2017 Half-Year Results 10 August 2017
Important notice concerning this document including 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 “outlook”, "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 in Glencore’s 2016 Annual 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 UK 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. The companies in which Glencore plc directly and indirectly has an interest are separate and distinct legal entities. In this document, “Glencore”, “Glencore group” and “Group” are used for convenience only where references are made to Glencore plc and its subsidiaries in general. These collective expressions are used for ease of reference only and do not imply any other relationship between the companies. Likewise, the words “we”, “us” and “our” are also used to refer collectively to members of the Group or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies.
2
Wonderfontein coal, South Africa
Ivan Glasenberg Chief Executive Officer
H1 2017 Highlights Strong financial performance
• Adjusted EBITDA(1,2) of $6.7bn, up 68%; Adjusted EBIT(1,2) of $3.8bn, up 334% • Net income attributable to equity holders of $2.5bn, -$369M in H1 2016 • Funds from operations of $5.2bn, up 88% Underpinned by a diversified portfolio of Tier 1 assets and Tier 1 commodities … • Favourable fundamentals and rising prices for key commodities amid robust growth momentum in the global economy: copper +22%, cobalt +109%, zinc +49% and thermal coal realisations +50% to 70% period-on-period
• Low-cost structures/high margins embedded within our key commodity industrial divisions:
copper 88c/lb, zinc –9c/lb (16c/lb ex gold), nickel 240c/lb, and thermal coal $45/t at a $32/t margin
… and the resilience of Marketing
• Marketing Adjusted EBIT of $1.4bn, up 13% (+22% with Agriculture on a like-for-like basis) • Reflecting solid YTD performance, increased full year 2017 guidance range by $100M to $2.4 - $2.7bn Balance Sheet further strengthened • Net funding and Net debt reduced by $2.4bn & $1.6bn respectively over the first-half to $30.2bn and $13.9bn • Robust cash flow coverage ratios at 30 June: – FFO to Net debt: 74% – Net debt to Adjusted EBITDA: 1.07x
Notes: (1) Refer to basis of preparation on page 5 of the 2017 Half-Year Report. (2) Refer to note 3 page 42 of the 2017 Half-Year Report for definition and reconciliation of Adjusted EBITDA/EBIT.
4
Sustainability and governance Safety
• 4 fatalities from 4 incidents YTD, 3 at focus assets
LTIFR(1,2) 2010 to June 2017
(Kazakhstan/Bolivia)
• • • •
155,000 employees and contractors at the end of 2016
2.79 2.54
LTIFR 1.00, down 29% compared to 2016(2) TRIFR 3.21, down 21% compared to 2016(2)
HSEC summit with senior leadership continued the focus on eliminating fatalities and implementation of critical controls for catastrophic hazards
2.07
64% reduction 1.89
Environment
1.60
• Set group wide emission intensity reduction target of at
1.34
least 5% on 2016 levels by 2020
1.40
• Publication of our second climate change considerations
1.00
report
• Achieved Level 4 ranking in investor-led Transition Pathway Initiative
• Improvement in sector performance analysis recognised
2010
2011
2012
2013
2014
2015
2016
2017 H1
by CDP
Governance
• Publication of our second payments to governments report Notes: (1) Lost time incidents (LTIs) are recorded when an employee or contractor is unable to work following an incident. LTIFR is the total number of LTIs recorded per million working hours. LTIs do not include Restricted Work Injuries (RWI) and fatalities (fatalities were included up to 2013). Historic data has been restated to exclude fatalities and to reflect data collection improvements. (2) From Jan 2017 the LTIs from Agriculture are not included due to the deconsolidation of this part of the business
5
Steven Kalmin Chief Financial Officer
Koniambo Nickel, New Caledonia
H1 2017 Financial highlights Strong H1 2017 financial performance …
Adjusted +68% EBITDA $6.7bn Adjusted +334% EBIT $3.8bn Marketing Adj. +13% EBIT $1.4bn Net (-$369M H116) Income $2.5bn Funds from +88% operations $5.2bn Net -7% funding $30.2bn
… underpinned by our low-cost, highmargin industrial asset portfolio(1)
Capital allocation Capital structure further strengthened policy to maximise Net debt down 11% value creation to $13.9bn
