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Delivering GrowthIan Pearce Chief Executive Xstrata Nickel
11
Ian Pearce - Chief Executive, Xstrata NickelRBC Capital Markets ConferenceJune 21, 2011 – Toronto, Canada
Disclaimer:
This presentation and its contents are confidential and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, in whole or in part, forany purpose without the written consent of Xstrata plc (“Xstrata”).This presentation does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any securities, or a proposal tomake a takeover bid in any jurisdiction. Neither this document nor the fact of its distribution nor the making of the presentation constitutes a recommendation regarding any securities.This presentation is being provided to you for information purposes only.
C t i t t t b li f d i i t i d i thi t ti ti l l th di th ibl d f t fi i l th f f X t t i d tCertain statements, beliefs and opinions contained in this presentation, particularly those regarding the possible or assumed future financial or other performance of Xstrata, industrygrowth or other trend projections are or may be forward looking statements. Forward-looking statements can be identified by the use of forward-looking terminology, including the terms“believes”, “estimates”, “anticipates”, “expects”, “intends”, “plans”, “goal”, “target”, “aim”, “may”, “will”, “would”, “could” or “should” or, in each case, their negative or other variationsor comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertaintiesbecause they relate to events and depend on circumstances that may or may not occur in the future and may be beyond Xstrata’s ability to control or predict. Forward-lookingstatements are not guarantees of future performance. No representation is made that any of these statements or forecasts will come to pass or that any forecast result will be achieved.
Neither Xstrata, nor any of its associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied inf d l ki t t t i thi t ti ill t ll Y ti d t t l d li th f d l ki t t tany forward-looking statements in this presentation will actually occur. You are cautioned not to place undue reliance on these forward-looking statements.
Other than in accordance with its legal or regulatory obligations (including under the UK Listing Rules and the Disclosure and Transparency Rules of the Financial Services Authority),Xstrata is not under any obligation and Xstrata expressly disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information,future events or otherwise.This presentation may contain references to “cost curves”. A cost curve is a graphic representation in which the total production volume of a given commodity across the relevantindustry is arranged on the basis of average unit costs of production from lowest to highest to permit comparisons of the relative cost positions of particular production sites, individualproducers or groups of producers across the world or within a given country or region. Generally, a producer’s position on a cost curve is described in terms of the particular percentile or
til i hi h th d ti f i l t d f d T t t t i d t l t il i f ti f i t fquartile in which the production of a given plant or producer or group of producers appears. To construct cost curves, industry analysts compile information from a variety of sources,including reports made available by producers, site visits, personal contacts and trade publications. Although producers may participate to some extent in the process through which costcurves are constructed, they are typically unwilling to validate cost analyses directly because of commercial sensitivities. Inevitably, assumptions must be made by the analyst withrespect to data that such analyst is unable to obtain and judgment must be brought to bear in the case of virtually all data, however obtained. Moreover, all cost curves embody anumber of significant assumptions with respect to exchange rates and other variables. In summary, the manner in which cost curves are constructed means that they have a number ofsignificant inherent limitations. Notwithstanding their shortcomings, independently produced cost curves are widely used in the industries in which Xstrata operate.
No statement in this presentation is intended as a profit forecast or a profit estimate and no statement in this presentation should be interpreted to mean that earnings per Xstrata sharefor the current or future financial years would necessarily match or exceed the historical published earnings per Xstrata sharefor the current or future financial years would necessarily match or exceed the historical published earnings per Xstrata share.
The distribution of this presentation or any information contained in it may be restricted by law in certain jurisdictions, and any person into whose possession any document containingthis presentation or any part of it comes should inform themselves about, and observe, any such restrictions.
By attending the presentation and/or accepting or accessing this document you agree to be bound by the foregoing limitations and conditions and, in particular, will be taken to haverepresented, warranted and undertaken that you have read and agree to comply with the contents of this notice including, without limitation, the obligation to keep this document and itscontents confidential.
