Aug 20, 2014 ... Xstrata plc and full consolidation of such had taken place as of 1 January 2013. ...
in the business or affairs of Glencore since the date of this document or ...... Block
V *. 80.00%. Block EG 05 *. 60.00%. Cameroon. Participating.
H1 2014 results London, 20 August 2014
Basis of preparation and disclaimer Basis of preparation The reported financial information has been prepared on the basis as outlined in note 2 of the interim financial statements. The unaudited and unreviewed pro forma financial information for 2013 and where otherwise noted has been prepared as if the acquisition of Xstrata plc and full consolidation of such had taken place as of 1 January 2013 to illustrate the effects of the acquisition on the profit from continuing operations and cash flow statement for the six month period ended June 2013. The unaudited and unreviewed pro forma financial information has been prepared in a manner consistent with the accounting policies applicable for periods ending on or after 1 January 2013 as outlined in note 2 of the financial statements with the exception of the accounting treatment applied to certain associates and joint ventures for which Glencore’s attributable share of revenues and expenses are presented (see note 3) and reflects the final fair value adjustments arising from the acquisition of Xstrata on 2 May 2013 as if the acquisition of Xstrata plc and full consolidation of such had taken place as of 1 January 2013. These adjustments primarily relate to depreciation, amortisation and the unwind of onerous and unfavourable contract provisions. The pro forma financial information has been prepared for illustrative purposes only and, because of its nature, addresses a hypothetical situation and therefore does not reflect the Group’s actual financial position or results. A reconciliation of the pro forma results to the reported results for the six months ended 30 June 2013 is included in the Appendix on page 73 of the 2014 Half-Year Report. The reported and pro forma financial information is presented in the Financial Review section before significant items unless otherwise stated to provide an enhanced understanding and comparative basis of the underlying financial performance. Significant items (refer to page 6 of the 2014 Half-Year Report) are items of income and expense which, due to their financial impact and nature or the expected infrequency of the events giving rise to them, are separated for internal reporting and analysis of Glencore’s results. 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" or "does not expect", "is expected", "continues", "assumes", "is subject to", "budget", "scheduled", "estimates", "aims", "forecasts", "risks", "intends", "positioned", "predicts", "anticipates" or "does not anticipate", or "believes", or variations of such words or comparable terminology and phrases or statements that certain actions, events or results "may", "could", "should", “shall”, "would", "might" or "will" be taken, occur or be achieved. Such statements are qualified in their entirety by the inherent risks and uncertainties surrounding future expectations. Forward-looking statements are not based on historical facts, but rather on current predictions, expectations, beliefs, opinions, plans, objectives, goals, intentions and projections about future events, results of operations, prospects, financial condition and discussions of strategy. By their nature, forward looking statements involve known and unknown risks and uncertainties, many of which are beyond Glencore’s control. Forward looking statements are not guarantees of future performance and may and often do differ materially from actual results. Important factors that could cause these uncertainties include, but are not limited to, those discussed under “Principal risks and uncertainties” of Glencore’s Annual Report 2013 and “Risks and uncertainties” in Glencore’s 2014 Half-Year Report. Neither Glencore 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 document will actually occur. You are cautioned not to place undue reliance on these forward-looking statements which only speak as of the date of this document. 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 Conduct Authority and the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited and the Listing Requirements of the Johannesburg Stock Exchange Limited), Glencore is not under any obligation and Glencore and its affiliates expressly disclaim any intention, obligation or undertaking to update or revise any forward looking statements, whether as a result of new information, future events or otherwise. This document shall not, under any circumstances, create any implication that there has been no change in the business or affairs of Glencore since the date of this document or that the information contained herein is correct as at any time subsequent to its date. No statement in this document is intended as a profit forecast or a profit estimate and no statement in this document should be interpreted to mean that earnings per Glencore share for the current or future financial years would necessarily match or exceed the historical published earnings per Glencore share. This document 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. The making of this document does not constitute a recommendation regarding any securities.