2016 extensive cost efficiencies / savings, sustained into H1 2017. Some volume and FX variances offset by higher by-product credits
Targeting strong BBB/Baa; underpinned by maximum through the cycle leverage of 2x, augmented by a Net debt cap of c.$16bn
Cu
88c/lb Ni
Net -11% debt $13.9bn Committed Avail. Liquidity $14.5bn
240c/lb
Zn
74%
ND/Adj.EBITDA (x)
-9c/lb
Framework(2) balances optimal capital structure with reinvestment / growth and shareholder returns. In H1, $0.5bn distribution, $0.6bn M&A, $1.6bn Net debt reduction
M&A + Other
16c/lb pre Au Thermal Coal
$1bn fixed distribution in 2017
FFO/ND (%)
$32/t margin
2013
2014
2015
1.07x H1 2016 2017
Maintain strong BBB/Baa
Equity cash flows
Strongly cash generative at spot prices(3)
Underpinned by robust margins in key asset segments combined with resilient marketing earnings
Cu,Ni,Zn,Coal EBITDA
$12.0b
+ Other Ind EBITDA
$0.3bn
+ Mktg EBITDA
$2.7bn
= Group EBITDA
$15.0bn
- Cash taxes + interest
$3.8bn
-
Capex
$4.1bn
= illustrative annualised spot FCF
$7.1bn
Fixed and variable payout basis commences from 2018 Notes: (1) See slide 21 for calculation and reconciliation to reported Adjusted EBITDA. Zinc costs include 25 c/lb gold credit. (2) See notes on slide 14 for framework definitions. (3) See slide 22 for underlying calculations
7
H1 2017 Marketing Adjusted EBIT up 13% to $1.4bn Marketing Adjusted EBIT ($M) (1)
+13%
1,368 107(3)
1,210 115(2)
291
Strong performance, up 13% (+22% with Agriculture on a like-for-like basis), reflecting a more supportive marketing environment, in line with improving fundamentals for key commodities • Metals and minerals
• Healthy demand and tightening market conditions across key commodities drove the 23% increase, with strong contributions from most commodities
• Energy Products
252
• Up 15%, reflecting improved coal marketing conditions. 1,048 852
Weather disruptions and China’s policy developments to curb Chinese domestic coal production/overcapacity, were positive period-on-period factors. The oil trading environment was more subdued, relative to prior periods.
• Agricultural Products(1) • EBIT up 86% on a 100% like-for-like basis to $214M,
H1 2016 Metals and Minerals Glencore Agriculture
H1 2017 Energy Products Corp and Other
reflecting the impact of a record Australian crop on local origination and Viterra handling operations. Grain, oilseeds, cotton and freight marketing all performed well in a generally challenging pricing environment.
Notes: (1) Following the sale and deconsolidation of Agricultural Products, Glencore’s 49.9% proportional share of Glencore Agriculture industrial earnings is now aggregated into overall Marketing. (2) H1 2016 Glencore Agriculture Marketing EBIT reflects 100% ownership, restated to include -$7M of Agricultural Industrial EBIT in H1 2016. (3) Comprises 49.9% of Glencore Agriculture.
8
2017 Marketing guidance of $2.4-$2.7bn Adjusted EBIT(1) Marketing Adjusted EBIT ($M) Long-term guidance range: +2017: $2.2-$3.2bn
3500 3000
• 2017 marketing guidance increased a further $100M to $2.4-$2.7bn
• reflects supportive market conditions, resulting in YTD
2000
1000 500
2016
2015
2014
2013
2012
2011
2010
2009
2008
0
2017F H1 $1.4bn
1500
FY:$2.4 - $2.7bn
2500
performance tracking above initial guidance
• Moving to the upper part of the long-term guidance range of $2.2-$3.2bn would require:
• a combination of production/volume growth, uptick in additional working capital, higher interest rates and tighter physical market conditions
• A low cost of capital, stable cost base and low
Marketing earnings resilience (Indexed 2012=100)
capex requirements underpin resilient and high returns on equity
• Marketing earnings are generated from the handling,
Marketing Adjusted EBIT Indexed(2)
blending, distribution and optimisation, in substantial scale, of physical commodities, augmented by arbitrage opportunities Industrial Adjusted EBITDA Indexed(3)
2012
2013
2014
2015
2016
2017
Notes: (1) Increased from $2.3bn-$2.6bn guidance range provided in May 2017. (2) 2017 marketing adjusted EBIT based on annualised H1 Marketing of $1.368bn. Dotted line reflects 100% of Agriculture EBIT. (3) 2017 Industrial adjusted EBITDA based on VUMA published 2017 consensus Industrial Adjusted EBITDA of $10.8bn as at 7 August 2017.