22
AgendaAgenda
Overview of Xstrata
Nickel Markets
Xstrata Nickel – Demonstrating Operational Excellence
Koniambo Nickel Project – Update
33
Xstrata today: A global diversified mining powerhouseA global diversified mining powerhouse Global diversified miner with market capitalisation of $60bn*
Headquartered in Switzerland employing over 60 000 people in 19 countries Headquartered in Switzerland, employing over 60,000 people in 19 countries
Top 5 global producer of export thermal coal, export coking coal, copper, ferrochrome, nickel and zinc, as well as a growing platinum business
X t t l S t L d f D J S t i bilit I d f f th Xstrata plc Sector Leader of Dow Jones Sustainability Index for fourth consecutive year 2010/11
Global mining and metals industry – 2011*
Gl b l BHPGLOBAL Global Player
BHPBilliton$222bn
Xstrata$60bn
Rio Tinto$136bn
GLOBAL DIVERSIFIEDS
INTEGRATED MONOLITHS
AngloAmerican
$60bn
6
Vale$154bn
FOCUSED LOCALS
3+ regions Glencore$54bn
$60bn
2NUMBER OF KEY GEOGRAPHIES1–3 regions
Xstrataat IPO
44Note: * As at 16 June 2011 based on market capitalisation COMMODITY FOCUS
LOCAL HEROESRegional Player
MultiSingle 1–3 commodities 3+ commodities 8+ commodities
Prolific organic growth pipeline de-risked to ensure successful deliveryto ensure successful delivery Established track record of successful project delivery Innovative project solutionsInnovative project solutions Alliances and pre-emptive lock-up of engineering capacity Best in class community engagement
Decentralised project execution Decentralised project execution– Tailored to specific project requirements– Transfer of skills and learning across business units
Xstrata projects in implementation
14 major projects successfully delivered i 2002
20 major projects currently in construction
since 200220 major approved projects
14 major projects
+30,000 employees and contractors on projects teams
+250,000 tonnes of steel in construction14 major projects with near-term
approvals
Feasibility
55 5
$14bn in construction plus $7.5bn in projects with expected near-term approval
Feasibility and scoping
66Nickel Markets
Nickel Markets – Demand Nickel Markets Demand
• Robust demand in H1 2011, record global Robust demand in H1 2011, record global stainless steel production
• Driven by strong growth in the developing world particularly Chinaworld, particularly China• Slowing in Q2 - lower nickel prices have
prompted some de-stocking• Europe and USA have also softened on
renewed economic concerns and summer cyclicality
• Stainless steel demand to remain at current levels in Q3 and rising in Q4
• Non-stainless steel demand strengthened over Non stainless steel demand strengthened over the first half, in-line with global industrial production
• Led by key sectors such as aerospace oil
77
• Led by key sectors such as aerospace, oil and gas and power generation
Nickel Markets
Nickel Markets – Supply Nickel Markets Supply
• Disruptions reduced H1 2011 supply• Matte run-out at Vale’s Sudbury
smelter• Tsunami hit PAMCO’s FeNi plantp• Furnace rebuild at BHP Billiton’s Cerro
Matoso FeNi plant• Delays to new projects further constrained • Delays to new projects further constrained
supply, resulting in H1 2011 deficit• Drawdown in LME inventory• High rates of NPI production in China
• Supply recovery for H2 2011 is expected to satisfy growing demandto satisfy growing demand• Resumption of production disrupted in
H1 2011R f j t
88
• Ramp-up of projects
Nickel Markets
99Xstrata Nickel – Demonstrating Operational Excellence
Integrated nickel business with a portfolio of diverse assets and projectsof diverse assets and projects
2010 Top 5 Refined Nickel Producers
Jinchuan
Vale
MMC Norilsk
(kt)Xstrata
BHP Billiton
Jinchuan
0 50 100 150 200 250 300
30‐35ktpa Ni (FeNi)
1010Source: CRU – Nickel Quarterly April 2011 Xstrata Nickel – Demonstrating Operational Excellence
