Glencore plc · LSE:GLEN
Glencore — 2014 Global Metals, Mining & Steel Conference
38 slides from Glencore's conference presentation, May 2014
Slide 1: 2014 Global Metals, Mining & Steel Conference
2014 Global Metals, Mining & Steel Conference Bank of America Merrill Lynch Miami, May 2014 Lomas Bayas, Chile
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: Ivan Glasenberg, CEO
Ivan Glasenberg CEO Lomas Bayas, Chile
Slide 4: Glencore – uniquely well positioned today
Glencore – uniquely well positioned today • Investors slowly returning to mining sector but concerns remain • Supply imbalances improving, but not uniformly for all commodities • Iron ore dominates earnings and growth plans for the major “diversifieds” • Glencore – by far the most diversified resour
Slide 5: Sector starting to come back into favour?
Sector starting to come back into favour? Mining sector under-performance reducing Evolution of thinking in the mining 29% 30% sector: 21% 23% 20% 14% • Before 2008 - growth at all costs 10% 8% 2% 2% 3% 2% • 2008-2012 - recovery and growth 0% -3% • From 2012 - management change -10% Technology -20%
Slide 6: What has changed in terms of capex?
What has changed in terms of capex? • Greenfield developments have been focus of capex cuts in the sector • now correctly seen as high-risk and un-forecastable • impact has been to increase weighting of brownfield iron ore capex within overall sector pipeline • Sector retains an obsession with organ
Slide 7: Glencore core commodity markets are improving underpinned by robust demand growth
Glencore core commodity markets are improving underpinned by robust demand growth Supply imbalances are correcting Higher prices required to incentivise new supply Seaborne thermal coal balance (Mt) Zinc balance (Mt) 20 22 10 Existing production and 20 approved projects 0 Forecast Zn demand -10 18 Z
Slide 8: Prices starting to better reflect physical demand
Prices starting to better reflect physical demand Demand has been and remains healthy 12 11.0 10 7.9 8 7.1 6.6 5.7 5.9 6 4.9 4.4 4.6 4 3.2 2.6 1.7 2 0 Copper Zinc Iron ore Alu Nickel Coal 5 yr average 2013 Prices have firmed up during H1’14 led by nickel Copper Zinc Iron Ore Alu Nickel Coal 40% 32%
Slide 9: Consensus commodity forecasts now in a wide range
Consensus commodity forecasts now in a wide range Indexed commodity price forecasts 140 Zinc +35% 130 Nickel +33% 120 Aluminium +20% Lead +14% 110 Coking Coal +8% 100 Copper +4% 90 Thermal Coal +3% Brent Crude -13% 80 Iron Ore -26% 70 2012A 2013A 2014F 2015F 2016F 2017F Source: Consensus broker rese
Slide 10: But, how diversified are the “diversifieds” currently...
But, how diversified are the “diversifieds” currently... Iron ore dominates economics of most majors - split by FY 2013 EBITDA 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Peer 1 Peer 2 Peer 3 Peer 4 Iron Ore Met coal Thermal coal Metals Oil Marketing Other Source: Annual Reports, company presentatio
Slide 11: ... “ore” in the future?