9
H1 2017 Industrial Adjusted EBITDA up 95% to $5.3bn Industrial Adjusted EBITDA by segment ($M)(1)
Industrial Adjusted EBITDA Bridge ($M) Volume: Mutanda weather, Alumbrera end of mine variability and oil field depletion
5,282 3,527
157
1,869
330
+95%
169
571 2,706 3,639
• EBITDA mining margin of 38% vs 28% in H1 2016 • Up 54%, in line with significantly higher prices over the period (cobalt +109%, zinc +49% and copper +22%). Modest offset from lower production and the associated impact on costs, and the weaker US dollar against various producer currencies
• Energy Products H1 2016
H1 2017 EBITDA
• Up 227%, on the back of higher coal prices, Other
FX
Inflation
Cost
Volume
Price
• EBITDA coal mining margin of 41% vs 17% in
Coal Hedging
Corp and Other
Energy Products
H1 2016 EBITDA
Metals and Minerals
158
Cost: including lower grades at Antapaccay and coal portfolio mix, in addition to higher fuel and other energy costs
2,365
H1 2017
5,282
FX: ZAR: -14% KZT: -8% AUD: -3% COP: -6%
2,706
H1 2016
34 171
Industrial Adjusted EBITDA up 95%, reflecting the significant margin expansion due to higher commodity prices and our attractive low-cost structures. Relatively minor offsets from FX and other cost categories • Metals and minerals
margins and production. Realised H1 2017 thermal coal prices were up 50% to 70% periodon-period. Offsetting impact from fuel related inflation, higher royalties and adverse FX movements
Note: (1) Following the sale and deconsolidation of Agricultural Products, Glencore’s proportional share of Glencore Agriculture is now reported through Marketing (-$7M in H1 2016)
10
Development of industrial mining unit cash costs/margins Spot LME c/lb
• Extensive cost efficiencies/ savings achieved in 2016 sustained into H1 2017 • Some negative volume variances offset by higher by-product revenues • Coal: Higher H1 costs reflect revenue linked royalties, more than compensated within the higher coal margins ($32/t), in line with higher coking and semi-soft prices
290 250
Cu
122
129
Ex Au
Ex Au
10
16
16
-10
-9
-9
261
Zn
221
Costs (c/lb)(1)
87
95
Costs (c/lb)(1) Ex Au
41 136
87
2015A
2016A
89
88
86
16 -5
2017 H1 2017A 2017 Guidance Updated
2015A
2016A
Ex Au
2017 H1 2017A 2017 Guidance Updated $/t Margin
Spot LME c/lb
• 2017 Updated • Tight cost control maintained throughout the Group with numerous productivity initiatives underway • Slight increase in coal unit costs (+$1/t), largely driven by revenue linked royalties, associated with higher prices, and FX movements
Spot LME c/lb
516 442
436
Ni
470
31.0
45
46
28
Coal
Costs ($/lb)(1)
32
16
18
Thermal derived Costs ($/t)(1)
269
265
2015A
2016A
248
240
213
2017 H1 2017A 2017 Guidance Updated
40
39
2015A
2016A
Note: (1) Disclosed cost is full cost including all cash costs to allow reconciliation and generation of EBITDA. Spot LME as at 7 August 2017. See slide 21 for reconciliation of H1 2017 actual costs to Adjusted EBITDA. See slides 22/23 for production volumes underlying 2017 full year cost guidance.
