Merafe Resources Limited · JSE:MRF
Merafe Resources — Investor Presentation (November 2010)
108 slides from Merafe Resources's investor presentation, November 2010
Slide 1: A Morning with an Irreplacable Element: Chrome
A Morning with an Irreplacable Element: CHROME Johannesburg & Cape Town, November 2010
Slide 2: F. P. Bath, 1968
F. P. Bath, 1968 Source: Bath, F.P.: “Chromium in South Africa”, Journal of the SAIMM, March 1968 2
Slide 3: South Africa – Sales Values
South Africa – Sales Values 14,000 12,000 Cr Ore & FeCr Sales 10,000 G.R.: 7.8% in Mill US$ 8,000 5,782 6,000 Gold G.R.: -2.9% 4,000 2,842 2,000 90 % 0 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Source: DMR, Heinz H. Pariser 3
Slide 4: Agenda
Agenda 1. The Effect of Chrome 2. South Africa – A Sleeping Cr Giant 3. Support for the Global Stainless Steel Industry 4. Nickel – the „Be-devilled“ Metal 5. Stainless Scrap – the Strongest Competitor 6. The Way Forward – Opportunities and Obstacles 7. Conclusions 4
Slide 5: The Effect of Chrome
The Effect of Chrome 5
Slide 6: Chromite – a Selective Historic Review
Chromite – a Selective Historic Review 1797 1821 1890 >1909 >1930 >1920 1797: Vauqeulin discovers a new element in „red lead“ – the mineral crocoite – and names it „chrôme“ 1821: First „Ferro Chrome“ obtained by direct reduction 1890: Research on „Chrome Steels“ starts 1909-15: Discovery of „Stainle
Slide 7: Chromium Alloys
Value Added Structure of Chromium Alloys 0.03 Cr Metal < 0.02 3.78 – 5.13 < 0.05 ULC 2.33 – 2.50 0.05 0.05 – 0.5 LC 2.00 – 2.17 0.36 0.5 – 4.0 MC 0.85 – 1.40 0.18 7.5 – 8.5 HC 0.65 – 1.16 4.18 4.0 – 7.5 Charge 1.01 – 1.36 3.93 Basis 2010 – Volumes in Mill. t Material Weight – Price Ranges 1st HY 201
Slide 8: Overview First Use for Chromite
Overview First Use for Chromite 8
Slide 9: Global Cr Ore & Concentrate Use
Global Cr Ore & Concentrate Use 2009, in % Chemical; 2.0 Refractory; 1.0 Foundry Sands; 2.5 Metallurgical; 94.5 Source: Heinz H. Pariser 9
Slide 10: Stainless First Use of Cr Units 2009
First Use of Cr Units 2009, in % (Metallurgical Use) 0.8 0.9 1.6 3 300 Series Stainless Steel 5 400 Series 200 Series 33 Carbon & Low Alloy 17 Special Engineering Alloy & Steels Tool & HSS HSLA Foundry & Casting Special Alloys* 16 * Electrical Resistance & 22 Catalyst Strip (NiCr, CrAl); Corrosion &
Slide 11: Cr End Use Markets 2009
Cr End Use Markets 2009, in % (Metallurgical Use) Engineering (Petro-chemical, Food 4 Processing, etc.) 5 Metal Goods 24 (Cutlery, Tableware, etc.) 11 Building & Construction (Panels, Sinks, etc.) Transport (Automotive, Aerospace, etc.) 16 Tubular Products 21 Electromechanical & Electronic Products
Slide 12: Overview First Use for Chromite
Overview First Use for Chromite Metallurgical Refractory Chromite Foundry Sand Chemical Chromite Chromite (Lump, Fines & Chromite ( Concentrates) (Lump, Chips, Fines & Concentrates) ( Concentrates) 0.3 Mill t Concentrates) 20.0 Mill t 0.2 Mill t 0.5 Mill t Upgrade / Smelting Roasting Upgrade Blend /
Slide 13: Metallurgical Chromite
Metallurgical Chromite Production & Applications Chrome Ore Production Stainless Steel Alloy Steel - Metallurgical Grade - 24 22 20 Automotive plastic molds & exhaust system forms 18 in Mill t 16 Growth Rate 6.9% 14 „General Purpose“ mandrel rods, Architecture, forging and food processing, pressing
Slide 14: Chemical Grade
Chemical Grade Production & Applications Chrome Ore Production - Chemical Grade - 1,100 1,000 900 Crocoite from Potassium Chromate Tasmania 800 700 in ´000 t 600 500 Potassium Tannery 400 Growth Rate Dichromate -9.9% 300 200 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Chrome Wheels Source: Hei
Slide 15: Refractory Chromite
Refractory Chromite Production & Applications Chrome Ore Production - Refractory Grade - Refractory Bricks 200 180 160 in ´000 t 140 Growth Rate 2.0% Source: Nelion Exports Source: Sterling Coomodities Ltd. 120 100 80 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: www.asia.ru Source: Hein
Slide 16: Foundry Grade
Foundry Grade Production & Applications Chrome Ore Production - Foundry Grade - 750 700 650 Chrome Ore 600 550 in ´000 t 500 450 Growth Rate 7.3% 400 Custom Mold Made of Foundry Sand 350 Source: www.metrom.com 300 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Heinz H. Pariser 16
Slide 17: Any Questions?
