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Sell-side analyst visit Copper
30 September 2014
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2
Agenda
• Welcome – Senior Management Team • Who we are and introducing our Senior Management Team
• Telis Mistakidis – Head of Copper • Global and Australian copper update
• Mike Westerman – Chief Operating Officer Copper Assets North Queensland • Ernest Henry Underground Mine • Mount Isa Copper Operations
• Deon Van Der Mescht – Chief Executive Officer CSA Mine
• Cobar: future growth options
• Questions
3
Glencore global copper
Copper overview
5
Third largest global mined copper producer
• 2013 mined pro-forma production of 1,497kt
Largest trader of copper concentrate and metal
• 2013 marketed volumes exceeded 2.8Mt copper units (in both concentrates and metal)
2013 mined copper production (kt)
Source: Glencore, company reports.
0 500 1000 1500
Glencore 2015
Rio Tinto
Anglo American
BHPB
Glencore
Codelco
Freeport
Glencore copper assets
6 Industrial assets comprise: 14 mines, 6 smelters, 5 refineries and 14 EW circuits, assets in 36 countries, marketing offices spread across five continents
Cu 2015
Copper asset portfolio optimised
7
c.$300M
industrial merger synergies and other cost savings by end
2014
Post-integration cost efficiencies and focus now
ingrained in industrial asset
structures
Q1
first quartile cost positions for industrial assets on track for end
2015
$7.9bn
combined Glencore and Xstrata expansionary copper capex since
2009(1)
Q1 Q2
Illustrative C1 metals cash cost curve
Note: (1) Excludes Las Bambas.
Cu 2012
Unit mine costs leveraged lower through expansion of lower-cost volumes by 2015:
• DRC Copper: $1.48/lb • Collahuasi: $1.75/lb • Antapaccay: $1.00/lb • Antamina: $0.47/lb
North Queensland copper assets
Copper Assets North Queensland (NQ) – overview
9
Copper Assets North Queensland • 2,584 employees (including contractors) • Significant contributor to the Queensland economy
Mount Isa Copper Operations • Two underground copper mines – Enterprise, X41 • Commenced Copper Mining in 1966 • 1800m deep • Life of Mine to 2020; reserves of 40Mt @ 2.43%
Ernest Henry Mining Pty Ltd
• Original Open pit – closed 2011 • Underground mining commenced 2009 • Life of Mine 2026; reserves of 74Mt @ 1.04% Cu, 0.53g/t Au
Copper Smelter • 900kdmtpa capacity • Scheduled closure in 2016 Refinery • 300ktpa capacity
2013 NQ transformation
10
Safety performance improved
Production maintained
• At time of acquisition (May 2013), the NQ copper business was forecast to generate a negative full year cash flow
• Key decisions and actions taken to achieve a positive cash flow outcome: • Removal of negative margin revenue
streams » Magnetite operations » Mount Margaret open pits
• Review of sustaining and expansionary capital expenditure
• Simplification of management structure to align with value delivery
• In 2013, NQ copper assets delivered a
positive free cash flow, achieving a 7 month turnaround
33.544.555.566.57
60
70
80
90
100
110
120
Jan 13Mrz 13Mai 13Jul 13Sep 13Nov 13Jan 14Mrz 14Mai 14
HPI
FR
DIS
R
DISR
HPFR
0
50
100
150
200
250
-
,5
,10
,15
,20
,25
Cu
in C
on (k
t) Fu
ll Ye
ar
Cu
in C
on (k
t)
Actual Budget
NQ transformation – consolidation of assets along the value chain
11
Copper ore sourced from Mount Isa
Copper concentrator
Copper smelter Copper anode
Townsville copper refinery
(cathode)
Glencore Port Operations
Mount Isa Mine
Copper ore sourced from Ernest Henry
Copper concentrator
Ernest Henry Mining
NQ transformation – streamlining management structure
12
Streamlined management structure
20x Senior Management 45x Corporate
Office
Chief Executive
Xstrata Copper
Corporate Functions
Brisbane Office
Chief Operation Officer NQ
MICO
EHM
Cu Smelter
HR
Finance
Corporate Affairs
EHM UG Project
Chief Operating Officer NQ
Chief Mining Officer
Chief Processing
Officer