44
2017 H1 2017A 2017 Guidance Updated
11
H1 2017 Industrial capex of $1.6bn; FY 2017 guidance of $4bn maintained • H1 2017 Industrial capex(1) of $1.6bn
Total Industrial capex ($bn)(2)
• $1.2bn sustaining capex; $0.4bn expansionary capex • Expansionary capex focused on Katanga, Mopani and Koniambo
14
• FY 2017 Industrial capex(1) guidance of c.$4bn
12
H1 2017 $1.6bn(3) 10 247
• c.$1bn of expansionary capex primarily progressing Katanga Whole Energy sustaining ($M)
Ore Leach commissioning by end 2017, Mopani’s concentrator/multiple shaft sinking projects and Koniambo rebuild
• Total Industrial capex guidance at c.$4bn per
8
annum over the next three to five years
6
• Including c.$3bn of sustaining capex • No large greenfield expansion projects
FY c.$4bn
923
Metals & Minerals sustaining
4
• Well capitalised assets requiring modest capex going forward • More than $38bn of expansionary capital (c.$66bn total capital)
36 2 377
Metals & Minerals expansionary
invested in the combined Glencore/Xstrata asset base since 2009
• Heavy capex program now essentially complete • Technology/infrastructure upgrades at Katanga and Mopani provide permanent capex (and opex) reductions
2017
2016
2015
2014
2013pf
2012pf
2011pf
2010pf
2009pf
2008
2007
2006
0
Energy expansionary
Notes: (1) H1 2017 total Industrial capex including JV capex. Marketing capex was $87M, including 50% of Glencore Agriculture (2) Glencore total Industrial capex 2006 to 2008 and combined Glencore and Xstrata total Industrial capex from 2009. Excludes Las Bambas capex from 2010 to 2014. (3) includes $9M of Corporate and other capital expenditure
12
Balance sheet further strengthened • Repositioned capital structure solidifies balance sheet strength and flexibility • Net funding and Net debt reduced further by $2.4bn and
52.2
35.8
54.4 49.8
• Committed available liquidity of $14.5bn at 30 June • RCF refinanced and resized in line with lower funding needs
•
23.6
20 30.2
Manage around Net debt cap of c.$16bn
15
15.5
10 H1 FY H1 FY H1 FY H1 FY H1 2013 2013 2014 2014 2015 2015 2016 2016 2017
74%
H1 FY H1 FY H1 FY H1 FY H1 2013 2013 2014 2014 2015 2015 2016 2016 2017
3.0
2.8
2.8 2.7
50% 33% 30%
28% 29% 29%
26% 25%
H1 FY H1 FY H1 FY H1 FY H1 2013 2013 2014 2014 2015 2015 2016 2016 2017
Notes: (1) H1 2017 FFO/ND and ND/Adj.EBITDA based on trailing 12 months for FFO and Adjusted EBITDA, see page 74 of the Half-Year Report 2017 for calculations
13.9
Net debt to Adjusted EBITDA
FFO to Net debt
– FFO to Net Debt of 74%
more flexibility and stability of distributions
25.9
30.5
25
39.0
32.6
• Robust cash flow coverage ratios at 30 June(1):
• Optimised capital structure provides less risk,
29.6
30
41.2
through the cycle, augmented by a upper Net debt cap of c.$16bn, being 2017’s opening Net debt position
– Net debt to Adjusted EBITDA of 1.07x
34.8
47.3
– 1yr RCF $7.335bn (was $7.7bn) with a borrower’s term-out option (to May 2019)
• Issued a 10yr $1bn 4% coupon bond in March 2017 Commitment to strong BBB/Baa ratings target • Targeting a maximum 2x Net debt/Adjusted EBITDA
37.6
35
49.2
$1.6bn respectively to $30.2bn and $13.9bn over H1 2017
– 5yr RCF $5.425bn (was $6.8bn) extended by 24 months to May 2022
Net debt ($bn)
Net funding ($bn)
2.9
2.7 2.4 Targeting maximum 2x augmented by Net debt cap of c.$16bn 1.07x
H1 FY H1 FY H1 FY H1 FY H1 2013 2013 2014 2014 2015 2015 2016 2016 2017
13
H1 2017 Capital allocation • Our capital allocation framework balances the
End ND: $13.9bn (down $1.6bn) • 1.07x ND/Adj.EBITDA • 74% FFO/ND • Baa2/BBB
M&A + Other: -$1.1bn • -$0.6bn buyout of African copper minorities • -$0.5bn FX revaluation movements (non USD debt), net of margin receipts on hedging instruments
preservation of our optimal capital structure, with attractive business reinvestment/growth opportunities and shareholder distributions
• H1 2017 capital allocation: • From $3.2bn Equity cash flow generation(1)
M&A + Other (3)
Maintain strong BBB/Baa
Start ND: $15.5bn • 1.51x ND/Adj.EBITDA • 50% FFO/ND • Baa3/BBB-
