xstrata copper: driving the next stage of growth through ...2beea829-a1a3-42bc-82eb-11c66… ·...

Xstrata Copper: Driving the next stage of growth through South America

Charlie Sartain, Chief Executive

18 September 2011

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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, for any 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 to make 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. Certain statements, beliefs and opinions contained in this presentation, particularly those regarding the possible or assumed future financial or other performance of Xstrata, industry growth 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 variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because 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-looking statements 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 in any 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 relevant industry 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, individual producers 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 quartile 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 cost curves are constructed, they are typically unwilling to validate cost analyses directly because of commercial sensitivities. Inevitably, assumptions must be made by the analyst with respect 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 a number 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 of significant 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 share for 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 containing this 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 have represented, 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 its contents confidential.

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Agenda Introduction Copper market update Xstrata Copper overview South American Operations Project Development South America Antamina and Collahuasi expansions

Antapaccay Project Las Bambas Project El Pachón Project Agua Rica Project Conclusions

Coffee break

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The team presenting today

Charlie Sartain Chief Executive Xstrata Copper

José Marún Executive General Manager, South America operations division

Bob Drabik Executive General Manager, Project Development South America

Max Combes Project Director Antapaccay

Joe Albright Project Director Las Bambas

Michael Holmes General Manager Minera Alumbrera

Xavier Ochoa General Manager El Pachón Project

Dave Dicaire General Manager Studies, Project Development South America

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Copper market update

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Copper demand has held firm despite challenging macroeconomic environment

US demand has recovered from lows

While macroeconomic concerns dominate current market sentiment, copper is well placed to show continued demand growth over the coming months.

Chinese demand has shown signs of recovery, with strengthening cathode imports in July/August, diminishing inventory and tightening availability of copper scrap; while end-use markets have shown strong growth throughout 2011.

Despite slower first half y/y growth, China will account for almost half of global demand growth this year, and is expected to return to a trend growth rate of around 8% from 2012.

In Western markets, copper demand remains stable despite economic uncertainty.

Data: China NBS, trade statistics, Analyst reports, Xstrata Copper estimates

4.0%

8.7%

20.0%

41.6%

19.1%

11.6%

17.7%

13.3%

-5% 5% 15% 25% 35% 45%

Automobile

Freezers

Washing machines

Air conditioners

Refrigerators

AC Motors

Copper Materials

Generating capacity

Chinese Output of Industrial Products, % growth JanChinese Output of Industrial Products, % growth Jan-July 2011 y/y

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

650

750

850

950

1050

H1 2008 H2 H1 2009 H2 H1 2010 H2 H1 2011

US apparent refined consumption, kt Cu % growth y/y


Strong end-use growth in China

(Bars)

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Existing copper production continues to underperform

0.9

1

1.1

1.2

1.3

1.4

1.5

1980 1985 1990 1995 2000 2005 2010 2015 2020

Primary copper head grades, %

Mine production actual vs plan


This year has seen high rates of mine disruption, once again shaving around 5% from forecast supply.

Underperformance has been caused by lower grades, adverse weather conditions in Chile, technical issues, labour disputes and project ramp up difficulties.

Labour unrest has featured highly in Q3, with strikes disrupting output at major mines, including Escondida, Grasberg and Cerro Verde.

Equipment lead times and labour shortages are mounting; while economic uncertainty and cost volatility are adding to project financing difficulties.

Just 3 new mines with capacity >50kt have entered production in 2011, limiting mine supply growth to <2% for the fourth year running.

Next year will see mine supply growth recover to around 7% - its highest rate since 2004.

-952 -917-987 -966

-800

-700

-850

-1000-900-800-700-600-500-400-300-200-100

02005 2006 2007 2008 2009 2010 2011e

Data: Brook Hunt Copper Mine Costs, Brook Hunt Long-Term Outlook for Copper, Xstrata Copper estimates

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Summary: Above trend copper pricing outlook remains intact


Demand Western macroeconomic uncertainty will constrain copper demand in Europe and the

USA over the balance of 2011 and into next year. However, developing markets have proven resilient to the downturn, as governments

invest heavily in copper-intensive sectors such as power infrastructure and construction.

