management structure, Sumitomo) 1 reduced overall numbers • Successfully syndicated bank facility Pr
Slide 25: Coal project pipeline update
Coal project pipeline update Ulan West 8Mtpa brownfield capacity Australia Cerrejón Puerto Nuevo Commissioned May 14 7Mtpa brownfield 21Mtpa port capacity capacity Colombia Colombia Complete 2013 2014 2015 2016 2016+ Mt Owen extension, Liddell extension, Bulga life extension, Ravensworth North Tweef
Slide 26: Ulan West Project delivered
Ulan West Project delivered Asset details Underground mine entry • 90% Glencore • 8Mtpa export thermal coal • 14 year mine life • First quartile cash cost at full production Project details • Approved 2010 Construction update • Longwall commenced operating May 2014 First longwall shear – 3 months ah
Slide 27: Tweefontein Optimisation Project update
Tweefontein Optimisation Project update Asset details Coal Processing Plant • Glencore effective ownership: 79.8% • Capex: US $823m • Brownfields expansion of existing operations • replacement of 3 old processing plants with modern plant • construction of rapid loading rail terminal • development of
Slide 28: Cerrejón P40 update
Cerrejón P40 update Marine works Asset details • 33% Glencore / 33% Anglo / 33% BHPB • +20 year mine life • By-pass export thermal coal • First quartile cash cost Project details • 95% complete • Mine expansion, upgraded rail & second ship loading facility Ship loader • Ship loader currently being c
Slide 29: Ravensworth North
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Slide 30: Hunter Valley overview
Hunter Valley overview • Opportunities: Mt Pleasant • Maximised recovery – (Project) Bengalla • open pit boundaries Rail Mangoola 10km • undeveloped undergrounds Ulan • Operational sequencing Ulan West Ulan OC Liddell Mt Owen • Implementation of best practices Glendell Rav UG Rav Nth • Product optim
Slide 31: Liddell Mt Owen Ravensworth
Liddell Ravensworth Mt Owen North Ravensworth Underground Glendell Ravensworth North Pit Shell Ravensworth Surface Operations Hunter River 31 31 31
Slide 32: Ravensworth North
Ravensworth North Asset details Mine development • 90% Glencore / 10% Itochu • Brownfield project • 8Mtpa, export thermal 80% and semi-soft coking 20% • 23 year mine life • Second quartile cash cost Project scope • Upgrade to Ravensworth CHPP and stockpile facilities • Relocation of roads and power
Slide 33: Ravensworth North History
Ravensworth North History Ravensworth Resource Aug Narama - Buy out Iluka 2010 MacGen / Coal & Allied Mar Pacific Sept North Project delivered on Access 2007 50% interest /11 agreements 2011 - Off-market takeover 2014 time, on budget Obtained Surface access CHPP, rail The control of site to enable o
Slide 34: Complex project approval
Complex project approval Project combines: • Multiple surface titles • Varying stratified mining depth approvals Cumnock OC • Negotiating a number of minority joint venture Ravensworth Ops off interests Lemington Road • Obtaining adjacent Exploration license landholder consents granted Ravensworth W
Slide 35: Q&A
Q&A
Slide 36: Ravensworth North - Induction & tour guide slides
Ravensworth North - Induction & tour guide slides
Slide 37: Ravensworth Operations - Site safety requirements
Ravensworth Operations - Site safety requirements Safety and Environmental care are of paramount importance • When in the Mine or CHPP the following PPE must be worn: • Hi-vis shirt or vest • Safety helmet • Safety glasses • Steel toe boots • No smoking is permitted on site • It is prohibited to be
Slide 38: Tour Plan
Tour Plan RCHPP WEA Dump Ravensworth North ROM Operations MIA — Tour Route — NE Hwy — Railway Narama Narama Viewing West Point 38
Slide 39: Mine planning – geology
Mine planning – geology • Coal seams extend from the Bulga Formation through to the Foybrook Formation of the Wittingham Coal Measures • Over 64 coal working sections • Coal thickness 0.3 – 4.0m • Approx 40% coals <0.5m • Pit depth >270m • Relatively flat dipping deposit with a number of regional fa
Slide 40: Mobile equipment
Mobile equipment Loading Units • 3x Cat 6090 Shovels (980t) • 1x Cat 6060 Excavator (600t) • 3x Cat 6040 Excavators (350t) • 2x LeTourneau L-1850 Loaders Trucks • 23x Cat 797F XQ Haul Trucks • 31x Cat 789 Haul Trucks • 4x Cat 789D XQ Water Trucks • 2x Cat 775F Service Trucks Drills • 2x Cat MD6420 D