– $0.5bn cash distribution (+$0.5bn in September), $0.6bn buyout of African Copper minorities, $0.5bn FX impact, $1.6bn reduction in Net debt
• Distributions from 2018 (basis 2017 equity cash flows) • Fixed $1bn base distribution, reflecting the resilience, predictability and stability of Marketing cash flows plus
• Variable distribution representing a minimum payout of 25% of $1bn fixed distribution in 2017 (2)
Industrial free cash flows
• Fixed and variable distribution components to be confirmed
Equity cash flows(1)
annually at full-year reporting; based on prevailing conditions and outlook, to be paid 50/50 in each half
• Variable distribution percentage flexed upwards, as appropriate: – In context of overall balance sheet requirements, surplus capital position and subject to prevailing conditions & outlook Distribution: -$0.5bn • $0.5bn second tranche to be paid in September
Equity Cash Flow: $3.2bn $6.7bn adj. EBITDA less $0.6bn tax, $0.8bn net interest, $1.6bn net capex, and WC (non RMI) changes of $0.5bn
– Cash distribution generally favoured versus buyback given inherent volatility in prices – At interim reporting, will also have the opportunity to top up distributions, as appropriate
Notes: (1) Equity cash flows defined as Adjusted EBITDA less tax, interest and other, sustaining and expansionary capex and dividends paid to minorities. (2) $1bn fixed distribution in 2017 payable in two equal tranches. (3) M&A + Other includes consideration around portfolio optimisation, asset monetisation, recycling and debt reduction. Reinvestment screened against rigorous criteria.
14
Ivan Glasenberg Chief Executive Officer
Raglan Nickel, Canada
The commodities that fuel maturing economies are changing
• Our “Tier 1” commodity portfolio of metals, thermal coal and agricultural products is well placed to benefit from this transition
80
Late cycle
60
Commodities weighted by contribution to 2018F EBITDA
underpinned the supercycle boom in fixed asset investment are likely to be displaced as demand patterns shift in favour of mid and late cycle commodities, in line with rising levels of income per capita
Mid cycle
100
Early cycle 40
20
Iron Ore, Coking coal, Manganese
• The early cycle commodities that
Glencore most exposed to mid and late cycle commodities(2) Cobalt, Oil/Gas, PGMs Diamonds, Thermal Coal, Agricultural products
•
differentiation is increasingly important Key emerging markets are maturing
Illustrative commodity intensity curves(1)
Copper, Zinc, Nickel, Aluminium, Lead
• Not all commodities are equal;
$US GDP per capita (real 2010)
0 0
5 10 15 20 25 30 35 40 45 50
GLEN
Peer 1 Early Cycle
Notes: (1) Stylised intensity curves based on developed countries, indexed to 100 at maximum. (2) Source UBS, commodities weighted by contribution to 2018F EBITDA
Peer 2 Mid Cycle
Peer 3
Peer 4
Late Cycle
16
Supportive fundamentals for our key commodities
• Most synchronised global economic growth environment
Global Manufacturing expansion (PMI indices)(3)
Key commodity prices (Indexed Jan 2016)(4)
in the last six years
• Solid demand and limited/no supply growth has
58.1
Eurozone
underpinned a more favourable pricing environment
Japan 52.1 51.4
China
Jul-16
Apr-17
May-17 Jun-17
Jul-17
2 million electric cars so far
180
130 Copper
80 Jan-16
130 80
Jul-16
Jan-17
Jul-17
Estimated electrification impact per vehicle (avg NMC battery)(6)
EV)(5) 2.0
(battery and plugin hybrid China: 0.65M USA: 0.56M Japan: 0.15M
40-50kg
5-15kg 2015
0.4
2013
0.7 0.2
2012
2014
0.1
2011
2010
2009
2008
2007
2006
2005
Million vehicles
50-75kg
Ni Cu
1.3
– This represents more than 26 million vehicles based on 2016 passenger and commercial vehicle sales of c.87M units(2) expected to unlock material new sources of demand for enabling underlying commodities including copper, cobalt and nickel
230
50
• The “greening” of the global economy is
• The electric vehicle/energy storage system transition is
NEWC thermal coal Zinc
indicates supportive conditions for commodities into H2 2017
goal for 30% electric vehicle market share for passenger cars, light commercial vehicles, buses and trucks by 2030.