Low inventory levels and tightening copper scrap availability will also support cathode demand over the balance of the year. Global demand is set to grow at just under 4% this year, recovering to 4.5-5% in 2012.

Supply High rates of disruption and underperformance amongst operating mines have led to

minimal supply growth this year of less than 2%. Few new mine projects have been developed in recent years, and although the

pipeline is stronger over the medium term, the risk of delays remains high. In the long term, the current pipeline of projects remains insufficient to meet demand

requirements.

Balance Supply has failed to keep pace with demand again this year, generating a substantial

market deficit. We anticipate a more modest deficit next year, as a number of greenfield and brownfield mine projects ramp up.

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Overview of Xstrata Copper

Charlie Sartain, Chief Executive 18 September 2011

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Xstrata Copper is a fundamental pillar of Xstrata’s diversified model

Contribution to Xstrata profit*

Coal 27%

Nickel 13%

Copper 44%

Alloys 3%

Zinc 13%

Xstrata Copper profit* by region

Argentina 15%

Australia 20%

Canada 8%

Chile 31%

Peru 26%

*Based on earnings before interest, depreciation, tax and amortisation for 1H11

Headquartered in Brisbane, employing over 20,000 people in eight countries Top five global mined and refined copper producer with copper output of

913,500 tonnes in 2010 Diversified geographic exposure Robust cost position in the second quartile Projects under construction to further transform business and increase

production by more than 50% to 1.5Mtpa in 2015 Near-term approval projects hold potential to increase production to 2Mtpa

in 2016


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Best practice sustainability performance underpins our business activities Xstrata retains Mining Sector leadership in Dow Jones Sustainability Index 2011/12

for fifth consecutive year and is also named Super Sector leader for Basic Resources industries the second consecutive year

Xstrata Copper annually receives numerous recognitions for Sustainability best practice (22 in 2010, 21 in 2009)

Application of Sustainability principles enables social licence to operate

Environmental best practice is feeding into successful ESIA approval processes

Significant ongoing improvements to safety performance


Safety performance 2007-Aug 2011 (YTD)

Antapaccay ESIA

public consultation meeting

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2006 Tintaya 2006 Falconbridge

Xstrata Copper’s Business Strategy

Growth through acquisitions and optimisation of asset portfolio

2003 MIM

Maximise NPV of existing operations including capitalising on regional

leverage opportunities

New quality growth through project development/construction

Generation and evaluation of new projects to replenish the pipeline

1.5Mtpa of further copper production under evaluation

USD3bn capex approved for expansions/extensions; continuous improvement


2011 E1, Monakoff, Agua Rica

USD4.2bn growth capex approved for 400ktpy copper

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Bolt-on acquisitions at regional level


E1 and Monakoff Agua Rica

Minera Alumbrera acquired exclusive four-year option in August 2011 to acquire and develop Agua Rica project

Project is 35km from Alumbrera operations Feasibility study underway Subject to positive construction decision in

2013, start-up planned for 2016 Transformation of Alumbera’s profile –

expanded production to 250ktpa copper (and gold/moly by-products) with +25 year mine life extension

E1 & Monakoff projects in North Queensland acquired from Exco Resources for AUD175M in June 11

Open pit resources with completed feasibility studies close to Ernest Henry Mine

Ore will be trucked to Ernest Henry and processed in existing concentrator

Scheduled to commence production in 2H12, adding 40ktpa to production from underground operations at Ernest Henry

Insert photo of E1 and Monakoff

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Organic growth strategy enabled through targeted mineral resource expansions

459% increase in resource base since 2005 to 86Mt copper in 2010. Further increase pending in 2011

Generation of new projects for evaluation: Coroccohuayco, Lomas Bayas sulphides, Agua Rica, West Wall, MIOP

Further resource expansions to Frieda River, Antamina and Coroccohuayco in 2011, and inclusion of Agua Rica

