Slide 1: Bauxite & Alumina Site visit Brazil
Bauxite & Alumina Site visit Brazil Johnny Undeli, Head of Bauxite & Alumina November 5, 2012
Slide 2: Content
Content 1 Hydro in Brazil 2 Market 3 Improving our cost position 4 Q&A
Slide 3: Safety first
Safety first Improved transparency Cultural development
Slide 4: Strong social and environmental commitment
Strong social and environmental commitment CSR Responsible business Viable societies
Slide 5: Hydro in Brazil
Hydro in Brazil 1
Slide 6: Hydro Storyline
Hydro Storyline A history of innovation Acquired VAW Company Became the largest aluminium company in Europe Hydro was established Hydro in Brazil Produced nitrogen-based Establishment of Acquired Vale’s aluminium industrial fertilizers Alnor, Karmøy MRN mine in Acro, Itú assets Created the first Tro
Slide 7: Integrated value chain in Brazil
Integrated value chain in Brazil Regional administrative center for activities in Pará Hydro holds a 5% stake in MRN in addition to a 40% off-take agreement Alunorte is the world's largest alumina refinery Paragominas mine has an Albras is the second- annual capacity of almost largest aluminium 10 m
Slide 8: World-class asset portfolio
World-class asset portfolio MRN Paragominas Alunorte alumina CAP alumina bauxite mine bauxite mine refinery refinery project • 5% ownership • 60% ownership, 100% by 2016 • 91% ownership • 81% ownership • Volume off-take agreement for • One of the world’s largest • World’s largest alumina refinery •
Slide 9: Strong up-stream position in Brazil
Strong up-stream position in Brazil Resource base for several decades
Slide 10: Market
Market 2
Slide 11: 66% of available bauxite in 3 countries
66% of available bauxite in 3 countries Billion mt Guinea 41.0 China1) 3.8 0.9 Jamaica Mali Vietnam 1.1 4.0 1.2 4.7 0.5 Venezuela 0.0 India 1.8 1.6 0.3 0.4 0.4 Indonesia Cameroon 1.0 1.2 0.5 0.0 Australia Brazil 9.5 8.2 5.9 2.0 Atlantic Pacific Big-league (Top- 3) Total bauxite, billion tonnes: rese
Slide 12: Alumina industry consolidating
Alumina industry consolidating Net long alumina position, million tonnes Alcoa 4.3 Alcoa 8.8 Vale 3.0 Hydro 2.1 Glencore 2.4 BHP Billiton 1.7 BHP Billiton 1.9 Rio Tinto Alcan 1.6 Kaiser 1.0 UC Rusal -0.8 Alcan 0.8 Vedanta -1.1 Sual 0.7 Century -1.1 Rio Tinto 0.5 Alba -1.7 Pechiney 0.4 China -1.9 VAW
Slide 13: Successful introduction of alumina index pricing
Successful introduction of alumina index pricing Platts index* USD per mt Percent 450 20 • Alumina index increasingly Alumina price % of LME accepted since introduction – creating market transparency 400 18 • Main reference for short-term contracts 350 16 • Alumina price relative to LME increased in
Slide 14: Chinese bauxite imports drop on Indonesian export ban
Chinese bauxite imports drop on Indonesian export ban Aluminium equivalents* in 2012, million mt • Bauxite and alumina 2 • Strong increase in bauxite imports in April/May, low levels June to August to China 1.5 • Bauxite import from Import Atlantic region • 200% growth in alumina 1 imports YTD 2012
Slide 15: Improving our cost position
Improving our cost 3 position
Slide 16: Bauxite & Alumina
Bauxite & Alumina Q3 Q2 Q3 Key figures 2012 2012 2011 Alumina production, kmt 1 441 1 491 1 553 Total alumina sales, kmt 1 683 1 888 2 092 Realized alumina price, USD/mt 270 296 345 Apparent alumina cash cost, USD/mt 261 268 280 Bauxite production, kmt 2 439 2 115 2 186 Underlying EBITDA, NOK millio
Slide 17: Bauxite mining costs in Paragominas
Bauxite mining costs in Paragominas Paragominas bauxite mining costs 2011 • Energy cost – power and fuel • Labor cost 15% • Influenced by Brazilian wage level 19% • Productivity improvements 16% • Maintenance and consumables 21% • Influenced by Brazilian inflation 9% • Large fixed cost base 20% • Im
Slide 18: Favorable integrated alumina cash cost position
Favorable integrated alumina cash cost position • Integrated alumina cash cost position 2011 Integrated alumina cash cost position 2011 • USD 266 per mt • Alunorte, Paragominas and sourced alumina 5% • Bauxite 11% • Cash cost to be improved as Paragominas increase production and pipeline is fully ut
Slide 19: Continued raw material cost challenge
Continued raw material cost challenge LME price lags important raw material prices Indexed (Q1 2010=100) 3-month LME Caustic price Coal price Fuel oil price* +127% +119% +105% +87% +88% +50% +35% +36% +15% +17% +10% +1% -1% +3% -8% -12% Q1 Q1 Q1 Q2 Q3 Q1 Q1 Q1 Q2 Q3 Q1 Q1 Q1 Q2 Q3 Q1 Q1 Q1 Q2 Q3 201
Slide 20: Hydro's position is competitive compared to peers
Hydro’s position is competitive compared to peers – despite lower LME and weak EBITDA Underlying EBITDA USD/mt for respective bauxite and alumina divisions 1H 2011 2H 2011 1H 2012 100 100 100 50 50 50 0 0 0 Hydro Peers -50 -50 -50 All figures based on public accounting data, not verified by Hydro. D
Slide 21: Significant improvement in Paragominas
Significant improvement in Paragominas Stabilize and improve further Annualized production thousand mt 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Q1 11* Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q1 11* Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Paragominas Alunorte * Pro-forma Nameplate capac
Slide 22: From B to A
From B to A
Slide 23: Improvement efforts in Bauxite & Alumina
Improvement efforts in Bauxite & Alumina NOK 1 billion improvement potential next 2-3 years Alunorte – Towards 6.3 Mtpy • Stabilize performance and availability • Increase productivity • Improve logistics efficiency • Optimize efficiency and rightsizing Paragominas – Towards 9.9 Mtpy ● Boost product
Slide 24: Strategic rationale verified; significant improvements achieved
• Strategic rational verified • Significant improvements achieved • Main focus is ”from B to A” improvement program
Slide 25: Questions?
Questions? 4
Slide 26: www.hydro.com
www.hydro.com HYDRO