330 280
180
56.6 56.3
USA
• Ongoing expansion in global manufacturing activity
underway, underpinned by policies to curb greenhouse gas emissions and air pollution • The government led Electric Vehicle Initiative(1) has set a
Cobalt (RHS)
Germany
2016
• Near-term
Co
+ Cu for charging point + Cu for grid access
Notes: (1) The Electric Vehicle Initiative is a multi-government policy forum comprising Canada, China, Finland, France, Germany, India, Japan, Korea, Mexico, Netherlands, Norway, Portugal, South Africa, Sweden, UK and USA. (2) http://www.jato.com/wp-content/uploads/2017/02/2016-Global-Sales-Release-Final-1.pdf, https://www.vda.de/en/press/press-releases/20170201-Global-commercial-vehicle-market-expands-in-2016.html. (3) Source UBS. (4) Data Bloomberg. (5) Source: IEA, Global EV Outlook 2017, Two million and counting. (6) Glencore estimates.
17
Well positioned for the future Earnings diversified by commodity and geography(1)
Outstanding costs for our key commodities – 2017F(2)
Coal Ferro alloys Nickel
Cu
North America
86c/lb
Oil Zinc South Marketing America South Africa Copper
Zn
Other Africa Europe Australia
•
-9c/lb 16c/lb pre Au Thermal Coal
Ni
213c/lb
The right commodity mix to feed the changing needs of maturing economies
•
$31/t margin
Major producer of enabling commodities (copper / cobalt / nickel) that underpin the battery chemistry likely to power future EV and storage batteries Significant supplier of other mid and late cycle commodities such as zinc and thermal coal
Significant low cost growth potential:
Cu +c.400ktpa
Zn +c.500ktpa •
plus multi-commodity brownfield growth options when the time is right
CIS
Well capitalised asset base: c.$38bn expansionary capital since 2009
Maximizing value creation through capital allocation
+2017
2016
2015
2014
2013pf
2012pf
2011pf
2010pf
2009pf
2008
2007
2006
Highly FCF generative at spot annualised prices (4)
Marketing Adjusted EBIT Indexed M&A + Other
c.$4bn
Resilience of marketing earnings (3)
Cu Zn Ni Coal Ind.Other Mktg
Maintain strong BBB/Baa
Min. 25% Industrial distribution
Equity cash flows
Industrial Adjusted EBITDA Indexed
$1bn fixed Marketing distribution
2012
2013
2014
Spot EBITDA Spot FCF 2015
2016
$4.8bn $2.6bn $0.5bn $4.1bn $0.3bn $2.7bn $15.0bn $7.1bn
2017
Notes: (1) H1 2017 Adjusted EBITDA split calculated pre-coal hedging impact and corporate overheads. Geographic split based on operating asset EBITDA. (2) See slide 23 for production volumes underlying 2017 full year cost forecasts. (3) See notes on slide 9 for basis of calculation. (4) See slide 22 for basis of calculation
18
Q&A
Appendix
Katanga Whole Ore Leach project, DRC
H1 2017 industrial mine costs/margin reconciliation Copper Total copper production (kt) By-product production from other Depts (kt) Mopani production (kt) Net relevant production (kt) Implied H1 production kt (1147/2) Actual H1 relevant production (kt) Average H1 Cu Price (c/lb) Full cash cost (c/lb) H1 Margin (c/lb) H1 Margin ($/t) Implied EBITDA ($M) Less African Cu (ex. Mutanda) losses(3) Implied from FY2016 (280/2) ($M) Actual ($M) Adj. EBITDA ($M) Inventory adjustment and other ($M) Reported H1 Adjusted EBITDA ($M)