Any Questions? Source: Heinz H. Pariser 17
Slide 18: South Africa – A Sleeping Cr Giant
South Africa – A Sleeping Cr Giant 18
Slide 19: Chrome Ore Reserves & Resources
Chrome Ore Reserves & Resources 2009 Chromite Ore Reserves Rank Chromite Ore Output in Mill t in % in Mill t in % South Africa 5,500 72 1 11.4 *) 50.0 Zimbabw e 930 12 2 0.3 1.2 Kazakhstan 387 5 3 3.6 15.9 Finland 120 1.6 4 0.2 1.1 Turkey 70 0.9 5 1.6 7.3 I ndia 67 0.9 6 2.4 10.6 Brazil 17 0.2 7 0.4
Slide 20: South Africa's Chrome Ore Market 2009
South Africa's Chrome Ore Market 2009 Output 11.4 Mill t Revenues: 1,071 Mill $ Metallurgical Export Chemical & Foundry Revenues: 239 Mill $ Revenues: 704 Mill $ Revenues: 128 Mill $ internal sales FeCr - Domestic & Export Sales Revenues: 2,455 Mill $ Source: Heinz H. Pariser 20
Slide 21: Chrome Ore Demand Structure 2009
Chrome Ore Demand Structure 2009 35 30 30 25 in Mill t 25 20 Growth Rate 2000 - 2009 in % p.a. Australia 20 China 15 10 15 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Other Europe 10 5 Average Growth Rate: 6.8% Other Africa Asia America 0 EU 0 20 40 60 80 -5 -10 Japan -15 -20 Share of Cr Ore D
Slide 22: South African Platinum Industry – Mine Production
South African Platinum Industry – Mine Production 588_ 2000 2007 2008 2009 G.R. in Mill t in % Merensky 25.1 36.7 36.7 35.0 4.5 100 UG 2 28.3 47.8 49.7 54.9 7.3 90 Total Mine Production Total 53.3 84.5 86.4 90.0 6.1 G.R.: 6.1% 80 UG 2 Ratio in % 53.0 56.6 57.5 61.1 1.1 70 in Mill t 2009 60 UG 2 G.R.
Slide 23: Mine Production & Supply
Mine Production & Supply 15.0 2007 2008 2009 14.0 HHP Supply in Mill t G.R.: 5.8% Mine Production 13.0 DMR 9.6 9.6 6.6 ICDA 8.7 9.3 6.2 12.0 HHP Supply 13.3 14.1 11.4 11.0 Independent Mine Production DMR Mines & UG2 5.0 6.5 5.5 in Mill t G.R.: 3.6% 10.0 9.0 8.0 7.0 Mine Production ICDA 6.0 G.R.: 2.3
Slide 24: Export Sales
Export Sales 6.0 2007 2008 2009 in ´000 t Official Exports 5.0 G.R.: 19.2% Official Exports 3,397 4,938 4,986 Exports Independent Mines 1,002 1,266 1,197 Exports of UG 2 4.0 G.R.: 67.2 Exports of UG2 1,503 2,953 2,794 Export Sales Integrated in Mill t Exports Mines 893 720 995 3.0 Independent Mines
Slide 25: Metallurgical Cr Ore Usage
Metallurgical Cr Ore Usage 10.0 2007 2008 2009 in ´000 t 9.0 Independent Mines Integrated & UG 2 G.R.: 1.0% Mines 6,558 6,110 4,347 8.0 Independent 7.0 Mines & UG2 2,168 1,961 1,326 in Mill t 6.0 5.0 4.0 Integrated Mines 3.0 G.R.: 3.2% 2.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: He
Slide 26: Chemical & Foundry Usage
Chemical & Foundry Usage 1.4 Independent Mines & UG 2 2007 2008 2009 G.R.: 7.2% in ´000 t 1.3 Integrated 1.2 Mines 831 797 496 1.1 Independent Mines & UG2 327 317 213 1.0 in Mill t 0.9 0.8 0.7 Integrated Mines 0.6 G.R.: -5.4% 0.5 0.4 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Heinz H.