2
Glendell Mine, Australia
Ivan Glasenberg Chief Executive Officer
Attendees Ivan Glasenberg Steven Kalmin
CEO CFO
Chris Mahoney Andrew Caplan Telis Mistakidis Tor Peterson Peter Freyberg Kenny Ives Alex Beard Daniel Maté
Agricultural Products Aluminium Copper Coal Marketing Coal Industrial Nickel Marketing Oil Zinc Marketing
4
H1 2014 – demonstrating confidence in our future • Strong financial performance in H1 2014 – – – –
marketing EBIT +27% y/y to $1.5bn industrial EBITDA +3% y/y to $4.8bn Net income +8% y/y to $2bn FFO +15% y/y to $4.9bn
• Balance sheet robust with improving outlook • Capex declining towards maintenance levels • Underlying commodity supply/demand balances continue to tighten, especially in our markets
• Numerous organic and other growth opportunities to pursue when appropriate
• Our objective remains the efficient deployment of capital to grow earnings, cashflow and dividend per share
• Capital return is/will remain a key element of this – $1bn additional buy back and 11% dividend increase, on top of $639M of convertible bonds bought back during H1 2014 – $3.9bn total capital return actioned in 2014 or $29 cents per share – since IPO Glencore capital return has exceeded IPO proceeds of $7.9bn – capital structure will be constantly reviewed 5
SD/Governance Safety remains our top priority • All fatal incidents investigated and subsequently reviewed by the Board • SafeWork in process of being rolled-out across the Group • Expertise from well-performing divisions leveraged across the organisation • 10 fatalities H1 2014 • Continued improvement in LTIFR: 3.0 (2009) to 1.88 (H1 2014) • 74% of assets performing ahead of 2014 targets Environment • No serious environmental incident in H1 2014 • Mopani smelter upgrade completed in April 2014
LTIFR(1) 2009 to H1 2014 3.5
3.0
3.00 2.74
2.5
2.51
2.05 2.0 1.89
1.88
1.5
Communities and stakeholder engagement • Community programmes continue to focus on health, education and infrastructure • Pro-active engagement with governments, communities and NGOs
2009 2010 2011 2012 2013
H1 2014
Policy setting and memberships • ICMM membership received in April 2014 after independent expert review • Membership of the Dow Jones Sustainability Index since 2013 • Signatory of the UN Global Compact since June 2014 • Endorsement and implementation of Voluntary Principles on Security and Human Rights in March 2014 (admission pending) Note: (1) Lost time incidents (LTIs) are recorded when an employee or contractor is unable to work following an incident. Glencore records LTIs which result in lost days from the next calendar day after the incident whilst Xstrata recorded LTIs which resulted in lost days from the next rostered day after the incident – therefore the combined LTI figure is not based on data of consistent definition. LTIFR is the total number of LTIs recorded per million working hours.
6
Harvester at Balaklava, Australia
Steven Kalmin Chief Financial Officer
Financial highlights H1 2014
H1 2013 (1)
% change
Adjusted EBITDA (2)
6,464
6,002
8
Adjusted EBIT (2)
3,624
3,182
14
Net income attributable to equity holders pre-significant items (3)
2,010
1,860
8
Funds from operations (FFO) (4)
4,909
4,264
15
Capex (excluding Las Bambas)
4,027
5,653
(29)
0.15
0.14
7
27.2%
17.5%
US$M
EPS – basic ($/share) Effective tax rate
US$M
Adjusted for Las Bambas / Caracal (5)
30.06.2014 31.12.2013 (2)
% change
Net debt (4)
32,595
37,595
35,798
(9) (6)
FFO to Net debt (4) (7)
33.8%
29.3%
29.0%
17 (6)
2.41x
2.78x
2.74x
(12) (6)
9.45x
9.12x
4
Net debt to Adjusted EBITDA (7) Adjusted EBITDA to Net interest (7)
Notes: (1) Refer to basis of preparation on page 4 of 2014 Half-year Report. (2) Refer to Glossary (page 75) for definitions and reconciliation of Adjusted EBIT/EBITDA to note 3 of the interim financial statements. (3) Refer to significant items table on page 6 of 2014 Half-year Report. (4) Refer to Net debt and FFO tables on page 8 of 2014 Half-year Report. (5) Net debt adjusted by $5 billion, including the effects, in July 2014, of the net proceeds received on sale of Las Bambas less the consideration paid for Caracal. (6) Change %, calculated post $5 billion impact of the net consideration received on sale of Las Bambas less consideration paid for Caracal. (7) H1 2014 ratio based on last 12 months’ FFO and Adjusted EBITDA and 2013 ratios based on pro forma results.