Sustainability continuesto be a key strategic focusto be a key strategic focus
Relentless focus on ‘Zero Harm’T l t ti i j i t Si l i
Xstrata Nickel safety statistics16 Total Recordable Injury Frequency Rate– Two years no lost time injuries at Sinclair
– Four million hours (4.5 years) at Kabanga– One year at Falcondo
Identification of five key safety priorities per site 8
10
12
14
16
rs W
ork
ed
Total Recordable Injury Frequency Rate
Lost-Time Injury Frequency Rate
– Identification of five key safety priorities per site integrated into continuous improvement process
Corporate Social Involvement0
2
4
6
Pe
r M
illio
n H
ou
r
– Focus on long-term investments and partnerships with third-party organisations that generate mutual benefits
2007 2008 2009 2010
P
Multi-Faceted Approach to Environmental Performance– Targeted capital investment to enhance
li d d li ffi i d t
Industry Awards
Raglan received two regional industry awards for lowest accident frequencies and best improvementcompliance and deliver efficiency and cost
savings– LEED certification at Nickel Rim South
– Active participation in development of policy and
frequencies and best improvement
Sudbury Operations received a regional award for attaining the lowest total medical aid frequency
1111
Active participation in development of policy and regulations for mines and smelter
Xstrata Nickel – Demonstrating Operational Excellence
Transformed into a robust business delivering value and future growth potentialdelivering value and future growth potential
Optimisation of Integrated Nickel Operations (INO)– Delivery of Nickel Rim South and Fraser mine in Sudbury (significant by-product credits); y y ( g y p );
continued cost focus at Raglan; Sinclair as a swing producer– Record INO mine production; record output from smelter (74ktpa Ni) and refinery (92ktpa Ni)
C1 dramatically reduced from $5 63/lb in 2008 to $2 16/lb in 2010 ahead of C1 dramatically reduced from $5.63/lb in 2008 to $2.16/lb in 2010, ahead of expectations, and down 43% from 2009
Strong track record of real cost savings ($208M over 2007-2010)
5.00
6.00200 FeNi productionINO productionC1 cash cost
Doubling of nickel production while maintaining 2nd quartile cost position
3.00
4.00
5.00
100
150C1 cash cost
Significant FeNi Production from Falcondo and Koniambo
1.00
2.0050
Significant expansion still remains• Raglan at 40ktpa Ni; New mine in
Sudbury (Amik, Big Smoke); Kabanga full production; Koniambo expansion;
1212
0.0002008 2009 2010 2013 2016
0kt mined nickel
$/lb C1 cash
cost
full production; Koniambo expansion; Araguaia
Xstrata Nickel – Demonstrating Operational Excellence
Supported by a strong resource base for the future
Australia
the future
Continual extension of existing mines Xstrata Nickel resource growth
4.0
5.0
6.0
ned
(Mt)
Indi
cate
d
AustraliaGreenfieldNew CaledoniaDominican RepublicCanada
and growth of project resources–~90% increased in measured and
indicated resources to a total nickel
1.0
2.0
3.0
Ni C
onta
inM
easu
re +
I
contained resource of 5.4Mt in 2010 (>8Mt Ni including Inferred)
~90%
increase
0.02007 2010
Focused and disciplined exploration –low risk increase of reserve base (sulphide focus)
Xstrata Nickel reserve base
2.0
2.5
3.0
(M
t)s
Mined outReserves
(sulphide focus)–Delineation of known discoveries–Extension drilling of brownfield sites
0 5
1.0
1.5
Ni C
onta
ined
Res
erve
s
– Exploration commitment towards highly prospective property for future resource expansions
~35%
increase
1313
0.0
0.5
2007 2010
p
Note: *Equity contained Nickel in reserves and resources Xstrata Nickel – Demonstrating Operational Excellence
1414Delivering Organic GrowthKoniambo Update
Project ScopeProject Scope
Earthworks – 8 500 000 m3 Earthworks – 8,500,000 m3
Pyramids of Giza – 2,500,000 m3
Concrete – 80,000 m3, Average capacity of standard Ready
Mix cement truck: 10 m3
Steel 53 000 tonnes (incl Steel – 53,000 tonnes (incl. modules) 7,000 tonnes of steel in the Eiffel