Slide 27: The Potential of UG2
The Potential of UG2 60 Relative Change in Ore Input Cost, in % UG2 Share in Ore Mix UG2 in SAF Technology: 40 0% 10% 30% 20 50% 70% • Reduction of ore input costs 0 UG2 in DC Technology: -20 • Direct use, -40 • Increased reduction of -60 ore input cost • Lower reductant cost -80 UG2 Transfer Price
Slide 28: Companies Utilizing UG2
Companies Utilizing UG2 Xstrata/Merafe: UG2 supplied from various sources; half of input is UG2 Samancor: Middleburg plant operates DC furnace using UG2 Tubatse plant might also use UG2 Assmang: UG2 supplied from „Two Rivers“ operation; another supply source is privately owned ASA: uses UG2 from tim
Slide 29: Metallurgical Chrome Ore & Concentrate
Metallurgical Chrome Ore & Concentrate Cr2O3 Content Cr : Fe Ratio Kazakhstan Sudan Sudan Kazakhstan Madagascar Zimbabwe Turkey India Zimbabwe Russia South Africa Turkey India Albania Indonesia Iran Oman Oman Brazil Brazil UG2 Madagascar Albania Finland Finland South Africa Iran Indonesia Russia UG2
Slide 30: Ferrochrome Production Technologies (I)
Ferrochrome Production Technologies (I) SAF DC Furnace (Outokumpu & Conventional Process) Fines Lumpy Ore Fines Beneficiation Beneficiation Pelletising Sintering Reductants Reductants Offgas Pre-heating Fluxes Fluxes Offgas SAF Power Offgas DC Furnace Power FeCr Slag FeCr Slag Ingots Ingots Source:
Slide 31: Ferrochrome Production Technologies (II)
Ferrochrome Production Technologies (II) Xstrata / Merafe – Premus Process Raw Materials: Cr2O3, Reductants, Hot sintered pellets Binder Clay Rotary Kiln Drying Coal, (Pre-Reduction) Off Gas Reductants, Fluxes Milling Slag Electric Furnace Power H2O Pelletizing FeCr Ingots FeCr Granules Roasting Hot
Slide 32: Capacity Changes
Generic*) Charge / HC FeCr – Capacity Changes 2007 2008 2009 2010 e 2011 f 2012 f 2013 f in ´000 t Europe 1,021 1,068 1,071 1,122 1,197 1,287 1,502 South Africa 4,354 3,740 3,890 4,095 4,195 4,275 4,734 Zimbabw e 250 250 250 250 250 250 250 Brazil 190 200 200 200 200 200 200 China 1,300 1,500 1,500
Slide 33: Charge / HC FeCr Production
Charge / HC FeCr Production Change 2008 2009 2010 e 2011 f 11/10 in ´000 t in % Brazil 187 113 183 180 -1.5 EU 27 356 157 335 405 21.1 Russia, Turkey, Albania 531 443 537 577 7.5 India 750 670 859 929 8.2 Kazakhstan 955 982 1,076 1,258 16.9 South Africa 3,239 2,179 3,542 3,500 -1.2 Zimbabwe 152 100
Slide 34: Producers of Charge / HC FeCr
Producers of Charge / HC FeCr 2008 2009 in ´000 t Cr Units Production Breakdown Type ENRC 696 740 Total Output Total Output High Grade Chelyabinsk 85 64 (Cr Units) (Cr Units) Mechel 45 57 4,237 kt 3,406 kt Eti Krom 44 24 Vargön 13 5 High Grade 24 India 466 417 HC FeCr 31 Low Grade China 305 334 Zimb
Slide 35: High Carbon overtaking Charge Chrome (Production)
High Carbon overtaking Charge Chrome (Production) 5,000 4,500 Charge Cr in ´000 t Material Weight 4,000 G.R.: 2.7% 3,500 3,000 2,500 HC FeCr G.R.: 10.3% 2,000 1,500 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 e 2011 f Source: Heinz H. Pariser 35
Slide 36: Regional Production Breakdown 2009
Regional Production Breakdown 2009 40 Russia HC FeCr 30 Growth Rate 2000 - 2009, in % Charge Cr 20 China 10 Turkey Average Growth Rate: 5.9% p.a. India Kazakhstan South Africa 0 Brazil -10 Finland Sweden -20 Zimbabwe -30 Others -40 0 10 20 30 40 50 60 70 80 90 Share of Production, in % Others incl.
Slide 37: Charge / HC FeCr Production – Integrated vs. Converters
Charge / HC FeCr Production – Integrated vs. Converters 9,000 30.0 China Converters with own G.R.: 24.2% 8,000 Cr Ore Base 25.0 % share of Chinese Converters G.R.: 11.2% 7,000 Other Converters 6,000 G.R.: -5.0% 20.0 in ´000 t 5,000 15.0 4,000 3,000 10.0 2,000 Integrated Producers G.R.: 3.7% 5.0 1,00
Slide 38: Charge / HC FeCr Consumption
Charge / HC FeCr Consumption Change 2008 2009 2010 e 2011 f 11/10 in ´000 t in % NAFTA 488 229 470 498 6.1 EU 1,993 1,263 1,532 1,658 8.2 Japan 831 459 708 724 2.3 S. Korea/Taiwan/India 1,003 1,052 1,396 1,437 2.9 Others 646 633 729 731 0.3 Subtotal 4,962 3,636 4,835 5,048 4.4 China 2,352 3,482 3,37
Slide 39: High Carbon overtaking Charge Chrome (Demand)
High Carbon overtaking Charge Chrome (Demand) 5,000 HC FeCr 4,500 G.R.: 8.7% 4,000 3,500 in ´000 t 3,000 Charge Cr G.R.: 4.2% 2,500 2,000 1,500 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 e 2011 f Source: Heinz H. Pariser 39
Slide 40: Regional Demand Breakdown
Regional Demand Breakdown Charge Cr Demand Structure HC FeCr Demand Structure 2009 2009 45 60 40 Growth Rate 2000 - 2009 in % p.a. Growth Rate 2000 - 2009 in % p.a. 50 35 China NAFTA 30 40 25 China 20 30 15 South Africa 20 Average Growth Rate: 8.9% Other 10 Av. Growth America 5 Rate: 4.2% South Kore