8
Marketing H1 2014 financial performance Adjusted EBIT H1 2013 vs H1 2014 (US$M) Robust contribution from marketing. Adjusted EBITDA and EBIT up 23% and 27% respectively over H1 2013, reflecting supportive market conditions in many commodities and synergy benefits from Xstrata and Viterra 1,600
+27%
1,400
1,512
Metals & Minerals: higher volumes, Xstrata synergies and generally favourable markets boosted EBIT by 25% to $888M
Energy: decrease in EBIT reflects fewer trading opportunities and low volatility in oil pricing/curve structure
Agriculture: strong contribution from Viterra’s grain handling operations, following record crops in Canada and an above average crop in South Australia. Comparable period performance was unusually weak
1,200 1,186
1,000
+25%
800
888 711
600
501
400
473 (55)%
200 0
227 H1 2013
H1 2014
Total
H1 2013
H1 2014
Metals & Minerals
H1 2013
H1 2014
Energy
15 H1 2013
H1 2014
Agriculture
9
Industrial H1 2014 financial performance Adjusted pro forma EBITDA/EBIT H1 2013 vs H1 2014 (US$M) Strong industrial first half performance with higher copper, coal and oil volumes, cost reductions and favourable FX movements more than offsetting challenging pricing conditions for key commodities. Adjusted EBITDA and EBIT up 3% and 6% respectively
Metals & Minerals: EBITDA and EBIT +11% and +26% respectively. Strong copper volumes (+13%), improved ferroalloys results & higher nickel prices more than offset the impact of the mid-2013 zinc mine closures
Energy: At EBITDA level the negative impact of weaker coal prices was substantially mitigated by higher low-cost coal volumes and weaker AUD and ZAR. Oil EBITDA up 45% to $266M as a result of higher West Africa production volumes
Agriculture: Significant improvement in earnings supported by 33% increase in processing/production
+3%
4,800
4,840
4,680
3,800
+11% 3,512
2,800
EBITDA
3,153 +6%
1,800
+26%
2,112
1,996
(6)%
1,902 1,566
1,508
800
581
1,468 (32)%
EBIT
-200
394
H1 2013
H1 2014
Total
H1 2013
H1 2014
Metals & Minerals
H1 2013
H1 2014
Energy
3
-35
H1 2013
73
35
H1 2014
Agriculture
10
Price weakness in key commodities more than offset by volume, cost efficiencies and favourable FX Industrial pro forma adjusted EBIT pre-exceptional items – H1 2013 vs H1 2014 (US$M) 2,500 567
2,300
(44)
(136) 2,112
2,100
1,996
(980)
551
(262)
1,900 1,700 1,500
420
1,300 1,100 900
Metals and minerals Energy products
700
Agricultural products
500 H1 2013 Adj. EBIT
Price
Volume
Net cost
Inflation
FX
D&A
Other
H1 2014 Adj. EBIT
11
Robust balance sheet • Robust liquidity position with $9.2bn of
Key debt metrics (1) 30.6.2014 Adjusted (4)
US$bn
30.6.2014 31.12.2013
• Strong cashflow coverage ratios:
Net funding
49.4
54.4
52.2
Net debt (3)
32.6
37.6
35.8
FFO to Net debt (3) (5)
33.8%
29.3%
29.0%
Net debt to Adjusted EBITDA (2) (3) (5)
2.41x
2.78x
2.74x
Adjusted EBITDA (2) to net interest (5)
committed undrawn credit facilities and cash as of 30 June 2014 (pre Las Bambas)
9.45x
9.12x
(post Las Bambas)
• FFO to Net debt of 33.8% • Net debt to Adjusted EBITDA of 2.41x
• 2014 debt activities • April: issued $2bn and EUR1.1bn of bonds • June: new $15.3bn committed RCF in three •
tranches June: repurchased and cancelled 25% of convertible bonds due December 2014
Weighted average funding cost (%)
• Moody’s and S&P’s investment grade credit
4.5
ratings at Baa2 (stable) and BBB (stable) • Maintenance of strong Baa/BBB levels remains a
4.0
financial target/priority
• Average VaR (1 day 95%) of $30M,
3.5
representing less than 0.1% of shareholders’ equity ($30M in H1 2013)
3.0
2.5 2009
2010
2011
2012
2013
2014
Notes: (1) Refer to basis of preparation on page 4. (2) Refer to glossary (page 75) for definitions and reconciliation of Adjusted EBIT/EBITDA to note 3 of the interim financial statements. (3) Refer to net debt and FFO tables on page 8. (4) Net debt adjusted by $5 billion, including the effects, in July 2014, of the net proceeds received on sale of Las Bambas less the consideration paid for Caracal. (5) H1 2014 ratio based on last 12 months’ FFO and Adjusted EBITDA and 2013 ratios based on pro forma results.