... “ore” in the future? Production growth 2013A – 2016E (Cu eqv) 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Peer 1 Peer 2 Peer 3 Peer 4 Iron Ore Met coal Thermal coal Metals Oil and Gas Source: Company websites, Glencore estimates. Note: Does not include commodities where production declines are e
Slide 12: Glencore – a major producer of the right commodities with a tier one cost structure
Glencore – a major producer of the right commodities with a tier one cost structure and development optionality Illustrative C1 metals cash cost curve / Inverse FOB cash margin thermal coal 2013 Mined copper production (kt) 2015 forecast production 1,874 1,792 1,497 1,149 775 631 Freeport Codelco Gl
Slide 13: Marketing – remains a key growth engine for Glencore
Marketing – remains a key growth engine for Glencore Marketing EBIT ($M) • Unique scale, diversification and skill – the clear global #1 3,000 • Unrivalled global intelligence/market knowledge and insight • commodity direction 2,500 • corporate activity/opportunities • customer and supplier behaviou
Slide 14: Sector-leading distributable free cash flow
Sector-leading distributable free cash flow Built-in volume growth in the right Consensus 2016 free cash flow yield commodities 16% Genuine diversification across, activity 14% 13.5% geography and commodity 12.4% 12% 11.2% Marketing leverage 10% 8.1% 8% Sector leading capital allocation 6% Efficient
Slide 15: Glencore – uniquely well positioned today
Glencore – uniquely well positioned today • Genuinely diversified • by commodity, geography, activity • by growth opportunities - no need for high-risk diversification or return-diluting growth capex • flexibility to be contrarian in investment terms • major “diversifieds” are heavily iron ore weigh
Slide 16: Q&A
Q&A Mount Isa metallurgical complex, Australia
Slide 17: Appendix
Zinc ingots, Asturiana, Spain Appendix
Slide 18: Sector performance
10.0% 12.0% 0.0% 2.0% 4.0% 6.0% 8.0% -8.0% -6.0% -4.0% -2.0% 20.0% 40.0% 60.0% 80.0% -60.0% -40.0% -20.0% 0.0% Stoxx Global 1800 2% Stoxx Global 1800 21% Source: Bloomberg. Utilities 9% Health Care 57% Construction 8% Media 55% Oil & Gas 7% Travel 47% Health Care Financials 6% 40% Real Estate Retail
Slide 19: Positive outlook for our core commodities
Positive outlook for our core commodities Copper Zinc Nickel Coal Balanced near-term The much anticipated Indonesia’s ore export Market remains before structural tightening of zinc mine ban and the likelihood oversupplied in the deficits emerge again supply is starting to of enforcement has near-ter
Slide 20: E&P overview
SS———O se : a —— E&P overview
Slide 21: E&P Portfolio
E&P Portfolio E&P Portfolio location Asset Participation Participating Equatorial Guinea Interest Block I 23.75% Block O 25.00% Block X 37.50% Block V * 80.00% Block EG 05 * 60.00% Participating Cameroon Interest Matanda * 90.00% Bolongo * 100.00% Tilapia 33.33% Participating Chad Interest DOB/DOI 3
Slide 22: Chad – Recently Announced Acquisition of Caracal Energy
Chad – Recently Announced Acquisition of Caracal Energy • Caracal is Glencore’s JV partner in Chad pursuant to a farm-in agreement signed in 2012 • Recently announced a Definitive Agreement to acquire Caracal • Board recommended offer of £5.50 / share in cash • To be implemented by plan of arrangeme
Slide 23: Future – organic growth complemented with selective M&A
Future – organic growth complemented with selective M&A • Chad accelerated development using existing pipeline infrastructure • Cameroon appraisal and development planning • Leverage existing infrastructure in EG for new discoveries • New country focus • Selective complementary M&A focused on return
Slide 24: Clermont acquisition
Clermont acquisition Queensland thermal coal operations, Australia
Slide 25: Clermont coal mine overview
Clermont coal mine overview • New open cut thermal coal mine currently reaching nameplate capacity of 12mtpa saleable • Replaced the adjacent Blair Athol mine (recently exhausted) • Product coal transported 13.5km by conveyor to utilise Blair Athol rail loadout (to be owned by Clermont JV prior to c