Slide 41: Characteristics of Charge / HC FeCr
Characteristics of Charge / HC FeCr Charge Cr High Carbon FeCr Almost exclusively for stainless steel Wide range of usage in alloy steels, the Application melting foundry industry as well as for other materials – but also in stainless steel Mainly direct sales to main stainless Often sold indirectly
Slide 42: Charge / HC FeCr Supply & Demand Balance
Charge / HC FeCr Supply & Demand Balance 2006 2007 2008 2009 2010 2011 ´000 t Demand* 6,316 7,591 6,639 7,117 8,210 8,835 Supply - Cr Production 6,555 7,727 7,463 6,164 8,163 8,516 - Capacity 7,807 9,325 9,024 9,172 9,563 10,278 - Utilisation (in %) 84.0 82.9 82.7 67.2 85.4 82.9 Supply & Demand Bala
Slide 43: Charge / HC FeCr Supply & Demand
Charge / HC FeCr Supply & Demand 2,400 Actual Forecast 2,200 2,000 1,800 1,600 in ´000 t Supply 1,400 1,200 1,000 800 Demand 600 400 2006 2007 2008 2009 2010 e 2011 f Source: Heinz H. Pariser 43
Slide 44: Power Supply
Power Supply 1. According to Escom, sufficient electricity will be available from 2013 onwards. 2. Industry sources believe that electricity demand will shortly thereafter exceed capacity again 3. Other power stations in Botswana are providing additional electricity. With exception of the recently a
Slide 45: Charge Cr Long-term Price Development
Charge Cr Long-term Price Development Phase : I II III IV V G.R. : -3.8% -1.4% -1.0% +8.0% -3.2% 3.00 Realistic Price Forecast 2.50 (in 2009 US$) Deflated Prices 2009 US$ 2.00 in US$ / lb 1.50 1.00 0.50 FeCr Nominal Prices Production Cost 0.00 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 S
Slide 46: Any Questions?
Any Questions? Source: Heinz H. Pariser 46
Slide 47: Support for the Global Stainless Steel Industry
Support for the Global Stainless Steel Industry 47
Slide 48: Chrome makes Stainless Stainless
Chrome makes Stainless Stainless Environment O O O O Stainless Steels O O O O O O are alloyed steel grades with a carbon mass fraction of 1.2% or less, and 10.5% Cr or more, Cr Cr Cr with or without other elements. Cr Cr Cr Stainless Steel Source: Steel Manual / Heinz H. Pariser 48
Slide 49: Stainless Steels – More than Different Grades (but all with Cr)
Stainless Steels – More than 200 Different Grades (but all with Cr) % Cr Typical Grades Applications Ferritic Automotive X 5 CrTi 12 4 („409“- 12% Cr) exhaust system Martensitic 10.5% X 20 Cr 13 („420“- 13% Cr) Cutlery, needle valves, nozzles - Austenitic / CrMn 30.0% X 5 CrNi 18 9 („304“- 18% Cr) „
Slide 50: Typical Stainless Grades
Typical Stainless Grades Chemical Composition Austenitic CrMn Ferritic Duplex 201 "LDX 2101" 301 430 17Cr; 3.5Ni; 21.5Cr; 1.5Ni; 17Cr; 7Ni 17Cr 6Mn 5Mn; 0.3Mo 202 409 2205 304 18Cr; 4Ni; 11.5Cr; 22Cr; 5.7Ni; 18.5Cr; 8Ni 8Mn 0.25Ti 3.1Mo 316 India/China 18Cr; 11Ni; 200 series 2Mo ~16Cr; 9Mn; <2Ni 904
Slide 51: Stainless Steel in the Global Steel Environment
Stainless Steel in the Global Steel Environment Stainless Steel Production Steel Production 2009 32,652 31,220 1,349 1,262 Stainless Steel 5,897 Production 26,418 25,971 5,616 2.4% 1,298 1,210 3,350 4,458 4,811 3,340 Others 3,564 2,607 Asia 12,010 Japan 11,258 7,344 China 9,751 EU 27 Crude Steel USA
Slide 52: Global Stainless Steel End Use - 2009
Global Stainless Steel End Use - 2009 Engineering 23.6% Metal Goods 22.1% Building & Construction 17.2% Tubular Products 12.9% Transport (incl. Automotive) 11.6% Electromechanical & Electronic Products 6.8% Non-Allocated 5.8% Source: Heinz H. Pariser 52
Slide 53: Stainless Steel Melting
Stainless Steel Melting 2008 2009 2010 e 2011 f Change 11/10 in ´000 t in % USA 1,925 1,618 2,333 2,382 2.1 Brazil 557 482 507 528 4.2 European Union 7,828 5,974 7,411 7,663 3.4 Other Europe 213 140 197 210 6.5 Japan 3,564 2,607 3,340 3,350 0.3 S. Korea/Taiwan 2,914 3,121 3,605 3,717 3.1 S. Africa 5
Slide 54: Global Stainless Melting – Since 1950
Global Stainless Melting – Since 1950 40.0 Phase : I II III IV VII V VI G.R. : +8.1% +2.9% +7.8% -0.7% +5.3% +7.0% +0.9% Post-War Reconstruction Crisis Years StSt Boom I: StSt Boom II: China Eastern Europe Transition 30.0 Japan, Europe, USA Market Taiwan, Entrance S. Korea in Mill t 20.0 AOD / VOD C
Slide 55: Typical Material Charge for Stainless
Typical Material Charge for 304 Stainless Carbon steel Ferrochrome Stainless Charge Cr scrap Nickel Other alloys HC FeCr scrap (C-scrap) LC FeCr Electric arc furnace 70kg 80kg melting 15kg 165kg 10kg 4kg Trimming & refining AOD / VOD(1) 1kg 180kg Continuous casting 180kg Cr input in kg Cr units Slab
Slide 56: Stainless Steel – Made of Scrap?
