Sustainability in the aluminium industry

Jørgen C. Arentz Rostrup, Executive Vice President and CFOCRU’s 16th world aluminium conference, June 2011

Hydro, an integrated aluminium producer

A transforming transaction

Albras, aluminium smelter

Paragominas, bauxite mine

• Capacity: 6.3 million tonnes• Ownership: 91%• First quartile cash cost position including Paragominas bauxite

• Capacity: 10 million tonnes• Ownership: 60%, 100%

from 2015

Alunorte, alumina refinery

• Capacity: 460 000 tonnes• Ownership: 51%• Upper second quartile cash cost position

Bauxite licenses

CAP aluminarefinery project

MRN bauxitepurchase agreement

Competence

Strong positions across aluminium value chain

Bauxite Alumina Energy Primary Casting Products

Rolling

Extrusion

Recycling

Recycling

The integration of Vale Aluminium is transforming Hydro

Key operational priorities

• Integration of Alunorte and Paragominas• Operational improvements • Improve efficiency to achieve nameplate production

capacity

• USD 300 cost improvement program

• Qatalum ramp-up

• Responsible aluminium player in HSE and CSR0

1

2

3

4

5

6

7

8

9

10

1995 1998 2001 2004 2007 2010

Alunorte Paragominas

Million tonnes

Attractively positioned, global reach

Continental Europe• Leading mid and downstream position

Asia• Growing metal marketing position• Extrusion expansion in China

Norway• 900 000 tonnes hydro-powered aluminium production• Technology centre, R&D for next-generation smelter• Hydropower developments• New recycling centre

North America• Alouette aluminium smelter in Canada• Leading position in US Extrusion• Growing metal marketing position

Brazil• World-class operations and resource base• Bauxite and alumina growth projects• Albras aluminium smelter

Middle East• Qatalum 1 in production• Qatalum expansion opportunity

Australia• Primary aluminium production

Strategy for further value creation

Bauxite & Alumina

Primary Metal

Energy

Mid- and downstream • Continue proven high-end product strategy• Pursue profitable life-cycle investments:

recycling, energy-efficient building systems, aluminum in transport

• Expand in emerging markets

• Develop current asset base• Implement global approach to power sourcing

• Reposition – 300 USD/t program• Qatalum top quartile operation• Expand in high-class assets

• Improve operations• Integrate• Expand• Commercialize

Fantastic opportunities for aluminium

The big challenges of our generation

Climate changeMillions climb out ofpoverty

Increased energydemand

Growth must be sustainable

Significant aluminium demand growth expected

44

53

36

48

34

22

-10

10

30

50

70

90

110

2010 2015 2020

World outside China ChinaDemand for semis

Fight for raw materials to continueResource-constrained world

Million tonnes

+80%

Source: CRU

Aluminium is the metal of the future

• Formability• Extrusion, rolling, casting• Low melting point vs. steel

• Excellent conductivity• Thermal – electrical

• Alloying technology• Gives wide range of physical properties

• Lightweight• 1/3 density of steel

• Recyclability• 5% of original energy consumption• 75% of all aluminium produced still in use

• Corrosion resistant• Oxide layer

Properties leadto increasedmarket share

• Aluminium intensive urbanization and infrastructure• Climate challenge – aluminium as part of the solution• Recyclability more important with high energy prices

Innovation drives aluminium demand

10µm 10µm600:1

Aluminium tubing

Minimum thickness for maximum protection Power house

Hydro aims at forefront position

A sustainable industry?

Aluminium weakest performer among base metals

0

100

200

300

400

500

600

700

800

900

jan.03

jan.04

jan.05

jan.06

jan.07

jan.08

jan.09

jan.10

jan11

Aluminium Copper LeadNickel Tin Zinc

8

4

17

17

20

26

27

28

29

33

34

Aluminium,ex. China

Aluminium

Coal

Bauxite

Nickel

Tin

Uranium

Gold

Zinc

Iron Ore

Copper

Premium above 90th percentile cash cost(1990-2005), percentage

Average

Source: McKinsey, CRU, Reuters

Commodity prices, indexed

Total shareholder returns for aluminium companies low compared to other industries

88

71 67 6762

106

81

5141

50

16

42 3933 30

1812 12 10 9 7 4 4 4 4 1 0 -1 -2 -2

-10 -14-7

-2

-17 -14 -10

-24

-10-16

-24 -26 -23-19

-13

-40

-20

0

20

40

60

80

100

120

Average annual TSR, 2005–2009 () High

Low

Industry weighted average

Chemicals

Machinery and Construction

ConsumerGoods

Mining and Materials

Media andPublishing

Travel andTourism

Pharmaceuticalsand MedicalTechnology

Technology and Telecom-

munication

Transportation and Logistics

Utilities Retail Pulp and Paper

MultibusinessAutomotive and Supply

Aluminum

Source: Boston Consulting Group

Low returns permeates the whole value chain

-10 %

-5 %

0 %

5 %

10 %

15 %

Low High AverageEBITDA margin downstream businesses, percentage

2005 2006 2007 2008 2009 2010

Source: Company reports. 8 core companies

Encouraging developments

• Development of more liquid bauxite and alumina markets

• Bauxite, a fight for cost efficient resources going forward

• Technology and application development

• Continued strong demand in overseas market for advanced technology products

Responsibility

The world needs aluminium

Ability

Aluminium is a fantastic material to meet market needs

Profitability

Sustainable return is the premise for developingaluminium’s full potential

www.hydro.com