Glencore plc · LSE:GLEN
Glencore — BMO Capital Markets 2017 Global Metals & Mining Conference
18 slides from Glencore's conference presentation, Feb 27, 2017
Slide 1: BMO Capital Markets 2017 Global Metals & Mining Conference
BMO Capital Markets 2017 Global Metals & Mining Conference 27 February 2017 Mobile equipment, Raglan Nickel, Canada
Slide 2: Important notice concerning this document including forward looking statements
Important notice concerning this document including 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 terminolog
Slide 3: Ivan Glasenberg, Chief Executive Officer
Tweefontein coal, South Africa Ivan Glasenberg Chief Executive Officer
Slide 4: Summary
Summary • 2012-2015 Commodity price weakness resulted from over-allocation of capital between 2006-2012 • Obscured that underlying demand growth remained robust in most commodities • Most investment went into reasonable quality assets … but has depleted the next generation of projects • 2016 turning
Slide 5: Post 2006 – sector chased expected volume growth
Post 2006 – sector chased expected volume growth The global copper market was forecast to double in • Excessive focus on demand forecasting size by 2020 (Mt Cu) • Metal demand assumed to almost double 2005-2020 40 • Emerging market urbanisation • 2x long-term historic growth trend • Bubble charts be
Slide 6: Resulting in a sustained period of over-investment
Resulting in a sustained period of over-investment … Sector invested more than $1 trillion of capex ($bn)(1) … and significantly increased supply in most ... commodities ($bn)(2) … 1200 +110% Aluminium 1000 Precious: $211bn Base Metals: $206bn +80% Iron ore 800 +79% Thermal coal Bulks: $149bn +72% L
Slide 7: … leading to sustained deflation 2011-2015
… leading to sustained deflation 2011-2015 … … helping to lower mining unit costs (1) ... … along with commodity prices (2) … Copper Iron ore Copper Thermal coal Iron ore Zinc Zinc Thermal Coal Met Coal Aluminium Nickel 2003 2005 2007 2009 2011 2013 2015 2003 2005 2007 2009 2011 2013 2015 Notes: (1)
Slide 8: … and weak cash flows, despite healthy demand growth
… and weak cash flows, despite healthy demand growth … generating just $370bn of free cash flow (1) … … despite demand growth (2) $bn operating cash 7% flow less capex 2003-2015 CAGR 2011-2016 CAGR 6% 60 5% 4% 40 3% 20 2% 1% 0 0% Aluminium Zinc Copper Lead Iron Ore Nickel Thermal Coal -20 2003 2005
Slide 9: Around this time last year … commodities apparently faced the apocalypse
Around this time last year … commodities apparently faced the apocalypse … 9
Slide 10: Today … cautious optimism has returned
Today … cautious optimism has returned 10
Slide 11: What has changed? … demand conditions in 2016 better than forecast
What has changed? … demand conditions in 2016 better than forecast • Sentiment proved too bearish Surprisingly strong(1) • Some forecast that China’s demand for mined 11.0% Actual/estimated 2016 demand growth vs commodities would more than halve in 2016 early 2016 forecast • Expected emerging market
Slide 12: What has changed? … supply growth was also weaker than feared
What has changed? … supply growth was also weaker than feared Copper rebalancing accelerated (1) • Years of low prices have induced stresses on Q4 2015 Forecast the supply side … Q4 2016 Forecast Surplus • Voluntary supply cuts • Involuntary supply cutbacks (strikes/technical problems) • Chinese sup
Slide 13: Outlook continues to justify optimism for major commodities
Outlook continues to justify optimism for major commodities • Structurally lower capex will limit new supply Copper mine project pipeline now less than half of growth depressed pre-super cycle levels(1) • From a peak of c.$71bn in 2012, capex spend by the major diversified miners shrunk to c.$25bn i
Slide 14: The future can be different
The future can be different Tweefontein coal mine, South Africa
Slide 15: Lessons learnt
Lessons learnt • Most key commodity markets have rebalanced or are rebalancing • Cyclical swings that characterise this industry do not have to be as large as they are • Glencore recognises that earnings potential can be vastly improved by accepting lessons from 2003-15 • Volume growth adversely imp
Slide 16: Glencore uniquely positioned for the challenges and opportunities that lie ahead
Glencore uniquely positioned for the challenges and opportunities that lie ahead Earnings diversified by Outstanding costs for our The right commodity mix to Significant growth potential: commodity and geography(1) key commodities – 2017F(2) feed the changing needs of capacity awaiting restart Coal
Slide 17: Q&A
Power generation, Raglan Nickel, Canada Q&A 17
Slide 18: Power generation, Raglan Nickel, Canada
Power generation, Raglan Nickel, Canada 18
Glencore — BMO Capital Markets 2017 Global Metals & Mining Conference on 6ix