Stainless Steel – Made of Scrap? Primary Metals Outokumpu´s Raw Material Mix Internal Scrap between 2005 - 2009 External Scrap Primary Metals 22.8 - 31.5% Internal Scrap 20.1 – 20.6% Stainless Melting External Scrap 47.9 – 57.1% Total Scrap Input 68.0 – 77.7% Source: Outokumpu Oy Annual report, Hein
Slide 57: South Africa's FeCr Position in Main Stainless Countries
South Africa‘s FeCr Position in Main Stainless Countries FeCr Imports 2000 in ´000 t per Month 2010 South Africa Average 55.5% South Africa Average 56.9% EU27 139 172 49.4% 69 56.0% 96 Asia 55 148 74.3% 41 49.9% 74 60 81 Japan 56.1% 33 75.6% 61 43 61 USA 50.3%22 48.8% 30 0 44 China 57.1% 25 0 Total
Slide 58: Charge / HC FeCr Imports
Charge / HC FeCr Imports 600 100 Total Charge / HC FeCr Imports by Stainless Producing Countries 90 500 G.R.: 5.3% 80 70 400 in ´000 t per Month 60 Share in % 300 50 40 200 30 Supplies from South Africa 20 100 G.R.: 4.6% 10 0 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: Heinz H.
Slide 59: Stainless Steel Substitution Process – Substitution Trigger
Stainless Steel Substitution Process – Substitution Trigger Ratios of: Ferritics 23.7 22.7 22.0 22.9 23.0 24.6 23.5 25.6 24.8 26.4 28.0 28.2 CrMn 3.8 5.3 5.3 6.9 10.2 11.5 11.1 14.3 14.7 15.9 15.8 16.0 50 80.0 45 LME Ni Price in ´000 US$/t SS Austenitic Ratio 75.0 40 Austenitic Ratio in % 35 70.0 30
Slide 60: Substitution Potential: Chrome vs. Nickel
Substitution Potential: Chrome vs. Nickel End Use of Substitution Potential End Use of Substitution Potential Chrome Units Nickel Units in % in % Stainless Steel 65 59 300 29 Not Replaceable 56 Yes, Int ernal Subst it ut ion 400 24 0 bet ween St ainless Grades 200 12 3 Alloy Steels 30 Limit ed Subst
Slide 61: Summary Substitution in Stainless
Summary Substitution in Stainless • Chrome is irreplacable: No Chrome – No Stainless! • High nickel prices trigger substitution, • But with China‘s growing stainless market – the global product mix has changed as well! • Growing expansion of either ferritics or duplex will push ferrochrome demand, a
Slide 62: Stainless Price Competitiveness
Stainless Price Competitiveness 250 Index 1967 =100 Source: Heinz H. Pariser 2008 2009 2010 (1-8) 430 SS CR 137.7 91.6 118.6 Non Ferrous 197.5 173.4 214.7 Plastic 178.9 161.9 166.8 Aluminium 200.3 184.6 191.0 200 Iron & Steel 313.5 233.0 251.6 304 (18% Cr, 8% Ni) 150 in Index Points 100 50 430 (18%
Slide 63: Intrinsic Element Value in Stainless Prices
Intrinsic Element Value in Stainless Prices Grade 304 (18% Cr, 8% Ni) Grade 430 (18% Cr) 80.0 35.0 Basis: Effective German 75.9 Basis: Effective German Trader Price 70.0 Trader Price Cold Cold Rolled Sheet, 2mm Rolled Sheet, 2mm 30.0 Nickel 60.0 25.0 Intrinsic Value, in % Intrinsic Value, in % 50.0
Slide 64: Any Questions?