Zinc Total Zinc production (kt) By-product production from other Depts (kt) 85% payability (kt) Net relevant production (kt) Implied H1 production kt (905/2) Actual H1 relevant production (kt) Average H1 Zn Price (c/lb) Full cash cost (c/lb) H1 Margin (c/lb) H1 Margin ($/t) Adj.EBITDA ($M) Reported H1 Adjusted EBITDA ($M)
Feb Guidance(1) 1355.0 -142.0 -66.0 1147.0 573.5 261 -89 172 3793 2175
Actual H1(2) 642.9 -75.3 -15.0
552.6 261 -88 173 3815 2108
Nickel Total Nickel (kt) Koniambo (kt) Net relevant production (kt) Implied H1 production kt (101.4/2) Actual H1 relevant production (kt) Average H1 Ni Price (c/lb) Full cash cost (c/lb) H1 Margin (c/lb) H1 Margin ($/t) EBITDA ($M) Inventory adjustment and other ($M) Reported H1 Adjusted EBITDA ($M)
Feb Guidance(1) 120.0 -18.6 101.4 50.7 442 -248 194 4283 217
Actual H1(2) 51.2 -8.0
43.2 442 -240 202 4459 193 18 210
-140 2035
Feb Guidance(1) 1190.0 -123.0 -162.0 905.0 452.5
122 -9 131 2885 1306
-173 1935 -98 1837 Actual H1(2) 570.8 -59.0 -76.8
435.0 122 -9 131 2881 1253 1253
Coal Total Coal (Mt) Implied H1 production Mt (135/2) Actual H1 production (Mt) Average Cal17 NEWC price ($/t) Portfolio mix adjustment ($/t) Full cash cost ($/t) H1 Margin ($/t) Implied EBITDA ($M) Less coal economic hedging Implied from FY2016 MTM (225/2) Actual ($M) EBITDA ($M) Reported H1 Adjusted EBITDA ($M)
Notes: (1) Refer to slides 11,21 and 22 in the Preliminary Results 2016 presentation for February guidance on 2017 full year costs and production. (2) Refer to 2017 Half-year Production Report for actual H1 2017 production. (3) Pending delivery of major transformation projects at Katanga and Mopani.
Feb Guidance(1) 135.0 67.5 78 -6 -44 28 1890
Actual H1(2)
61.1 78 -1 -45 32 1977
-113 1778
-158 1819 1819
21
Illustrative “spot” annualised cashflows
Copper EBITDA(1) Zinc EBITDA(2) Nickel EBITDA(3) Coal EBITDA(4) Other industrial EBITDA(5) Marketing EBITDA(6) Group Adj. EBITDA Estimated cash taxes, interest + other Capex(7) Illustrative spot free cash flow(8)
$bn 4.8 2.6 0.5 4.1 0.3 2.7 15.0 -3.8 -4.1 7.1
Notes: (1) Copper spot annualised adjusted EBITDA calculated basis mid-point of production guidance Slide 23 adjusted for copper produced by other divisions less Mopani production. Spot LME price as at 7 August 2017. Costs include TC/RCs, freight, royalties and a credit for custom metallurgical EBITDA. (2) Zinc spot annualised adjusted EBITDA calculated basis midpoint of production guidance Slide 23 adjusted for zinc produced by other divisions less adjustment for 85% payability. Spot LME price as at 7 August 2017. Cost includes credit for custom metallurgical EBITDA. (3) Nickel spot annualised adjusted EBITDA calculated basis mid-point of production guidance Slide 23. Spot LME price as at 7 August 2017. (4) Coal spot annualised adjusted EBITDA calculated basis mid-point of production guidance Slide 23. Estimated average (H1 Actual and Q4 2017 forward curve) 2017 NEWC of $83/t less $6/t quality discount gives a $31/t margin to be applied across overall forecast group production of 132Mt. As at 30 June, 6Mt of the coal economic hedge remains and is expected to be settled before 31 December 2017. (5) Other industrial EBITDA includes Ferroalloys, Oil and Aluminium less c.$350M corporate SG&A. (6) Marketing Adjusted EBITDA calculated using the mid point of Marketing Adjusted EBIT guidance on Slide 9 + $150M of Marketing D+A. (7) Industrial capex including JV capex plus marketing capex of c.$75M in 2017F. (8) Excludes working capital changes and distributions. (9) Excludes Mutanda