Provides the platform to develop new world class mines − Las Bambas − El Pachón − Tampakan

Provides the basis to extend and/or expand production at existing mines − Lomas Bayas, Ernest Henry,

Antamina, Collahuasi, Isa, Tintaya

Growth of Xstrata Copper resource base


0

10

20

30

40

50

60

70

80

90

100

2005 2007 2010

Greenfield Projects

Canada

North Chile

Southern Peru

Minera Alumbrera

North Queensland

Mt contained copper

+459% increase

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Relentless pursuit of cost savings and NPV enhancements

Mine expansions and extensions By-product benefits

Ernest Henry exported first magnetite in June 2011

- AUD79M investment - 1.2Mtpa magnetite capacity

Feasibility study underway to leach residual copper and cobalt from Mount Isa concentrator

Minera Alumbrera molybdenum plant commenced operations in 2008

Sites responding well to industry cost pressures


31%

13%

12% 8%

32%

3%

Labour Contractors Electricity Fuel Consumables Other

H1 2011 operating costs

Operational efficiencies – maintenance processes & organisational alignments

Energy – new contracts achieving savings of USD300M

Consumables – synergies providing savings in NQ and South America

Labour – owner operated savings C1 costs have remained at 90c/lb +/-

2c/lb for past 4 years

Project Investment

Lomas Bayas II USD293M

Ernest Henry u/g USD542M

Antamina 130ktpd USD435M†

Antapaccay USD1,473M

Collahuasi 160ktpd USD92M† †Xstrata’s share

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South America: Transformational growth through high quality projects +1.2Mt Cu


Approved and in construction Near-term approvals

On budget and schedule: will start production in 2H12

Antapaccay +160ktpa

copper

On budget and schedule: will start production in 2H14

In Feasibility: decision to construct anticipated in 2013

In Feasibility: decision to construct anticipated in 2012

Agua Rica +250ktpa

copper

Las Bambas +400ktpa

copper

El Pachón +400ktpa

copper

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Next generation growth projects offer significant optionality

+450ktpa copper

+50ktpa copper

+70ktpa copper

Tampakan, Philippines: completed feasibility study, decision expected 2013, potential start-up 2016

All estimated copper production figures on a 100% basis

+260ktpa copper


+500ktpa copper

Lomas Bayas III, Chile: brownfield expansion in pre-feasibility study stage, potential start-up 2017

Frieda River, Papua New Guinea: feasibility study to be completed January 2012, decision expected post FS review, potential start-up 2017

Collahuasi, Chile: brownfield expansion to 1Mtpa in pre-feasibility study stage, potential start-up 2017

Coroccohuayco, Peru: brownfield expansion entering pre-feasibility stage, potential start-up 2016

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Entering the organic growth era Projects under construction will lift production by 50% to 1.5Mtpa in 2015 Near term South American projects hold potential to increase production by

further 33% to 2Mtpa in 2016


Production Growth Profile

0

500

1.000

1.500

2.000

2010 2011 2012 2013 2014 2015 2016

Existing Production Approved / Implementation El Pachon Agua Rica

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Conclusions Xstrata Copper is currently constructing six projects that will increase

production by 50% to 1.5Mtpa by the end of 2014 Near-term approval South American projects hold potential to lift

production a further 33% to 2Mtpa in 2016 Focus on continuous improvements at existing operations provides further

potential for enhanced business performance

Project commissioning dates


Project 2H11 1H12 2H12 1H13 2H13 1H14 2H14 2015 1H16 2H16 Antamina Collahuasi 150ktpd Lomas Bayas II Tintaya Antapaccay E1 and Monakoff * Collahuasi 160ktpd Ernest Henry u/g Las Bambas El Pachón * Agua Rica *

Approved projects Near-term * approval projects

Anticipated approvals

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Questions?

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Agenda Introduction Copper market update Xstrata Copper overview South American Operations Project Development South America Antamina and Collahuasi expansions

Antapaccay Project Las Bambas Project El Pachón Project Agua Rica Project Conclusions

Coffee break

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