12
Balance sheet further strengthened • Operational free cashflow and declining capex, together with the Las Bambas proceeds have firmly consolidated Glencore’s credit metrics within the BBB/Baa rating
• Strong BBB/Baa considered to
BBB/Baa illustrative target metrics(1) Adj. Net Debt(2)/EBITDA 1.75x
FFO/Adj. Net Debt(2) 45%
2.00x
BBB+/ Baa1
40%
be our optimal capital structure
• supports marketing activities – positively differentiated credit positioning from most trading competitors
funds from operations in H1 2014, up $650M year on year
2.25x
33.8%
35% 2.50x
BBB/ Baa2
• enables Glencore to efficiently grow cashflow, earnings and dividends per share
$4.9bn
30%
FFO to Net debt Target: >25% 2.75x
• provides abundant access to capital markets allowing efficient and prudent balance sheet and liquidity management
25% 3.00x
BBB/Baa3
3.25x H1 2014
FY 2013
H1 2013
FY 2012
H1 2014
FY 2013
H1 2013
FY 2012
20%
2.41x Net debt to Adjusted EBITDA Target: $1.9b
Q1
industrial merger synergies and other cost savings by end 2014
first quartile cost positions for industrial assets on track for end 2015
Illustrative C1 metals cash cost curve / Inverse FOB cash margin thermal coal
Cu 2015
Post-integration cost efficiencies and focus now ingrained in industrial asset structures
$6.8bn
FeCr 2015
asset disposals over last 12 months (1)
$2.5bn
$35bn
acquisitions over the last 12 months(2)
combined Glencore and Xstrata expansionary capex since 2009(3)
Ni 2015 Zn 2015 Thermal Coal 2015
Q1 Notes: (1) Including Las Bambas, Frieda River, Viterra disposals, Agmet and PT Stargate Pasific. (2) Includes Caracal, Mutanda, Clermont. (3) Excludes Las Bambas.
Q2 17
Marketing earnings power rebased • Historical Marketing EBIT guidance • • •
• •
of $2bn to $3bn per annum EBIT guidance range increased to $2.7 – $3.7bn from 2014, following the Xstrata and Viterra transactions Marketing business benefits from unique scale, diversification and relationships – the clear global #1 Unrivalled global intelligence / market knowledge and insight: • underlying commodity supply/demand • corporate activity/opportunities Earnings uplift available as physical output grows Low cost of capital, minimal fixed assets and stable cost base underpin, resilient and high ROE
Marketing EBIT ($M) 0
1,000
2,000
3,000
2008 2009 2010 2011 2012 2013 2014
H1 14 annualised
H1 14
$700M annual EBIT guidance range increased, following the Xstrata and Viterra transactions
18
A differentiated outlook – exposure to the right commodities Consensus price forecasts 2014=100 140 Nickel Aluminium
130
Zinc
120 Thermal Coal
110 Copper Oil
100
90
Iron Ore
80 2014 Source: Consensus broker research
2015
2016
2017
2018
19
Key growth projects scheduled to commission 2014/2015 – strong pipeline of capital efficient growth opportunities Commissioning 2014 Copper Katanga Phase V: increase to 300ktpa milling + 2*35ktpa EW tankhouses Zinc McArthur River Phase 3 Expansion: increase to 370ktpa zinc in concentrate Ferroalloys Lion II: 360kt Premus technology smelter - complete Coal Ulan West: +8Mtpa export thermal Wonderfontein: +2.7Mtpa export thermal Tweefontein: +7Mtpa for 24 years Oil Mangara (DOB/DOI) – Chad
Commissioning 2015
2016+ brownfield growth options
Copper Nkana Synclinorium: New shaft to extend section life by 25 years DRC Power: first 162MW refurbished turbine (G27) at Inga
Copper Coroccohuyaco Mutanda Sulphides
Oil Krim (DOB/DOI): – Chad
Nickel Raglan 40ktpa Raglan Phase II
Commissioning 2016 Copper Mopani Deeps: new shaft infrastructure to provide a 25% increase in own source production and a 20% reduction in mine cash costs Commissioning 2017 Iron Ore Askaf: 7Mtpa iron ore mine utilising existing SNIM rail and port infrastructure
Note: Cu equivalent annual growth including above projects of c. 6% expected 2014-2017.