Copper(1) Total copper production (kt) By-product prod other Depts (kt) Mopani production (kt) Net relevant production (kt) Spot Cu price (c/lb) Cost guidance (c/lb) Margin (c/lb) Margin ($/t) Illustrative EBITDA ($M) Less African Cu losses(9) Estimated ($M) Spot annualised Adj. EBITDA ($M)
Nickel(3) Total Nickel Koniambo Net production Spot Ni Price (c/lb) Cost guidance (c/lb) Margin (c/lb) Margin ($/t) Spot annualised Adj. EBITDA ($M)
Aug Guidance 1330.0 -145.5 -63.0 1121.5 290 -86 204 4488 5033
Zinc(2) Total Zinc production (kt) By-product prod other Depts (kt) 85% payability (kt) Net relevant production (kt) Spot Zn Price (c/lb) Cost guidance (c/lb) Margin (c/lb) Margin ($/t) Spot annualised Adj. EBITDA ($M)
Aug Guidance 1130.0 -125.2 -150.7 854.1 129 -9 138 3045 2601
-250 4783
Aug Guidance 115.0 -20.0 95.0 470 -213 257 5664 538
Coal(4) Total Coal (Mt) Average Cal17 NEWC price ($/t) Portfolio mix adjustment ($/t) Cost guidance ($/t) Margin ($/t) Spot annualised Adj. EBITDA ($M)
Aug Guidance 132.0 83 -6 -46.0 31 4092
22
2017 Production guidance Commodity
Unit
Actual FY 2015
Actual FY 2016
Actual H1 2017
Guidance FY 2017
Production split H1:H2 implied(1)
Copper
kt
1,502
1,426
643
1,330 ± 25
48%:52%
Zinc
kt
1,445
1,094
571
1,130 ± 25
51%:49%
Lead
kt
298
294
139
285 ± 10
49%:51%
Nickel
kt
96
115
51
115 ± 4
44%:56%
Ferrochrome
kt
1,462
1,523
836
1,585 ± 25
53%:47%
Coal
Mt
132
125
61
132 ± 3
46%:54%
Changes to production guidance: •
Copper: 25kt (2%) reduction, primarily Alumbrera related
•
Zinc: 60kt (5%) reduction largely reflects the expected August to December production loss impact from sale of Rosh Pinah and Perkoa to Trevali Mining
•
Lead: 15kt (5%) reduction reflects mine plan changes in Australia
•
Nickel: 5kt (4%) reduction reflects maintenance delays in the first half
•
Ferrochrome: 65kt (4%) reduction due to additional market driven maintenance days
•
Coal: 3Mt (2%) reduction reflects the impact of year to date weather in Colombia and various other minor revisions
Notes: (1) Implied H2 production split derived from the mid-point of full year guidance less H1 actual production
23
Distribution timetable H2 2017 distribution timetable
Jersey
Exchange rate reference date:
Johannesburg 29 August
Last time to trade on JSE to be recorded in the register on record date:
5 September
Last day to effect removal of shares cum div between Jersey and JSE registers:
5 September
Final Ex-Div Date:
7 September
6 September
Last time for lodging transfers in Hong Kong: Final Distribution record date: Deadline currency election (Jersey):
Hong Kong
6 September 4:30 PM, 7 Sep
8 September - Close
8 September - Close
8 September - Open
11 September
Removal of shares between Jersey and JSE:
From 11 September
Exchange rate reference date:
13 September
Final Distribution payment date:
26 September
13 September 26 September
26 September
24
Power generation, Raglan Nickel, Canada
25