Slide 26: Clermont deal structure
Clermont deal structure • Acquisition price of US$1,015M for Rio Tinto’s 50.1% stake • Coal chain capacity predominantly through DBCT (10.8Mt) • Acquisition through jointly controlled Bidco owned 50:50 by Glencore and Sumitomo • Successfully syndicated bank facility to provide US$550M of debt to Bid
Slide 27: Additional information
Additional information KOV pit, Katanga, DRC
Slide 28: SD/Governance
SD/Governance Safety is our top priority • 26 fatalities in 2013 (27 in 2012): focus on fatality prevention through LTIFR(1) 2009 to 2013 SafeWork 3.50 • Continued improvement in LTIFR: 3.0 (2009) to 1.9 (2013) • All fatal incidents investigated and reviewed by the Board 3.00 • Roll-out of SafeWork
Slide 29: A strong board
A strong board • Former CEO of BP Anthony Hayward • CEO of Genel Energy Chairman Ivan Glasenberg, CEO William Macaulay Executive Director Non-Executive Director • CEO of Glencore since 2002 • Chairman and CEO of First Reserve • 30 years with Glencore • Chairman of Dresser-Rand and CHC • NED of Rusal
Slide 30: Capital efficient business model
Capital efficient business model • Application of Glencore’s capital-efficient business model • Glencore run by owners for the benefit of all shareholders • maintain flexible but efficient balance sheet – strong BBB/Baa • Marketing remains highly capital efficient • low capex and equity requirements
Slide 31: Glencore’s flexible capital model
Glencore’s flexible capital model • Two distinct pools of capital centrally funded and allocated • Marketing • Industrial • Marketing: ~$20bn of capital employed • working capital average turnover cycle of ~35 days • target for 80% debt-funded • Marketing debt is frequently refreshed; average durati
Slide 32: 2014 EBIT sensitivity
2014 EBIT sensitivity US$M Indicative full year(1) 10% movement in copper price 1,200 10% movement in zinc price 280 10% movement in lead price 80 10% movement in nickel price 170 10% movement in ferrochrome price 135 10% movement in gold price 140 10% movement in silver price 90 10% movement in coa
Slide 33: 2013 financial performance
2013 financial performance(1) US$M H2 2013 H1 2013 2013 2012(2) % change Revenue 239,673 236,236 1 Adjusted EBITDA (3) 7,049 6,022 13,071 13,086 - Adjusted EBIT (3) 4,252 3,182 7,434 8,591 (13) Net income attributable to equity holders pre- 2,539 2,044 4,583 5,970 (23) significant items (4) Funds fr
Slide 34: Robust balance sheet
Robust balance sheet (1) Key debt metrics – pro forma • Robust liquidity position with $13bn of committed undrawn credit facilities and cash as H2 13 at 31 December 2013 US$bn 31 Dec 13 31 Dec 12 annualised • Strong cashflow coverage ratios: Gross debt 55.2 52.8 • FFO to Net debt at 29.0% • Net debt
Slide 35: Capex update
Capex update • 2013 expansionary capex of $8.5bn, including progression of development projects acquired with Capex profile ($bn) the Xstrata acquisition: • Las Bambas - $1.7bn 2013A 2014F 2015F • Koniambo - $1.0bn Investor Day forecast 12.1 8.0(1) 5.9(1) • Australian thermal coal - $0.9bn Delta on
Slide 36: Marketing – countercyclical cashflow profile
Marketing – countercyclical cashflow profile Current capital employed(1) (US$bn) vs commodity markets 30 300 Q2 08 – Q1 09: • Rapid fall in commodity prices from the mid-2008 peaks 25 • Glencore’s operations released 250 c.$8bn of CCE, more than offsetting any impact of the fall in profitability. 20
Slide 37: Marketing – working capital net cycle
Marketing – working capital net cycle Working capital ($bn) Comparison with trading peers 50 120 Days on hand 40 28.4 28 days 100 30 80 20 6.50 10 36 days 60 16.6 Average 47.5 days 0 . . 40 -10 (33) (26.1) days 20 -20 32 days -30 0 RMI Inventory (ex RMI) (1) Glencore Noble Bunge ADM Wilmar Olam Trad
Slide 38: Murrin Murrin nickel mine and metallurgical plant, Australia
Murrin Murrin nickel mine and metallurgical plant, Australia
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