Zinc Mararovskoe Dolinno
Coal Bulga life extension (OC&UG) Mt Owen extension Rolleston Phase II expansion GGV expansion Optimum / Zonnebloem Oil: >800 MM bbls of risked prospective resource potential in Chad Chad exploration: Doseo/Borogop, DOBI/DOI, DOH blocks Chad development: Kibea and nearby discoveries Bolongo – Cameroon Diega – Equatorial Guinea
20
Capital management framework Excess operating free cash flow
Capital structure maintain strong BBB/Baa credit metrics
Returns to shareholders including ongoing buyback programme • IPO proceeds (c.$7.9bn) fully returned to shareholders since IPO • Ongoing buyback program should underpin EPS accretion as well as P/E multiples
Criteria: • risk • return • cash payback
• Strong BBB/Baa believed to be the optimal rating target supporting the balance between our growth strategy and shareholder returns
M&A / Brownfield projects screen growth options against capital allocation criteria • High-returning opportunistic M&A and brownfield growth opportunities screened against rigorous capital allocation criteria • Investment opportunities also screened against returns generated from buybacks • Generates growth in profits and FCF
21
Concluding remarks Delivering on our commitments
• Asset portfolio largely restructured
IPO proceeds have already been returned to shareholders 8
Buyback $1.0bn
• Marketing earnings rebased • Balance sheet strengthened • Exposure to the right commodities
7
Convertible repurchase $639M
6
• Strong pipeline of organic growth opportunities
5
Confidence in outlook allows us to start returning excess capital to shareholders on a sustainable basis
4
• 25% of convertible bonds repurchased • Dividend rebased – interim dividend $6 cents
IPO proceeds $7.9bn
Dividends since IPO $6.3bn
3
• Ongoing share buyback – $1bn until 31 March 2015
IPO proceeds now already returned to shareholders
2
1
Capital structure will be constantly reviewed 0 Note: Dividends include the 2014 declared interim dividend.
22
Q&A
Los Quenuales, Peru
Lady Loretta mine, Australia
Appendix
Improving outlook for our key commodities Copper
Zinc
Tight market conditions Zinc market continues reflected in critically to tighten low cathode stocks
Nickel Rebalancing near-term, then sizeable deficit emerging
• Cathode deficit in H1 • Improving Western • Indonesia’s export ban 2014 - impact of supply demand, combined with and enforcement has disruptions met by record metal imports put more than 300kt of reduction in exchange into China during H1 has primary Ni production stocks to levels last resulted in a significant (mostly Chinese NPI) at seen in late 2008 draw down of zinc metal risk • Forecast stronger H2 • Record levels of raw inventories worldwide supply growth likely to • Lower inventories, and finished inventories be tempered by scrap tightening spreads, will initially limit the shortages and risks impact of the ban increased premia all around aging mines and point to a zinc metal • Amid robust forecast delivery of new deficit already in 2014 demand, sizeable greenfield supply. • With the key Western deficits forecast to • Continued Chinese mine closures forecast emerge as ore stockpiles and exchange strength and improving from 2015 and no western demand likely significant new projects stocks are run down. • Permitting / to keep H2 supply in underway to replace check them, the market deficit infrastructure will limit • Capex cuts and project will only widen further the pace of Indonesian deferrals to generate NPI build out deficit markets again from 2015
Thermal Coal Growing pressure for supply cuts