Chief Financial Officer
• Previous management structure very siloed and unconducive to integrated production
• Streamlined structure enables: » Effective decision making across three
geographical locations » Sharing of resources across the NQ copper
assets, reducing capital requirements » Ability to leverage Glencore expertise in
shipping and logistics » Standardisation of work practices to
maximise value
NQ transformation – reducing the 2013 cost base
13
Operating Expenditure initiatives • Management restructure and streamline • Negative margin operations removed • Improved productivity • Renegotiation of contracts 18% Headcount Reduction • Staged approach to headcount reduction
• Production profiles sustained • No impact on safety • Focus on Contractor reduction
• Rationalisation of support services and duplication
• Consolidation of Business on site
30 % reduction in sustaining
capital expenditure 25% reduction in expansionary
capital expenditure
Capital Expenditure initiatives • Low probability study work terminated • Marginal investment cases abandoned • Gold plated solutions removed
3 % reduction in operating costs
EHM – Ernest Henry Underground Mine
EHM – transition to a long life, low cost underground producer
15
Sub level caving process EHM underground mine plan
• From 1995 to 2011 successful open pit • Innovative Sub level caving utilised to achieve viable low cost, low grade ore operation • $589M brownfield project approved in December 2009 to convert from underground trucking
operation • Develops to over 1,000m below the surface and 475m below the open pit • Extends life of mine to 2026 • Hoisting commenced end of May 2014 • Production rates ramp up to 6.0Mtpa in 2015, exceeding feasibility expectations
EHM – underground mining flowsheet
16
Transfer System Feeders Trunk Conveyor Automation
Crushing System Transfer Level Automation Crusher operation
Sub Level Cave Caving initiated Transfer Automation Resources and
Reserves Ore Passes
Hoisting System Loading Station Winder System Surface System Feeders Conveyor
Other Ventilation system In Pit Dewatering Underground Dewatering
EHM – major project infrastructure
17
600m overland conveyor Underground primary crusher
Underground surge bin Loading station
0%1%2%3%4%5%6%
Jan 14 Feb 14 Mrz 14 Apr 14 Mai 14 Jun 14 Jul 14 Aug 14
Cumulative Milling Variance 2014
Glencore Owned Smelter Slag 3rd Party
-4%
-2%
0%
2%
4%Ja
n 13
Feb
13M
rz 1
3Ap
r 13
Mai
13
Jun
13Ju
l 13
Aug
13Se
p 13
Okt
13
Nov
13
Dez
13
Jan
14Fe
b 14
Mrz
14
Apr 1
4M
ai 1
4Ju
n 14
Jul 1
4Au
g 14
Sep
14
Au Recovery Variance
-3%-2%-1%0%1%2%3%
Jan
13Fe
b 13
Mrz
13
Apr 1
3M
ai 1
3Ju
n 13
Jul 1
3Au
g 13
Sep
13O
kt 1
3N
ov 1
3D
ez 1
3Ja
n 14
Feb
14M
rz 1
4Ap
r 14
Mai
14
Jun
14Ju
l 14
Aug
14Se
p 14
Cu Recovery Variance
EHM – concentrator
18
Operational improvements yielding results Background • Historically utilised as a single-line single-ore
concentrator • Evolution of the plant enabled processing of
additional feed sources, including low-grade ores, smelter slag, and 3rd party ores
2014 YTD operational improvements • Opportunity to introduce low-milling rate
operational strategy, improving grind size and overall recoveries:
» Cu recovery improved 0.3% post change » Au recovery improved 2.9% post change
• Utilisation of additional plant capacity: » Milled tonnes up 4% YTD » Unit costs (AUD/t) down 6% YTD
• Asset management strategy remains a core focus:
» Underlying plant runtime >92%
EHM – unit cost performance and project upside
Current performance in line with expectations • Early ramp up to 6.0Mt planned for 2015, 12 months ahead of schedule • Mining unit costs reduced by 50% • 42% reduction in EHM C1 Unit costs by end of 2015, taking operation from 4th Quartile to 2nd
Quartile