Tower Mechanical - >1,500 major pieces
of equipmentof equipment Electrical cables – 1,500 kms
Sydney to Adelaide
1515Koniambo Update
Module ConstructionModule ConstructionMetallurgical plant modules completed in China to take advantage of best value country approach
1616Koniambo Update
Module Shipment, Site Transport andStackingStacking
17-day journey by sea; 3 – 5 hour transport on site; 4 – 12 hour jacking process
1717Koniambo Update
Worker CampWorker CampCamp capacity currently 4,600, ahead of requirements
1818Koniambo Update
Koniambo DevelopmentKoniambo Development
Feasibility and
Design, specification, fabrication and delivery of large Labour-intensive
approval equipment, met and power plant, and
conveyor
project construction
1919Koniambo Update
Mass EarthworksMass EarthworksMass earthworks 79% complete; primarily contracted to local enterprises; re-vegetation in progress
2020Koniambo Update
Overland Conveyor AssemblyOverland Conveyor Assembly11-km conveyor from the massif to the plant; elevated construction minimizes environmental impact
2121Koniambo Update
Xstrata has maximum optionality to deliver sustainable growth in shareholder value
• Transformation of assets delivered long-life, low cost
sustainable growth in shareholder value
delivered long life, low cost businesses
• Industry-leading growth of 50% to 2014
• Entrepreneurial culture • Opportunistic but
disciplined approach to
World-class assets and projects
• Significant further growth options under study
M&A growth• Management track record
in transformational and organic growth Value-organic growth
• Net debt of $7 6bn and
seeking culture
Strong • Net debt of $7.6bn and 15% gearing
• $8.7bn of headroom in facilities
Strong financial position
• Continued demand growth from emerging markets facilities
• Strong cashflow generation
• Progressive dividend policy
Attractivecommodity
outlook
from emerging markets
• Robust recovery in developed markets
2222 22
outlook• Structural supply
constraints
Questions?
2323
2424Appendix
Delivery of embedded optionality well underwayunderway
Phase III:Deliver optionality
Phase I:Create optionality
Phase II:Enhance optionality
O ganic
Deliver optionalityCreate optionality Enhance optionality
Projects of $14bn currently in implementation to deliver 50%* volume growth to 2014Organic
Growth
g Significant further growth
potential from other early stage projects
Operational Excellence
Continued cost improvements Significant extension of
resource base – increase of 60% from 2006 to 2010
Dow Jones Sustainability Index o Jo es Susta ab ty deSector Leader for 4th
consecutive year
Strong track-record of di i li d M&A l ti ith Mergers and
Acquisitionsdisciplined M&A valuation with strong integration capability
Continue to review transformational and bolt-on acquisitions
2525 25
q‒ e.g. Recent entry into iron
ore
Note: * on a copper equivalent basis compared to 2009 Appendix
Koniambo LocationKoniambo LocationUniquely short distance from mined to finished product; well positioned for Asian markets
2626AppendixAppendix- Koniambo update
Industry-Leading Grade and ScaleIndustry-Leading Grade and Scale
Measured and indicated nickel laterite resources
With inferred resources,
~400Mt of ore, containing 7.6Mt of Ni7.6Mt of Ni
2727Source – Intierra and Xstrata AppendixAppendix- Koniambo update
Vavouto PortVavouto PortDredging , ocean outfall and wharf completed in 2010 without environmental incident
2828AppendixAppendix- Koniambo update
Met Plant AssemblyMet Plant AssemblyFull height of metallurgical plant is 110 meters, the tallest structure in New Caledonia; 28% complete
2929Appendix- Koniambo updateAppendix- Koniambo update
Power Plant ConstructionPower Plant Construction2 X 135MW coal-fired boilers and 2 X 40MW diesel-fired turbines; 21% complete
3030Appendix- Koniambo update
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