Any Questions? Source: Heinz H. Pariser 64
Slide 65: Nickel – the “Be-devilled” Metal
Nickel – the “Be-devilled” Metal 65
Slide 66: Long-Term Historic Nickel Price Development
Long-Term Historic Nickel Price Development 80,000 Nickel Price Crises I 70,000 Nickel Price 60,000 Crises II Nickel Price 50,000 Nickel Price Crises III in US$ / t Deflated 40,000 LME Nickel Contract 30,000 23,200 US$/t 20,000 19,400 US$/t 15,500 US$/t 10,000 Nickel Price Nominal 0 1950 1960 1970 1
Slide 67: Chrome vs Nickel – A First Use Comparison
Chrome vs Nickel – A First Use Comparison (Basis: 2009 First Use Data) 4.2% p.a. Chrome 4.5% p.a. 4.0% p.a. Nickel 2.7% p.a. 1.7% p.a. 33.7 70.5 4.4 60.1 25.1 0 6.2 -0.6 % p.a. in Stainless Steel in Other Applications in Alloy Steel Source: Heinz H. Pariser 67
Slide 68: Stainless Driving Nickel Demand
Stainless Driving Nickel Demand First Use of Nickel 2009 p 900.0 800.0 Batteries & Stainless Steel Others 700.0 G.R.: 4.9 % Foundry 7% 4% 600.0 Plating 11% 500.0 in ´000 t Cu Base 400.0 1% Stainless Steel 300.0 Ni Base 59% 10% 200.0 Non-Stainless Application 100.0 Alloy Steel G.R.: 2.2 % 8% 0.0 1960
Slide 69: Primary Nickel Consumption – 2006 to 2011
Primary Nickel Consumption – 2006 to 2011 1,800 Actual Forecast 1,600 1,525 +6.8% 1,401 1,428 + 15.0% 1,400 1,323 1,287 1,242 All Other 1,200 718 Applications 517 622 in ´000 t 520 521 1,000 543 37 Low Ni CrMn 800 48 60 62 (1.5%) 43 48 600 400 847 CrNi SS 755 722 746 744 651 (8.5%) 200 0 2006 2007 2
Slide 70: Regional Nickel Consumption Breakdown 2009
Regional Nickel Consumption Breakdown 2009 1,500 30 1,400 Growth Rate 2000 - 2009 in % p.a. 25 1,300 in ´000 t 1,200 20 1,100 15 China / Hong Kong 1,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 10 Australasia 5 Average Growth Rate: 1.8% 0 America EU 27 Japan Asia Africa Other Euorpe -5 0 20
Slide 71: Nickel Supply & Demand Balance
Nickel Supply & Demand Balance 2007 2008 2009 2010 2011 ´000 t Demand 1,323 1,287 1,242 1,428 1,525 Supply - Ni Production 1,445 1,382 1,347 1,415 1,622 - Capacity 1,640 1,724 1,724 1,780 1,850 - Utilisation (in %) 88.1 80.1 78.1 79.5 87.7 Supply & Demand Balance 122 95 105 -13 97 LME Nickel Price (
Slide 72: Any Questions?
Any Questions? Source: Heinz H. Pariser 72
Slide 73: Stainless Scrap – The Strongest Competitor
Stainless Scrap – The Strongest Competitor 73
Slide 74: Stainless Scrap Cycles
Stainless Scrap Cycles Internal Scrap External Scrap Blend Material TIM E Influencing Factors Stainless Production Stainless Consumption Historical Stainless and Alloy Consumption, Nickel Price Recycling Time 3 days – 3 months Approx. 6 months 15 – 20 years Recycling Ratio Approx .100 % Approx. 100%
Slide 75: Stainless Scrap Availability
Stainless Scrap Availability Change 2008 2009 2010 e 2011 f 11/10 in ´000 t in ´000 t in % NAFTA 1,483 1,282 1,404 1,488 6.0 Other America 177 146 175 192 10.0 European Union 2,955 2,465 2,907 3,160 8.7 Other Europe 447 338 456 530 16.1 Japan 894 764 794 810 2.0 Other Asia 693 587 716 750 4.7 Middle
Slide 76: Scrap Availability – Dependency on Nickel
Scrap Availability – Dependency on Nickel 2,600 25.00 Source: Heinz H. Pariser Scrap Availability 2,400 LME Cash Nickel Price, US$/lb 20.00 Scrap Availability, '000 t 2,200 15.00 2,000 1,800 10.00 1,600 5.00 1,400 LME Cash Nickel Price 1,200 0.00 2006 2007 2008 2009 2010e 2011f Source: Heinz H. Pari
Slide 77: Long-term Global Scrap Reserve
Long-term Global Scrap Reserve 600.0 1980 2000 2009 2010 2020 in Mill t Cum. Aust. Consumption 66.1 208.1 322.2 338.2 560.4 500.0 Cum. Scrap Consumption 20.2 92.0 159.1 169.1 303.3 Scrap Reserve 45.9 116.1 163.1 169.1 257.2 400.0 in Mill t 300.0 Scrap Reserve Cum. Aust. Consumption 200.0 Cum. Scrap
Slide 78: Product Mix Defining Scrap Input
Product Mix Defining Scrap Input External Stainless Scrap Consumption (Ratio in %) Global Average MIN MAX China USA 300 Series 27.6 42.2 74.4 China USA, EU, Japan 200 Series 8.5 10.1 25.0 China India 4.5 400 Series 5.0 10.0 Source: Heinz H. Pariser 78
Slide 79: External Scrap Ratio's Austenitic Grades (300 series)
External Scrap Ratio‘s Austenitic Grades (300 series) 80.0 74 73 Ø 2009: 41.8% 70 Ø 2010: 44.1% External Austenitic Scrap Ratio, in % 70.0 Ø 2011: 45.3% 60.0 54 55 55 56 52 49 48 50.0 45 39 40.0 34 34 35 30.0 28 26 24 20.0 10.0 2010 2009 2011 0.0 USA Taiwan Europe Japan S. Korea China Source: Heinz
Slide 80: Contribution to Primary Raw Materials
Contribution to Primary Raw Materials Cr Units 2009 Nickel Units 2009 Secondary; Secondary; 1,102 560 Primary; Primary; 3,406 1,347 Leading Chrome Producer (´000 t Cr) Leading Nickel Producer (´000 t Ni) ENRC 740 Norilsk 283 Xstrata / Merafe 488 Vale 187 Samancor 312 BHP Billiton 136 Source: Heinz H