Upside emerging • Cave productivity already above nameplate capacity of 6.0Mtpa • Ability to enhance grade (by up to 5%) due to Cave draw flow predictability • Low rate milling strategy delivering higher than expected recoveries • Leveraging Mount Isa expertise and productivity agenda
19
EHM – possible mine extension 2025 to 2030
• Orebody currently open at Depth • Potential to increase current Resource to below 1200 sub level • Explore DD intersections from 1992-94 surface campaign of 42m @ 1.37% Cu • Mineralisation adjacent EJ and open at depth and along strike of existing ore domains
• Low grade halo conversion at higher recoveries and higher production rates
20
EH631 - 190m @ 0.76%
1200 RL
EHM SLC orebody
Drilling Target
EHM – potential for mine extension 2025 to 2030
• Additional drilling enables recovery of low grade material along footwall of the main sub level cave (SLC)
• Additional mining to the east of the main SLC
Footwall Overdraw East Extension
Without FW rings With FW rings
21
Mount Isa Copper Operations (MICO)
MICO – overview
23
• 6.4Mt production rate via underground Sub Level Open Stoping methods
• Mining 4km along strike & between 500m and 1800m below surface production from ~50 stopes/annum.
• Extraction from two mines spilt approximately 60:40 in tonnage
Remaining Reserve Depleted Reserve
Enterprise Mine
23Mt @ 3% Cu
X41 Mine 30Mt @ 1.8% Cu
X41
Sha
ft
M62
Sha
ft
2 km
4 km
Mount Isa Copper Mine • Underground Mining commenced in 1966 • 1,200 km of development drives • Over 200Mt of ore recovered from mine
N
U62
Sha
ft
R62
Sha
ft
MICO – overview
24
4km
• Aged Asset with high grades and very productive infrastructure • Demonstrated ability to reliably deliver high volumes of copper at robust margins • Requires focus on operational discipline and management of variability (complexity):
» Development ~12km primary / 9km rehabilitation per year » Large number of active mining areas spread out towards extremities of ore bodies » Labour and equipment intensive » Mobile fleet comprising 10 Jumbos, 3 cable bolters, 6 production drills, 11 trucks, 15
loaders
MICO – operational discipline achieving results: mobile equipment
25
Truck utilisation trend LHD utilisation trend
• Disciplined tracking of idle, standby and delay times enabling significant utilisation improvement
• Increased utilisation of truck and loader fleet allows for absorption of additional tkms as transfer approaches 2.5 rehandle ratio
• Underground shift changes remain key idle time driver, with mine firings, distance to work area and mine complexity significant contributors
Jumbo idle time (per unit per day)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
,0
,10
,20
,30
,40
,50
,60
,70
2010 2011 2012 2013 Est 2014
Thou
sand
Hou
rs
Operating Hours UofA Availability
0%10%20%30%40%50%60%70%80%90%
,0
,10
,20
,30
,40
,50
,60
,70
,80
2010 2011 2012 2013 Est 2014
Thou
sand
Hou
rs
Operating Hours UofA Availability
0.00
0.50
1.00
1.50
2.00
2.50
3.00
Hou
rs Id
le ti
me
MICO – operational discipline achieving results: concentrator
26
Ore milling rate performance Concentrator unplanned downtime
Embedded approach to asset management • Increased processing volumes • Improved plant performance • Reduction in reactive maintenance and
contractor demand Systematic approach to controlling variation • Mitigate repeat events – sustain the
baseline • Drives continuing incremental improvements • Devolved accountability and ownership
Incremental copper recovery improvement
420
440
460
480
500
Jun
11
Sep
11
Dez
11
Mrz
12
Jun
12
Sep
12
Dez
12
Mrz
13
Jun
13
Sep
13
Dez
13
Mrz
14
Jun
14
Ore
Mill
ing
Rat
e (tp
h)
0
1000
2000
3000
4000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014YTD
Unp
lann
ed M
aint
enan
ce (m
in/m
onth
)
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
Jun
12
Sep
12
Dez
12
Mrz
13
Jun
13
Sep
13
Dez
13
Mrz
14
Jun
14
Incr
emen
tal C
oppe
r Rec
over
y
MICO – future resource potential: underground
27
X41 MINE
R62 SHAFT
U62 SHAFT
North 3500 Remake
Potential target size – 43Mt