• Despite continuing strong demand from the major Pacific and Atlantic consumers, the market remains oversupplied due to a slow supply response • c.35% of seaborne supply is cash negative and more than two thirds of Chinese domestic producers are believed to be suffering losses • Growing likelihood of production cuts amid Indonesian efforts to tackle illegal exports and Chinese measures aimed at curbing overcapacity • Capex cuts and project deferrals will help to accelerate the necessary rebalancing • Medium/long-term confidence in market upside – demand supported by role as lowest cost fuel choice
25
A strong board Anthony Hayward
Leonhard Fischer Non Executive Director A(C), N, R • CEO of RHJ International (parent of the Kleinwort Benson Group) (EBR) • NED of Julius Baer (VTX)
Chairman H • Former CEO of BP • CEO of Genel Energy (LON)
William Macaulay
Ivan Glasenberg, CEO
Non Executive Director A, R • Chairman and CEO of First Reserve • Chairman of Dresser-Rand and CHC Group (both NYSE) • NED of Weatherford International (NYSE)
Executive Director H • CEO of Glencore since 2002 • 30 years with Glencore • NED of Rusal (HKEx) • NED of Pirelli
John Mack
Peter Coates
Non Executive Director R(C),N • Former CEO of Morgan Stanley • Member of the Advisory Board of CIC, of International Business Council of WEF, of NYC Financial Services Advisory Committee and of Shanghai International Financial Advisory Council
Non Executive Director H(C) • 40 years of experience in the resource industry • NED of Santos and Amalgamated Holdings (both ASX)
Peter Grauer
Senior Independent Non Executive Director N(C), A • Chairman of Bloomberg • NED of Davita Healthcare (NYSE) • Member of International Business Council of WEF
Committees: A Audit; H HSEC; N Nomination;
R
Remuneration;
C
Chair
Patrice Merrin Non Executive Director H • Former COO of Sherritt and former CEO of Luscar (Canada’s largest coal company) • Former Chair of CML Healthcare (then TSX) • NED of Stillwater Mining (NYSE)
26
Interim distribution • Increased interim distribution reflects
Distribution payments (US cents per share)
confidence in our outlook and financial position
18 16
• Interim distribution of 6 cents per share
16.5 15.8
15.0
14
declared, an 11% increase
12
• Payment date: 19 Sep 2014
10
10.4
10.0
11.1
8
+11%
+8%
6 4 2
5.0
5.4
5.4
6.0
2011
2012
2013
2014
0
Interim distribution timetable Exchange rate reference date: Last time to trade on JSE to be recorded in the register on record date: Last day to effect removal of shares cum div between Jersey and JSE registers: Interim Ex-Div Date: Last time for lodging transfers in Hong Kong: Interim Distribution record date: Deadline currency election (Jersey): Removal of shares between Jersey and JSE: Exchange rate reference date: Final Distribution payment date:
Jersey
Johannesburg
Hong Kong
22 Aug 29 Aug 29 Aug 3 Sep
1 Sep
5 Sep 8 Sep
5 Sep
3 Sep 4:30pm 4 Sep 5 Sep
From 8 Sep 10 Sep 19 Sep
19 Sep
10 Sep 19 Sep
Note: Dematerialisation and rematerialisation of registered share certificates in South Africa may not be effected during the period from Monday 1 September 2014 to Friday 5 September 2014, both days inclusive. Distributions will be declared and paid in U.S. dollars, although Shareholders on the Jersey register will be able to elect to receive their distribution payments in Pounds Sterling, Euros or Swiss Francs. Shareholders on the Hong Kong branch register will receive their distributions in Hong Kong dollars. Shareholders on the Johannesburg register will receive their distributions in South African Rand.
27
A leading producer in key commodities Export thermal coal production (Mt)
#1
Mined copper production (kt) #3
1,874
98 55
Glencore
Bumi
43
40
35
31
BHPB
Siberian
Adaro Energy
AAL
Freeport
#1
Export metallurgical coal production (Mt)
1,792
Codelco
1,497
Glencore
1,149
BHPB
775
631
Anglo American
Rio Tinto
Mined zinc production (kt)
#6 1,399
34 26
21
848 19
18
615
582
12 Glencore BHPB
Mitsub.
Teck
Alpha
AAL
Vedanta
Teck
Glencore
Mined nickel production (kt)
#1
299
China Votorantim Minmetals
289 Nyrstar
Ferrochrome production (kt)