Slide 81: Ni Units in External Stainless Scrap
Ni Units in External Stainless Scrap 750 + 14.5% + 8.1% 700 - 7.9% + 17.7% 650 - 2.9% 600 in ´000 t Ni Content - 11.5% 550 500 450 400 350 2006 2007 2008 2009 2010e 2011f Ni Units in ´000 t 707 652 633 560 659 712 Source: Heinz H. Pariser 81
Slide 82: Cr Units in External Stainless Scrap
Cr Units in External Stainless Scrap 1,500 + 8.9% 1,400 + 13.9% + 21.4% - 3.5% 1,300 - 6.6% in ´000 t Cr Content 1,200 - 10.6% 1,100 1,000 900 800 2006 2007 2008 2009 2010e 2011f Cr Units in ´000 t 1,368 1,321 1,234 1,102 1,339 1,457 Source: Heinz H. Pariser 82
Slide 83: Cr Units in External Stainless Scrap
Cr Units in External Stainless Scrap Cr Requirement in Cr Requirement in Stainless Steel - Total Stainless Steel - China 6,000 2,000 Cr Requirements in 1,800 Stainless Steel 5,000 1,600 Cr Requirements in Stainless Steel 1,400 4,000 in ´000 t Cr Content in ´000 t Cr Content 1,200 3,000 1,000 800 Cr
Slide 84: Element Valuation in Stainless Scrap
Element Valuation in Stainless Scrap … but Ni is the main Scrap offers discounts… determinant (e.g. grade 304 type scrap) 110 8.0% Ni Referenceprice Valuation relative to Referenceprice, in % Cr 100 Nickel 18.0% Fe 90 71.7% 80 70 74.0% 60 Molybdenum Chrome 19.4% 50 9.0% 40 2006 2007 2008 2009 2010 q
Slide 85: Chrome Valuation in Scrap vs. SA Producer Price
Chrome Valuation in Scrap vs. SA Producer Price 2.50 50.0 45.0 Charge Chrome 2.00 South African 40.0 Cr in Scrap Discount, in % Producer Price 35.0 Prices in US$ / lb Chrome 1.50 in Scrap 30.0 25.0 1.00 20.0 15.0 0.50 10.0 5.0 0.00 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: H
Slide 86: Any Questions?
Any Questions? Source: Heinz H. Pariser 86
Slide 87: The Way Forward – Opportunities & Obstacles
The Way Forward – Opportunities & Obstacles 87
Slide 88: China's Position in Stainless & Related Raw Materials 2000 vs 2009
China‘s Position in Stainless & Related Raw Materials 2000 vs 2009 Production Share in % Consumption 48.9 42.4 37.5 37.9 33.5 24.5 22.3 20.0 15.4 7.6 8.0 4.7 6.0 5.1 5.5 2.9 3.7 1.3 1.2 2.2 Stainless Nickel Chrome Chrome Stainless Stainless Nickel Chrome Chrome Stainless Steel Ore Scrap Steel Ore Sc
Slide 89: Stainless Steel Intensity in the Year 2000
Stainless Steel Intensity in the Year 2000 Cold Rolled Flat Products 25 Newly Industrialized Asian Economies 20 Taiwan Consumption per Capita in kg 15 South Korea 10 Advanced Economies EU 27 Emerging Markets Japan 5 China Turkey NAFTA Africa Australasia 0 India Other Europe South America Other Asia
Slide 90: Stainless Steel Intensity in the Year 2009
Stainless Steel Intensity in the Year 2009 Cold Rolled Flat Products 25 20 Newly Industrialized Consumption per Capita in kg Asian Economies 15 Taiwan South Korea 10 Emerging Markets Advanced Economies China EU 27 5 Japan Africa Turkey NAFTA Australasia 0 India Other Europe Other Asia South America
Slide 91: Stainless Steel Intensity in the Year 2020
Stainless Steel Intensity in the Year 2020 Cold Rolled Flat Products 25 20 Taiwan Consumption per Capita in kg China South Korea 15 Japan EU 27 10 Turkey 5 India NAFTA Africa Australasia 0 Other Europe South America Other Asia Middle East -5 0 1 10 100 1,000 PPP per Capita in ´000 US$ (Logarithmic S
Slide 92: Outlook Stainless Steel & FeCr in China
Outlook Stainless Steel & FeCr in China 30.0 Actual Forecast 10.0 Actual Forecast 9.0 Stainless Steel Melting Production in Mill t FeCr Demand in Mill t Material Weight 1990 2000 2009 CAGR 2020 CAGR 25.0 Mill t % Mill t % Stainless 8.0 Melting 0.2 0.6 9.8 23.6 27.6 9.7 FeCr 7.0 20.0 Demand 0.2 0.2 3
Slide 93: China's Challenges (1)
China‘s Challenges (1) 1. It appears that China’s Stainless Steel Market might not reach saturation before 2025. 2. Stainless Steel Demand is expected to increase from presently 7.1 kg /capita to almost 20 kg / capita by 2020 as rural areas are further developed. 3. Crude Stainless Output might subs
Slide 94: China's Challenges (2)
China‘s Challenges (2) During the past decade China has rapidly expanded FeCr production on the basis of imported Cr ore. It is questionable whether this can be maintained in future if the following aspects are considered. 1. China’s National Development & Reform Commission (NDRC) is already control
Slide 95: China's Challenges (3)
China‘s Challenges (3) 4. On the other hand, countries providing Cr ore to China’s FeCr converters are taking a more and more critical stand vs. exports of unprocessed vital raw materials such as Nickel and Chrome 5. South Africa might well benefit from this development provided electricity availabi
Slide 96: India – Opportunity or Threat?