HWL Basement
Potential target size – 17Mt S3500/W-block
Potential target size – 3.5Mt
BQF Perched (Current)
Potential target size – 40Mt
ENTERPRISE
North 3000 Remake
Potential target size – 32Mt
N
BCZ Blind
Potential target size – 40Mt
SSW 1100
Potential target size – 10Mt
650 OB
Potential target size – 7Mt
Blind East 3500
Potential target size – 1.5Mt
Target Size
N3000 remake ~30Mt
3500 remake ~40Mt
W Block South ~3.5Mt
SSW 1100 OB ~10Mt
Perched HWL ~17Mt
Buck Quartz Fault ~40Mt
N650 OB ~17Mt
SW 1100 OB ~4Mt
MICO – future resource potential: surface resources
28
Black Rock Open Cut
Leach Circuit Concept
Background • Progression of several open pit studies
completed since the 1970’s, hampered by infrastructure and metallurgy challenges
• The BROC cutback addresses these challenges:
» Pit has been optimised on Copper ore types only
» Designed not to interfere with high replacement cost infrastructure
» Metallurgical test work programs producing promising results on treatability of BROC ores
Potential • Extension of current pit depth to 225m and
600m from N – S • 50m nominal standoff from infrastructure
restricts pit boundary • Total Strip ratio of 5.4 (or 4.0 inclusive of
Pb/Zn Ore)
Copper smelter and refinery
Mount Isa Copper Smelter - overview
30
2014 Copper smelter • 200 employees • 22 FTE contractors • 900 kdmtpa Concentrate capacity • 97.5% recovery • Acid plant owned and operated by
Incitec Pivot
Copper Smelter Equipment • 35kwmt concentrate storage
capacity • Isasmelt Vessel • 2 x Rotary Holding Furnace • 4 x Piece smith Converters • 2 x Anode Furnaces • 1 x Anode Wheel (80t/hr)
Auxiliary equipment
• ESP Leach Plant (4 tph capacity) • Converter Slag/Reverts Crushing
Plant (60tph capacity) • CRL electrolyte recovery process
Mount Isa Copper Smelter
31
Isasmelt campaign life
Converter campaign life
0
50
100
150
200
250
1 2 3 4 5 6 7 8 9 10 11
Refr
acto
ry L
ife (W
eeks
)
Campaign #
100
150
200
250
300
350
400
2001 2004 2006 2009 2012 2014 2017
# of
Cha
rges
Com
plet
ed
Year C1 Charges C2 Charges C3 Charges C4 Charges
Asset Management • Smelter outage June 2014
» Refractory replacement across 4 vessels » Significant overhaul of primary smelter
off-gas treatment system • Converter hood replacement program in
progress to sustain SO2 capture through to closure
• Strong, integrated IPL/MIM planning process achieved 24% improvement in off-gas treatment in 2014
Outlook • Isasmelt refractory capable of 4+years • Scheduled for closure - December 2016 • Personnel retention process in place through
to smelter closure • Treatment of third party concentrate
32
Standing on pallet rack rail
Fell to this spot
Townsville Copper Refinery
Tankhouse Parameters • ISA Process Technology • 37 sections, 3 operating circuits, 1162 operating cells • 2 crop cathode cycle, 8 day crop 1, 10 day crop 2
CRL Operations • Cathode annual production target 288,500t • Slimes annual production target approx. 900t • Cathode registered on LME and SHFE
Anode Weight 350kg
Cathode Weight 75kg
Anodes per cell 45/44
Anode Scrap Rate 17.8%
Current Efficiency 95.5%
Time Efficiency 96.0%
Current Density 326 amps/sqm
Cell Current 26,500 amps
Kunz Cranes 2
Townsville Port Operations
33
Berth 8 – Townsville Port Facility • All weather berth • 3 storage sheds, total capacity of 160kt • Dedicated rail loop and tippler
Environmental Authority Approvals • Concentrates (Zn, Cu, magnetite, revert
and dross) – 3.86MTPa • Lead concentrate – 140kTPa • Fertiliser – 1.2MTPa
Relocation Project to Berth 8 • $86 million investment (jointly funded) to
relocate to a new berth • Offers:
» 2.5 times more shiploading capacity » Greater berth efficiency » Significant improvements in
environmental performance
Third-party processing
34
• Currently progressing options on tolling both copper ore and concentrates through the EHM and Mount Isa concentrators and smelter to supplement own sources.