#5 251
215
1,238 134
Norilsk
Vale
PT Aneka Tambang
124
BHPB
98 Glencore
1,117
81 Jinchuan
860 434
Glencore
ERG
Samancor Outokumpu
280
189
Hernic
ASA Metals
2015 Source: AME, Wood MacKenzie, CRU, Heinz Pariser, Glencore 2013 production report.
28
Adjusted, reported and pro-forma EBITDA The impact of the proportionate consolidation of certain associates and joint ventures, and the pro forma adjustments, is set out in the following table: H1 2014 Reported
Adjustment for proportionate consolidation
H1 2014 Adjusted Reported
H1 2013 Reported
Adjustments for proportionate consolidation and Xstrata
H1 2013 Pro forma
114,064
1,486
115,550
112,035
9,358
121,393
Adjusted EBITDA
6,038
426
6,464
3,491
2,511
6,002
Adjusted EBIT
3,471
153
3,624
2,008
1,174
3,182
Net income attributable to equity holders – pre significant items
2,010
-
2,010
1,207
653
1,860
Significant items
(290)
-
(290)
(10,593)
9,378
(1,215)
Net income attributable to equity holders – post significant items
1,720
-
1,720
(9,386)
10,031
645
FFO
4,831
78
4,909
1,919
2,345
4,264
Capex
4,585
240
4,825
3,400
3,152
6,552
US$ million
Revenue
29
Oil drilling, Chad
E&P Chad
Chad – Acquisition of Caracal Recently completed acquisition of Caracal, Glencore’s JV partner in Chad Strategic rationale
• Larger working interest in a proven oil basin gives Glencore the opportunity to fully benefit from both development and high prospect exploration activities in Chad
• Extensive exploration portfolio of over 80 prospects and leads analogous to existing discoveries • Continued build out of Glencore’s operated E&P platform opens up a wider spectrum of opportunities across the E&P life cycle (exploration, development & production)
• Accelerated development using existing pipeline infrastructure Production
PSC map
• First oil from Badila field in Badila and Mangara EXAs EXAs approved Glencore: 85% SHT (Chad NOC):15%
September 2013
• Mangara field scheduled
EEAs Glencore: 100%
to be on-stream during H2 2014
• Exited 2013 with production of 10,000 barrels of oil per day (gross)
Chari East Doseo
Mangara DOH
Badila
Borogop
Doseo / Borogop PSC DOB / DOI (Badila / Mangara) PSC DOH PSC
• Target production of 40 to 45 kbbl/day by 2015 PSC: Profit Sharing Contract; EXA: Exclusive Exploitation Authorizations; EEA: Exclusive Exploration Authorizations.
31
E&P Portfolio E&P Portfolio location
Asset Participation Equatorial Guinea Block I
23.75%
Block O
25.00%
Block X
37.50%
Block V *
80.00%
Block EG 05 *
60.00%
Cameroon
Participating Interest
Matanda *
90.00%
Bolongo *
100.00%
Tilapia
33.33% Chad
DOB/DOI *
Participating Interest 100%
Mangara Field *
85.00%
Badila Field*
85.00%
DOH *
100%
Doseo/Borogop *
100%
Morocco
Note: * Glencore operated
Participating Interest
Participating Interest
Boujdour Offshore*
38.25%
Foum Ognit Offshore
18.75%
32
Koniambo, New Caledonia
Koniambo update
Koniambo project update H1 2014 Performance • First half production of 4.1kt primarily impacted by power availability issues • Early operation of the plant’s principal energy source (2 x 135MW steam turbines) uncovered a range of OEM manufacturing problems impacting heat exchanger tube bundles, combustors and fan impellers • Plant initially operated on a de-rated basis supplemented by backup diesel turbines • Metallurgical plant has been operating for 12 months under Glencore control • Confidence in the technology is very high • Operational staff now familiar with the rampup/operating challenges • Smelter producing commercial grade ferronickel
Revised production guidance
• 2014: 10 to 18kt Ni • 2015: 25 to 40kt Ni • 2016: > 50kt Ni to nameplate capacity Power availability no longer a constraint
• Requirement at full capacity: • Total current power sources: • STG 1 • CTG 1 & 2 • ENERCAL (local provider) • 3 mobile generators
215MW 250MW 50MW 2 x 52 MW 35MW 3 x 20MW
Koniambo metallurgical plant
Power update • Sufficient power now available until steam turbines are fully operational • Remanufacture of the heat exchanger tube bundles underway which should enable both lines to generate power at capacity during Q2 2015 STG: Steam Turbine Generator; CTG: Combustion Turbine Generator.
34
Katanga KOV pit, DRC
Copper
Copper exchange stocks at lowest levels since late 2008 Global copper stocks (Mt)
Global copper stocks (Mt)
1.8
1.8
1.6
1.6
1.4
1.4
1.2
1.2
1.61
1.41
1.13
1.0
0.98
1.0
0.94 0.87
0.8
0.8
0.6
0.6
0.59 0.51
0.4
0.4
0.2
0.2
0.0
0.28
0.26
0.0 January June 2013 January June 2014 2013 2014 LME
COMEX
SHFE
Present
CHINA BONDED
January June 2013 January June 2014 2013 2014 Total copper stocks Total excluding China bonded
Present
36
Abbot Point, Australia
Coal update
Market update – thermal coal supply and demand Seaborne thermal coal supply (Mt) 1,200
Seaborne thermal coal demand (Mt) 1,200 1,111
1,000
941
975
1,032 991 1,013
1,061 1,019 1,000
880
866 800
931
971
792
773
800
600
600
400
400
200
200
0
0 2011 Indonesia South Africa Source: Glencore.