India – Opportunity or Threat? 96
Slide 97: India – Stainless Steel & FeCr Demand
India – Stainless Steel & FeCr Demand 4.5 Actual Forecast 1.2 CAGR: CAGR: Stainless Steel Melting Production in Mill t 4.0 FeCr Demand in Mill t Material Weight 7.5% 7.6% 1.0 3.5 CAGR: CAGR: 12.2% 7.2% 3.0 0.8 2.5 0.6 2.0 1.5 0.4 1.0 0.2 0.5 0.0 0.0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Slide 98: India – FeCr Production & Demand
India – FeCr Production & Demand 1.2 Actual Forecast 2.0 CAGR: CAGR: 1.8 FeCr Production in Mill t Material Weight FeCr Demand in Mill t Material Weight 7.5% 7.6% 1.0 1.6 CAGR: CAGR: 7.6% 7.2% 1.4 0.8 1.2 0.6 1.0 0.8 0.4 0.6 0.4 0.2 0.2 0.0 0.0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Slide 99: India – Opportunity or Threat?
India – Opportunity or Threat? 1. India’s Cr Ore reserves are of high quality – but very limited. Subsequently, the Government wants to protect these and has imposed export restrictions and an export tax. 2. India is the third largest exporter of FeCr after South Africa and Kazakhstan. In 2009, the
Slide 100: Stainless Steel – Old concepts renewed?
Stainless Steel – Old concepts renewed? 100
Slide 101: Changing Stainless Market Leadership…
Changing Stainless Market Leadership… United States Japan EU China 1950 1960 1970 1980 1990 2000 2010 … Changing (Raw Material) Strategies Region Scrap Scrap Input Scrap Trade Interest in Availability Ratio Primary Metals United States High High Exports Very low Backward Japan Sufficient Medium Expo
Slide 102: RoW - Stainless Steel Old Concepts Renewed?
RoW - Stainless Steel Old Concepts Renewed? 25.0 Actual Forecast 7.0 Stainless Steel Melting Production in Mill t FeCr Demand in Mill t Material Weight 6.0 20.0 5.0 15.0 4.0 3.0 10.0 2.0 CAGR: CAGR: 5.0 3.5% 3.7% 1.0 CAGR: CAGR: 2.6% 2.1% 0.0 0.0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 201
Slide 103: Stainless Steel Old Concepts Renewed?
Stainless Steel Old Concepts Renewed? 1. Underlying desire to further consolidation in Europe (ArcelorMittal; ThyssenKrupp Stainless) 2. Phasing out high of nickel containing stainless grades favors primary chrome requirements for ferritic stainless steels. 3. Subsequently primary Cr units will bene
Slide 104: Conclusions
MERAFE Conclusions 104
Slide 105: Conclusion
Conclusion 1. South Africa has the largest Cr reserves and accounts presently for half of the global Cr ore supply. Ore availability is further supported through mining of UG2 platinum containing ores. Due to lack of electricity, this wealth is not fully utilised for a few years now. 2. China has be
Slide 106: Conclusion
Conclusion 3. India is in a similar situation as stainless demand and production expands rapidly. High grade Cr reserves are limited and India has already undertaken counteractions by imposing export restrictions as well as an export tax and noteworthy volumes of Cr ore are meanwhile imported from M
Slide 107: Any Questions?
Any Questions? Source: Heinz H. Pariser 107
Slide 108: Contact Details
Contact Details Heinz H. Pariser Heinz H. Pariser Alloy Metals & Steel Market Research Scharnstr. 51 46509 Xanten Germany Tel.: +49 2801 77 11 0 Email: info@heinzpariser.de You are always welcome to contact us. Source: Heinz H. Pariser 108
Merafe Resources — Investor Presentation (November 2010) on 6ix