» Allowing local mines to leverage our existing asset base for processing copper ores and concentrates
» Smelter value-add to copper product stream through removal of logistic constraints and delays
» Established logistics chain to market
Cobar
CSA Mine – historical overview
36
Sinking No.1 Shaft (Feb. 1962)
CSA Mine (Jan. 1964)
• Discovered in 1871 • Current operation began in 1967 • Initially produced Cu/Ag/Zn/Pb – now Cu/Ag
only • Acquired by Glencore in 1999 ending a year
long shut down • 25Mt of ore extracted to date • Highest grade copper mine in Australia
CSA Mine – today
37
• High grade asset with aged infrastructure • Amongst the three deepest mines in
Australia – currently 1,640m below surface • Producing 1.1Mtpa of copper/silver ore (4.6%
Cu, 15.2g/t Ag) • Producing 162ktpa of copper/silver
concentrate (28.5% Cu, 80g/t Ag) • Concentrate transported by rail from mine to
Newcastle – sold to smelters overseas. • Reserves: 5.8Mt @ 4.4% Cu, 17.3g/t Ag • Resources: 11.5Mt @ 5.7% Cu (2.7Mt
Measured, 3.1Mt Indicated, 5.7Mt Inferred – Dec 2013)
• Current Life of Mine – 10 years
CSA Mine No.2 Shaft
CSA Mine – additional potential cost reduction
38
CSA Mine Processing Plant Upgrade of current infrastructure • Ventilation and hoisting capacity to facilitate execution
of new infrastructure, replacing trucking at depth • Majority of current infrastructure upgrades to be
completed by end 2015 and allow/facilitate: » initiation of new infrastructure establishment » increased development of resource, particularly in the
new QTS Central ore body
Increase current ore resource to enhance project capital returns
• Potential exists to double current resource within the new QTS Central ore body and the down plunge extent of the QTS North ore body
• Magnitude and success of the ore resource increase will dictate the size of the new infrastructure investment
QTS Central • Discovered 2014 • Inferred: 1.0Mt @ 6.1% Cu • Open at depth
Known anomaly • @ +5% Cu
Potential • @ +5% Cu
Ore body open at depth (2-3 km below surface)
Decl ine base 1.6km below surface
QTS North Mineral Resource
8.9Mt @ 5.9% Cu (525 Kt Cu)
Potential • @ +5% Cu
Inferred Resource
Indicated Resource
Measured Resource
Depleted
Historic Western & Eastern System Workings
Remaining Western & Eastern Resources
2.2Mt @ 4.4% Cu (97 Kt Cu)
QTS South Mineral Resource 0.3Mt @ 7.4% Cu (22 Kt Cu)
No.2 No.1 Shaft
s
Shaft base 1.1km below surface
CSA mine – significant resource growth potential
Conclusion
Summary
The future of our Australian Copper operations is via expanded mining and concentrate production
• We are continuing to invest in our business • Major projects are progressing in line with targeted expectations • We have mature assets – efficient mining and processing techniques, improving productivity
and lowering costs is critical for our future • Significant resources and reserves remain for potential future development • We remain committed to high standards in the areas of health, safety, environment and
community
41
Q&A