2012
2013 2014F 2015F 2016F 2017F
Australia USA
Colombia Other
Russia
2011 China Taiwan
2012
2013 2014F 2015F 2016F 2017F
India Germany
Japan Other
Korea
38
c.35% of seaborne thermal coal supply is cash negative USD/t FOB 20
thermal coal cash margins at current market prices ($/t) Seaborne Thermal Coal Cash Margin Curve Glencore Major 1 Major 2
15
Major 3 Major 4 Major 5
10
Major 6 Major 7 Major 8
5
Other
-
(5)
(10)
(15)
(20) 0
50
Source: Glencore
100
150
200
250
300
350
400
450 500 550 Million Tonnes
600
650
700
750
800
850
900
950
39
Major project update – Tweefontein Optimisation Project Asset details
Coal Processing Plant
• Glencore effective ownership: 79.8% • Capex: $823M • Brownfields expansion of existing operations • replacement of 3 old processing plants with modern plant
• construction of rapid loading rail terminal • development of large open cut mine with 7 pits and owner operated fleet
• Production capacity: 13.6Mtpa ROM; 7Mtpa Saleable
• Thermal: 75% Export; 25% Domestic
Rail load-out nearing completion
Project status
• Under construction • Coal Processing Plant, 91.9% complete • Full Project, 87.4% complete • Plant operational Q4 2014 • Project completion Q2 2015 40
Major project update – Ravensworth North Asset details • 90% Glencore • Brownfield project • 8Mtpa, export thermal and semi-soft coking • 23 year mine life • Second quartile cash cost
Mine development and MIA
Project details • Project complete • Approved 2011 • CHPP completed Q4 2013 CHPP and product stockpiles
Construction update • CHPP fully commissioned and operational • On time and on budget ($1.4bn)
41
Major project update – Ulan West Asset details • 90% Glencore • 8Mtpa export thermal coal • 14 year mine life • First quartile cash cost at full production
Box cut and main gate entry
Project details • 92% complete • Approved 2010 Construction update • Longwall commenced operating in May 2014 • Project on time and on budget ($1.2bn)
First longwall shear
42
Nickel crowns, Nikkelverk, Norway
Sector overview
Source: Bloomberg, as of 18 August 2014.
40% 38% 36% 33% 27% 19%
-2% -2% Retail
41%
HSBC Global Mining
41%
-2% Telecomm.
47%
Basic Resources
Financials
-1% Autos
Banks
-1%
Stoxx Europe Mining
Utilities
Telecomm.
Industrial Goods
0%
Oil & Gas
Insurance
1%
Real Estate
P&H
1%
Construction
Construction
2%
P&H
Chemicals
5%
F&B
58%
Media
Mining sector performance last 3 years F&B
6%
Chemicals
58%
Travel
6%
Banks
59%
Basic Resources
Oil & Gas
Utilities
4%
Industrial Goods
65%
7%
Autos
66%
8%
Retail
69%
9%
Insurance
50% Stoxx Europe Mining
10%
Travel
83% HSBC Global Mining
11%
Technology
88% Health Care
11%
Health Care
105% Real Estate
Technology
Stoxx Global 1800
12%
Financials
Media
Stoxx Global 1800
Sector performance Mining sector performance year to date
4% 0%
-1% -20% -29%
44
Supercycle over ? Commodity demand: 2004 vs 2014F 52.6
2004 2014
13.9
1.90 976
2.0
21.9
1.2 467
Zinc
Iron Ore
Mt
Mt
billion t
Mt
Mt
Copper
1.29
30.3
Alu
Mt
10.3
16.9
Nickel
Thermal Coal
Prices have generally firmed during H1 2014 led by nickel. Slowing supply growth lending support Copper
Zinc
Iron ore
Alu
Nickel
Coal
35.0%
40.0% 30.0%
Last 18 months
20.0% 6.0%
10.0%
14.0%
10.0%
YTD 5.0%
0.0% -10.0% -20.0%
-4.0%
-6.0%
-6.0% -12.0%
-15.0%
-30.0% -30.0%
-40.0% -50.0%
-41.0%
Source: Bloomberg as at 18 August 2014, Wood Mackenzie, Deutsche Bank, Glencore estimates
45
